Nick's Place

Nicholas Barnard The Economy of Modern India: Response 5/3/2001

In considering the modern economy of India the relationships of the agricultural systems of India what I found most interesting was the continual mismanagement of several aspects of the countries ventures by various British Companies. While these company focused on short term exploitive profits they ultimately encouraged the lack of investment in the development of the Indian agricultural economy.

In agriculture the East India Tea Company's goal was to extract as much as possible with providing the smallest amount of capital investment. This much of the land went uncultivated or was under cultivated. The East India Tea Company's decided that extracting the maximum amount of immediate profits was a far more favorable option than investing the immediate profits back into selling or leasing farm equipment that would have increased the production in India, and thus the profits of the East India Tea Company.

In some ways this desire for unquenched extraction is indicative of the capitalist. A recent issue that would fit the paradigm is the Alaskan Pipeline. But whereas the Indian concerns are economic, the Alaskan concerns are environmental. The pipeline itself was built with some environmental precautions, but most of these precautions existed to ensure the pipeline had the ability to function; only the minimum regard was made for the environment. This resulted in several debacles, the explosion of a pumping station, the need to re-weld many joints, and the notorious Exxon Valdez Oil spill in Prince William Sound. If these capitalists had considered every aspect of the environment they would have tested their systems, and insisted on reasonable safety precautions, including double-hulled ships, and secondary monitoring of ships locations by an outside observer. While these actions resulted in a localized environmental disaster, the Indian mismanagement resulted in the handicapping of the Indian economy.

I also found the management of the Railway system also to be very poor, and another example of managing for the short term. While the investment of building a rail system was a substantial investment, which could have brought continual returns. The railroad did not bring reasonable returns because it was maintained at very poor standards, evidenced by slow trains, long delays in shipment, and cargos that went gone bad. While a wise manager would have examined the problem and most probably determined that a reasonable capital investment or bringing in an outside expert to examine and restructure the rail system would have resolved many of the problems, it was instead determined that the rail company should endure monetary cutbacks. By placing these cutbacks into place and raising rates, while decreasing service, the rail company predetermined that its revenues would fall, thus placing itself into a self-perpetuating negative spiral.

This problem is similar to the ones that were faced by Internet Service Providers and Cell Phone Providers who could choose to compensate for their fixed costs by raising the rates and possibly losing customers and making it harder to recruit customers, or they could compensate for their fixed costs by lowering rates closer to their cost to increase volume and thus spread the fixed costs over more customer traffic, which would create a revenue stream to provide upgrades, which in turn would lead the company toward greater self-sufficiency and profitability.

What was highly interesting to me was the dual disposition of India as both a semi-autonomous republic with its own monetary system, but it also existing as a defacto colony of the British. It appears that the import/export balance continually caused the economy trouble, including credit problems, currency trade problems, and extreme exposure to the farm product pricing fluctuations. The British's desire to develop India as a resource left it venerable to the world market, due to the dependence on trade for all goods with the exception of foodstuffs.

The theme that runs through all of the British actions in India is an overwhelming concern for what is best for the home country without a concern for growing the colony to move it toward self-sustainability that would still be able to support the needs of the home country. While this goal is elusive it exists in a present modern day with Korea, Malaysia, Japan, and other countries. There is a continual balancing act that has been achieved; each country has moderated its imports and exports not to wreck the economies of either country.

What I believe is most troubling is the British organizations willingness to allow India to suffer at the hands of short-term management. If they had insisted on creating long-term viable options India would continue to be a strong trading partner with the United Kingdom. Also there would most probably be improved views of the other nation on both sides.