Scientists speculate that Nature sends viruses to stop other things growing too fast which are threatening the health of the whole system while caring for their own health only. David East and Martin Kaspar state, on UNIDO’s Industrial Analytics Platform, that “The current model of globalisation, particularly global supply chains, seems to be under threat of a radical reconfiguration”. Unbridled globalisation was threatening the well-being of societies and the sustainability of the natural environment and Covid-19 has stopped it from spreading any further.
Physical lock-downs to contain the spread of the virus have broken up global supply chains. Businesses, as well as humans, are being compelled to find their resources locally. A ‘Vocal for Local’ movement, which was growing for various reasons before Covid, including geo-political tensions as well as societal resistance to the neoliberal model, was described as retrograde by the ‘Vocal for Global’ lobby. Local has now become a necessity for business as well as human survival.
What is surprising is that, even though there is much clearer evidence now that the model of globalisation which was founded on more trade across borders is not sustainable, eminent economists continue to defend it. They continue to dismiss the arguments of those who have been proposing another model based on growth of local capabilities as anti-trade, and even lable them as anti-‘progress'. For years, those who have been proposing the other view have been pointing out that unless people everywhere are able to improve their own conditions, overall human well-being will not be improved. These people explained that human well-being is improved when citizens are able to stand on their own feet, and can live and earn with dignity. Economists have pointed out that Ricardo’s foundational thesis of competitive advantage works only in a static world in which countries, enterprises, and individual human beings cannot build new capabilities to improve their competitive advantages.
Economic history has disproved a foundational premise of free trade theory. Nations have grown, through history, by learning to do what they could not do before, and doing it better than others. Japan, after the War; China in the 21st century; the US in the 19th and 20th centuries; etc. Industrial nations, unlike natural resource rich nations, are not born with competitive advantages; they develop them.
The simplistic free-trade theory fails in a dynamic world, in which humans, businesses, and nations aspire to progress and improve their abilities. It must be supplemented with theories of how humans, businesses, and nations, learn new capabilities. And, since humans, businesses, and nations will compete, the only sustainable competitive advantage of businesses and nations is their ability to learn faster than any potential competition. Therefore, an ‘industrial policy’ focused on increasing capabilities of humans and businesses within the nation is imperative for the survival of the nation and the well-being of its citizens. This is atmanirbhar.
There is continuing conceptual confusion amongst some of India’s policy-makers and their advisers. While they are beginning to recognise the need for atmanirbhar (which for India has become more urgent because of the China threat) they continue to propound the necessity for Indian businesses, even small ones, to become connected with global supply chains. There is nothing wrong with taking advantage of global supply chains. However, they will hardly provide India and its businesses large channels for growth in the next two decades.
India must grow 'local supply webs’, radiating outwards as far as geopolitical boundaries and trade barriers will allow them to spread. The authors of the UNIDO paper say a shift in business and national economic strategies is required away from cost-efficiency, which global sourcing enabled, to increases in market focus. ‘Europe for Europe, Asia for Asia’, they say. ‘India for India’, we may add.
India has the potential to be a large market, and an engine of growth for the whole region. It will be a large market when more of Indians earn higher incomes. For more people to earn higher incomes, they must produce something that someone else will buy. Markets will be more local, and production will also be more local, in the new post Covid world. India needed an employment policy with an industrial policy ever since it embarked on its trade liberalisation path in the 1990s. Sadly, those who have been proposing such policies were dismissed as ‘protectionist’, ‘backward looking’, and anti-trade' people. It is time to listen to them.
For nations to become competitive with other nations, it is not sufficient to develop a few, large, world-class companies. Industrial ecosystems within countries, comprising of webs of small and large, and formal and informal enterprises, must compete with ecosystems in other countries. Indeed, large companies from a country cannot become competitive unless they are sustained by a competitive ecosystem. Therefore, large companies must nurture small domestic companies, and all of them must nurture the human beings who work in them. Human beings are the only ‘appreciating assets’ any enterprise can have. Because they have the ability to learn new capabilities if they are given opportunities to work and learn. Fortunately, India is abundantly endowed with humans. They will be India’s source of sustainable competitive advantage when India reorients its policies to nurture the growth of local economic ecosystems.