Isn’t there some sort of international law which makes criticizing Muslims a punishable crime?

Anyway, the title of that article is provocatively misleading. Here’s a bit from it that I find very revealing about the man and his style.

Lee also revealed that he had donated to charity all his earnings of S$13 million ($10 million) since stepping down as prime minister in 1990 after 31 years in power.

Singapore’s cabinet ministers are the highest paid in the world as part of a strategy to prevent corruption and attract talent from the private sector.

Mr Lee Kuan Yew, I wish India had someone like you to lead it. But when it comes to the kind of leaders a country gets, it is a random draw — just like one has no choice in what kind of parents one gets.

It’s all karma, neh?

[Hat tip: Rajeev Mantri for the link to the AFP article.]

Mr Lee Kuan Yew

I have written quite a bit in admiration of Mr Lee Kuan Yew on this blog. Now here’s a bit more from a speech of his that he gave at the US-ASEAN Business Council’s 25th Anniversary event in Washington DC on October 27 2009.

He began by saying, “Small countries have little influence on international trends. Singapore has always taken the world as it is. We analyse the world clinically, take advantage of opportunities that come our way or get out of harm’s way. This evening, I hope to share with you some of my views on some major international trends.”

He is a genius of realism. “Taking the world as it is.” But doing what is most rational in the given context. Take advantage of opportunities and don’t get into trouble. It reminds me of the Buddhist injunction: “First do no harm. Then try to do good.” He’s a realist. He knows that being a small country, Singapore cannot change the world. All it can do is to be the change that it wants to see in the world. Many people parrot that advice reportedly given by MK Gandhi, the Indian political leader of the mid-20th century, but Lee Kuan Yew is one of the few who followed that strategy. I don’t know for sure but it sounds very much like what Confucius may have said.

Mr Lee Kuan Yew is a Confucian genius.

Here’s part of what he said about China in his speech:

It faces enormous domestic problems. No one knows their seriousness better than China’s own leaders. But in a pragmatic way, they have coped with their problems. This leadership is not in denial of the weaknesses and flaws in their system: among them, widespread corruption and increasing numbers of mass protests in rural areas where Communist Party officials collude with property developers to evict farmers from their land without adequate compensation. Beijing’s response has been flexible, using the carrot or stick, or both. It has survived traumas that would have cracked a rigid system. While there are imponderables in its development, the course it has set out on will result in high growth rates for the next two decades. High growth will bring major social and political changes. China’s present political structures will come under acute stress. Governing a people with over 70% living in urban areas with access to worldwide information through “Blackberries”, cell-phones and the Internet will require a restructuring of their political structures and governance of this huge nation.

He sees China’s rise as part of the continuation a reformation that began with Japan’s Meiji Revolution in 1868.

China’s rise is one facet of East Asia’s modernization growth story. It began with Japan and the Meiji Revolution in 1868. In China, it began in December 1978 with the open-door policy of Deng Xiaoping. India opened up to the world in 1991. China and India can and will catch up with the West in science and technology. They will restore Asia to its leading position before European colonialism enveloped them. The world order will be re-balanced.

It was a short speech but as always, full of insight and practical advice. Go read the transcript.

[This was previously published on another site on Nov 5th 2009.]

Related Post: Lee Kuan Yew on India — Dec 2005. This post is worth reading, even if I say so myself.

Whether personal or societal, transformations generally require will and vision. In the case of personal transformation, unless one is a schizophrenic, a combination of intelligence, basic human values, determination, foresight and will is sufficient. For social transformation, something more is needed. Clearly leadership matters.

Here’s something to think about. Below the fold is an extended excerpt from the book, “Lee Kuan Yew: The Man and His Ideas” by Kwang, Tan and Fernandez. Indian leaders ought to take note. Or at the very least, they should read what Lee Kuan Yew has accomplished.

When Lee Kuan Yew wanted Singapore to become a garden city, to soften the harshness of life in one of the world’s most densely populated countries, he did not write a memorandum to the environment minister or to the head of the agency responsible for parks and trees.

He did not form a committee nor seek outside help to hire the best landscapists money could buy. For one thing, in the 1960s, when he was thinking of these matters, money was in short supply. In fact, having been unceremoniously booted out of Malaysia, the country’s economic survival was hanging in the balance. For another, there was no environment minister to speak of then, so low down in the list of priorities were these matters. When jobs had to be created and communists fought in the streets, only the birds were interested in flowers and trees.

But Lee was interested. And he became personally involved in the project of transforming Singapore from just concrete and steel to concrete, steel, trees, shrubs, flowers and parks. He would become personally knowledgeable about soil and vegetation, trees and drainage, climate and fertilisers. And he surveyed the world for ideas, taking advantage of his travels abroad to look out for them. In France, for example, he discovered that the broad tree-lined boulevards were possible because a drainage system had been built below the pavements. Around each tree was a metal grating through which surface water flowed into the underground system.

The problem of the grass in Singapore, which everyone could see in the bald, yellow football fields, needed a nationwide solution. When he saw beautiful rolling meadows in New Zealand he was moved to ask for the services of two experts from the country under the Colombo Plan technical assistance scheme. Lee was told that Singapore did not have a grassland climate in which rain fell gently from the skies. Instead, being part of an equatorial region, it experienced torrential rainfall that would wash off the topsoil and with it the vital nutrients necessary for strong plant growth. In an equatorial forest, with tall big trees forming a canopy, the rain water drips down. But in Singapore, where the trees had been chopped down, it would all come down in a big wash.

But Lee was not one to let climate get in the way. Fertilisers would replenish the soil, and so began the task of making compost from rubbish dumps, adding calcium, and lime where the ground was too acidic.

Years later, when economic survival was no longer an issue and Singapore’s success was acknowledged worldwide, he was still working at it to make the garden city possible. When expressways and flyovers sprouted all over the island, he had officials look for plants which could survive below the flyovers where the sun seldom shone. And instead of having to water these plants regularly, which was costly, he got them to devise a way to channel water from the roads, after filtering it to get rid of the oil and grime from the traffic above.

The constant search for solutions would not end. When development intensifed even further and the roads and flyovers became broader still, shutting out the light completely from the plants below, he did not give up. The road was split into two so there would be a gap in the middle with enough space for sunshine and rain to seep through and greenery and vegetation to thrive below. “I sent them on missions all along the Equator and the tropical, subtropical zones, looking for new types of trees, plants, creepers and so on. From Africa, the Caribbean, Latin, Middle, Central America, we’ve come back with new plants. It’s a very small sum. But if you get the place greened up, if you get all those creepers up, you take away the heat, you’ll have a different city,” he said.

Making Singapore a different city! That has been Lee’s constant obsession. Even when the difference had to do with trees and flowers, subjects which one would not normally associate with the man who has been at Singapore’s helm for 38 years, 31 of which he served as prime minister, his approach to the problem has been typically hardheaded and pragmatic. For him, the object of the exercise was not all about smelling roses. In the end it was about keeping Singapore ahead of the competition. A well kept garden, he would say, is a daily effort, and would demonstrate to outsiders the people’s ability to organise and to be systematic. “The grass has got to be mown every other day, the trees have to be tended, the flowers in the gardens have to be looked after so they know this place gives attention to detail.” [Source.]

Singapore, Oct 10: Mr Lee Kuan Yew, Minister Mentor, Singapore, on Friday said the PURA model advocated by the former Indian President, Mr A.P.J. Abdul Kalam, will not work in bringing about India’s transformation into a developed country.

Answering a question at a session of ‘PBD Singapore’, he said, “He is a great scientist and a very powerful man. I don’t want to cross swords with him.

“But if you study very carefully how other countries have industrialised and become knowledge economies – Korea, Japan, China and Eastern Europe – you will realise you cannot bring urban amenities to rural areas.

“How can you do it? Where is the manpower? How will you get the best doctors to stay in the rural areas?”

Getting into the area of some “hard headed analysis”, he said one needed to look at the fact that while companies such as Pepsi and Citicorp were headed by Indians, “they are outside India.”

The way to do it, Mr Lee Kuan Yew said, was by rapid urbanisation as Singapore had done it (“we don’t have a single village left in Singapore”), or by planned urbanisation, as China was doing it by moving 10 million villagers to urban areas every year. “Look at Brazil: They are building huge centres, factories for making cars, aeroplanes and all kinds of things.”

Villagers are moving to these centres, he noted.

“If you look at ancient Greece – Socrates and Virgil, were they in the countryside?

“They were in the cities where all services were concentrated.”

(Link thanks to a comment by t.)

As I always argue, Singapore got lucky in the random draw for dictators and drew Lee Kuan Yew; India got unlucky and drew Nehru. (Nehru did not know much but had at least tried to educate himself, though somewhat unsuccessfully. But what he spawned — the whole uneducated khaandaan — would not know which end of a book was the correct end to start from.)

LKY is smart. He understands why urbanization matters. He has practical understanding of it. It’s interesting that Krugman who got the Bank of Sweden Prize in economics (the economics Nobel prize) has done important theoretical work on urbanization.

LKY is also very diplomatic. I like the way he says, “I would not want to cross swords with [Kalam].” Basically he means that it would be an uneven match and it would be unsportsmanlike of LKY to fight Kalam.

I think that Mr APJ Kalam was (and still is) very powerful. His PURA model was flawed from the word go and yet it got a huge amount of press and a lot of attention among the movers and shakers of industry. No one of any importance ever spoke out against it. I did but then my name is nobody. I did develop RISC before PURA came along, though. Here’s a comparison of RISC and PURA (Nov 2006).

RISC and PURA are in some sense diametrically opposed concepts. There is of course a superficial commonality of objective: economic development. But even that superficial commonality disappears once the objective is stated in more details.

PURA’s objective is based on what I would call “village centric development” while RISC is about “urban centric development.” PURA is about distributing economic activity among a group of villages and then connecting these villages so that people are constantly moving from one village to another to get something achieved. (In one version of PURA, I believe they want to connect all villages with bi-directional high speed modern alternative fuel buses — which makes me wonder why not implement PURA in Pune since this metropolis lacks a decent public transportation system.)

RISC concentrates all economic activity of a large number of villages in one location so that it can catalyze economic growth through lowered transaction costs, and economies of scale and scope are achieved. PURA attempts to keep people in 600,000 villages and disperse economic activity around the rural countryside. RISC says that the village as an economic social unit is inherently incompatible with development, and that the rural economy can be helped by urbanizing the population in place. RISC is feasible with limited resources while PURA is only possible if there is about $600 billion spare cash. RISC requires minimal government involvement, while PURA is what can be a license-permit-control-quota bureaucrat’s wet dream.

But once again, it is unsportsmanlike to pitch RISC against PURA.

Let’s get a little more wisdom from LKY. Here’s a bit from a 2005 Der Spiegel interview, “It’s Stupid to be Afraid.” (Thanks t again for the link.)

SPIEGEL: You’ve been the leader of a very successful state for a long time. Returning from your time in China, are you afraid for Singapore’s future?

Mr. Lee: I saw it coming from the late 1980s. Deng Xiaoping started this in 1978. He visited Bangkok, Kuala Lumpur and Singapore in November 1978. I think that visit shocked him because he expected three backward cities. Instead he saw three modern cities and he knew that communism — the politics of the iron rice bowl — did not work. So, at the end of December, he announced his open door policy. He started free trade zones and from there, they extended it and extended it. Now they have joined the WTO and the whole country is a free trade zone.

SPIEGEL: But has China’s success not become dangerous for Singapore?

Mr. Lee: We have watched this transformation and the speed at which it is happening. As many of my people tell me, it’s scary. They learn so fast. Our people set up businesses in Shanghai or Suzhou and they employ Chinese at lower wages than Singapore Chinese. After three years, they say: “Look, I can do that work, I want the same pay.” So it is a very serious challenge for us to move aside and not collide with them. We have to move to areas where they cannot move.

SPIEGEL: Such as?

Mr. Lee: Such as where the rule of law, intellectual property and security of production systems are required, because for them to establish that, it will take 20 to 30 years. We are concentrating on bio medicine, pharmaceuticals and all products requiring protection of intellectual property rights. No pharmaceutical company is going to go have its precious patents disclosed. So that is why they are here in Singapore and not in China.

SPIEGEL: But the Chinese are moving too. They bought parts of IBM and are trying to take over the American oil company Unocal.

Mr. Lee: They are learning. They have learnt takeovers and mergers from the Americans. They know that if they try to sell their computers with a Chinese brand it will take them decades in America, but if they buy IBM, they can inject their technology and low cost into IBM’s brand name, and they will gain access to the market much faster.

SPIEGEL: But how afraid should the West be?

Mr. Lee: It’s stupid to be afraid. It’s going to happen. I console myself this way. Suppose, China had never gone communist in 1949, suppose the Nationalist government had worked with the Americans — China would be the great power in Asia — not Japan, not Korea, not Hong Kong, not Singapore. Because China isolated itself, development took place on the periphery of Asia first.

Further down in the interview, he talks about democracy and why he had to do things differently.

The British came here, never gave me democracy, except when they were about to leave. But I cannot run my system based on their rules. I have to amend it to fit my people’s position. In multiracial societies, you don’t vote in accordance with your economic interests and social interests, you vote in accordance with race and religion. Supposing I’d run their system here, Malays would vote for Muslims, Indians would vote for Indians, Chinese would vote for Chinese. I would have a constant clash in my Parliament which cannot be resolved because the Chinese majority would always overrule them. So I found a formula that changes that…

People voting for narrow sectarian interests — sounds familiar, doesn’t it? Worse yet, how the politicians do their best in India to divide the population on caste, creed and religious lines just so as to get the vote. The wonders of democracy in India are a marvel to behold. A few days ago I saw a full-page ad in the Times of India which declared proudly what Mayawati had done to privilege Muslims over non-Muslims. It was a blatant display of religious discrimination and a shameful admission of the failure of the Indian political system.

Singapore gets Lee Kuan Yew. India gets Nehru and soon enough will have Mayawati. Makes you want to weep.

I have one piece of advice to all. Stop wasting so much time on news. If you stop reading the newspapers and watching TV news for a few days, you will not have missed much. Things that matter are not news; they persist. So by not wasting too much time on news, you free up some time to gain some insight into deeper issues. Knowledge of the deeper issues would help you makes sense of the news when you do get around to the news eventually.

That advice applies to reading stupid blogs as well (including this one.)

I appear to have made an abrupt left turn after the first paragraph. Getting back on topic, here’s the point. LKY is a very smart guy, and is head and shoulders above the crowd of stupid nincompoops that pretend to lead almost all countries around the world. I know that these idiot leaders are too busy doing their best to wreck whatever little good there is in their countries to have time to read Lee Kuan Yew. But you should rise above these fools (and that is not a very high bar) and read LKY whenever you get the urge to learn something about the nature of the world, how it works, and how to make it work better. Forget the news for a bit. That’s why I took that hard left turn in the second paragraph.

You may ask what am I going on about? I was coming to that.

I was reading the transcript of an interview that LKY gave last year in September at his office in Singapore. The interviewers were Tom Plate of the UCLA Media Center and new-media expert Jeffrey Cole of the USC Annenberg School Center for the Digital Future.

Reading the transcript is a bitter-sweet experience for me. Sweet that LKY is going strong even past his 80th birthday; bitter that LKY was not the guy in charge of India since its political independence. If only, lord if only, Lee Kuan Yew had been India’s prime minister! Even today, if somehow the BT were to take orders from LKY instead of the SoT, India would take off like a interstellar rocket ship headed to the stars. But no such luck.

Stupidity is humanity’s common lot. It is hard to not be stupid. But there are grades of stupidity. The zeroth grade is “Not Stupid.” The first grade is “Stupid — and know it.” The second grade is “Stupid — and don’t know it.” 1st grade stupid know that they have to ask the not stupid for advice. 2nd grade stupid are too stupid to even ask for advice from smart people. Most of us cannot avoid being 1st grade stupid. The problem is that Indian leaders appear to be 2nd grade stupid.

A country which has a few 0th grade stupid and the rest 1st grade stupid is not in too much trouble. After all, the rest can depend on the wisdom of the few smart ones. But if the majority are 2nd grade stupid, there is no way that the smart people would even be consulted. Impose democracy on a population of 2nd grade stupid, and you have the makings of a colossal disaster. Evidence: Exhibit A — India. (For Pakistan and others of its kind, the stupidity meter breaks under overload.)

Anyway, back to the interview. At one point, LKY is asked about his choice in the US presidential elections of 2008.

Q: You have a candidate in the coming American presidential election that you prefer? You’d like to endorse whom? I have my candidate, but you’ve got to get American citizenship!

Lee: Who’s your candidate?

Q: You! You’ve helped run this pretty well country for so many years.

I would write LKY in if I were voting at the US elections.

Go read the transcript. I will quote some of my favorite bits here, for the record.

On China and the challenges to the leaders Rongji and Zemin.

Lee: Their problem now is convincing the world that they’re serious about a “peaceful rise.” These are thinking people. You’re not dealing with ideologues.

I don’t know if you’ve been seeing this or heard of this series that [the Chinese] produced called The Rise of the Great Nations. It’s now on the History Channel. I got our station here to dub it in English and show it. It was quite I would say a bold decision to tell the Chinese people this is the way the European nations, the Russians and Japanese became great. Absolutely no ideology and they had a team of historians, their own historians. To get the program going, they went to each country, interviewed the leaders and historians of those countries.

You should watch the one on Britain, because I think that gives you an idea of how far they have gone in telling their people this is what made Britain great. I was quite surprised. The theme was [doing away with] the Divine Right of Kings, a Britain that was challenged by the barons who brought the king down to Runnymede and then they had the Magna Charta, and suddenly your “Divine Right” is based on Parliament and [the barons] are in Parliament. That gave the space for the barons to grow and the middle class eventually emerged. When the King got too uppity, Charles the First got beheaded.

Now this series was produced in a communist state, you know. In other words, if you want to be a great nation, so, if the leader goes against the people’s interests, you may have to behead him! They also said that because there was growing confidence between the people and the leaders, the country grew.

It is in fact a lesson to support their gradual opening up and their idea of how they can do it without conflict — the “peaceful rise.” They have worked out this scheme, this theory, this doctrine to assure America and the world that they’re going to play by the rules.

On the US:

Q: What about inside America itself? Do you see any indices that worry you, whether it’s education?

Lee: For the next 10, 15, 20 years what you have will keep you going as the most enterprising, innovative economy with leading-edge technology, both in the civilian and military field. You have got that already.

You will lose that gradually over 30, 40, 50 years unless you are able to keep on attracting talent and that’s the final contest, because what you have done, the Chinese and other nations are going to adopt parts of it to fit their circumstances and they are also going around looking for talented people and wanting to build up their innovative enterprising economies. And finally this is now an age where you will not have military contests between great nations because you will destroy each other, but you will have economic and technological contests between the great powers.

I see that as the main arena of competition by 2040, 2050 and it’ll be the U.S.; China for sure; Japan, keeping up with the U.S. and trying to retain its separate position from China, closer to the U.S. and hoping to maintain a special position; India, somewhat behind China, trying to catch up. I don’t know about Brazil.

Q: Charles de Gaulle had a great comment about Brazil. His advisers said to President de Gaulle that he had to go to Latin America — Brazil. He said why? They said Brazil has great potential. De Gaulle said, “Ah, yes Brazil has great potential … and always will.”

Lee: I put my money on China, India and Western Europe. If Western Europe can get past the welfare approach to society and get their unions modernized, I think they have got the technological basis and the talent to rise again, not as a military power because I don’t think they got the stomach for that, but as an economic power which they can do. I think they’ll give the world a run for their money.

Can they do it? I don’t know. Their history is so deep, you never know. Under pressure, as they feel they’re being left behind by history, they may decide to do it. I mean, you look at [French President] Sarkozy, he may or may not succeed, but he’s convinced himself and he’s convincing quite a group of the French elite. The CEOs of the big multinationals in France don’t need convincing. They know it. It’s the broad think-tanks, the media, the intellectuals who still feel that they have a superior system. They loath having to give that [welfare approach] up, but they may, you know, because that’s the only way to catch up.

Russia may become a player if they are able to find a way to convert the oil and gas into a more enterprising economy. I don’t know if they can get out of their corruption and the mismanagement of the resources, but they have got talented people.

But long-term for America, if you ask me, say, project another 100 years, 150 years into the 22nd century, say, 2150, whether you stay on top depends upon the kind of society you will be because if the present trends continue, you’ll have a Hispanic element in your society that’s about 30, 40 percent. So, the question is do you make the Hispanics Anglo-Saxons in culture or do they make you more Latin American in culture.”

On Singapore’s future, and matters related to Western Europe, and India:

Q: I read somewhere recently that you actually have a bit of a worry about your country’s survivability over the long run? Are you serious?

Lee: Singapore is not a 4,000-year culture. This is an immigrant community that started in 1819. It’s a migrant community that left its moorings and therefore, knowing it’s sailing to unchartered seas, guided by the stars, I say let’s follow the stars and they said okay, let’s try. And we’ve succeeded and here we are, but has it really taken root? No. It’s just worked for the time being. If it doesn’t work, again, we say let’s try something else. This is not entrenched. This is not a 4,000-year society.

Q: You really have a sense of the country’s endangerment.

Lee: Yes, of course.

Q: It’s amazing, you come in here and you walk around here in one of the great cities in the world. Yet you are worried about survival.

Lee: Where are we? Are we in the Caribbean? Are we next to America like the Bahamas? Are we in the Mediterranean, like Malta, next to Italy? Are we like Hong Kong, next to China and therefore, will become part of China? We are in Southeast Asia, in the midst of a turbulent, volatile, unsettled region. Singapore is a superstructure built on what? On 700 square kilometers and a lot of smart ideas that have worked so far — but the whole thing could come undone very quickly.

For this to work, you require a world where there are some rules of international law and there is a balance of forces of power that will enforce that international law and the U.S. is foremost in that. Without that balance of power and international law, the Vietnamese will still be in Cambodia and the Indonesians will still be in East Timor, right? Why are they out? Because there were certain norms that had to be observed. You can’t just cross boundaries. This little island with four and a half million people, of whom 1.3 are foreigners working here, has got to maintain an army, navy and an air force. Can we withstand a concerted attempt to besiege us and blockade us? We can repel an attack, yes. Given the armed forces in the region and our capability, we can repel and we can damage them. Three weeks, food runs out, we are besieged, blockaded.

Q: Who will come after you? Who would come after you?

Lee: There are assets here to be captured, right?

Q: Some unnamed bad regime?

Lee: When [Malaysia] kicked us out [in 1965], the expectation was that we would fail and we will go back on their terms, not on the terms we agreed with them under the British. Our problems are not just between states, this is a problem between races and religions and civilizations. We are a standing indictment of all the things that they can be doing differently. They have got all the resources. If they would just educate the Chinese and Indians, use them and treat them as their citizens, they can equal us and even do better than us and we would be happy to rejoin them.

Q: Do you think it’s healthy for the citizens of Singapore to feel that pressure, that tension that it all could change quickly? Do you think that makes them run this country more effectively, be better citizens by not getting complacent?

Lee: My generation, the ones above 50, who have lived through the first part, they know. The ones under 30, who’ve just grown up in stability and growth year by year, I think they think that I’m selling them a line just to make them work harder but they are wrong. The problem is they don’t believe. They think I’m wrong. That’s a problem that all countries face. You look at the Japanese, I remember their parents. After their defeat, they had great leaders not just in politics but in business at every level. They travel, they work, and they sold their goods like mad to rebuild Japan. Now you look at them … You look at the younger generation, will they work like some of the fathers did? I don’t think so, but in a corner will they do it again? I think yes because it’s a deeply-imbedded culture. They will fight. That’s the difference between an ancient culture and a new one. Theirs is embedded, ours is not. At the same time that ancient culture is preventing them from making rational decisions about migration, immigration and meeting the problems of ageing.

Q: Singapore’s armed forces are in pretty good shape, right? So when are you all planning to invade neighboring Indonesia?

Lee [laughing]: All we want is a quiet peaceful world. We have made something of our lives and we’ll be quite happy to carry on like this and help them get along and do better. We started this LKY School of Public Policy, giving them scholarships to prove to them it’s done by good governance. It’s not by robbing you.

Q: I (Plate) graduated from the Woodrow Wilson School of Public and International Affairs at Princeton. And so I’m a big fan of public policy schools. I think you all are doing a great job at the Singapore policy school. I think you chose a wonderful dean [former U.N. Ambassador Kishore Mahbubani]. I was recently there to offer a humble seminar. The quality of the students knocked me out.

Lee: I think that’s an investment worth making because [students from the region] will go back and they will tell their media chaps and their leaders and say, look this country works because it’s working like this: first, it’s honest; second, it’s rational; third, it makes decisions and follows through on those decisions. The decisions are made after very careful consideration of all options and consequences.

Q: I agree with you and if you look at the course list, it’s a very impressive course list. Now, you were educated in England and many of your top people were educated in America or England, so Western education for a long time has been the cutting edge, has been the leader, the place you wanted to go to. Is it your sense that American higher education is still terrific?

Lee: It will stay like that for as long as you keep on getting talented people into your country and staying on, but will you do that? I think yes for 10, 20 years, but 30, 40, 50 years, I’m not sure because other countries will become more attractive or as attractive. It is the extra inputs you get.

Let me explain how I see it. If Singapore depended on its own domestic talent, we wouldn’t have made it, but we were the center for education in this region from British days and many came to be educated and many stayed behind. Our top layer was drawn from a larger base and in my first Cabinet of 10, there were only two of us who were born and bred in Singapore. The others came from Malaysia, China, Ceylon, from India and elsewhere. It’s a talent pool that was drawn from a bigger region, and that’s the secret of your success. You drew in first your talent from Europe because you offered them opportunities. In the last few decades, you’ve been drawing your talent from all over the world, including Asia. If you can continue to do that, you will continue to succeed.

Not only must you attract them, you must get them to stay.

Q: How are you doing on that?

Lee: We give a lot of scholarships to Chinese and Indians. If one quarter stay on here in Singapore, we’re winners, especially with the Chinese. They come in here, they get an English education, they get our credentials and they’re off to America because they know that the grass is greener there. The Indians, strangely enough, more of them stay here in Singapore because they want to go home to visit their families, America is too far away. We are net gainers for how long? I think in the case of China, maybe another 20, 30 years and then the attraction is gone. We can’t offer them that difference in opportunities and standards. India, maybe longer — 50, 60 years before their infrastructure catches up. Anyway, this is not my worry anymore!

Q: On India, there’s been a lot of hype in America, in foreign affairs publications and so on, about India becoming the next superpower. I was in New Delhi about three months ago — it seems to me India’s got a long way to go.

Lee: They are a different mix, never mind their political structures. They are not one people. You can make a speech in Delhi; [Prime Minister] Manmohan Singh can speak in Hindi and 30, 40 percent of the country can understand him. He makes a speech in English and maybe 30 percent of the elite understand him.

In China, when a leader speaks, 90 percent will understand him. They all speak one language, they are one people. In India, they have got 32 official languages and in fact, 300-plus different languages. You look at Europe, 25 languages, 27 countries, how do you? The European Parliament? Had we not moved into one language here in Singapore, we would not have been able to govern this country.

We have to pay attention to what Lee Kuan Yew is saying. One important point: deep culture matters. If you don’t value it, it can get eroded. There’s a caution that India needs take seriously. Another point: the dangers of becoming complacent.

A great point that LKY made is the investment in education. Just the other day, my friend Alok told me that his cousin who is studying in Singapore has received a Singapore government scholarship to go to Stanford for a year. The catch? After graduation, she has to work for a Singaporean firm in Singapore or abroad for a couple of years.

India has the potential to become a giant collection of universities. Unfortunately, indications are that India will have that potential to perpetuity, unless the government lets go of the stranglehold it has on Indian education.

It is all karma, neh?

[There is a good collection of LKY related links at www.lee-kuan-yew.com. One of my blog posts is also included in that set.]

Ill fares the land, to hastening ills a prey,
Where wealth accumulates, and men decay:
Princes and lords may flourish, or may fade;
A breath can make them, as a breath has made;
But a bold peasantry, their country’s pride,
When once destroyed can never be supplied.

The poem is a lament on the ruin of the countryside brought upon by modernization. But I was reminded of Goldsmith’s poem in a different context. Lee Kuan Yew, my hero, recently noted that “we [the leaders of Singapore] have not got richer, Singapore has.”

What a terrific point, LKY makes. Let me paraphrase Goldsmith:

Ill fares the land, to hastening ills a prey
Where the leaders’ wealth accumulates, and the country decays …

On a related note, 1.7 percent of Singaporeans — or about 77,000 — have wealth exceeding US$1 million. In the immortal words of Tevya, “I realize of course that it’s not a shame to be poor.” But what would have been so terrible if India too had no one who was really poor?

In India, the leaders are rich and the people poor.

Here, for the record, a bit of the report from the Straits Times

ONE freak election result is all it will take to wipe out Singapore’s success in building up the city state, Minister Mentor Lee Kuan Yew warned last night.

This could happen if voters became bored and decided to give the ‘vociferous opposition’ a chance – out of ‘light-heartedness, fickleness or sheer madness’.

‘In five years, you can ruin this place and it’s very difficult to pick up the pieces,’ he told 650 participants of a dinner forum at the Shangri-La Hotel.

[snip snip]

He said a country needed three elements to succeed.

First, a government that people have confidence in and will trust when tough decisions need to be taken.

Second, leaders who are above board, who make decisions based on necessity, not how they will personally benefit. He said Singaporeans know they have such leaders because, over the years, ‘we have not got richer, Singapore has’.

Third and most importantly, a country needs able men in charge.

The problem with popular democracy, he said, is that during elections, candidates are not judged on how well they can govern, but on their persuasive power.

Good luck, Mr Lee Kuan Yew. Hope all goes well.

I suppose the court would figure out if Mr Chee’s charge is true or not. If the charge is false, I would be much relieved because I would hate to find out that the man I have very high regard for — Mr Lee Kuan Yew — has feet of clay.

Why do I admire the man so much? Perhaps because of what he achieved. Here’s the NY Times:

“The final test is what Singapore was when I became prime minister in 1959 and what Singapore is now,” Mr. Lee said. “We had less than $100 million in the kitty.” Today, he said, “global financial services assess Singapore to have sovereign wealth funds of over $300 billion.”

Singapore is just a few million people. LKY worked the miracle of transforming a third world resource-poor mosquito-infested swamp into a wealthy first world nation state admired around the world for efficiency, lack of corruption, order and cleanliness. He didn’t make pretty speeches about scaling the commanding heights of the economy. He just did it and did it within a generation. Not just the phenomenal infrastructure of the tiny place, not just the rich stock of human capital, Singapore has also amassed $300 billion in reserves. Under LKY’s guidance, Singapore’s reserves have multiplied 3000 times. How great is that?

Lee says that Singapore has $300 billion in the kitty. Chee says that it does not make up for

the silencing of political opponents, the closing down of independent media “and all your shenanigans, including making sure that I’m not allowed to speak during an election rally.”

Speaking strictly for myself, I value political freedom and the freedom of expression. A civilized human existence requires freedom. But in what sense is there freedom if one is starving? Isn’t one willing to sell one’s soul for a piece of bread when starvation threatens one’s life? What would you give up in exchange for not seeing your child starve to death? I know that I would give up a lot of my highly prized freedom of political expression if in the process I could at least see my children not starve.

Mr Chee says that $300 billion in the bank (and of course all other goodies that Singapore enjoys) is too high a price to pay for the lack of political freedom and the muzzling of the press. Perhaps the restrictions on the press and on political opposition were wholly unnecessary and Singapore would have been what it is today even otherwise. Perhaps it was merely to satisfy LKY’s personal whims and fancies that political opposition was curbed and which actually did not serve any instrumental purpose. But I doubt it. When a country is poor, the squabbling for resources does push to the fore the most opportunistic criminals to enter the policymaking circles.

I know that no one reading this is actually starving. When one is sitting comfortably with a full tummy, it is easy to see how valuable it is to have the freedom to speak your mind. It is clearly better to have political freedom than not to have it, all else being equal. But how would one rank these two: one, a very full stomach but limited political freedom; two, a very empty stomach but unlimited political freedom.

At which point does the benefits of political freedom of the few outweigh the material concerns of 500 million others? How many million people is it ok to condemn to a pitiably poor life so as to guarantee that a few people have the right to make fiery political speeches?

And often times, the only political speeches made are ostensibly on behalf of the starving millions. If those starving millions did not exist, these politicians would have little to make speeches about. So it would seem that if by banning idiotic political speeches, one achieves a level of prosperity such that it makes political speeches about poverty completely irrelevant and inconsequential, it would be a good thing.

I think that there is a hierarchy of needs, as Maslow pointed out. Only after the lower level needs are met can one attempt to satisfy needs higher up. I will secure air before I start worrying about food and water. I will not worry about free speech if I am in imminent danger of keeling over from hunger. I would trade in a lot of pretty political speeches in exchange for a decent shot at living a comfortable life. If I were in the bottom 300 million in India, I would happily trade in my situationally useless right to political freedom in exchange for the life of an average Singaporean.

All the above with the usual disclaimer that your mileage may vary.

POSTSCRIPT:

Why do I stress so much on the starvation bit? Because I know how it feels to starve for 2 days. If it feels that awful to starve for just 2 days, I wonder how it must be to chronically starve — as do an estimated 200 million in India. I know that I could not handle it and I would make a deal with the devil himself to try to avoid it. That is what I fear: that millions of people at the edge of starvation are quite capable of making deals with the devil. Don’t believe me? Well, then, how do you think the communists get elected in India?

Even though the [Indian] economy’s annual growth rate has been 8% to 9% for the last five years, India’s peaceful rise hasn’t led to unease over the country’s future. Instead, Americans, Japanese and western Europeans are keen to invest in India, ride on its growth and help develop another heavyweight country.

He contrasts that with the apprehension associated with China’s rise:

Why has China’s peaceful rise, however, raised apprehensions? Is it because India is a democracy in which numerous political forces are constantly at work, making for an internal system of checks and balances? Most probably, yes–especially as India’s governments have tended to be made up of large coalitions of 10 to 20 parties.

“Internal system of checks and balances” reminds me of a joke. At a particular seaport, they were unloading shipments of live crabs in crates from various countries. The crates from all countries, except those from India, had lids on them to prevent the crabs from escaping. The Indian exporter explained that the Indian crabs have internal checks and balances: if some crabs try to escape, the others pull them down and therefore those crates don’t need to have lids.

Lee Kuan Yew continues:

One example of India’s “checks and balances” at work was the suspension of its talks on a U.S. nuclear power deal. Although this deal is manifestly in India’s interests, 60 communist MPs–part of the Congress Party-led coalition government–opposed the deal. Subsequently, the Communists allowed negotiations to resume, reserving their position on the outcome. India’s development will, from time to time, run into domestic obstruction.

The Indian communists do the job of keeping a lid on the Indian economy and prevent it from escaping the crate of Nehruvian socialism. But the communists are not the problem — they are a symptom of a deeper problem with India. In the broadest terms I think it is Indian culture. Saying this exposes me to all sorts of charges. But unpalatable though it is, it is an inescapable conclusion. LKY goes on:

The speed of China’s change and the thoroughness, energy and drive with which the Chinese have built up their infrastructure and pursued their goals spring from their culture, one that is shared by the Koreans, Japanese and Vietnamese, who adopted the Chinese written script and absorbed Confucian culture. The Chinese are determined to catch up with the U.S., the EU and Japan. Fast-forward 20 to 30 years and the world will have to accommodate a more technologically advanced and economically more sophisticated China, whether under a single- or multiparty system.

The drive to excel derives from a knowledge of one’s place in the larger context, an understanding of one’s own worth, a certain confidence and pride in one’s heritage. At least in the Indian policy-making circles, this is impossible as they all Macaulay’s children.

LKY states what India needs to do simply:

India does not pose such a challenge–and won’t until it gets its social infrastructure up to First World standards and further liberalizes its economy. Indeed, the U.S., the EU and Japan root for India because they want a better-balanced world, in which India approximates China’s weight. [Emphasis added.]

So what is social infrastructure and what does “liberalize the economy” mean? I think social infrastructure is the set of rules that govern society. Do the rules allow individuals freedom or do they make the individual subservient to the group? Is discrimination institutionalized in the legal and civil code? Does the system create incentives for groups to fight against other groups?

How can we build social infrastructure if we are stuck with governments that insist on dividing and ruling? Can we at least have an argument about this?

Give me six hours to chop down a tree and I will spend the first four sharpening the axe, said Abe Lincoln. Astonishing how much profoundly practical wisdom is packaged into that simple declaration. Time spent in sharpening the tool is time well-spent; so is time spent in thinking through a problem and thoroughly understanding the problem before rushing off to solve it. And in most cases, since there is almost nothing new under the sun, there are already known solutions to many problem. So the most efficient method to solve a problem is to first seek the solution that someone may have figured out already.

The problem of economic development is multifaceted and complex, taken as a whole. But the problem can be effectively partitioned into simpler subunits that are more tractable. Then solutions for these can be sought—right out of the grab-bag of existing solutions or if needed, solved for the first time.

There are important lessons in Singapore’s development experience, if one cares to but observe very carefully. To learn from the person who engineered Singapore’s transformation from a backward poor city-state to a vibrant developed economy is a blessing. It fills my heart with hope that transformation is indeed possible, and it restores my faith in the conviction that powerful individuals are the only agents of deep transformation—both for good as well as ill—of society.

I read Lee Kuan Yew’s address to the 37th Jawaharlal Memorial Lecture on 21st Nov 2005 in New Delhi very carefully and with deep interest. I found that his wide ranging analysis of India’s economy incisively accurate. I annotated his speech in parts (parts one, two, and three) and this one is the concluding summary of what I gather from his talk.

In a sense, I did not find anything that he said even remotely surprising. I had pretty much reached the same conclusions independently. Why, one may wonder, don’t the leaders of India see what LKY so easily sees? Are they merely incapable of clear thought, or is it that they think but are prevented from acting due to circumstances, or is it a combination of both? Surely, one would think, that if the Indian leaders are not competent thinkers, they would at least have the intelligence to hire intelligent advisors to figure out the problems. So what is the problem?

I think the answer lies in what economists call the objective function. Individuals have a certain goal which can be stated as the maximization of a function given a set of constraints. For instance, for someone maximizing the amount of money given the constraints of time and effort may be the objective function; for another it could be to maximize leisure given the constraint of a reasonable income and time; for another, it could be to do social work subject to leisure, time and money constraints.

LKY’s objective function, I believe, was to rapidly develop Singapore. He was not looking to win elections, or to maximize his personal wealth, or to be a mahatma, etc. Given that he is a man of amazing practical genius, he figured out the sequence of interventions and implemented them. Under his autocratic rule, he did what India’s autocrats have been either unwilling or unable to do.

India’s autocrats have had different objective functions. I suspect that to a first approximation, their objective function have been to maximize personal wealth, not the development of the economy, through corruption, nepotism and bribery. Of course there was the matter of elections every so often and funding this costly farce required even more corruption.

Different objective functions lead to different perceptions which in turn lead to different understandings, and so on to different actions and ultimately to different outcomes.

My objective function is to figure out what exactly is wrong and how to solve the problem of India’s economic growth and development. I am not trying to win elections and therefore am not forced to bribe some voting block or the other with hare-brained schemes that ultimately harm not just the economy but even harm those vote blocks. I am not trying to fatten my numbered Swiss bank account and so I don’t have to implement any asinine license-control-quota-permit industrial policy. I am not trying to promote the members of my family as the only enlightened beings on the planet capable of ruling India, and so I don’t have to ruthlessly eliminate any opposition. I am not wedded to any ideology such as monotheism or communism, and so I can advocate the use of any idea as long as it makes sense.

The reason I arrive at similar conclusions as does LKY is that our objective functions are similar, we are sufficiently intelligent, have learnt from others’ experiences, and we have thought sufficiently long about the problem. I am sure that LKY has spent a lot of time polishing the ax before he struck the first blow.

There are differences, of course, between a LKY and me. For instance, I am as lazy as they come and he is a hard-working achiever. But the most significant is this: he is a dispassionate observer of India’s development while I am not. I sincerely care about what happens to India personally; LKY cares to the extent that India’s economic performance has a bearing on Singapore’s welfare, but he does not have a personal stake in India’s successes or failures. If what LKY tells India is just a lot of water off a duck’s back, he would sleep soundly. And that is why I believe that what he says should be taken very seriously. He has no reasons to sugar-coat his conclusions or misrepresent his recommendations.

Dispassionate observers must be trusted more than those who have a stake in the game. I would trust LKY more than I would trust someone like Dr Manmohan Singh when it comes to an honest assessment of India’s strengths, weaknesses, prospects and possibilities. Dr Singh has a boss and various constituencies that he has to please; LKY has to please no one. (The same holds for me: I don’t have to please anyone. I don’t have to please an editor and if the reader does not like what I scribble, it just takes one click and I am history.)

So with that preamble, let me try to summarize what LKY said.

1. India has missed the bus too many times and this time around, it should look sharp and get on the bus.

It could not jump on the bus because it was tied hand and foot by those with different objective functions than economic growth and development. Now we need to unshackle the economy. They call it liberalization. Of course, you can only liberalize a shackled economy. I think it is time to enquire why the economy was chained in the first place. Will this be done? No, because it may turn out the holy cows being worshipped were in fact asses. Best to keep quite and move on. But then of course we run the risk of chanting the same old mantra in worship of the old “holy cows” and end up precisely where we are. Insanity, it is said, is doing the same thing and expecting different results. Let’s stop this insanity.

2. Production precedes distribution. If you don’t produce, even after equitable distribution, you would still be dirt poor.

LKY put is thus: Before distributing a pie, I had to first bake it.

Simple isn’t it? But this simple truth eludes the communists and socialists. They want to distribute first and then perhaps maybe produce some stuff if they feel like it. They have not figured out that poverty is lack of what I call “stuff.” If you don’t have stuff, you are poor. Producing sufficient amounts of stuff is a necessary condition; the sufficient condition is to distribute it equitably.

When production is insufficient, then there is a mad scramble for the limited production. The powerful get hold of this stuff, and the majority of the people have to eat dirt. That is, a very lop-sided economy develops when there is insufficient production of stuff: a few very rich people lording it over hoards of abjectly poor people.

So the lesson is simple: make the production of stuff the first priority. Therefore

3. Manufacturing has to be the base upon which India’s growth must be based.

Which means that all this talk about a service economy is a lot of stuff and nonsense. India is a large economy (in terms of population numbers) and like any other large economy, it has to be largely self-sufficient in that what is consumes, it has to produce itself. Small economies can specialize and import the other stuff they need, but India cannot. In other words, India has to grow its own food (and therefore must have a large agricultural sector), must manufacture its own stuff (and therefore have large manufacturing sector), and provide its own services. “Large” here means production capacity, not necessarily employment capacity.

I am not in favor of employment; I am in favor of producing stuff. If you produce enough stuff, you can give stuff away to “unemployed” people. On the other hand, if the obsession is with employment, and if this employed population produces zilch, then all can be employed and yet all can be dirt poor.

4. To produce stuff, you have to have infrastructure. Build infrastructure first.

You cannot produce much with your bare hands. So you need factories, You need power to run those factories. You have to have roads and ports and airports to bring inputs to the factory and take the output out. Invest in infrastructure.

And you don’t need to bring out the excuse that the government does not have the capacity to fund the infrastructure. The private sector at home and abroad is more than eager to build them, provided the asinine policies blocking this investment were discarded.

5. Learn from you mistakes.

Of course, to do so, one has to admit that one has made mistakes. Flatly denying that would not accomplish much. China learnt from its mistakes and has changed course.

I have my doubts whether we can learn from our mistakes because it is not politically correct to point out that mistakes were made. Goring of holy cows is not taken very lightly by the worshippers of holy cows.

Thank you, Mr Lee Kuan Yew, for speaking to the Indian leaders. I am not sure that you have not wasted your time.

The recent performance of India’s private sector has underlined an important economics lesson, that competitive markets work where too often the command and control system founders. Within your arm’s reach is a device which is a miracle of modern technology—the cell phone. It took the government telecom monopoly 45 years—from 1951 to 1996—to install around 14 million land lines. Between 1996 and 2000, with the liberalization of the telecom sector, India’s installed capacity doubled to around 30 million lines. In the next five years, India’s telephone companies added another 90 million lines (of which 70 million were cell phone lines.)

Imagine if the government had continued to monopolize the sector and had continued the installation of capacity at the pre-1996 rate. It would have taken about 300 years—or till 2300—to reach today’s installed capacity. Astonishing things happen when the government gets out of the business of business, or at least allows the private sector to do its thing without trying to cripple it. Take another sector where the government allowed private firms to compete—the airlines. I recall those days where one was often reduced to begging a government employee at the airlines office for the privilege of being treated rudely by the airline staff on flights that more often than not delayed. Those were the days my friend, we thought would never end.

The license quota permit control regime was instituted with the express purpose of making sure that essential goods and services were affordable and available to the people and thus was the sole prerogative of the government. An admirable socialist goal of reaching the commanding heights of the economy. The outcome should not come as a surprise: shoddy goods and services, affordable and available to only those who had the clout and could bribe the officials. Bajaj scooters had a waiting time of 7 to 10 years! They were prized as dowry; want your homely daughter married soon, promise a scooter to sweeten the deal.

While the Indian economy has done better since the government has started relaxing its chokehold on it, there is much that is left undone. Until the bureaucrats and the politicians let go entirely, the Indian economy has a hard row to hoe. It is imperative that we ask and clearly understand what motivated the policy-makers to hobble the economy for so many decades. Without that frank enquiry, we may never fully understand which mistakes were made and therefore continue to stumble into the same traps.

By now, even the minimally awake observer may conclude that the private sector can do business better than the public sector can. For instance, India’s private sector uses capital very efficiently. Lee Kuan Yew points it out in his lecture (see part 1 here and part 2 here of my commentary):

A factor worth noting: India gets a much better economic return for the investment it makes in its economy because India’s private sector capital efficiency is high. If India opens up fully to FDIs, the results will be profitable for the investor and add considerable employment and added GDP growth for India. With jobs there will be a trickle down of wealth to millions of Indian workers, as there has been in East Asia.

Globally, there is a savings glut which is looking for investment opportunities. India would be the destination of this massive investment but the economy needs liberalization. If I am asked what I thought of the liberalization of the Indian economy, I would echo Gandhi (the home-grown one) and say, “I think it would be a good idea.”

The liberalization so far is too little but I sincerely hope it is not too late. LKY points to some stellar examples—they are miniscule in the context of the Indian economy but they are indicative of what is possible.

What India has achieved since 1991 should not be underrated. There have been many successes. The Delhi Metro is one. Bharat Forge, the largest Indian exporter of auto components and the leading global chassis component manufacturer, is another example in the manufacturing sector. There are others. The question is why there are not many more of them?

Why indeed. The Indian private sector can do much better but can’t. Why? Here is my conjecture on what LKY thinks is the reason: the mendacity, greed and ignorance of Indian politicians. LKY is a shrewd observer, of course. But even dim-witted people have realized that when it comes to greed Indian politicians are a class apart. Exposing that greed, mendacity and ignorance is fast becoming a thriving cottage industry as evidenced by Tehelka and Cobrapost.

Being a scholar and a gentleman, he really could not come right out and tell the politicians to their face that they are the problem. So he used a well-worn technique of deflecting the blow by saying that it is politics that is to blame. More over, he did not present it as his own conclusion but let other well-known Indians speak:

There is no dearth of excellent analyses by Indians about this problem. An entire library could be assembled on the subject. I consulted two books: The Future of India by Bimal Jalan, who was Governor of the Reserve Bank of India from 1997 to 2003, Chairman of the Economic Advisory Council to the Prime Minister and has represented India at the IMF and World Bank; one other book, Governance by Arun Shourie who has held several government portfolios and is a well-known writer. To sum up their arguments for the failings of the system in a single word: politics.

There you have it. The failing of the system are centered around politics. And who engage in politics? Therefore politicians. He said it to their face, however a bit more politely than I would have. He quotes Dr Singh’s interview in which Dr Singh pleads that his inability to govern arises from the coalition that he has clubbed together to do the job. But LKY does not let him off the hook.

Earlier this year, Prime Minister Manmohan Singh gave a wide-ranging interview to the McKinsey Quarterly. He rated his own government’s achievement as 6 out of 10, a performance he said was unsatisfactory. He acknowledged the need for better infrastructure, for more FDI, and also the need to move ahead in manufacturing. When asked whether the pace of implementation was fast enough, he replied:

” … economic policy and decision making do not function in a political vacuum. It takes a lot of time for us to take basic decisions. And furthermore, because we are a federal set-up, there are a lot of things that the central government does, but there are many things, like getting land, getting water, getting electricity – in all these matters the state government comes in, the local authority comes in ….. …. I do recognise that at times it gives our system the label that it is slow moving. In a world in which technology is changing at such a fast pace, where demand conditions change very fast, we need to look at a more innovative mechanism to cut down on this rigmarole of many tiers of decision-making processes.”

Prime Minister Singh added, “We are a coalition government and that limits our options in some ways.”

It is a sad sight: the Prime Minister of the country making excuses. Straight talk would be appreciated, instead of the mealy-mouthed equivocation emphasized above. Say, “our system is slow moving” instead of “at times it gives our system the label that it is slow moving.”

LKY responds to that excuse by rejecting it. He also rejects the notion that because India is a “democracy,” it is slow.

Politics is a fact of life in any country. And coalition politics is a fact of Indian political life.

It has been suggested that India’s slow growth is the consequence of its democratic system of government. Almost 40 years ago, Professor Jagdish Bhagwati wrote that India may face a “cruel choice between rapid expansion and democratic processes”.

But democracy should not be made an alibi for inertia. There are many examples of authoritarian governments whose economies have failed. There are as many examples of democratic governments who have achieved superior economic performance. The real issue is whether any country’s political system, irrespective of whether it is democratic or authoritarian, can forge a consensus on the policies needed for the economy to grow and create jobs for all, and can ensure that these basic policies are implemented consistently without large leakage. India’s elite in politics, the media, the academia and think tanks can re-define the issues and recast the political debate. They should, for instance, insist on the provision of a much higher standard of municipal services.

I agree with LKY. Fundamentally, what we finally achieve is what we are willing to settle for. This true at all levels of organization. As individuals, we pretty much end up where we have set our goals. Our achievements reflect to an unusually large extent what we set out to do. At the aggregate level, the society we end up having is determined by what type of society we desire. It is a cultural thing: the obtained level of corruption, poverty, filth etc is determined by how our culture accepts, tolerates, and takes as normal certain levels of corruption, poverty, filth, etc. It is the tolerance of corruption, poverty, filth that allow them to exist to the extent that they do.

So he says that politicians cannot hide behind the excuse that politics is what explains the poor performance.

By way of example, Chinese politics have always been plagued by factionalism. China also has great regional diversity. Like India, China also has powerful vested bureaucratic interests. But Deng Xiaoping forged a basic consensus among all political factions and the bureaucracy on the economic development and the necessary opening up to the outside world to succeed. A similar consensus can be achieved in India.

Next he goes on to point out that we have some great opportunities which must be taken to their logical conclusion instead of half-hearted implementation.

The passage of the Special Economic Zone (SEZ) Bill by the Lok Sabha (Lower House of the Indian Parliament) in May this year was an important move. SEZs can finesse some difficult internal issues blocking liberalisation. Singapore has some experience with SEZs in China. If India thinks it useful, we are willing to share our experiences with you, building upon what we have done in the Bangalore International Technology Park. I must conclude with a word of caution. SEZs, once embarked upon, must be made to succeed, which means total and sustained commitment from politicians and bureaucrats at national, state and local levels.

When they succeed, they will have a powerful effect on the whole economy, give a boost of confidence and spark off a healthy competitive dynamic between different states and regions. Successful SEZs also will erode opposition to reforms because their benefits become self-evident, as has happened in China.

He concludes this part of his talk with a wonderful example of the mendacity of the communists. West Bengal, once upon a time the most valuable jewel in the Crown, is a basket case, now more known around the world as the “Gutter” (thanks to the tireless working of the “Saint of the Gutters” who enriched her own organization by show-casing the poverty of Bengal). How did this remarkably sorry transformation take place, you may ask. The secret sauce: communists.

A few months ago, in August, the communist Chief Minister of West Bengal was in Singapore to drum up investments for his state offering market incentives to attract investors. He said: “The lesson from the collapse of the Soviet Union and from China is that [India] must reform, perform or perish.” That very same month, members of his own party in Lok Sabha in New Delhi forced a retreat on India’s privatisation programme. This is India’s party politics.

Pondering the imponderables is next on LKY’s mind. He lets Prof Pranab Bardhan speak about the important distinctions which lie at the base of the differential performance of China and India.

There are some imponderables. American commentators believe that China’s political system is too rigid, that it does not have the flexibility of pluralistic politics and democracy with freedom of speech, the media, assembly and respect for human rights. So China will encounter severe problems and setbacks. Professor Pranab Bardhan of University of California, Berkeley, has explained the problem this way:

“China’s authoritarian system of government will likely be a major economic liability in the long run, regardless of its immediate implications for short-run policy decisions.

“But inequalities (particularly rural-urban) have been increasing in China, and those left behind are getting restive.

”With massive layoffs in the rust-belt provinces, arbitrary local levies on farmers, pervasive official corruption, and toxic industrial dumping, many in the countryside are highly agitated.

“China is far behind India in the ability to politically manage conflicts, and this may prove to be China’s Achilles’ Heel.

”Over the last fifty years, India’s extremely heterogeneous society has been riddled with various kinds of conflicts, but the system has by and large managed these conflicts and kept them within moderate bounds. For many centuries, the homogenizing tradition of Chinese high culture, language, and bureaucracy has not given much scope to pluralism and diversity, and a centralizing, authoritarian Communist Party has carried on with this tradition”.

Prof Bardhan’s assessment is that India’s ability to politically manage conflict better than China could be a reason to believe that India holds at least one good card in its hand.

LKY diplomatically states that he believes that China will learn how to manage conflict in time and that it is not realistic to imagine an unchanging Chinese political system. As he says in the conditional below, India will draw ahead in the longer term only if the Chinese make the mistake of not transforming their political structure.

If they are right, India will draw ahead in the longer term.

Such analyses assume that the Chinese political system will remain static. If China’s political structures do not adjust to accommodate the changes in its society resulting from high rates of growth, India will have an advantage because of its more flexible political system in the longer term.

But Bardhan also cautions: “India’s reform has been halting and hesitant. India’s heterogeneous society has been riddled with conflicts, but the system has by and large managed these. There are many severe pitfalls and roadblocks which India and China have to overcome.”

Both India and China are huge countries with vast populations and long histories. They have to evolve standards of governance that is consonant with their cultures and the spirit of their civilisations.

The implicit assumption of that last statement is that Indian and Chinese cultures are different. To me, cultural distinctions explain the varying performance of different groups of people. In some sense, it is a dismal conclusion because it means that to succeed, ultimately one must change a dysfunctional culture, and success is not going to be easy.

At stake is the future of one billion Indians. India must make up for much time lost. There is in fact already a strong political consensus between India’s two major parties that India needs to liberalise its economy and engage with the dynamic economies of the world. The BJP led coalition government of former PM Atal Behari Vajpayee continued and indeed extended the economic liberalisation policies of Manmohan Singh when he was Finance Minister in PM Narashima Rao’s government. India now has a strong, able and experienced team with Manmohan Singh as PM. The time has come for India’s next tryst with destiny.

The first tryst with destiny did not work out as planned, if you pardon the pun. Too much planning can lead to failure of plans. Indian leaders and policymakers have a seemingly hypocritical attitude towards the people. The people are assumed sophisticated enough to figure out who should rule the nation, but they are not smart enough to make simple day to day market decisions; for the latter, they have to have a patronizing government official in charge.

If I were the one making pretty speeches for the next tryst with destiny, I would recommend a few things such as trusting the people a bit more, and trusting the bureaucrats and politicians a bit less.

In the next and final bit I will summarize what I learnt from LKY’s speech.

Reading Lee Kuan Yew’s lecture is edifying at various levels. As an observer, he is incomparable. But he did not merely observe; he hinted at solutions and did so without being rude. You know the Hindi saying, samajhdar ko eshara kafi hota hai (to the intelligent, a mere gesture suffices). Unfortunately, his talk to the Congress and other assorted disciples of Nehru must have been as useful as a bicycle to a fish. Nothing that LKY prescribed for India is surprising or counter-intuitive. Yet it is good to hear it from one who has not only talked the talk but actually walked the walk.

LKY transformed a third-world mosquito infested swamp into a rich developed city state within one generation. An autocrat to the core, he sequenced the changes and orchestrated the development of his city without apologizing for what he had to do. Singapore is one of the least corrupt economies of the world. He made Singaporeans clean up their act, both figuratively and literally. No other dictator has been able to achieve that sort of transformation. It is a random draw from which dictators are drawn. India drew a lousy hand and got saddled with dictators that were incompetent to the core. And staggering from one calamity to another, the country got rid of the dictators and with only a brief break, got a government that is headed by a foreign-born rather reluctantly naturalized citizen of India and supported by a bunch of treasonous communists.

There is sweet irony in LKY delivering the Nehru Memorial Lecture: a successful dictator lecturing the family members of a failed dictator who made a mess of the economy that was so full of promise. Just in case it is not entirely clear, Nehru was a dictator, never mind the fact that there may have been an election. The laws of the universe do not preclude the democratic election of dictators. Adolf Hitler was also elected, and he enjoyed the confidence of the majority just as much as Nehru enjoyed the confidence of the people of the newly minted republic of India. There was no opposition worth its name and Nehru did precisely what he willed.

Based on Nehru’s policy prescriptions, the Indian economy grew at a sorry 2 or 3 percent a year—the aptly named “Nehru rate of growth.” Per capita figures were even more dismal than that because the population grew rapidly. The Nehru dynasty continued to favor policies that kept India locked into the Nehru rate of growth until about 1991. Then economy grew at a more respectable rate but only compared to the Nehru rate of growth. In absolute terms, the “post-reform” growth rate was nothing to write home about. China had been growing for over a decade and at a much faster rate.

Compared to the dismal performance of the Nehruvian socialistic system, anything would look good. But that is not enough. LKY warns that today’s India should stop comparing itself to Nehru’s India. LKY put it thus:

India should benchmark itself not just against its own past, but against the best in Asia. And India can take heart from the achievements and performance of Non-Resident Indians (NRI) in free market economies such as the US, UK and even Singapore, where large numbers of NRIs have assumed high corporate positions in multi-national corporations. {Emphasis added.}

It is important to acknowledge precisely what makes NRIs tick whereas RIs don’t tick. It is a combination of nature (internal) and nurture (external) factors. The successful NRI in the US, for instance, are largely those who are innately intelligent, hardworking, ambitious, well-educated and driven to excel. They were born lucky, worked hard in school, and then ended up in a fine environment which allows and encourages people to do their best and move up. The external – environmental – factors that goes with a market economy is missing in India.

Considered as any large group of humans, Indians are no better or worse than others. There is genetic diversity and variation within the group. A specially selected subset could be constructed with arbitrarily extreme characteristics such as “very successful NRIs.” But the fact that the large group does poorly compared to other large groups is then entirely due to the environment. The environment can be changed but with great determination and foresight, as LKY did to Singapore.

One of the commonest objections I come across is, “Don’t compare Singapore to India. India is very large while Singapore is very small.” First of all, I am not comparing Singapore to India. I am comparing the culture and quality of the governance of Singapore to that of India. The values that are expressed by the leaders of a society are independent of the physical size of the society. Values and standards are thus not like physical goods. The value of not tolerating corruption applies with equal force whether the field is large or small. Just because India is a few hundred times larger than Singapore does not mean that the determination to not tolerate corruption has to be a few hundred times the determination required in Singapore’s case.

LKY then quotes growth statistics which should make Indians hang their head in shame. China is a very large country. So comparing China and India cannot evoke the standard response that is given when Singapore is mentioned in any way with regard to India. Of course, the objection raised is then that India is a democracy while China is not. I have not yet figured out why being a democracy should be a valid explanation for a dysfunctional economic system.

The US, if I have my facts correct, is also a democracy, as are the Western European nations. Their populations do not subsist at the edge of starvation. Of course, all rebuttals to India’s dismal economy cleanly sidesteps the fundamental problem which is that India’s economic policies suck chrome off the bumper of a truck parked a hundred yards away. Open up any newspaper if you dare on any day of the week, and you will see the next asinine brain-dead scheme being proposed by the heirs of Nehru. Yesterday, for example, the government proposes to impose reservations and quotas for private sector jobs. No, not merit or competency—what will matter is if the applicant has the right caste, the appropriate religious affiliation, belongs to the correct vote bank.

Here is a stark demonstration that economic policies matter. LKY reports the differential growth rates of China and India. Were his audience, the honorable head of the Indian government and the Prime Minister Dr Manmohan Singh, paying attention?

Both India and China have both done much better than most of the world. In the decade from 1994 to 2004, India’s GDP grew two-fold from US$310 billion to US$661 billion. But during the same period, China’s GDP grew three-fold from US$542 billion to US$1,649 billion. In 1984, India’s GDP was about 30% smaller than China’s. A decade later, it was more than 40% smaller and by 2004 it was about 60% smaller. Such a wide disparity is unnecessary. India can and should narrow the gap by embarking on a new round of reforms.

Wide disparity unnecessary? Almost nothing that the various governments of India have done have been necessary. Futility has been writ large on each hare-brained scheme that the illiterate narrow-minded bigoted bunch of psychopaths have imposed on the economy.

I have been following the shenanigans of the government of India for a few decades. To quote Groucho Marx, “He talks like an idiot, and behaves like an idiot. But don’t let that fool you. He really is an idiot.” The Indian policymakers behave like idiots, and talk like idiots. Don’t let that fool you. They are actually a bunch of idiots.

Anyway, enough of this rant. Let us go back to LKY. He asks, “Can India keep pace with China’s growth?” and responds, “Yes, if India does more in those sectors where China has done better.”

That statement, ladies and gentlemen, is worth drumming into the heads of India’s movers and shakers. Are you paying attention, Dr Singh?

Where did China do better? Manufacturing. That is where the foundation of a large economy lies. That is where it makes sense to distinguish between a small state like Singapore and a large ones such as India or China. A small economy of only a few million people can get by with only a services sector. But a large country with a billion people needs to have a correspondingly large manufacturing sector. When I say large, I do not mean that it should employ a large percentage of the people. I mean that the value of the production of the sector should be large. Why? Because manufacturing produces goods and it is the availability of goods that make people non-poor. Here’s LKY—

… But India cannot grow into a major economy on services alone . Since the industrial revolution, no country has become a major economy without becoming an industrial power.

Just as China is learning from India to improve its performance in the IT sector, so India must emulate China’s success in attracting FDIs and the jobs they create in manufacturing. It can do this by building infrastructure and educating and raising the skill levels of its workers.

Infrastructure and education. Actually, education is also part of the infrastructure—the supporting foundation upon which one can build an economy. Neglect of primary education rivals the neglect of other infrastructure such as roads, ports, power generation, railways, etc. Many decades have passed since India’s constitution was adopted in which primary education was given priority. Like pretty speeches, it is a non-starter. A very large percentage of Indians cannot read the constitution of India.

Yet—and this is the most baffling puzzle to me—I hear the claim that India is an information superpower endlessly touted by journalists, writers, and even the President of India. Cognitive dissonance on a social level or is it just plain stupidity?

LKY is right in his assessment that a country cannot leap-frog the agriculture and manufacturing stage and go directly to a services economy. He says:

Arvind Panagariya, a professor of Indian political economy at Columbia University, USA, puts the issue clearly. He noted that some have argued that India can focus on IT, grow rapidly in services, skip industrialization, and yet transform itself from a primarily rural and agricultural country into a modern economy. He dismissed such ideas as “hopelessly flawed” and “far-fetched”.

IT is less than 2% of India’s GDP. While services have grown rapidly, the bulk of the growth is from service sectors where wages and productivity are low. Business services, which include software and IT-enabled services, account for only 0.3% of GDP. Only manufacturing can mop up India’s vast pool of unemployed, narrow the urban-rural divide and reduce poverty.

Professor Panagariya concluded:

“The right strategy for India is to walk on two legs: traditional labour intensive industry and modern IT. Both legs need strengthening through further reforms ….”

LKY comes back to the mantra—education and production of stuff. In the manufacturing sector, he notes that reform in labor laws is critical.

India’s relatively young population can be an asset if they are universally well educated. UN forecasts that India’s population will outstrip China’s by 2030. Job creation through faster GDP growth is therefore an urgent necessity. Growth in IT and other services will not create enough jobs. IT-related jobs make up only one quarter of one percent of India’s labour force.

To create jobs the main thrust of reforms must be in manufacturing. That requires a change in labour laws to allow employers to retrench workers when business demand is down , streamlining the judicial processes, reducing the fiscal deficit, loosening up the bureaucracy, and most of all improving infrastructure. Let me focus on the last two as I believe they are crucial and inter-connected.

Industrialisation cannot take off without adequate infrastructure: better roads, and a reliable supply of power and clean water, better ports and airports. By one estimate, economic losses from congestion and poor roads alone are as high as US$4 to 6 billion a year. Another estimate is that the cost of most infrastructure services in India is about 50% to 100% higher than in China. The average cost of electricity for manufacturing in India is about double that in China; railway transport costs in India are three times those in China. China has spent over eight times as much as India on its infrastructure. Three years ago, China’s total capital spending on electricity, construction, transportation, telecommunications and real estate was US$260 billion or more than 20 percent of its GDP as compared to US$31 billion or 8 percent of India’s GDP.

Why do I think that India’s policy makers are incompetent? Because it should be clear to the meanest intelligence that industrialization depends on infrastructure and that that should be a priority. Which part of this simple statement don’t they understand. And if they do, why are they preventing the building of infrastructure? No money to finance the infrastructure? LKY says let the private sector do it.

If there are budgetary constraints , the answer is to privatise these infrastructure projects. There are well established construction companies, Japanese, Korean and others, that have done many such infrastructure projects on franchise terms.

One area where India has done well is its telecommunications infrastructure. This has been a critical factor for India’s IT success. India needs to aggressively privatise infrastructure development and open it to foreign investment. Then FDI flows will increase. And the bureaucracy must not impose onerous conditions that will hamper this privatisation.

Good luck Mr Lee Kuan Yew. Bureaucracy not impose onerous burdens? That is their raison d’etre.

The Political and Economic Risk Consultancy (PERC) based in Hong Kong, recently surveyed expatriate businessmen on bureaucracy and red tape in Asia. India was rated worst out of the 12 countries covered. PERC’s conclusion was that:

“The Government would like to liberalise many sectors, and there are plenty of announcements of new initiatives to do so. But when push comes to shove, bureaucratic inertia has been extremely difficult to overcome.”

Asking bureaucrats to stop throwing spanners into the works is like trying to teach a pig to sing: it cannot be done and it annoys the pig.

The World Bank has also done its own study. It found that in India it can take a decade to close a business through insolvency proceedings. It also found, among other things, that official fees amount to almost 13 percent of a property transaction in India as against just over 3 percent in China.

My secretaries asked Singapore businessmen with investments in India what, apart from infrastructure, they found as major constraints. To a man, they replied it was the bureaucracy.

I am sure that there must have been senior bureaucrats in the audience. Did they feel uncomfortable? Or are they too thick-skinned to understand how much damage they inflict on the nation.

Last year I was at a policy makers’ roundtable in Chennai. The topic under consideration was how ICT can enable development. Lots of hot air was generated by impassioned speeches on how the Internet and the PC would enable rural India to leap-frog development. When it was my turn to speak, I started off with, “First we kill all the bureaucrats.” The bureaucrats at the round table were not amused. Perhaps it was because they did not recognize that it was Shakespeare localized for Indian conditions (“First we kill all the lawyers.”) I continued that bureaucracy ruthlessly strangles with hands of gold the Indian economy and no amount of ICT will change India’s fortunes unless the bureaucracy is fixed first.

OK, maybe I was a bit too blunt. LKY is polite and says it like it is:

They believe it is a mindset problem. The average Indian civil servant still sees himself primarily as a regulator and not as a facilitator. The average Indian bureaucrat has not yet accepted that it is not a sin to make profits and become rich . The average Indian bureaucrat has little trust in India’s business community. They view Indian businessmen as money grabbing opportunists who do not have the welfare of the country at heart; and all the more so if they are foreign businessmen. Deng Xiaoping said at the start of China’s open door policy, it was glorious to be rich. The sequel is reported in Forbes Asia, November 14 2005, where it listed over 300 China’s richest, 40 of them with thumbnail CVs in a centre -fold. All are new entrepreneurs creating jobs and spreading wealth. Now, after private enterprise and the free market have generated wealth in the coastal provinces, China’s leaders have concentrated on spreading growth to the inland provinces by building infrastructure and offering generous economic incentives for investments.

One Singapore businessman told me this story. He entertained a former senior Indian civil servant to lunch in Singapore. Some months later when he was in India, the former civil servant reciprocated by hosting a dinner at which several other guests were present. His host made this surprising comment that he was amazed to see that in Singapore, a business could be successful without being dishonest.

India must find some way to reward bureaucrats who facilitate, not hinder investments and enterprise whether Indian or foreign.

India needs reform in various areas. The most critical area is the bureaucracy. Why India got saddled with a dysfunctional bureaucracy is easy to understand: the British were in India to exploit and extract wealth and created the bureaucracy with that objective. When the British left, the bureaucratic infrastructure was not jettisoned because it was the perfect tool for the “command control license permit quota” Raj which began with Nehru and still impedes India’s progress.

I think I will take a break and get back to the rest of LKY’s speech tomorrow. Au revoir until the next time and the case is sol-ved.

[Continue on to Part 3 of LKY on India.]

He starts off with quoting from Nehru’s famous “tryst with destiny” speech of 14th Aug 1947 which he heard as a young student at Cambridge. I suppose it is de rigueur to quote those lines about “Long years ago we made a tryst with destiny, and now the time comes when we shall redeem our pledge, not wholly or in full measure, but very substantially. At the stroke of the midnight hour, when the world sleeps, India will awake to life and freedom. A moment comes, which comes but rarely in history, when we step out from the old to the new, when an age ends, and when the soul of a nation, long suppressed, finds utterance.”

I must hand it to Nehru—he did make pretty speeches. The problem was not lack of flowery language; it was all about lack of substance behind the form. All talk about stepping out of the old into the new is meaningless if the same structure of bureaucratic control and a meddlesome government is imposed with a vengeance that even the British could not match.

LKY said

The destiny Nehru envisaged was of a modern, industrialised, democratic and secular India that would take its place in the larger historic flows of the second half of the 20th Century.

Nehru never doubted India’s place in the world.

Certainly not. There is little point in doubting the greatness of the country that you feel is your birthright to rule.

LKY

…Nehru’s speeches resonated with me. I shared intellectual and emotional roots with Nehru because I had also experienced discrimination and subjugation under the British Raj and admired Nehru for his vision of a secular multiracial India, a country that does not discriminate between citizens because of their race, language, religion or culture.

Again, Nehru’s vision of a secular country not discriminating among its citizens based on religion conflicts with the reality that he imposed on the country. It was he who set the country on a path where the laws that apply to a person are based on a person’s professed religion, where the privileges you enjoy depends on what your religion is. Want admission in an educational institution? Well, depending on what religion you are, you may or may not get in. If this is non-discrimination, then we are using Orwellian-speech from his novel 1984.

I know that LKY is not ignorant of the real state of discrimination in India. I conclude that he was making a point by highlighting the blatant discrimination in India.

As prime minister, LKY met Nehru twice in India – in 1962 and in 1964. He must have regarded Nehru’s attempt at “scaling the commanding heights of the economy” with bemused contempt. Of course, in his speech he put it rather diplomatically, thus:

Like Nehru, I had been influenced by the ideas of the British Fabian society. But I soon realised that before distributing the pie I had first to bake it. So I departed from welfarism because it sapped a people’s self-reliance and their desire to excel and succeed. I also abandoned the model of industrialisation through import substitution. When most of the Third World was deeply suspicious of exploitation by western MNCs (multinational corporations), Singapore invited them in. They helped us grow, brought in technology and know-how, and raised productivity levels faster than any alternative strategy could.

Import substitution industrialization was stupid and even in those times it was known to be an impractical idea. Many people defend Nehru’s blunder by making the trite observation that he was product of his times and therefore cannot be held accountable for his mistakes. I don’t see what that defense has to do with the price of tea in China. Well, LKY was also a product of his time; he did not give in to the insanity of ISI. I have a theory about why Nehru blundered the way he did, which I have outlined before elsewhere (reference given later.)

LKY then goes on to sugar-coat the pill he administered. He admits that Nehru was all pretty speeches and no substance.

Nehru had a great vision for India and for Asia and his elegant style of writing and speech captivated many young minds in the British empire. He had insights into the causes of India’s problems, but, burdened by too many issues, he left the implementation of his ideas and policies to his ministers and secretaries. Sadly they did not achieve the results India deserved.

Nehru’s ideal of democratic socialism was bureaucratised by Indian officials who were influenced by the Soviet model of central planning . That eventually led to the “Licence Raj”, corruption and slow growth.

Then LKY notes that change was forced on India and that the Congress was dragged kicking and screaming from the clutches of Nehruvian socialism. As a guest, he did his diplomatic best in noting that the first term of Rajiv Gandhi accomplished little.

The end of the Cold War and the collapse of the Soviet Union undercut the strategic premises of India’s external and economic policies. By 1991, with the country on the verge of bankruptcy, India had no choice but to change. Some Indians believe that, had Rajiv Gandhi lived to serve a second term as India’s Prime Minister, he would have pushed for major reform. But he was cut down before he was able to.

Ah, if only Rajiv had another term, surely he would have transformed India. LKY is devastating with faint praise. I bow deep in recognition of the maestro’s skill.

LKY then proceed to list the numerous postponement of India’s “tryst with destiny.”

… In January 1996, I visited New Delhi and spoke to civil servants and businessmen on the changes that Prime Minister Rao and his team were putting into place. I said that India’s ’tryst with destiny’ had been repeatedly postponed.

And the reason for the delay is not hard to figure out. The bureaucrats and the politicians had a wonderful time with the “license control permit quota” raj. With the machinery that Nehru had engineered, they could continue to rob the country with impunity. The racket they had going was –and it still continues to be– too lucrative to give up.

LKY—

When I published the second volume of my Memoirs in 2000, I wrote “India is a nation of unfulfilled greatness. Its potential has lain fallow, under-used.”

I am happy to now revise my view. Nehru’s view of India’s place in the world and of India as a global player is within India’s grasp.

Yes, it is. But the dead hand of Nehru’s socialism has still not released its grip on the economy.

To put the best spin on the numbers about India, LKY as the gracious guest, presents aggregate figures for India and China, not India’s figures alone. For instance he says

… The rise of India and China is changing the global balance. Together they account for about 40 percent of the world’s working age population and 19 percent of the global economy in PPP (purchasing power parity) terms. On present trends, in 20 years, their collective share of the global economy will match their percentage of the global population, which is roughly where they were in the 18th Century, before European colonialism engulfed them.

Reading between the lines, it is clear that India’s figures alone would be too dismal to mention. Then with a caveat, he adds:

… If there are no mishaps by 2050 the US, China, India and Japan will be economic heavyweights , as will Russia if it converts its revenue from oil and gas into long term value in infrastructure and non-oil industries.

India is an intrinsic part of this unfolding new world order. India can no longer be dismissed as a “wounded civilisation”, in the hurtful phrase of a westernised non-resident Indian author (V.S. Naipal). Instead, the western media, market analysts, and the International Financial Institutions now show-case India as a success story and the next big opportunity.

This is a comforting development for the US and the West, that a multi-party India is able to take off and keep pace with single-party China.

I am sure it is comforting the US and the West because India can be a useful counterbalance to China. Being used as an instrument is a relief only in comparison to the alternative of being an inconsequential bit-player in the greater global drama. Again, LKY puts the brightest spin he could manage quoting media reports:

Forbes Asia recently reported that US venture firms will raise US$1 billion for India by the end of this year. India has emerged as a power in IT sector. It is the largest call-centre in the world. Almost half of the largest global corporates now do at least some of their back office work in India. Indian R&D centers of American technology firms are reported to file more patents than Bell Labs. This year, India announced more than 1,300 applications for drug patents, second only to the US and 25 percent more than Germany, way ahead of the UK and Japan.

The US is now courting a nuclear India as a strategic partner. The EU has also launched a strategic partnership with India, and Japan wants a global partnership with India. These are indices of India’s growing weight in the world. Many countries, including Singapore, supported India’s bid to be a Permanent Member of the UN Security Council. Nehru’s vision is within grasp and India’s leaders must realise it in the next few decades.

Sweet vision that Nehru had. I cannot pass on this one without mentioning that India would not have had grovel and be repeatedly humiliated in trying to become a permanent member of the UNSC if way back when Nehru had not in his infinite wisdom turned down the offer when India was asked to join in the first place.

Back to the speech. He compares China and India:

I have always taken a keen interest in both China and India. Like all democratic socialists of the 1950s, I tried to forecast which giant would make the higher grade. I had rather hoped it would be a democratic India. By the 1980s, however, I accepted that each had its strengths and weaknesses and that the final outcome would depend on their economic policies, the execution of those policies, the responsiveness of the government is to the needs of the people, and most of all the nature of the culture of the two civilisations.

… At independence in 1947, two years before the Chinese Communist Party liberated China, India was ahead in many sectors. Both lost steam by adopting the planned economy. But because of its “great leap forward” and “Cultural Revolution”, China suffered more. However Deng Xiaoping was able to acknowledge China’s mistakes and China’s course dramatically change when he returned to power in 1978.

Subtext: China’s leaders learnt from their mistakes and took corrective action. India is still hung up on Nehruvian socialism to make real progress. One should read LKY’s statements very very slowly. They are the words of a person who is not only immensely bright but amazingly perceptive of the nature of the world. Of course I am sure, to the illiterate bunch of corrupt politicians and bureaucrats listening to the man in person, the words carry no meaning. I should mention that the ruling dynasty of India does not have a single university degree among the whole lot of them, starting with the celebrated Nehru whose name graces scores of universities and colleges around the country.

But let’s get on with the China/India comparisons. I read the comparison and wish he would sugar-coat it a bit more; it hurts to be reminded how poorly my country fares compared to China – and recall that China was poorer than India in 1980.

India has a superior private sector companies. China has the more efficient and decisive administrative system.

China has invested heavily in infrastructure. India’s underinvested infrastructure is woefully inadequate. India has a stronger banking system and capital markets than China. India has stronger institutions, in particular, a well developed legal system which should provide a better environment for the creation and protection of Intellectual Property. But a judicial backlog of an estimated 26 million cases drags down the system. One former Indian Chief Justice of India’s Supreme Court has given a legal opinion in a foreign court that India’s judicial system was practically non-functional in settling commercial disputes.

There you have it. Straight from the master’s mouth. A non-functioning judicial system is worthless. It is one of the major reasons for India’s pathetic economy. Economic production and growth depends on the ability to establish and enforce contracts. If contracts cannot be enforced, the cost of trades goes up, welfare losses accumulate, and finally in about 50 years, you have a country with about 300 million people at the edge or below starvation levels.

A poor economy then leads a hand to mouth existence and cannot invest in education. About 400 million Indians cannot even read; about half of Indian children drop out before completing primary school. Here is the comparison:

Both India and China have excellent universities, at the peak of their systems. India’s institutes of technology and management are world class. China is determined to upgrade its top 10 universities to world class status. Overall China’s education system is more comprehensive. China’s illiteracy rate is below 10%, India’s about 40%. India’s narrower band of educated people will be a weakness in the longer term. And although top quality Indian manpower is in high demand, large numbers of engineers and graduates lack the skills required in a changing economy and remain unemployed. However India has a larger English speaking elite than China. But only over half of each Indian cohort completes primary school, a big loss.

After liberalisation, China and India have followed different models of development, maximising their respective strengths. China adopted the standard East Asian model, emphasising export-oriented manufacturing. China has been immensely more successful in attracting FDI. India has focused on IT and knowledge-based services. Job creation is much slower in India and will continue to remain so until India’s infrastructure is brought up to date to attract the many manufacturers who will come to use India’s low cost workers and efficient services.

India’s “low cost workers” is a euphemism for very low average productivity in India. Wage levels reflect average productivity because aggregate wages and aggregate production must approximately balance. Average income therefore reflects average production levels. I shudder every time I hear India’s “low cost workers” trotted out as a badge of honor.

Well it’s time to do the numbers:

China’s GDP for manufacturing is 52%, India’s 27%; in agriculture China’s is 15%, India’s 22%; for services China’s 33%, India’s 51%. Over the last decade, in the service sector India has averaged 7.6% annual growth, China 8.8%, in manufacturing India’s growth is 5.7%, China’s 12.8%.

I see that I have only about half way through the lecture. I think I will stop here and put the rest in a follow up post.

{Go to Lee Kuan Yew on India — Part II.}

There are lessons by the score that one can learn from the Singapore experiment; lessons that could be arrived at through simple logical reasoning in the abstract but made all the more compelling to see it actually work out in practice. The fundamental lesson to my mind is this: policies — well thought out, rigorously implemented, and single-mindedly enforced — have the power to transform.

Where can these well thought out policies come from? From at least two sources at the opposite ends of a spectrum: the mind of a single intelligent person, or the collective wisdom of an enlightened majority of the population. The latter is possible in theory of course just as it is possible that all the atoms of your body will simultaneously jump two feet vertically in unison (physics does not disallow this) so that you spontaneously levitate momentarily but it is so unlikely as to be dismissed unconditionally. An enlightened majority is in the realm of the possible but not in the realm of the probable.

The other extreme — a single person or a small set of people evolving rational policy — is imaginable. Even given the short history of civilization, some examples of this type exist. The founding fathers of the United States, a small group of people, wrote a constitution that lays the foundation for enlightened policy. More recently, it was one person who formulated rational policies and implemented them with single-minded dictatorial vigor. His name is Lee Kuan Yew.

Lee Kuan Yew is one of the most intelligent leaders in contemporary history. The man is a practical genius. The people of Singapore got lucky when in the random draw from which dictators are drawn, they drew Lee Kuan Yew. India, I cannot but note with sadness and grief, drew from the same random draw and came up with Jawaharlal Nehru. Both dictatorial but one a practical genius and the other . . . well, the less said the better.

There are deep contrasts between India and Singapore. Take for instance the degree of corruption that permeates both public and private sectors. According to Transparency International, India ranks 90th (in the company of such nations as Malawi, Mozambique, Nepal, Russia, and Tanzania) while Singapore ranks 5th (led by Finland, New Zealand, Demark, and Iceland) least corrupt country.

The corrosive impact of corruption on economic development and growth is not a mystery, nor was it unknown fifty years ago. Lee Kuan Yew decided on a zero-tolerance policy on corruption. Corruption at all levels of society had to go. The task was to re-invent the whole culture so that corruption had no place in it. That was the first bit: deciding that corruption was history. The next bit is implementation and enforcement.

To root out corruption you can use all sorts of means. You can lecture school children to take an oath to eschew corruption (as in here), you can prosecute a poor milkman for diluting milk (as in here) — that is, basically you can start at the bottom and implement an idiotic policy of targeting marginal players while shielding the really corrupt. Or you can do it by catching the big fish and handing out exemplary punishments and — this is the important point — publicizing it so that anyone who is even minimally aware understands that corruption is not tolerated by the society no matter how powerful the person is.

This is what I heard. A certain minister, very close to Lee Kuan Yew, in charge of housing (or some such) was involved in some kick-backs. The word went around that the guy will surely get off easy since he was in the inside circle. Lee asked the minister to see him. The meeting was brief. Two days later the minister blew his brains out. The message was clear: zero tolerance.

In India we hear of some high-level bureaucrat or politician robbing the public purse blind with sickening regularity. But we have never heard of even one high-ranking corrupt public official or politician ever being punished for his misdeeds. We have a free press of sorts and people get to know about how the most corrupt get away with murder. The notion that it is OK to be corrupt is internalized and soon enough we justify our own petty corruption by referring it back to those high and mighty whose corruption is legendary and who are never punished. We grow cynical and the society suffers as a whole. Our culture erodes and standards of probity and justice fall until we are a nation of petty thieves ruled by mega-robbers.

To re-iterate once again (as they say in the Department of Redundancy Department), you have to have intelligent policy, rigorous implementation and no-exception enforcement to bring about a radical change. Most policies in India don’t meet the intelligence criterion, and those that do suffer from indifferent implementation and half-hearted enforcement.

Crimes other than corruption are also a brake on economic growth. Singapore controls these without a too visible police force. I only saw a couple of cops during my three-day visit. One of the most impressive people I met while in Singapore (who is an alien in Singapore but runs a very successful business) told me of his informal theory about how they keep crime low. He said that he imagines that in the police headquarters they have a huge wall chart where each crime has a schedule of enforcement. So, for instance, “vandalism” may be scheduled for the week of 15th of August. That week they go out and catch a vandal, prosecute him to the utmost, and plaster his picture on the papers and in the write-up use the word “shame” a dozen times.

Prospective vandals, however irregular they may be in keeping up with current affairs, get to learn about the punishment and decide to curb their impulses. But public memory fades with time. So after a suitable span of time, the police will once again catch a vandal and make an example of him. They repeat this same formula with other routine crimes.

The important bit is that you don’t have to have zillions of cops watching every corner for vandal all round the year. You just catch the one every now and then to put the fear of god into the others and thus prevent vandalism from happening in the first place.

Lee Kuan Yew (I like using his full name because there is a certain something, a rhythm to it) must be a remarkable man. My meeting with him did not happen. I am kidding you, of course. But he is someone I would have liked to meet him and bow deep as a sign of my respect for what he did for Singapore.

Apparently little things, things that one may not consider very important or significant in the grand scheme of things, they too have a transformational impact on the society. Litter and garbage on the streets depresses the spirit and instills a sense of hopelessness and helplessness in the society. Lee Kuan Yew fined people who littered so vigorously that Singapore became clean but earned the reputation of being a “Fine City.”

Of course, the litterbug loses significant freedom in the society. He cannot litter to his heart’s content. But if there is a negative externality of following your heart’s dictates, then you have to be made to stop. Not just littering, but religion as well. They have what I call the “Freedom to use, but not the freedom to abuse.”

Freedom of religion is guaranteed in Singapore but freedom to proselytize is not. Proselytizing essentially says that my religion is better than your religion and that if you don’t accept my god as the One True Savior(TM), you will rot in hell that my god has specially prepared for you. This sows seeds of discord in society and soon the newly converted start asking for special treatment and handouts and in the limiting case, when the bunch grows sufficiently large, ask for a separate state of their own because they cannot bear to live with the other people who are destined to go to hell.

So Singapore is strict about proselytizing. In keeping with their policy of discouraging that anti-social behavior, they caught a meek little Catholic lady who was going door to door peddling her religion and threw her into jail after she was found guilty by the courts. Then they publicized the event. This sent the message to all religious bigots who follow the dictates of their own hearts that bigotry is not ok.

They took care of the mullahs as well. Got them together and told them that if they even make a peep in their weekly religious sermons promoting killing and terrorism, they will have their butts in the sling. Live and let live was the message they got and as rational humans, the mullahs got in line. The last time they had communal unrest was sometime in the late 1960s.

No such luck in India, of course. We have Christian missionaries from all over the world having a grand old time converting heathens and soon enough you have the neo-converts pissing on Ganesh idols to show their new-found faith. News gets around and finally out of desperation and plain old brutality, a few missionaries get roasted and this gives the country an ill-deserved reputation of being intolerant. Madrassas funded by Saudi money flourish by the thousands where apparently the mullahs teach the young that killing kuffars is a pretty practical way of arranging society.

In reaction to this ocassionally, a few of the normally tolerant Hindus band together and retaliate. This hits the international press and India is tarred as a society full of murdering morons.

As I was saying, Singapore does not have those problems because they have the enlightened policy of making proselytizing a crime and then enforce it. Lacking the essential bit that leads to religious disharmony, they avoid the entire series of unwelcome consequences.

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The essential important faculty that gives rise to good policy — which our leaders lack — is imagination.

Humans, I imagine, are different cognitively from other things in the universe in their capacity to imagine. We can ask “What if” and think through the consequences of a set of actions that are not yet set into motion. We have to be able to foresee the consequence of our present actions to reach a desired future state. Or by backward induction, we can start at a future desired state and work our way back to what we should be doing today to obtain the future state.

Every chronic persistent shortage you see around you in India is the result of a failure of imagination. (I think that this statement should be elevated to the status of a principle. Here is the one of the first axioms, then.)

In Pune, we have power cuts for about 4 hours a day on average. Pune is a city with a population the size of New Zealand’s population — four million people. It is certainly not an obscure little village in the middle of some god-forsaken forest. Power is not a new-fangled fad whose demand could not be foreseen. The growth of the size of the city and the consequent demand for power could have been easily foreseen and actions taken. Power generation is not an esoteric undertaking which the private sector is incapable of doing. Yet there is a shortage and the economy suffers because some idiot in charge did not have the imagination to realize that more power is needed.

Not so the Singaporeans under Lee Kuan Yew. They learnt to use their imagination. They build capacity before they hit shortage. I hear that they have started building the third terminal at the airport even though the second one is not even up to full capacity.

Compare that to India. First a road gets choked with 10 times the number of vehicles than it was designed to handle. Then the realization dawns on people that the capacity has to be increased. On an already congested road, they start making some changes — for instance a bridge. This take about four years to complete (whereas the same work in a different place would have taken four months). By the time the capacity is in place, the traffic has also increased so that once again it is 10 times what the road can handle.

This reminds me of my email inbox. For the last year or so, I am constantly falling behind — the number of messages sitting there increases monotonically. I am forever trying to catch up.

But enough of my woes. I was going on about how smart Lee Kuan Yew was. He has the best imagination of them all, I guess. Take for example his insistence on air-conditioning. Singapore is a hot and extremely humid place around the year. Without AC, you are bound to be less productive than with it. Air-conditioning makes sense if the cost is lower than the increased income from a more productive workforce. He saw the benefits of AC and implemented it.

I don’t know why but some people just draw good cards from the random draw that is life. Singaporeans are lucky. I am sure there are those who will immediately retort that the Singaporeans don’t have the freedoms that are normally associated with a liberal democracy. And I am also sure that the person making that statement is sitting comfortably well-fed in his nice office or home accessing the world wide web for knowledge and entertainment. For the average schmuck in a third world country, he would any day trade in his imaginary freedoms for a decent shot at a full stomach, a roof over his head, and a chance to get his children educated. After the average schmuck has achieved those basic necessities, he would ask for all sorts of goodies that a liberal democracy provides. And that is when the society should become a liberal democracy.

The sequence is important.

{More about Mr Lee Kuan Yew here.}