Merits of good microeconomics — India proves Porter right
Competition among firms and the spectacular economic performance in recent years is principally the result of good microeconomics by the government. Firms have responded to the `new' microeconomics. Prof Michael Porter could choose to showcase India and India Inc. as proof that national wealth is actually created at the microeconomic level, says G. Ramachandran.
"Developing countries, again and again, are tripped up by microeconomic failures... countries can engineer spurts of growth through macroeconomic and financial reforms that bring floods of capital and cause the illusion of progress as construction cranes dot the skyline... Unless firms are fundamentally improving their operations and strategies and competition is moving to a higher level, however, growth will be snuffed out as jobs fail to materialise, wages stagnate, and returns to investment prove disappointing... India heads the list of low-income countries with microeconomic capability that could be unlocked by microeconomic and political reform."
— Michael Porter, of Harvard Business School, in Enhancing the Microeconomic Foundations of Prosperity: The Current Competitiveness Index, September 2001.
CONSTRUCTION cranes have yet to dot the skylines of India's metropolises but they soon will. However, firms have fundamentally improved their operations and strategies. Competition among firms has moved to a higher level, and the spectacular economic performance in recent years is principally the result of the practice of good microeconomics by the government.
There is compelling evidence to show that firms — the big, publicly-traded firms and the small, privately-financed ones — have responded to the `new' microeconomics. The merits of good microeconomics have begun to show up. Professor Michael Porter could choose to showcase India and India Inc. as proof that national wealth is actually created at the microeconomic...