Tough to steer these ships ...
I am fascinated by the similarities between countries and companies.
Larger countries (in terms of the size of their economy), like large companies have some inherent advantages and disadvantages.
The most important advantage is that their size and the resources at their disposal act as a significant barrier to entry to other companies/countries (co/co's). Huge marketing budgets, huge R&D budgets, a well-known brand and the ability to attract and retain talent make large co/co's extremely difficult to unseat.
On the other hand though, the very size of these companies is sometimes a disadvantage. It is of course, much easier to turn a smaller ship than a larger one. And the sheer size of large co/co's makes it more difficult and costly to implement changes.
For example, a corporate restructuring at General Motors would be much more expensive and painful as compared to one at a much smaller company like eBay.
Similarly, the costs of making changes in a developed country as against a developing country is larger by a degree of magnitude.
Lets assume that a new technology for roads was invented that is vastly superior to existing ones. How much would this cost per mile in the US as against India, for example ?
The cost/mile constructed in India is $1.4 Million - 4 lanes
Cost/mile constructed in the US is $12.4 Million - 4 lanes
And the Indian figure is from the Golden Quadrilateral project, with road quality at acceptable quality standards.
Even if the quality of US roads is considered to be twice the Golden Quadrilateral roads, the cost is about 4 times India.
Similarly, if it would cost $200 Billion to re-build New Orleans, it probably would be much, much cheaper if an equivalent Indian city was destroyed.
I think the high costs in developed countries will ultimately end up making infrastructure costs higher and higher to the extent that developing countries will be able to catch up very quickly, because of their lower base costs.
Its simple economics - And in a truly free world market, no country would ever remain the richest for more than a few years because the other countries would be cheaper places to build newer infrastructure.
Larger countries (in terms of the size of their economy), like large companies have some inherent advantages and disadvantages.
The most important advantage is that their size and the resources at their disposal act as a significant barrier to entry to other companies/countries (co/co's). Huge marketing budgets, huge R&D budgets, a well-known brand and the ability to attract and retain talent make large co/co's extremely difficult to unseat.
On the other hand though, the very size of these companies is sometimes a disadvantage. It is of course, much easier to turn a smaller ship than a larger one. And the sheer size of large co/co's makes it more difficult and costly to implement changes.
For example, a corporate restructuring at General Motors would be much more expensive and painful as compared to one at a much smaller company like eBay.
Similarly, the costs of making changes in a developed country as against a developing country is larger by a degree of magnitude.
Lets assume that a new technology for roads was invented that is vastly superior to existing ones. How much would this cost per mile in the US as against India, for example ?
The cost/mile constructed in India is $1.4 Million - 4 lanes
Cost/mile constructed in the US is $12.4 Million - 4 lanes
And the Indian figure is from the Golden Quadrilateral project, with road quality at acceptable quality standards.
Even if the quality of US roads is considered to be twice the Golden Quadrilateral roads, the cost is about 4 times India.
Similarly, if it would cost $200 Billion to re-build New Orleans, it probably would be much, much cheaper if an equivalent Indian city was destroyed.
I think the high costs in developed countries will ultimately end up making infrastructure costs higher and higher to the extent that developing countries will be able to catch up very quickly, because of their lower base costs.
Its simple economics - And in a truly free world market, no country would ever remain the richest for more than a few years because the other countries would be cheaper places to build newer infrastructure.
Comments
Ashish's Niti
If you google "comparative advantage" you will much better articles and posts.
Good comparison, which probably works in our favor when it comes to IT sector, but economy is a circle. For roads to be constructed, tax has to flourish, and companies have to flourish, which again depends on infrastructure. I guss this (vicious) circle introduced quite a lag before countries are in a popsition to catch up...
Thats exactly right !