NYTimes: “There are three justifications for industrial policy, each based on correcting a failure of the free market. One is that companies left to their own devices invest less than is socially optimal because they capture only some of the benefits; targeted measures to increase their investment can benefit all. Another justification is that private companies don’t manage to coordinate their efforts in a way that is good for all; the government can be the coordinator. Third, private companies require certain inputs that only government can reasonably supply, such as a highway to a port. Up against these three positives are the two negatives, namely the risks of government incompetence and regulatory capture.”
David Brooks: “China’s industrial policy illustrates the classic downsides of excessive state interference. Even the vaunted German model, one of the great success stories of the 20th century, is showing its age. German manufacturing output and gross domestic product have been stagnant since 2018. American politics is dysfunctional, and our social fabric is in tatters, but somehow our economy is among the strongest in the world. Our economic competitors stumble and fall; we stumble, and somehow bounce back.”
Business Standard: “In 2008, the World Bank published a study on the post-World War II growth experience. The study was conducted by a team led by Nobel Laureate Michael Spence. Three points made in the study are worth highlighting. Growth of over 7 per cent, sustained over 25 years, was unheard of until the latter half of the 20th century. Only 13 economies managed this feat after WWII. (Of these, about half were small economies whose experiences are not particularly relevant to India). Growth of 7 per cent became possible because the world economy was open and integrated and offered a large market for exports. Clearly, sustaining high growth over a long period is a tall order, and this happens only when global conditions are favourable. The problem for India is that world economic conditions have turned distinctly unfavourable.”
Venkat Atluri on the ecosystem economy: “An ecosystem is a community of interconnected digital and physical businesses that come together, sometimes across traditional sectors of the economy, in the interest of providing customers what they want, when they want it, and in the form they want to consume it. This is typically enabled by businesses sharing assets, information, and resources, as a result of which they create value beyond what they could have achieved individually...Ecosystem-oriented businesses typically start with customers—how do we create more value for customers?—while conglomerates tend to focus on diversifying their portfolios, bringing together sometimes loosely related or unrelated businesses. Secondly, ecosystem-oriented businesses usually anchor on a digital or physical platform and develop relationships with other companies around that platform. You see less of that in conglomerates. Thirdly, ecosystem-centric businesses tend to expand the pie and share it with their ecosystem partners. It’s also worth noting that ecosystem-oriented businesses are usually more profitable than conglomerates and a few players tend to capture much of that value.”
