Comments on: The Importance of Producing Stuff

By: Abhijit Gadgil

Abhijit Gadgil — Tue, 01 May 2007 18:40:29 +0000

Isn’t this a bit tricky? In most of the economies of the developed nations “Service” sector constitutes the largest percentage for GDP, followed by a much smaller percentage by industry and “miniscule” by agriculture. So ironically most of the developed countries consume more stuff (produced by developing countries) than they produce and yet they are at the head of the list. Why is this so?

By: Walker

Walker — Unknown, 30 Nov -0001 00:00:00 +0000

Good post. There are some who say that India can skip the “manufacturing led” growth phase and specialize in services. The points you made in this post help show why such a strategy will be ineffective. If a society is to have more “stuff” it can either make it or trade for it. But since manufactured goods are generally more tradable than services, the using a service surplus to fund a goods deficit is a losing proposition. This is why service-heavy ecnomomies like the United States and Britain run large trade deficits, and it is also why if India is to get more stuff it must be able to produce for itself.

By: TTG

TTG — Unknown, 30 Nov -0001 00:00:00 +0000

Hi,
I came across your blog thru the IndiBlogs nominations. While agree with you on the Employment guarantee act, I totally disagree with you on the internet kiosk issue.
1) Somebody has to be employed to run that kiosk
2) Somebody has to assemble the computer.
3) Somebody has to sell it

These are, as you say services, but they put money in people’s hands

Second you mention that the kiosks will be used to for e-governance services. This is humongous, if implemented properly. Farmer A living in village B needs to take a bus/bullock cart/train to get to the nearest town to obtain some form/permit or the other, also being exposed to touts, and having to shell out some stupid fee to some official. If the kiosks are implemented correctly, then it requires a simple printout, and time saved. Farmer’s time saved = farmer’s production increased. Of course this is very hypothetical…

But yes, manufacturing in the country is stunted. And that is because we refuse to shift to a free market. We are still stuck in the goonda raj of socialism when it comes to manufacturing, and the sooner we step out of it, the better.

By: Atanu Dey

Atanu Dey — Unknown, 30 Nov -0001 00:00:00 +0000

Walker, thanks for the point about the goods deficit cannot be funded by a services surplus in a large economy.

Tarun, thanks for taking the trouble to write the detailed and thoughtful comments.

I am glad that you disagree because it gives me the opportunity to engage in debate with the view to reaching a better understanding of

the issues.

By: Ramesh

Ramesh — Unknown, 30 Nov -0001 00:00:00 +0000

My knowledge of economics is not so great, but would like to put forth my opinion.

You say divide stuff by ppl to get an idea of ‘poorness’. My understanding of this ’stuff’ is ‘wealth’, not goods like you say. Wealth comprises both goods and services. For instance, if India earns revenue by being the world’s back office, we use that revenue to buy goods from say, China. So we increase our ’stuff’(your definition) using services. So, exchange does increase stuff/goods for one nation, though not for the whole world. Why are goods more ‘tradeable’ than services? I-banking vs. sweatshops??

Services do need goods as the basis, I agree, but the definition of the ’system’ isnt so clear. The global economy cannot have only services without goods, I agree. But cant India/any one country skip the manufacturing cycle and get to services first? I think its possible.

By: Grag

Grag — Unknown, 30 Nov -0001 00:00:00 +0000

What is an activity performed by 40% of all people at a party?
Snoop in your medicine cabinet. – a joke