CBERInternational Journal of Business & Economic Development (IJBED)
After many years of socio-economic and political turbulences, the world economy started behaving in an orderly way following the Second World War with the establishment of UN, GATT and other world bodies. That was also the time that the distribution of world resources began to take a highly inequitable form, more in favour of the rich- the industrialised world guided by forces of capitalism and hence the private sector business. Most of the LDCs remained unresponsive. They were mostly poor and yet got bogged down to socialist principles that they thought would be invincible in their move to progress. While the world economy grew at a rapid pace during the 60s onwards, the world of the poor grew at a measly 3% or so, out of this much was eaten away by the population growth. Similarly, world trade grew at an amazing pace, yet the developing countries' share fell. For example, during the post-independence period, India had as much as 6% share in world trade, but its share has rapidly fallen over the years.
But there were exceptions too - the South East Asian countries, for example, led by the magic wand of entrepreneurship and supported by the government’s policy framework. Those countries saw this burgeoning world trade as an opportunity and benefited immensely. The response was robust, having taken the challenges head-on, benefits naturally followed.
Then, of course, China appeared on the scene in the 70s when capitalism replaced socialistic principles in matters pertaining to economics, the latest to go on the show is India, when much of the economy was thrown open to competition in the 90s. The economies in all these countries have benefited from a highly diversified business sector, more so in China than others.
In the end, for development to take shape, the response from business in respect of quality is, therefore, of crucial importance. In line with the model of development put forward by Porter, moving forward, to start with, from a factor driven stage to investment driven stage, and then to the stage of innovation, is mostly a function of the quality of resources employed. The developing countries are experiencing it. Where the quality of response is high via resource quality, both at individual (entrepreneurship) and govt. level, the steeper gradient of production becomes easily visible. If we look at the DCs, the same scenario again. America is in a less advantaged shape today, we all know. It might have been more awful, had not the policy making body gone for the supply side rationalisation. Britain would have been in a much poorer shape today, had it not been for the conservative govt. to restructure the economy and increase the level of quality in business in the ‘80s, although a think tank had suggested reformulation of business strategies i.e. - move away from heavy industry bias- way back in the 60s that had gone unheeded.
All said and done, managerial practices aiming at economic development today are a product of capitalism, but it has an ugly face. True, but it needs good governance to employ the energy that it releases to the cause of the society’s welfare for the larger community and not for the few – as Scandinavian experience well demonstrates.
The lessons to be learnt are several. First, hard core socialist economic principles do not work. They are palatable in theory, unworkable in practice. Soviet Russia and China are witnesses and most recently Castro’s Cuba. Democratic India tried it and experienced miserable growth rates. Businesses do not respond favourably to these initiatives. Secondly and a crucial one is that without the creation of an accommodating and friendly environment , businesses would not flourish to their full potential and that the stage would not be set for the interplay of factors central to Porter’s Diamond depicting the economic advancement of the society. Finally, the most important, there must always be a process of business restructuring – old must give way to the new and conditions must be created for this to happen if economic development is not to be undermined, for this to happen, innovation, creativity and technological advancement must always be taken forward failing which the economy would crumble under pressures of macroeconomic instability coming from inflation, unemployment and unfavourable balance of payments.
All these bring us to the point central to this journal that business, in all its facets - production, marketing, finance, human capital, organization etc. at operational level supported by a conducive policy environment - and economic development complement each other. The linkages between the two need proper focus, for the cause of ‘development’, of course, the issues of productivity, efficiency and equity have to have their respective weights.
There is scope for many controversial issues. For instance, whether there should be promotional efforts devoted to large business interests or the SMEs. Can development models be copied or should they always be country specific? What is the World Bank’s stand on this? These are just a few to mention. Academic journals should encourage these debates that is the very basis of intellectual progression.Visit Website