ORIENTALS IN CALIFORNIA

[In Stanford, I came across AnnaLee Saxenian and read her work on Indians and Chinese in the Californian information technology industry; this column in Business Standard of 22 October 1999 was my first dip into it.]

Silicon Valley

As AnnaLee Saxenian puts it, Silicon Valley is the home of IC – of Indian and Chinese engineers, not the integrated circuit. She has a fascinating story of Asian immigrants into Silicon Valley to tell. Silicon Valley really refers to only two counties – San Mateo and Santa Clara counties, and here too, to the cities along a 50-mile stretch of Highway 101 going south from San Francisco. In 1990 it had a total work force of 1.8 million. Of these, 15 per cent worked in high-technology industries, and a fifth of those were engineers. A quarter of the total work force was foreign; the proportion was 30 per cent in high-technology industries, and a third amongst engineers. The proportion of Asians was 11 per cent in the total work force, 18 per cent in high-technology industries, and 21 per cent amongst engineers. This is a booming region with a buoyant labour market; foreigners fill in those occupations which the local people find unattractive, such as construction labour or taxi driving, as well as specialized occupations that suffer from labour shortages. Mexicans and others from neighbouring countries more typically move into the first type of occupations; Indians and Chinese have been increasingly filling the gaps in the supply of trained engineers.

Within the high-technology industries, Indians and Chinese have a niche. The proportion in 1990 of highly educated people amongst them, those holding a doctoral or MSc degree, was extraordinarily high – 55 per cent amongst the Indians and 40 per cent amongst the Chinese. But they were least likely to be running the companies; only 7 per cent of the administrative staff were Indian or Chinese, and only 9 per cent of the managerial staff. They were more heavily represented amongst the semi-skilled workers (15 per cent), technical workers (14 per cent) and professionals (18 per cent).

Within the respective grades, their earnings were comparable to those of native whites, but somewhat lower. Amongst managers, for instance, a white earned $52500 a year, an Indian $52100, a Chinese $49100, and a non-Asian foreigner $45300 on the average. Amongst professionals the average salaries were $47000 for whites, $45500 for Chinese, $45300 for Indians and $43500 for others. Thus the earnings differentials were not overwhelming, but there were still significant.

These differentials may have partly been due to the fact that the Indians and the Chinese more often have technical or professional rather than managerial or business education. It is also true that they had been in their jobs less long. For 60 per cent of the Chinese and 41 per cent of the Indians in the high-technology industries in 1990 had arrived in the 1980s; 27 per cent of the Chinese and 30  per cent of the Indians had arrived in the 1970s. The proportion of the arrivals in the 1980s and the 1970s amongst the whites was only 4 per cent and 3 per cent. But according to Saxenian, who interviewed many immigrants, they feel that there is a glass ceiling – that they are less likely to be given managerial responsibilities. Older people were more likely to feel this way than younger ones – no doubt since they were more likely to have been passed over.

Those who feel discriminated against, if they have the guts, are likely to launch out on their own. Of the 3392 technology companies in Silicon valley in 1990, 210 were run by Chinese and 50 by Indians. There might have been many more run by them which the Census did not identify because it counted only self-employed persons. More reliable is the count made by Saxenian of high-technology companies started after 1980 and listed by a 1998 Dun and Bradstreet database; of these 2775 companies, 774 had Indian CEOs and 2001 had Chinese. The Indian figure may be a slight underestimate since some Indians have European names. Thus a quarter of the startups were headed by them; they employed 14 per cent of the work force, and accounted for 17 per cent of the sales. The the proportions of Indians and Chinese amongst entrepreneurs is not much higher than amongst professional staff. But they are very important amongst the entrepreneurs of Silicon Valley. The proportion of Chinese CEOs in the startup companies rose from 9 per cent in 1980-84 to 20 per cent in 1995-98; the proportion of Indian CEOs rose from 3 to 9 per cent.

The high rate of Asian startup formation is a comment, not only on the Asian penchant for enterprise, but also on the IT industry and the venture capital industry in this region. The average size of a high-technology company in Silicon Valley in 1998 was 36 persons generating sales of $8.5 million. The average hides enormous variation between a few big firms and thousands of small firms; the typical firm was more likely to employ 5-15 persons. To finance these small firms, there are a large number of venture capitalists. These are typically no financial companies, but individual financiers managing millions of their and other people’s money. They typically attract people with ideas and fund them. They supervise the startups very closely, generally meeting their CEOs once a week. And if they think that the entrepreneur is not delivering, they have no hesitation in replacing him. In other words, startups do often change hands, generally on the intervention of the venture capitalist.

What makes the 1990s so distinctive is the emergence of Chinese and Indian venture capitalists. Social ties have always been strong amongst the two communities; it is common for older immigrants to help out new ones. But now many of the former have formed successful businesses, often sold them out or sold shares and made millions; now there are Chinese and Indians in the Valley who have money and who know the IT industry. They have gone into venture capital funding. Thanks to them, the number of companies being founded by these two communities is likely to take off.

BJP'S RETURN TO POWER

[In 1999, the Bharatiya Janata Party has just formed government, and was brimming with ideas, good and bad. This column from Business Standard of 8 October tried to temper its excesses.]

Making the best of good luck

The Bharatiya Janata Party left office with much bitterness. It blamed fate for having lost power on account of one vote; it blamed the Congress for having pulled it down, and it thought that its performance in government had been poorly rewarded. All this bitterness can now be put behind. The gods have smiled on the Party. Its alliance has a solid majority. The Congress could not dream of pulling it down. It may still be vulnerable to a revolt from a constituent of the alliance. But only the Telugu Desam, Janata Dal and Shiv Sena have the numbers to cause serious trouble, and none of them is quite capricious enough to cause serious misgivings. The Prime Minister can now get down to the business of governing.

As luck would have it, the economy is also looking in good shape. Inflation is at a 20-year low. Industrial growth is looking up. After two years of stagnation, exports are rising again. These are early days of good news, and it may be too soon to start counting its blessings, but the government can afford to be more relaxed about the economy.

The last government had an ambitious finance secretary in Vijay Kelkar. He had planned to bring out a paper together with the February budget outlining a set of second-generation reforms. I had then suggested that the BJP government was short of good news. The budget was going to bring good news; if the Finance Minister presented the reform plans together with it, he would be wasting an opportunity. He would do better to present the reforms paper at the end of the budget session. That way he would be spreading out the good news; and he would be able to incorporate the fallout of the budget in the design of the reforms.

But luck was not with Vijay. The government fell in the meanwhile. The BJP toyed for a while with the idea of presenting the reforms proposal as a first instalment of the election manifesto. But doing so would have reopened the rift between the liberals and the swadeshi backwoodsmen in the party, so the paper was put off. In the meanwhile, Vijay was removed. Now, for the first time since 1991, there is no economist worth the name in the finance ministry. The reforms proposals will be announced with fanfare. But the BJP’s problem has been that it has no one who can judge what is a reform and what is not, or what is important and what is not. So its reforms are in danger of being the kind of mishmash that CII and FICCI nowadays put out – a mixture of the high-sounding, well-meaning, self-serving proposals that are sound only by accident.

I also think that some realism is necessary about what this government is and is not capable of. Vajpayee’s political acumen can only be admired. His party did not make things easy for him. Kushabhau Thakre served capably as a loose cannon. The swadeshi lobby provided the mob. In the sombre days of last winter, it looked as if the enemies within the BJP would do it more damage than the enemies without. However, doctrines do not win elections; moderation does. And Vajpayee is the only leader in the BJP who makes moderation his leitmotiv. He firmly told the Hindu extremists to leave him free to govern; after a determined fight he won. Now, having won the election as well, he has won freedom of manoeuvre which he must use.

At the same time, it must be admitted that Vajpayee is not a master of detail. Recall his forays into foreign policy – his precipitate return when China invaded Vietnam in 1978, his intemperate reaction to Mandela’s well meaning speech last year. Consider even the telecommunications policy on which he has set his heart; what a mess it remains to this day, despite the removal of Jag Mohan! Studying something thoroughly, getting one’s teeth into it, fine-tuning a document – these are not Vajpayee’s strong points. He is best at reaching a balanced judgment and setting a direction.

I think this implies that he should pick a few issues where a major direction-setting exercise is required. In terms of his interests, of his express concerns, three are paramount, namely foreign policy, public enterprise policy, and constitutional reform.

In foreign policy, the Pokhran ceremony made a break with Nehruvian humbug and blew India into uncharted waters. Jaswant Singh has tried bravely to navigate, but something handicaps him. It may be his great country complex; whatever he might tell Karl Inderfurth, India is not a great country. Its share of world trade is 0.6 per cent. Its share of world foreign investment flows is even lower.

This means three things. First, India must increase its presence in the world economy; and that means that the Indian economy must be opened up further. This may be unwelcome to the BJP rank and file and to truly indigenous Indian businessmen; but the way to make the world take India seriously is not by making serious speeches to foreign dignitaries, but by tripling our imports and finding a home in the country for $25 billion of foreign investment. It is not as drastic as it sounds, for imports cannot be tripled without tripling exports, and foreign investment will not find any use unless it goes into export production. But once this is seen as the path to the greatness that the BJP seeks, its implications follow – not only for import duties and advance licensing, but also for WTO, our relationship with the US, and telecommunication and power licensing. Foreign policy has implications for domestic policies in many areas that the BJP needs to face up to – and that Vajpayee must coordinate.

Second, Jaswant Singh’s approach of mending fences with the US and forgetting the rest must be abandoned. Vajpayee has the correct perspective of seeking closer relations with neighbouring countries. I was nauseated by Kapil Sibal’s finding scams in imports of sugar, edible oil and whatever else; he is a party colleague of Manmohan Singh, who should have told him that cheaper imports of mass consumer goods, whatever their source, make the common people better off. I think that Vajpayee was right to try out the Lahore overture, despite what happened later. Eventually India and Pakistan will have to make peace, and that peace will be easier to make if its leaders know one another personally. Vajpayee was also right to promise duty reductions to Bangladesh and Sri Lanka; I only wish he applied himself enough to stop the commerce ministry from sabotaging his initiatives. But the point is broader; we must seek closer relations not only with our south Asian neighbours, but with all our neighbours across the Indian Ocean; and the easiest way of building up relationships is to provide a large and secure market for their production in our country. If we were more closely integrated with the Indian Ocean countries, the world would begin to see us as a regional node instead of the insignificant India.

Finally – and this follows from the first two points – foreign policy involves not just politics, but also economics, society and science. We cannot attract students from abroad if the home ministry continues its vexatious restrictions; the elite of neighbouring countries will not come to India unless we allow them to invest in our stock markets. Thus a liberal stamp must be imprinted on all our policies, whichever ministry they are the concern of. This is where the PMO is crucial; this is where Vajpayee must exercise authority.

The BJP prides itself on having dared mention privatization; but hitherto its contribution has been just a word. It is scared of provoking massive strikes of organized public sector workers if it goes any further. So it has continued with the approach initiated by Manmohan Singh seven years ago of selling public enterprise shares without parting with control. However, seven years have passed; the successful public enterprises, such as ICPL, BHEL or SAIL are now handicapped rather than helped by government ownership. Their trade unions will welcome it if the government loosens its stranglehold. The government should forget its obsession with disinvestments as a money raising device. It should give profit-making enterprises the freedom to issue shares whenever they like, provided they do it through a public, transparent process. When they do, the government should make a commercial decision whether it wants to buy any of those shares or whether it wants to use the issue to unload some of its own shares.

It is the bankrupt enterprises that pose the problem, and that problem will not be solved until the workers are separated from the assets. The only peaceful way is to pension off the workers by giving them a certain number of years’ salary. Once an enterprise is divested of its workers, rational decisions about what to do with its assets are easy.

On constitutional reform, the BJP swarms with stupid ideas like banning Sonia Gandhi from fighting elections. But the reality is that no constitutional changes are possible without the cooperation of the Congress, whereas if the NDA and the Congress agree, almost any constitutional reform can be passed. And it is in the interests of the Congress as well as the BJP to move the Constitution so as to facilitate a two-party system. My preferred solution is a changeover to list-based proportional representation with a cut-off point of 25 per cent. Other options can be thought of. The important thing, however, is to start thinking of big changes – and to bring them about in cooperation with, not in conflict with the major political formations. This is the task for which only Atal Behari Vajpayee is qualified.

MAYAWATI AND BJP

[While Mayawati was one of our least attractive politicians, despite her extravagant dresses, the way the Bharatiya Janata Party tried to deal with her was shameful. This column Business Standard criticized the heavy-handed way the BJP government went about punishing her in 1999.]

Making democracy safe for themselves

The central cabinet has proposed three amendments to the Constitution. The first would overturn the amendment passed under Rajiv Gandhi, under which a member of Parliament or a legislature forfeits his seat if he defies the party whip, unless the defiance comes collectively from a group which has at least one third the strength of the party. Instead, it proposes that the member would forfeit his seat under all circumstances.

The second amendment would restrict the number of ministers to a tenth of the strength of the legislature or seven, whichever is higher. It is not clear whether the strength referred to is the strength of both houses together, where they exist, or only one; just now it looks as if it will be the strength of the lower house.

Under the third amendment, assembly seats would be delimited using the population figures from the 2001 census.

All three amendments are political dirty tricks. First, the amendment that would ban defections. It is really proposed to keep the BJP from shrinking into insignificance – of suffering the fate of the Congress – in UP. For UP today has a chief minister who proudly exhibits a shameless lack of scruples. She has been recorded as telling her MLAs to give a commission to her party from the bribes they would accumulate out of projects financed in their constituencies out of their budgeted quota. For exposing her, she has filed criminal cases against the leaders of the Socialist Party and set the stage for their imprisonment.

She has once before been in coalition with the BJP. At that time she had made a pact with the BJP that she would be chief minister for six months, and then give over the chief ministership to the BJP for six months. She reigned as chief minister for six months in which she made umpteen transfers for consideration that can be imagined, and then broke the pact and the government. The BJP leaders would have to be advanced amnesiacs to trust her an inch. Still, they have taken the state BJP into a coalition with the BSP to share in the loaves and fishes of power.

But in the intervening five years, Mayawati has gained in ambition and guile. She broke the Congress legislature party and lured away half its MLAs by offering them four seats in the ministry; just to underscore the signal that she is arbitrary and hence powerful, she left out the dissidents’ leader in the cold. She is in danger of losing the support of Muslims to the SP because of her cohabitation with the BJP. To prevent that, she has tried to put the leaders of the SP in jail. Although she was elected almost a year ago, she has called the assembly to session only once – when a cooperative speaker declared a vote in her favour without any vote having taken place. Even her most sympathetic observers must wonder: would she stop at anything? If they are in the BJP, they will wonder, will she hesitate to do to the BJP what she did to the Congress – lure away its MLAs, and then throw it away like an empty plastic bottle out of the coalition?

It is that thought, that fear, that has prompted the NDA cabinet to propose that anyone who votes against the party whip must lose his seat. Earlier, the BJP had shown much enthusiasm for a section in the German Constitution under which a government, even if defeated on the floor of the house, does not have to resign unless an alternative government is voted in. Then, when Mayawati showed her colours, the BJP lost its enthusiasm for this provision: if she chose to break the government by unmentionable means, she would arrange well in time to put another government in place.

It is ironic that an amendment to limit the size of ministries should come from a Prime Minister who created the largest ever cabinet in independent India’s history. Why he did so is well known: he wanted to reward as many footling parties as possible so that he could cobble together a majority. Just what Mayawati did when she gave what she felt was disproportionate representation to the BJP in an equally oversized UP cabinet. When it suits the BJP, it would put every MP or MLA supporter into the cabinet to form the government. And it does not have to do that. Narendra Modi has put a number of his MLA supporters into chairmanships of state corporations with ministerial status. That gives them a car, a house and chaprasis, as well as an empire to lord over. And those positions, which are ministerial in everything except in name, would be untouched by the amendment proposed by the NDA cabinet. These politicians are clever. Or they think the electorate is stupid.

And the amendment to delimit assembly constituencies on the basis of the 2001 census is in reality an amendment to delimit them on the basis of the 1971 census. For that census is the basis of the present constituencies; the results of the 2001 census will not be out till the end of this year, so all the state elections this year will be held on the basis of the 1971 election. Why? Because constituencies that have been the strongholds of BJP leaders in Delhi for decades will be redrawn and become marginal. That much is known; the leaders pointed it out to their central leaders. What is not certain, but likely, is that the BJP would get fewer seats in the assembly elections if the boundaries were withdrawn.

But this is nothing compared to a constitutional amendment this government has already got passed: right till the 2036 elections, parliamentary constituencies will remain the same, delimited on the basis of the 1971 elections. Why? Most leaders cultivate a constituency: the Gandhi family cultivated Phulpur and later Amethi, Vajpayee, a true backwoodsman from Madhya Pradesh, has cultivated Lucknow, and Advani, who does not know a word of Gujarati, is in the process of creating a fortress in Gandhinagar. They like the electorate they have cultivated to remain unchanged from election to election. They do not like redrawing of constituency boundaries. So the demographic changes in sixty years will not be reflected in election results till 2036.

I once went to see an ex-Prime Minister in Jamaica. He made me wait, because he was anxiously listening to the radio: there had been a gunfight between his followers and the police in his constituency. What they do over there is to recruit an armed gang; it throws out from a constituency all opponents of the politician – turn it into a garrison. Over here, we do it by “constitutional” means. But the impulse is the same: politicians want to make India safe for themselves, even if they make it unsafe for democracy thereby. They will try their worst to stick on to power – all we can do is to throw them out at the first opportunity. The Jamaicans almost never vote a party back into power.

MY FIRST DAYS IN STANFORD

[I spent an academic year in Stanford in 1999-2000 on an invitation from Anne Krueger. This is the first column from there, published in Business World of 10 October 1999.]

Excess of  prosperity

I have moved to Stanford for some months. I had never spent much time on the west coast of America before. So I have got a chance for a while to look around with wide-eyed curiosity.

The first American one encounters on landing is, of course, the immigration officer. I went to Geneva for the weekend, so I’ve met two immigration officers by now. The first was a young woman in her 20s. She asked me about economics in Stanford. She said she had a degree in economics from Davis (That is the Davis campus of the University of California, a vast state-financed university with campuses strewn across the state); she had been three years in the immigration service, and was thinking of going and doing a doctoral degree.

The other immigration officer took me by surprise. When I told him I was an economist, he asked whether the prosperity of the US economy was due to Greenspan. I said Greenspan had made a very dexterous governor of the Federal Reserve. So he asked who was better, Greenspan or his predecessor, Volcker. That was a difficult one; I said the American economy had done better under Greenspan, but that he had built on an inheritance from Volcker. As I came out, I realized why I had been so surprised. There was, of course, the difference in demeanour: Indian immigration officials are so dour, where the American ones were affable. But more important, the American officials did not see it as their primary job as being to catch the guilty. Quite possibly they were finding out whether I was what I claimed to be; but if so, they did it more subtly and cleverly than an Indian official would.

As soon as you face an Indian immigration official, he starts doing some mysterious ritual behind the counter – placing the passport under laser, punching keys, turning his head one way and another, staring at you for 17 seconds etc. I have tried to talk to some of them. Once one was taking a very long time, and the queue was getting longer and longer. So I went up to him and asked: “Are you on strike or on go-slow?” To my great surprise, he asked me inside his cubicle, and said, “Look! This man’s name is Gurmeet Singh. I look up Gurmeet Singh in the computer, and I find 17 of them. So I punch in his father’s name, and I still get five names. So I punch in his village, and so on until I am sure that he has a valid passport.” The fact is that the software he was using had been designed years ago by National Informatics Centre; it was outdated, and bogged him down in time-consuming fingerwork. So he faced long queues, and could never take time off to chat with or study his victim.

The next thing you notice is the labour shortage. There are no taxi stands. You ring for a taxi, but it will take at least a quarter of an hour, often longer, for one to arrive. The chances are 99 to 1 that the taxi driver will be a foreigner and will not know his way around – I have picked up a Russian, a Jamaican and a Ghanaian till now. The Russian did not like America; people had no warmth here unlike in Russia. The Nigerian had lived opposite a single woman for a year and a half, but never talked to her for fear she might misunderstand his overtures.

And there is a shortage of hotel rooms. I was locked out of my apartment. First I tried to get help from neighbours, but it was some time before I could find one who would open the door. He would not let me in, but obligingly called a taxi for me. I asked him to keep my bag overnight, but he refused: there may be something valuable in it, and I may accuse him later of having stolen it. I went to one hotel after another. Except in upmarket Sheraton, all the people at the counter were foreigners – Gilbert from the Philippines, Praveen from Fiji, and a man with an indefinable accent, probably from some British colony. After a considerable search, I found a vacant room for $250. Next morning, Christina ordered a taxi for me, but said it would take at least a quarter of an hour, and advised me to take the first taxi that came.

I went to a bookshop; there was an express queue for customers who had fewer than five books. There, Jane at the counter said, “Where did you get this Blue Book (Blue Book is a 400-page used car guide which gives the valuations for all the cars, vans, and trucks sold in the US since 1984)? I never knew we had it.” So I asked her advice about which car to buy; she went through all the reasonable options and came down to her own car, a Volkswagen Jetta, which was the best. She had got it when they were three; now they were five, and it was getting a bit small, but she loved it. Here was a young mother of three young children working eight hours a day. She needed to work and supplement the family income if she wanted to live in this very expensive region. But there are jobs for everyone like her.

And why should she want to live here? Because it is heaven on earth. The temperature is in the higher 20s (in the 80s as they say here), the sky is a clear blue, the sun is so bright it almost hurts, the air smells of eucalyptus and cut grass. The children still grow up naturally here; no shootings in schools. Even Indians think this is a good place: not just software engineers, but taxi drivers as well.