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The
town and village industries, which are the counterparts
of our small and village industries hold the key to
Chinese competitiveness, says Susmita Dasgupta, Deputy
Chief Economist, Economic Research Unit Joint Plant
Committee.
Michael
Porter, the guru of corporate competitiveness has taught
us about how to think about the issue. Porter says that
competitiveness does not lie in either cheap inputs,
or natural endowments or in the level of infrastructure.
Competitiveness is not a feature of any technology or
of any policy parameter - it is a behaviour under a
set of prearranged circumstances, a behaviour which
optimises results in any given situation. Through numerous
country and industry studies, Porter established that
while no amount of resource advantage contributes to
industrial competitiveness, the strategies of marketing,
direction of innovations and relationships with supplier
and user industry indeed do so. Competitiveness is a
result of human involvement in production, relations
of exchange in society and an outcome of very sharp
strategic actions rather than of adverse or of enabling
environment, whether economic, or policy or even natural.
China's rise to a very competitive nation illustrates
this point.
The
problem before us is the growing competitiveness of
the Chinese industry. Long known to be a totalitarian
country with economic corruption, localism, extortion,
indiscipline, bureaucratic inefficiency and an utter
inability to handle famines and floods, China, today
threatens to run over half the known world through its
standardised and cheap products. Yet, nothing has happened
in China which can explain this phenomenon with the
straight forward laws of economics. When China liberalised,
it did not give up government controls over new investments,
and when it invited the foreign investors, they were
given no operational autonomy since all their work had
to be done through the local Chinese. The Chinese economy
faced demand recession immediately after liberalisation,
its firms complained of very high rates of interest
and the government not only lost much of its revenue
base but it faced an increasing difficulty in collecting
revenues so that most of its investments were put on
hold. Yet China prospered. |
