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Its a fat world, ater allBy Thomas L. Friedman

Globalization 1.0 (1!"#1$00% shran& the world rom size lar'e to med.ynami) or)e was )o*ntries 'lobalizin' reso*r)es + imerial )on-*est

Globalization ".0 (1$00#"000% shran& the world rm size med#smallsearheaded by )oy 'lobalisain' or m&t and labo*r

Glob .0 ("000# % shrin&in' the world rom small to tiny + le/elin' the

layin' eld. o*ntries 'lobalizin' )oy 'lobindi2small )oy 'lob

3*ro2amedi/erse 'ro*

4nyone )an rea the benets o 'lobalization now with internet,te)hnolo'ies that enable meetin's to be held witho*t needin' to be hysi)allyto'ether.

5ow did world be)ome fat6 Thro*'h 10 e/ents rm 1!!0s to "000.112!berlin wall )ame down whi)h allowed *s to thin& o the world as a sin'lesa)e. $2! 7 ! 4*' 1!!8 when 9ets)ae went *bli), allowed browser to dislayima'es +data stored on websites + sto)& o:erin' tri' dot#)om boom whi)h

be)ame a b*bble and res*lted in assi/e o/erin/estment in ber#oti) tele)om)ablemin )ost o trans /oi)es, data and ima'es to 0a:e)ted india a lotwor&fow re/o*tso*r)in', o:shorin', inso*r)in', oen#so*r)in', s*ly#)hainin', inormin'wireless a))ess and ;oI< (t*rbo)har'e these new orms o)ollab so yo* )an do any one o them anywhere with any de/i)e. 1!!0s, l o)hina, india, =*ssia, eastern 3*roe, latin ame and )entral asia all in)r ree to

>oin ree mar&etdidnt e/en ha/e to lea/e home to arta&e.

10 or)es enable )onne)ti/ity + )ollaboration at a distan)e are ?fattenin'the 3arth + le/elin' the eld o )ometiti/eness.

9o '*arantee that ame2western e*r will )ont to lead the way.

Flattenin' o the world means the world is )han'in' in ways that re- ameto ste ba)& and re#e/al*ate how they )an ma&e the best *se o this sit*ation.@sin' ta)ti)s whi)h were s*))ess*l re/ mi'ht not be s*))ess*l now.

B*ildin' stron' stateb*ildin' stron' indi/id*als

Aol*tion m*st be o*nd themsel/es as ame ha/e basi) e)on and ed* toolsto do that.

risis d*e to 'as (1%4mbition 'a#yo*n' ener'eti) Indians+)hinese /slazy ame ("%9*mbers Ga C ins*D)ient en'ineers +s)ientists (%3d*)ation 'a#o*tso*r)in' to 'et better#s&illed+more rod*)ti/e l than ame wor&ers.

Ehy the world isnt fat

By Ghemawat lose loo& at data re/eals !0 o all hone )alls, web traD), in/estment

is lo)al.

Few )ities tht dominate inter nan)ial a)ti/ity C Fran&*rt, 5on' on',London, 9ew Hor& are at the hei'ht o modern 'lobal intera)tion, all well)onne)ted to ea)h other.

?10

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ser/i)es C HandeJ. Ehat is hinderin' 'oo'le rom eJandin' into =*ssian m&ts6Lin'*isti) )omleJities.

or di:*sion o world te)h in ro'ress+ tht western nations are losin' their trad ad/ there are still te)h 'as anda)t*al )aital fows to de/eloin' )o*ntries in the 1!!0s ha/e been small ha/in''one to latin ame instead. ("% worlds e)on )entre o 'ra/ity will shit to the 4siannations o the western a)i) (% 4sian s*))esses demonstrate the s*eriority oe)onomies with ewer )i/il liberties + more lannin' than the west is willin' toa))et

3)on 'rowth is the reward or eJtraordinary mobilization o reso*r)es,

deerred 'rati)ation, willin'ness to sa)ri)e )*rrent satisa)tion or *t*re 'ain.

Aystemi) ;*lnerability + The ri'ins e/elomental Atates 9ortheast 4ndAo*theast 4sia In omarati/e

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a)tion KKITK39TAQ ("% hei'htened need or orei'n eJ)han'e and warmaterial ind*)ed by national se)*rity PA3;3=3 A3@=ITH T5=34TAQ (% hardb*d'et )onstraints imosed by s)ar)ity o easy re/ so*r)es PA4=3 =3A@=339EK39TAQ .(1% R ("% R (% S systemi) /*lnerabilitye/elomental states emer'e when oliti)al leaders )onront )onstrainedoliti)al en/ironment and are not hi'hly a*tonomo*s entities

9I# Ain'aore, Taiwan, Ao*th &orea enhan)ed ino fows within + btwnte and *bli) se)tor. B*rea*)rats 'i/en the oliti)al )lo*t to ma&e )redible b*t)onditional )ommitments + withdraw to s*ort rms that *nderer desite wthe hel rom the state and to 'i/e hel to rms to )omete w 'lobal ri/als inmore )hallen'in' e)on a)ti/itiesin)r ino fow and the resol*tion o)ommitment rob hel states )oordinate m*ltile a)tors and *rs*e LTob>*'radin' C 'rowth in lo)al inno/ation )aa)ities, lower#/al*e to hi'her/al*e e)on a)ti/ities within the 'lobal )ommodity )hains)ombination o eJortromo+ind*strial deeenin' ;A 4A349# (Kalaysia, Thai,

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and some in)rease )ost#)ometiti/eness6 ("% 3Jternal Threat how war ma&esstates 'enerate re/en*e (% =eso*r)e ometition =asiah ar'*ed that nat*ral#reso*r)e eJorts red*)ed s)al ress*re on the 4A349# to romote)omlementary instit*tional + lin&a'e de/eloment b*t this )ant a))o*nt or instdi: between )o*ntries w similar reso*r)e endowments. 5a/e to loo& at whetherstates are re/#maJimisers2satissers whi)h deend on )oalitional + 'eooli)it)al)onteJt they are or)ed to oerate

Aystemi) /*l broad )oalitions + eJt se)*rity )laims on nat*ral reso*r)esress r*lin' elites to be re/#maJimisersthey ha/e to romote 'rowth, in) li/in'standards + *'rade lo)al reso*r)es. =*lin' elites ha/e to set * stron'instit*tions to deal with these C s&ills *'radation, ed*)ation, ens*re ty ri'hts,est ma)ro stability, so)ializin' ris&s o new in/estments and these new oli)iesneed to be bo*'ht in by n*mero*s arties. Instit*tions in this )ase need to )ome* with broad de/ ob>, a)il ino fows within state a'en)ies + betwn oD)ials andte a)tors re'ardin' m&t re-, monitor rm er and be )redible in terms o)ommitment to e)on oli)ies + willin'ness to eJa)t re)iro)ityEeberianb*rea*)ra)ies led by ilot a'en)ies ?embedded in or' sets o ri/ate interests

A&orea + Taiwan r*ral de/ + imort s*b (early to mid 1!80s%labo*r#

intensi/e eJort romotion (late 1!80s to early 1!0s% ind*strial deeenin' +*'radin' (early 1!N0s%. Aide mt too& the orm o wealth#sharin' me)hanismsin r*ral de/ + ed*)ation I.e. land reorms to 'et s*ort rom easants.

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emo)ra)y )an hel to in)rease *bli) ro/ and imro/e inst er only iit is in interests o oliti)ians. therwise , oliti)ians )an reser/e ower witho*tdeli/erin' side mt C

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Eor& borrowed rom "001 4)emo'l*, Mohnson + =obinson, 1!!! Me:reyFran&el + a/id =omer to )at*re /ariation in the determinant that is eJo'eno*sC international trade + instit*tional -*ality

=e'ression analysis showed that insti -*ality always had R/e + si' e:e)ton inte'ration ( trade% while inte'ration also has a ositi/e ima)t on inst-*alitytrade )an ha/e indire)t e:e)t on in)ome by imro/in' insti -*ality

Tyes o instit*itons (1%Kar&et#)reatin' C rote)t ty ri'hts and )ontra)t

enor)ements. Eitho*t them mar&ets )ease to eJist2er oorly ("% K&tre'*latin' C deal w eJternalities, 3A, imere)t ino e.'.tele)om, transort, ns/)s (%K&t stabilizin' C ens*re low infation, min ma)roe)on /olatility, a/ert n)risis e.'. )entral ban&s, eJ)han'e rate re'imes, s)al2b*d'etary r*les (%K&tle'itimizin' C ro/ide so)ial rote)tion, ins*ran)e, redistrib*tion and mana'e)onfi)t e.'.ension systems, so)ial *nds. ("%,(% +(% needed to s*stain the'rowth moment*m, b*ild resilien)e to sho)&s and a)ilitate so)ially a))etableb*rden sharin' in resonse to s*)h sho)&s.

Ka&e instit*tional )hoi)es by id in)enti/e e:e)ts o alt arran'ements +rele/ant tradeo:slar'e role or *bli) deliberation and )olle)ti/e )hoi)e withinso)ieties. ro'rammes are slow otherwise eJe)tations wo*ld be*nmet. 4lso, i instit*tional -*ality is the main so*r)e o de/, m*st )han'e*nderlyin' instit*ions in at way or oli)ies wo*ld be ine:e)ti/e. Aho*ld nd theri'ht instit*tional re)onditions rather than mi)romana'e o*t)omes whi)h iswhat @A Killenni*m hallen'e a))o*nt is doin' and IKFs o/erty red*)tion

strate'y aer (

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Instit*tions Katter, B*t 9ot For 3/erythin'. The =ole Geo'rahy + =eso*r)e3ndowments In e/eloment Aho*ldnt Be @nderestimatedBH Me:rey .Aa)hs

@sin' instit*tions as a sin'le reason to eJlain or in)ome le/els is all*rin'be)a*se (1% 4ttrib*tes hi'h in)ome le/els in @A4, 3*roe, Maan to s*eriorso)ial instit*tions ("% =i)h has little nan)ial res or oor be)a*se de/ ail*resare the res*lt o insti ail*res, not la)& o reso*r)es.

Instit*tions matter b*t not e/erythin'. Ehat the oor needs now aredire)t inter/entions, donations, address o disease and 'eo'rahi)al isolationand low te)h rod*)ti/ity and reso*r)e limitations that tra them in o/erty.

Eorlds most tro*bled de/ hot sots s*b#saharan 4ri)a and )entral asia.

a))ordin' to 4dam Amith these )o*ntries )ant arta&e in international tradebe)a*se transort )osts were too hi'h. w2o international trade, re'ions)ondemned to small internal mar&ets, ineD)ient labo*r di/ision, )ont o/erty.

4ri)a )*t o: rom 'lobal trade + in/estment by Kalaria. 4ri)as )limateaided malaria sreadlowers ret*rns on orei'n in/estments, raises trans )ostso international trade, mi'ration and to*rism in malaria re'ions.

Ehen )o*ntries are remote2ha/e ew s&illed wor&ers, these wor&ers moreli&ely to emi'rate than attra)t hysi)al )aital into )o*ntry. Tr*e e/en within)o*ntries.

Globalisation ha/e )a*sed )o*ntries to be )lassied into )ate'ories(1%o*ntries within )o*ntries in whi)h insti, oli)ies and 'eo' are all reasonably

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a/ C )oastal re'ions o east 4sia ha/e all be)ome )losely inte'rated w 'lobalrod*)tion system and benetted rm lar'e infows o orei'n )aital ("%=e'ionsrelati/ely well endowed 'eo' b*t ha/e or instit*tions C )entral 3*roeanstates7 instit*tional reorms imt (%Imo/erished re'ions w *na/ 'eo' C s*b#Aaharan 4ri)a , )entral 4sia, lar'e arts o 4ndean re'ion and hi'hlands oentral 4meri)a7 'lobalisaion has not s*))eeded in raisin' li/in' standards andmay ha/e )a*sed brain drain R )aital o*tfows. Initial low le/els o in)ome andsmall o*lations (int m&ts%, li/in' ar rm )oasts, b*rdened by diseasetraedin o/erty be)a*se o inability to attra)t te )aital

Eron' to say that nth )an be done to 'eo'. Ae)ial in/estments neededto 'ht malaria, roads, )omm*ni)ations, transortation a)ilities. 9eed hel romo*tside world to initiate sel#s*stainin' 'rowth.

alternati/es (1%ont o/erty or re'ion ("%Ki'rtion rom interior to)oast ("%A*D)ient orei'n assistan)e to b*ild inrastr*)t*re needed to lin& re'ionto world m&ts (%=e'ional inte'ration brea& down arti)ial oliti)al barriers thtlimit m&t size and )omdemn isolated )o*ntries to relati/e o/erty b*t slow tohaen

'ood test to see i oli)ies are s*))ess*l are they s*))ess*l in

attra)tin' new )aital infows international )omm*nity )an set a)t*al de/ 'oals or s*)h re'ions instead

o ma&e do w wt/ e)on res*lts tht emer'e. Best stnd C millenni*m de/ 'oals

ree thin&in' rm 1#a)tor eJlanations.

Instit*tions and in/estors The

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ro/ additional )he)& on eJe) a)tionhels eJl raid rise o in/estment +'rowth 'lobally. Ehen 'o/t is inst )ontrained, a more stable + redi)table oli)yen/iron eJists or in/estors ;A ("%FleJibility in oli)yma&in' + e)onomi) reorm)r*)ial to ma&e *nattra)ti/e in/esmt en/ironment more attra)ti/e + re/ent anattra)ti/e one rom losin' aeal.

@sin' Geor'e Tsebelis /eto layer ramewor& allows *s to )omare,)alibrate di/erse systems o o/t. It di: oliti)al systems by e no.o a)tors who

)an blo)2/eto a oli)y )han'e. 4 /eto layer ind2)olle)ti/e a)tor whosea'reement is re- oli)y )han'e2le'islati/e )han'e. The hi'her e no.o /etolayers, the *rther aart their oli)y reeren)es, the more di: or oli)y)han'emore stable + redi)table oli)y en/iron

=2s between no.o /eto layers + oli)y ris& or in/estors is a @#shaed)*r/e tht asses thro*'h a min. more than 1 /eto layer hels red*)e oli)y

/olatility b*t at some t o infeJion, no additional /eto layers are wel)ome asthey ser/e to in)rease oli)y ri'idity. Fewer /eto layer'reater ris& to =s ooli)y /olatility.

;eto layers id by both )onstit*tional str*)t*re + arty system wherelayers who are rendered m*te2red*ndant are dis)o*nted i their a''re'ate reare s*bs*med by a'' re o others.

Thailand "ho*ses o arliament. @er ho*se had owers o delay ratherthan a)t*al /eto, w no s)oe >*di)ial re/iew. nly ho*se o re )arried /etoower. Thai also had m*ltile wea& arties (10#1"% bein' re in arliament,ma&in' )oalition in 'o/t ine/itable (2more arties%Uleast /eto layers asrime minister (m%ris&ed )oalitional )ollase i he attemted to o/erride serio*soositionra'mented )ontrol o/er oli)y as ea)h arties wanted to 'ht ortheir own interest2side mt.

# or oli)y )han'e d*e to disersed /etoower. 4mn*ay was installed as nan)e minister and he aimed to )*t 'o/tsendin'. 5owe/er, this )reated oosition.

# Feb 1!!N 1st

dea*lt on orei'n loan w anno*n)ement tht )o*ntryslar'est n )oy mer'in' to a/oid )ollase. Kany went to withdraw their money. rd

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mar)h, 4mn*ay + )entral ban& 'o/ =ern')hai Kara&anond s*sended tradin' on shares and anno*n)ed emer'en)y meas*res to reass*re ner/o*s m&ts C re-tht all ban&s + n )oys ma&e stron'er ro/ bad debt and 10 o e wea&est n)oys ha/e to raise their )aital base within 0days. id little to reass*re m&ts.Ehen tradin' res*med, n shares ell. Aome members o 'o/t had interests in e10 insit*tions +/etoed a)t*al imlementation o to*'h meas*res)entral ban&had to *m in new )aital to &ee these )oy afoat in e a)e o ani)&ed =A.ha/alit delayed meas*res to re/ent ris&in' )ollase o his 'o/t. )entral ban&was also sendin' down reser/es to ro * eJ)han'e rate. Kany eole startedto eJ)han'e their )*rren)y to the dollars (in)reasin' s*ly o thai baht and)a*sin' it to all *rther%. 4mn*ay resi'ned, ta&en o/er by Thanon' Bidaya7 heanno*)hed s*sension o 1 n )oy while )entral ban& was tryin' hard to ro* baht.

# =eser/es o entral ban& eJha*stedFall o baht on "nd>*ly 1!!N d*e toail*re o 1strnd o )risis m't ta)ti)s

# Thanon's oli)ies blo)&ed and resi'ned 1!tho)t# =s )onden)e ell eJ)han'e rate ell, )aital few o*t o )o*ntry and

lendin' dried o*t d*e to 'o/ts inability to deli/er ne)essary oli)y ad>

K, enhan)ed ban& re', ti'htened F< (in) taJ, de)r G sendin'to de)r 4% and a tolerably timely + )oherent o*t)ome was a)hie/ed. entralban& wor&ed w 'o/t to red*)e li-*idity. *ne7 with *)omin'ele)tions, some le'islators )hamion hi'her taJ#ree thresholds. 4'reement met$de) by ho*se, senate nally. Late b*t not too late o*)ome or hel by IKF. ("%oildere'*lation eb1!!N re/ hea/ily s*bsidized and re' oil ind*stry b*t *bli)

oosition arose d*e to risin' oil ri)es R dere o eso. Ae/eral members o)on'ress )hallen'ed the dere' and s*reme )o*rt o/ert*rn law on 8no/oil

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ind*stry ri)in'+admin was )on*sedRin)r s)al b*rden on 'o/ R )o*ld>eoardise n s*ort to battle e)on instability by IKF as it was also a)omonent o 3FF a'reement

# )onstraints on eJe) a)tion rm le'islat*re + >*di)iary s*D)ient to re)l*deossiblility o radi)al oli)y /olatility

Kalaysia more )entralized. K*ltiarty system, only lower ho*se oarliament has /etio ower. It has a lon'standin' + o/ersized )oalition made*

o di: oliti)al artiesC barisan nasional that is made * o arties tht di/ideele)toral ma amon' themsel/es b ea)h ele)tion " re/ent )ometitionamon'st the 'ro*. The absen)e o )ometition amon' artieis in barisan to' whistory o stablilitybarisan is a *nitary a)tor2sin'le arty. @nited malaysnational or' o/ershadows m*)h smaller ethni) + re'ional arties in barisan +)ontrols all &ey )abinet osts. r*)ial battles in msia not amon' arties in)oaltion b*t within @K9. ne )olle)ti/e /eto layer# Barisan, dominated by@K9.

# entral ban& inter/ened "*sh * i2r to bolster eJ)han'e rate. In >*lyrin''it )ame *nder ress*re ollowin' de/al*ation o baht and manilas de)isionto de/al*e eso.

# *ly, B widened daily tradin' ban& o r*iah. mid a*', 'o/t intro sharli-*idity s-*eeze to eon)o*ra'e =A to hold r*iah dets, B *shed * i2r andstate enterrises trans dets. From )ommer)ial to )entral ban&. Go/t sendin'roze or "wee&sdrained li-*idity rm the interban& m&ti2r rose sharly. Litin'o restri)tions on orei'n ownershi o shares or )oys listed on Ma&arta sto)&eJ)han'e anno*n)ed. =*iah stabilized in set b*t ell in early o)t. 'o/t )alledor IKF assistan)e and si'ned an a'reement or n s*ort where it )ommitteditsel to an intensi)ation strate'y it had alr be'*n)lose ban&s down, red*)eimort tari:s, )*t ' sendin', remo/al o entry barriers or orei'ners "

wholesale+dist a)ti/ities b*t A*harto also si'ned a de)ree to a*thorize initiation

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o some b*idin's ro>e)ts and instead o )losin' ban&s down, he bailed themo*t/olatile oli)y si'nals

Initial )onditions were similar and

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Thailand re#1!!N health oli)y o)*sed more on inrastr*)t*re than onser/i)es li&e ins*ran)e. Inrastr*)t*re was at times made red*ndant as shown bythe low bed o))*an)y rates. This is d*e to ele)toral system in)enti/izin'ersonal o/er arty /otes. Then )ame the 0baht sol*tion health )are s)hemewhi)h de)reased the *nins*red rom 8.8 to 8 (1!!#"00"%e:e)ti/e in)omein r*ral area in)reased 8#10

Tha&sin + yin'l*)& )entralization o ower, redistrib*tion o reso*r)es)a*sed ba)&lash amon' elites in r*ral so*th. 4))*sed o s*ressin' media)riti)s and o /ote b*yin', *sin' oli)ies to enri)h himsel (sold o: shin )or andno taJes%.

Introd*)tion# From Kar&et Fail*re to Go/ernment Fail*reBy Rahul Mukherji

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Instit*tions a)ilitate )ertain modes o e)on beha/ior + inhibit others.3)on instit*tions dis)o*ra'ed entrerene*rshi in India. 4irlines, iron + steel,minin', ban&s, tele)omm*ni)ations, ower 'eneration,et), were almost entirelystate#)ontrolled beore 1!!0. Those te )oys that s*))eeded C 5ind*stan Kotors,a> 4*to deended on ermissions, monoolisti)ri/ile'es and 'o/t rote)tion. Forei'n in/estment was little. 4nn*al trade o/erG< was 1 /s "8#"! or hina. Indias e)on instit*tions + oli)ies la)ed si'

)onstraints on )o*ntrys entrerene*rial talent. 4t 1!!1, ramewor& o Indias e)on insti )han'ed dramati)ally b*ildin' on

the 'rad*al dere'*lation o te )oys tht be'ain in 1!N8. Atate a)ti/ely romotedthis transormation. ometition dri/en down J7 mobile hones enetrated r*ralareas, bein' more a))essible to the oor. Tele)om,a*tomobiles + airline ind*stryin india was re/ol*tionized sin)e 1!!1

Atate withdrew rm in/estment de)isions, india eJ raid 3G at 1!!1whi)h a))elerated at "00. Indias e)on )ont to 'row at ann*al rate o morethan 8 e/en w 'lobal n )risis.

Transition to a m&t#based e)on had not )*red the inrastr*)t*re de)it.

3)on reorms )hallen'in' in ower se)tor where indias oliti)allyower*l armers re*se to ay ele)tri)ity bills.

Tiin' oint model o e)on )han'e where new e)on ideas + oliti)sare e-*ally imt or *nd e slow#mo/in' ro)esses o )han'e. India was at atiin' oint in 1!!1 when a B< )risis started a shit in )o*ntrys e)on oli)ies.In 1!, similar )risis b*t e)on ideas and 'o/t oli)ies not e/ol/ed in thedire)tion o )han'e at that time. TTK imortan)e o endo'eno*s + slow#mo/in'ro)esses tht )an brin' a system to e brin& o )han'e.

1!!1 bo )risis indian te)hno)rats ne'otiated a deal with IKF7imlemented some o their home#'rown ideas abt )ond lendin'. The a'reementshited domesti) b< in a/o*r o those who belie/ed the indian e)on has been

eJ)essi/ely re' + sel#)ontained.

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rod rots or )ertain ri/ile'e arties. Geor'e Ati'ler demon tht *s )oysbenetted rm the systemati) )at*re o ind oli)y by te )oy. Ati'ler lamentedtht a small + )on) 'ro* o ind in the @A )o*ld obtain s*bstantial rents by ro/reso*r)es to oliti)ians whi)h enabled these oliti)ians to remain in ower andallowed arty wor&ers to 'ain a))ess to 'o/t >obs. =i)hard or blow when some 3ast andAo*theast 4sian )o*ntries 'rew raidly in 1!$0s by romotin' their .

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'o/t bese at ma&in' )redible )omm b)*s o )he)&s and bal in la)e d*e ton*mero*s /eto layers in the 'o/ernin' )oalition.

Indias resonse to B< sho)& in 1!!1 di: rm )risis in 1! as oli)y elitewell re in 1!!1 to harness the )o*ntrys deenden)e on IKF to initiatetransition to dere' and 'lobalization. o*ntrys det on IKF heled indianind*stry to a))et a more )ometiti/e e)on order.

Indias a)t sheet Gained indeenden)e in 1!N at ")ent o British )olonial r*le. emo)ra)y

sin)e indeenden)e.

ority. M*di)iary is ormally indet + in)r asserti/e

Fairly ins*lated rm 0! 'lobal re)ession, b*t a bo*t o o*list sendin'be' 0$ wasted *bli) sendin'

To rate o both ersonal + )or taJ or indian S 0. 3Jemtions red*)ee:e)ti/e taJ rate or indian rms to less than "0. 4ll )oy ay 10 taJ on distrots. or taJ rate or orei'n rms C 0.

Trade de)it narrowed rom 1"#1 d*e to de)linin' K d*e to strin'ent)ontrols on 'old K, eJandin' with wea&er r*ee

Ka>or #en'in 'oods, etrole*m. Ka>or K#etrole*m dt, 'old+sil/er

Leadin' m&ts 1 @A, @43. Leadin' A*lier 1 hina, Aa*di 4rabia

4 G*ide To The onstit*tional Atr*)t*res + 3le)toral Aystems 3ast, Ao*th 4ndA34By 4llen 5i)&en, H*&o as*ya

es)ribes the )onsti str*)t*res and ele)toral system o the 1N asian#a)

)o*ntries sin)e 1!8 =e)o'nition that e )onsti str*)t*re + ele)toral system a )o*ntry adots

)an ha/e imt imli)ations or demo)rati) stability, e)on 'rowth + so)ial welare

Followin' )on/ention *sed by Mones (!8% , owell ($"% and others, onlysystems tht were indt + had ele)ted 'o/t a min o 8 yrs are in)l*ded. In)l*deany re'ime tht had held re' ele)tions at least 8yrs, in whi)h oosition artieswere allowed to arti)iate. 3J)l*de re'imes tht held ele)tions or a minority ole'islati/e seats. Hears 1!8#"000. o*ntries are di/ided into m*ltile timeeriods to refe)t si' )han'es in the /ariables listed.

i:erent ways to )lassiy )onstit*tional str*)t*res a)ross 4sia.

1stway

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;ietnam(1% ha/e had a residential re'ime whi)h meets )riteria listed abo/e. N)o*ntries *sed the hybrid systems tht dont t well into either )ate'ory.Ain'aore ("% dire)tly ele)ted

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/otes win all the seats in that G=. 4 ew )o*ntries 'i/e /oters a sin'le non#trans/ote (A9T;% rather than m*ltile /otes. @nder A9T; there are m*ltile seats inea)h distri)t and ea)h /oter has one /ote. Aeats awarded based on l*ralitybasis C ele)tion o AA 9at 4ssembly rm 1!N"#1!$0 + Maanese lower )hamberele)tions *ntil 1!!.

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The basic principles underlying proportional representation elections are that all voters deserverepresentation and that all political groups in society deserve to be represented in ourlegislatures in proportion to their strength in the electorate. n other words, everyone shouldhave the right to fair representation.

n order to achieve this fair representation, all "# systems have certain basiccharacteristics -- characteristics that set them apart from our current election system. (irst,

they all use multi-member districts. nstead of electing one person in each district, as we dohere in the U.S., several people are elected. These multi-member districts may be relativelysmall, with only three or four members, or they may be larger, with ten or more members.!The figures below illustrate districting maps for a hypothetical )*-person state senate.(igure + shows )* single-seat districts, as is common with plurality-maority systems.(igure depicts +* five-seat "# districts, and (igure shows ) ten-seat "# districts.$

$igue % $igue & $igue '

The second characteristic of all "# systems is that they divide up the seats in these multi-member districts according to the proportion of votes received by the various parties orgroups running candidates. Thus if the candidates of a party win /*0 of the vote in a +*member district, they receive four of the ten seats -- or /*0 of the seats. f another partywins *0 of the vote, they get two seats, and so on.

That, in a nutshell, is how proportional representation works. &ut while all "# systems have

the same goals of ensuring that all voters receive some representation and that all groupsare represented fairly, various systems do have different ways of achieving these goals. Soit is helpful to see how different kinds of "# systems work in practice.

Ty"es o# PR Sys(emsPa(y Lis( )o(i!g"arty list voting systems are by far the most common form of proportional representation.1ver 2*0 of the "# systems used worldwide are some form of party list voting. t remainsthe system used in most 3uropean democracies and in many newly democrati4edcountries, including South %frica.

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Ho* I( Wo+s.5egislators are elected in large, multi-member districts. 3ach party puts upa list or slate of candidates e6ual to the number of seats in the district. ndependentcandidates may also run, and they are listed separately on the ballot as if they were theirown party !see below$. 1n the ballot, voters indicate their preference for a particular partyand the parties then receive seats in proportion to their share of the vote. So in a five-member district, if the 7emocrats win /*0 of the vote, they would win two of the five seats.The two winning 7emocratic candidates would be chosen according to their position on the

list.

There are two broad types of list systems8 closed list and open list. n a closed list system--the original form of party list voting--the party fi9es the order in which the candidates arelisted and elected, and the voter simply casts a vote for the party as a whole. This is shownin the first ballot below, which illustrates an election for the :ouse of #epresentatives in afive-seat district. ;oters are not able to indicate their preference for any candidates on thelist, but must accept the list in the order presented by the party. Winning candidates areselected in the e9act order they appear on the original list. So in the e9ample here, if the

7emocrats won two seats, the first two candidates on the pre-ordered list--(oster and#osen-%my--would be elected.

Close, Pa(y Lis( Ballo(

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O"e! Pa(y Lis( Ballo(

% variety of different formulas e9ist for accomplishing the actual allocation of seats to theparties. 1ne of the simplest seat allocation formulas is the called the largest remainder

formula. n this approach, the first step is to calculate a 6uota, which is determined bytaking the total number of valid votes in the district and dividing this by the number of seats.n the e9ample in the table below, +**,*** votes were cast and ten seats are to be filled.+**,***>+* ? +*,*** @ which is the 6uota. The 6uota is then divided into the vote that eachparty receives and the party wins one seat for each whole number produced. So the#epublican party received 2,*** votes, which is divided by +*,*** to produce three seats@ with a remainder of 2,***. %fter this first allocation of seats is complete than theremainder numbers for the parties are compared and the parties with the largestremainders are allocated the remaining seats. n our e9ample, two seats remain to beallocated and the #epublicans and

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members so that each party has its appropriate share of seats in the legislature."roponents claim that mi9ed-member proportional voting !

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added to its district winners until that party achieves its appropriate share of seats. Thefollowing table illustrates how this process works for our hypothetical election. The7emocrats won /*0 of the party list votes in the +**-member state legislature, so theywould be entitled to a total of /* of the +** seats. Since they already elected 2 of theircandidates in district elections, they would then add + more from their regional party liststo come up to their 6uota of /* seats.

Allocation of Seats in

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ranking numbers as they would for standardi4ed tests taken in school, which allows forcomputeri4ed vote counting and ballot transfers.

Choice )o(i!g Ballo(

%s the name single transferable vote implies, this systems involves a process of

transferring votes. To understand how the transfer process works, it may be best to start outwith a simple analogy. magine a school where a class is trying to elect a committee. %nystudent who wishes to run stands at the front of the class and the other students vote fortheir favorite candidates by standing beside them. Students standing almost alone ne9t totheir candidate will soon discover that this person has no chance of being elected andmove to another candidate of their choice to help him or her get elected. Some of thestudents standing ne9t to a very popular candidate may reali4e that this person has morethan enough support to win, and decide to go stand ne9t to another student that they wouldalso like to see on the committee. n the end, after all of this shuffling around, most studentswould be standing ne9t to candidates that will be elected, which is the ultimate point of this

process.

n the single transferable vote, votes are transferred around ust as the students movedfrom candidate to candidate in the analogy. The e9act order of the transfer process isillustrated in figure below. %n e9ample of how the votes are actually transferred is shown inthe table that follows. (or the sake of simplicity, assume that there is a three-seat district inwhich si9 people are running for office. The first step in the process is to establish thethreshold8 the minimum number of votes necessary to win a seat. The threshold usuallyconsists of the total number of valid votes divided by one plus the number of seats to befilled, plus one vote. The formula looks like this8 Threshold ? !valid votes>+Gseats$ G+ vote.

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So in our three-seat districts with +*,*** voters, a candidate would need +*,***>+G !whichis ,)**$ plus one more vote, for ,)*+.

Diagam o# Ballo( Ta!s#e Pocess

The second step is to count all the number one choices to see if any candidates havereached the threshold of ,)*+. %s shown on the table below, the 7emocrat =ome4 has,B** voters and he is declared elected. &ut =ome4 actually has BB more votes than heneeds to win. These votes are considered wasted if they stay with =ome4, so they aretransferred to the second choices on the ballot. !There are several ways to do this, but weneednAt get into those details here.$ n the second count, we see the effect of this transfer.The other 7emocratic candidate, Eampbell, gets ** of those second choice votes, and the

independent candidate, 7aniels, gets the other BB. The vote totals are now recalculated tosee if anyone is now over the threshold. Co one is, so the ne9t transfer takes place. Thecandidate with the least chance to win is eliminated and his or her votes are transferred totheir second choices. This candidate is :iggins, the #epublican, and )** of his votes aretransferred to the other #epublican candidate, 7ainsH and the other +** votes are given to7aniels. %gain the votes are recounted to see if anyone has reached the threshold. 7ainshas reached it with ,2** votes and so she is declared elected. 1nce again her e9cessvotes are redistributed to their second choices--** to =raybeal, and BB to 7aniels. &ut stillno one has reached the threshold, so again the lowest candidate is eliminated and thosevotes transferred. That candidate is Eampbell, the 7emocrat, and +** of his votes go to

=raybeal, and I** go to 7aniels. This puts 7aniels, the independent candidate, over thethreshold with ,IB2 votes, and she is the last one elected.

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Ballo( Cou!( a!, Ta!s#e Pocess

This transfer process is a bit complicated, so why does it e9istJ The transfer process wasinvented primarily to reduce the problem of wasted votes -- votes that are cast but do notactually elect anyone. "lurality-maority systems routinely waste large numbers of votesand this is why they are prone to such problems as party misrepresentation, and theunderrepresentation of political minorities, racial minorities, and women. The transfer

process in ST; is designed to ensure that the fewest votes are wasted and that thema9imum number of people gets to elect a representative to office. t acknowledges thatthere are two kinds of wasted votes8 votes for candidates that stand little chance of winning,and votes in e9cess of what a winning candidate needs. Transferring these votes to theirne9t ranked choice makes it more likely that they will actually contribute to the election of acandidate.

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Aale o Ahin or (o*nded by Tha&sin and owned by his amiy% to a s' rmor a s*bs, taJ ree rot in >an0seen as tha&sin *sin' his a*thority or his ownersonal ad/.

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relati/ely narrow 'rs o s*orters and dire)ted 'o/t reso*r)es to them (/oteb*yin'%

1 ar'*ment is that lar'e no o arties in re#reorm d*e to di:erent artiesthat ran or ele)tions rm )onstit*en)y to )onsti, rom ro/in)e to ro/in)e, re'ionto re'ion. amin =eilly

Trend toward demo)ra)y bein' a))eted means or )hoosin' + )han'in'a )o*ntrys oliti)al leadershi. 3.'. *risin' a'ainst the Kar)os re'ime in the

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Identiable 4sian model o demo )hara)terized by a''re'ati/e ele)toraloliti)s, )entrist oliti)al )ometition, nas)ent two#arty systems. Instit*tionalreorms has ima)t on ele)tions, arties and arties /ia ?oliti)al en'ineerin' C)ons)io*s desi'n o oliti)al instit*tions " a)hie/e )ertain se)ied ob>e)ti/es

Trend in 4sia re/ersedless roortional ele)tions, towards l*rality

Aystemati) )on/er'en)e in ele)toral + arty systems a)ross the 4oritarian ele)tions% and reresentation

(ority needed to amend )onstit*tion. Ain'aore most K

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@se /ote thresholds to limit no o arties whi)h re/ent ele)tion osmaller arties into arliament. In thai + Taiwan arties )ometin' or arty#listm*st attain at least 8o /ote.

4sian model o demo)ra)y mo/in' )loser to an'lo#ame model o "#artydemo)ra)y. 3J)etions indo + i''in' oliti)al r*les in their a/o*r b*t why + how asiasleaders ha/e been able to *sh thro*'h this &inds o in)*mbent#benettin'reorms b*t not their )o*nterarts in Latin 4me + 3*r (% 4sias distin)ti/edemo)rati) de/eloment in re)ent years heralds a new orm o oliti)alar)hite)t*re C histori) )omromise between mass )onstit*ents ( need or morero' + e:e)ti/e arties + elite oliti)ians who a/o*r restri)tions on oliti)al ra'

+ s*ression o ethni)2re'ional mo/ements%b*t why only in asia notelsewhere6

8 Kost ommon Tyes to those 'o/erned. itizens le'titimise'o/ernan)e and )an re)all the 'o/t. li'ar)hy r*le by a ew )itizens2'r o)itizens. Konar)hy head o state till abidi)ation2death. ten, manar)h has nal wordin 'o/t. (a% 4bs monar)hy monar)h tr*ly has the nal say. (b% 3le)ti/emonar)hy monar)h is ele)ted. omm*nism KarJ2 Lenin. obs.

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8. i)tatorshi a*thoritarian orm o 'o/t. 9orm main ind r*lin' the )o*ntry. 9otrestri)ted by )onstit*tions2 arliaments. Kilitary di)tatorshi military eJerts a'reat deal o ress*re on the 'o/t, r*nnin' the )o*ntry de a)to. 4*thoritarianorms o 'o/t has the ad/ o -*i)& de)isions bein' made.

Ehy Isnt The Ehole Eorld e/eloed6 Lessons From The otton KillsBy Gre'ory lar&

1!10, 9ew 3n'land )otton teJtile wor&ers erormed better than others.Lo)al )*lt*re seems to det wor&ers er. A*)h di:eren)es )an hel eJlain inter/ariation in wa'es. They also hel in ma&in' *s *nd labor mi'ration, )hoi)e ote)hni-*e + so*r)es o 3G.

3Jamine *nderde/ thr*'h detailed st*dy o the )otton teJtiles ind*stry inthe early "0th)ent as a)tory rod o teJtiles was a 1stste on the ath toind*strailisation. Fail*re o oor )o*ntries to dominate teJtile rod in the way theirlabo*r )ost ad/ wld s*'est is the res*lt o ineD)ient labo*t rather than ail*re oimort te)h2m't s&ills2ail*re o lo)al )aital2im*t m&t2s)ale s)on within teJtilea)tories. Th*s, reasons ineD)ien)y o low#wa'e labo*r m*st be o)*s oeJlanation o *nderde/ o these )o*ntries.

Britain la*n)hed the modern a)tory system in teJtile rod in late 1$th)ent and te)hnolo'ies soon sread to 9orth 4me + 3*ro. ther )o*ntries soonollow s*it. Britain est 1stsinnin' a)tory in 1NN1. @A, Fren)h, =*hr, or in*t remain so lon' s*))ess*l, when )ometin' with others with lowerwa'es6

Tr*e that other )osts o:set labo*r )ost ad/ in low#wa'e )o*ntries ( had toK ma)hinery2ersonnel rom Britain, had to ay transort eesRimort d*ties%

3n'land had better wor&in' ho*rs, wa'es and lower dollars erlant2ma)hinery

I a))ordin' to the rot rate2rate o ret*rn, the ad/ o low wa'es in )hinaand india wo*ld allow rod*)tion to eJand raidly. 5owe/er, this did not haen.Ehy then did Lan)ashire ()o*ntry in @% eJerien)e s*)h an eJansion6

4lso, 'i/en the same rod*)tion rate and ta&in' )osts o nonlabo*r in*tinto a))t, the hinese )o*ld ha/e aid hi'her wa'es. ost disad/ o low#wa'e)o*ntries in other in*ts eJlain little o their low wa'es.

The British S 3n'land remained )ometiti/e desite hi'h labo*r )osts aswor&er eD)ien)y )orresonded )losely w real wa'es. Eor&er eD)ien)y )an beshown by loo&in' at how many ma)hines ea)h wor&er tended. IndeJ o the no osindles + looms er wor&er. Loom 'i/en a w't o 1, rin' sindles w't o 0.011

and m*le sindles w't o 0.00$. IndeJ ad> to a er shit basis. The hi'her theindeJ the better.

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4''re'ate meas*re )ontaminated by (1% i: tyes o ma)hinery *sed("% i: roortions o women + )hildren (% Harn + loth di:ered in tness and-*ality b*t wor&ers eD)ien)y still most imt a)tor.

Better#aid wor&ers were more eD)ient.

Ta&in' into a))t di: in labo*r eD)ien)y, the only )o*ntries able to)omete w British wo*ld ha/e been hina, India, Maan.

o*nter to (1% i: ma)hinery *sedby 1!10 only 94 adoted a*to loom

whi)h infate no.o loom#e-*i/alents er wor&er in 4me b*t )loser eJaminationshows the same indeJ bein' )on)l*ded#low#wa'e )o*ntries emloyed many morewor&ers er ma)hine. o*ld anythin' other than eD)ien)y o wor&ers eJlainthese di:eren)es6

ne eJlanation aital#Labo*r A*b b*t low#wa'e )o*ntries not 'ettin''reater *tilisation o their )aital eJ)et thr* r*nnin' lon'er ho*rs. Aeem to ha/e'otten si' lower o2 er hr arnd 1!10. 3D)ien)y o sindles2looms S o ama)hines theoreti)al rod*)tion det by seed ma)hine was set to r*n at, whi)hwas a)t*ally a)hie/ed. By 1!"0s, some e/iden)e tht Maanese + )hinese millswere *sin' their )aital more intensi/ely than British mills as o2 er sindle orBrit 100, Maan 118, hina 11N. (Insert orm*la here2write% 1!10#"0, India showsno 'reater ma)hine *til than Brit so #L s*b )annot eJ e eJtra .0$ wor&ers erBritish wor&ers.

#L s*b irrele/ant in eJlainin' eJ)ess mannin' o low#wa'e )o*ntries.A*bstit*te L or to red*)e total man* )osts.

4nother eJlanation =aw Katerials#Labo*r s*b ossible to some eJtentto sa/e )otton )osts by *sin' more labo*r. Eea&er yarns bro&e easily, re- morelabo*r to reair bro&en threads, )an sa/e on total )osts i labo*r )hea b*t this isnot a 'ood reason " eJlain eJtra labo*r in low#wa'e )o*ntries. Ehy6 (1% nly aew )o*ntries w hi'h mannin' l/ls *sed inerior )otton ("% Eor&ers did not sendm*)h time reairin' (% ;al*e o o2 aear to be red*)ed si' when inerior )otton

*sed (% /ermannin' was >*st as 'reat as ma)hines ma&in' ner yarns (8% 3/enro)esses *na:e)ted by )otton -*ality were o/ersta:ed. hina, India had s*lieso 'ood -*ality yarns. Atren'th o yarn doesnt seem to ha/e m*)h to do w di:mannin' le/els.

4nother Te)h 'as 9o, low#wa'e )o*ntries were not emloyin' ineriorte)h. Te)h were similar + m'rs.2s&illed wor&men s*lied by Britain to o ema)hinery + train wor&or)e in many )o*ntries. 4bsen)e o se)ondhandma)hinery as well as set* )ost or ma)hinery in a mill was "0 o nal )ost.India, )hina, >aan had hi'h )aital sto)& 'rowth rates in the late 1!thand early"0th)ent.

4ntoher Labo*r eJerien)e lar& ar'*es that this sho*ld 9T be a realreason. Basi) )onstraint on a/e eJ o wor&ers was 'rowth rate o ind*stry. Indwhi)h 'rew -*i)&ly had relati/ely ineJ wor&ers. Basi) det o a/e wor&ers eJwas how raidly emloyment was 'rowin'. iD)*lt to ose eJ as eJlanation(1% 9o simle asso)iation betwn labo*r rod*)ti/ity + 'rowth rate o lo)al ind ("%3:e)t o eJ on )ometen)e o ma)hines tender Is sli'ht meas*red by earnin's,on)e initial trainin' eriod has assed. 4/e eJ o wor&ers in )o*ntries whr indwas 'rowin' -*i)&ly wld not be m*)h shorter than in mat*re )entres o ind. Thea)t that yo*n' 'irls )ld be re)r*ited as tem wor&ers e/iden)e that eJ didntmatter m*)h. 4lso, newer ma)hines in low#wa'e )o*ntries (1% Less reair to &eeit r*nnin' ("% 5i'her ma)hine#wor&er rationeed less wor&ers a)t*ally.

4nother Inherent Labo*r X*ality oor n*trition2'eneral trainin'2no ormaled B@T nat*re o oerati/es tas&ew tas& demanded litera)y7 only need" er

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ew simle os reeatedly, stren'th didnt mattersmall size didnt matter. Ismall size did matter, a)tories )ld simly eed the wor&ers and 'ain enormo*s o2'ains. Ehate/er )reated the ineD)ien)y didnt seem to be inherent sin)e e' 9ew3n' emloyed most eD)ient o b*t these wor&ers )ame rom )o*ntries whoseown teJtile ind had / ineD)ient 33s

4nother Lo)al lar& thin&s that the eD)ien)y o wor&ers is limited d*e tothe lo)al en/ironmenta:e)t ind )hoi)es, whi)h )orrelated to lo)al real

wa'e.KeJi)o C )onser/ati/e, didnt want to a))et a*tomati) looms. Ka>or )a*se o *nderde/ in oor )o*ntries was ineD)ien)y o labo*r

rather than inability to absorb modern ind te)h.

Labo*r )onstrained by lo)al en/ironment.

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also honor o their own )lass. They thin& not in terms o m'r /s non#m'r b*t)adres /s non#)adres. ne be)omes a )adre by attendin' roer s)hs andremains in it ore/er, re'ardless o a)t*al tas&. adres ha/e ri/ile'es o a hi'herso)ial )lass + rare or a non#)ade to )ross the ran&s. KatriJ or' ne/er not thto*lar

5olland need )onsens*s amon' all arties, neither redet by)ontra)t*al r2s2)lass distin)tions b*t based on oen#ended eJ)h o /iews +

balan)in' o interests. Leadershi res*oses modesty as oosed toasserti/eness as in @A. Time#)ons*min' rit*al )ons*ltations to maintainaaren)e o modesty and )onsens*s.

The o/erseas )hinese Taiwan, hon' &on', s'. 3nterrises tend to be smallor' thro*'h networ&s based on ersonal relations. They are amily#owned w2searation btwn ownershi + m'mt. Fo)*s on 1 rdt2m&t w 'rowth byoort*nisti) di/ersi)ation. e)ision#ma&in' )entralized in hands o onedominant amily member, low role, eJtremely )ost#)ons)io*s, aly on*)ian/al*es o thrit and ersisten)e. Aize &et small by ass*med la)& o loyalty o non#am 33s.

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=e'ions o the world w history o lar'e#s)ale oliti)al inte'ration + )i/il'enerally done better than re'ions in whi)h no lar'e#s)ale oliti)al + )*lt*ralinrastr*)t*re eJisted. e/eloment )annot be r*shed. It re-*ires time to 'row)*lt*ral inrastr*)t*re C lo)al m't. It )ant be K in a)&a'ed orm.

=*ssia + hina the ind Eestern world + Eorld Ban& seem )ommitted tohel eJ#3astern blo) )o*ntries de/ b*t w the same te)hno)rati) ne'le)t lo)al

)*lt*ral a)tors tht ro/ed *ns*))ess*l in de/ ass to other oor )o*ntries. Freem&t )aitalism intro by west s*osed to be the answer. K't theories )antne'le)t the 'reat literat*re o the )o*tnries they want their ideas to aly to.

*lt*ral di: btwn nations )an be des)ribed *sin' 8 biolar dimentions.4nd the osition o )o*ntries on these dimensions allow *s to redi)t the waytheir so)iety oerates, in)l m't ro)esses, + the &ind o theories ali)able totheir m't. *lt*re )olle)ti/e ro' o e mind whi)h dist 1 'r2)ate'ory o l rmanother. ate'orySnation in the aer. These dimensions are )onstr*)ts thtshldnt be reied (made )on)rete%. First dimension eJ ! o /ar in data7 other81 remain se)i) to ind )o*ntries. First dimen dete)ted thro*'h )omarisono /al*es o similar l (33s and K'rs% in national s*b in IBK )or.

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di: nat /al*es ha/e )or )*lt*re tht &ees thaem to'. (% Atress n K'rs =atherThan Eor&er K'rs more in/ol/ed in maintainin' networ&s. I anyth, it is the ran&+ le wor&er who )an really ma&e de)isions on his2her own altho on a simle l/l.

4ll 'reat ideas ha/e tra/elled rm one )o*ntry to another, enri)hed byorei'n inf*en)es.

Eorld ;al*e A*r/ey (E;A% C worldwide networ& o so)ial s)ientists st*dyin' )han'in'

/al*es + their ima)t on so)ial + oliti)al lie. =e s*r/eys in !N so)ieties )ontainin'almost !0 o worlds o*lation. A*r/eys show )han'es in what l want o*t otheir lie and what they belie/e. )tion o di/oir)e, abortion, e*thanasia, s*i)ide,ha/e hi'h le/els o nat ride + a nationalisti) o*tloo&. ("% A*r/i/al2sel#eJression

/al*etrans rm ind*strial to &nowled'e so)iety lin&ed w shit rm s*r/i/al /al*estoward sel#eJression /al*es. In &nowled'e so)ieties, many 'row * ta&in's*r/i/al 'ranted. well#bein', sel#eJ + -*ality o lie. Ael#eJ hi'h riority " en/ironrote)tion, toleran)e o orei'ners, 'ays, les + 'ender e-*ality + risin' demands arti)iation in dei)ison#ma&in' in e)on + oliti)al lie. Ahit in )hild#rearin'/al*es rom emhasis on hard#wor& to on ima'ination + toleran)e as imt /al*esto in)*l)ate in a )hild.

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o))*ations tht re- indt thin&in', ma&in' them more arti)*late + bettere-*ied to arta&e in oliti)s. 5*man de/eloment 3)on de/in)reso*r)essel#eJ /al*ese:e)ti/e demo)rati) instit*tions.

Globalisation, 'ender + )on/er'in' /al*es6 Globalisation shld lead to a)on/er'en)e o /al*es b*t data rm "0 )o*ntries show tht rom 1!$1 to "00Nalmost 9 e/iden)e o a )on/er'en)e o /al*es. A*ort 'ender e-*ality not

>*st a )onse-*en)e o demo)ratization b*t art o a broader )*lt*ral )han'e tht istrans ind*s so)ieties + *ellin' mass demands in)r demo insti.

*lt*re, di/ersity + reli'ion se)*larization theorymodernization +risin' l/ls o h*man se)*rity are said to )a*se de)linin' l/ls o reli'io*sin/ol/ement to' w a more s&eti)al /iew o reli'ion ima)tin' oliti)s.Kodernization brin's abo*t )*lt*ral di/ersity as well that leads to more reli'io*sin/ol/ement + more ositi/e /iews o reli'ions ima)tin' oliti)s. " s)hs otho*'ht.

=isin' inse)*rity + /al*es est stable demo *nder se/ere eJisitentialinse)*rity eJtremely diD)*lt. Atable, e:e)ti/e demo 'enerally emer'es thro*'h aro)ess o h*man de/ tht starts w e)on de/ + leads to a )*lt*re o toleran)e, tr*st+ emhasis on h*man a*tonomy. Ao)ioe)onomi) de/ brin's shit rm Jenohobi)+ a*thoritarian o*tloo& lin&ed w s*r/i/al /al*es towards in) tolerant+ demo)rati)o*tloo& lin&ed w sel#eJ.

Fa)ilitatin' e/eloment The =ole B*siness Gro*sBy =aymond Fisman + Tar*n hanna

e/eloin' )o*ntries *nable to s*ort or' e)on a)ti/ity d*e toinade-*a)y o basi) s/)s.

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a''lomerations o rms C biz 'rs. Gr#aDliates more li&ely to rotably lo)ate inless#de/ states than *naDliated rms. A)ale + s)oe o 'rs R de a)to tyri'hts enor)ement within 'rs in en/iron where le'al enor)ement iSs la)&in'ermit them to o/er)ome some diD)*lties tht imair rod*)tion in *nderde/re'ions.

.

Firms )an either (1% ma&e do w shorta'es, *se what is *bli)ly ro/,a))et low rod*)ti/ity + rdt -*ality as )ost o doin' biz in *nderde/eloed areaor ("% s*ly in*ts or their own *se.

Biz 'rs better s*ited to dealin' w oor a/ail o basi) in*ts2s/)s. A*)h'rs )omrise o a di/erse set o biz oten initiated by a sin'le am, bo*nd to' bye-*ity )ross ownershi2)ommon board membershi. Gr#aDliates oten share a)ommon brand id C Aalim Gr in Indo, Tata Gr in India, Aams*n' in orea, ha/e a)ommon labor ool, rely on one another or nan)in'. Family bonds red*)e

li&elihood that )ontra)ts will be rene'ed*t 'rs in better osition to deal wail*res in n, labor, rdt m&t. Grs may be able to ta&e ad/ o 3A ininrastr*)t*re ro/ision by )o#lo)atin' a no o 'r aDliated lants + sharin' )ostso inrastr*)t*re s/). @nrelated biz in a 'r rob ens*re smoother o/erall internalF than a rm (di/ersi)ation%.

Fo*nd tht 'r#aDliated lants more li&ely to lo)ate in less#de/ re'ions1!N8#1!!8 and stron'er or yo*n'er lants where lo)ation de)ision less li&ely theres*lt o oliti)al e)onomy )onsiderations dri/en by Indias ind li)ensin' re'ime.

India well#s*ited or st*dy be)a*se lar'e ro o Indian 'r aDliates are*bli)ly traded, rms aDliated w 1 'r only. Lar'e no o 'rs a)il stat analysis.

K*)h /ariation in de/ le/el a)ross re'ions o the )o*ntry whi)h enable *s to loo&at rm de)isions as a Jn o de/.

ata ta&en rom KI3 C entre or monitorin' the indian e)onomy.

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)aa)ity er )aitaa:e)t li&elihood + re- o browno*ts2bla)&o*ts. ire)t honelines2telehone eJ)h er )aita *sed to assess a))essibility o )omm. Trans*se o roads tht are s*ra)ed. Ao)ial s/)sloo& at *bli) ro/ o ed*)ation # + otea)hers w ormal trainin', total eJen on ed*)ation2)aita and health)are Chosital beds2health)are wor&ers er )aita. A)ore or ea)h tye o s/) is a simlea/e o its )omonent. /erall meas*re o de/ is the s*m o these s)ores s)aledto ma&e lowest s)oreS0 and hi'hestS1.

Ehy lo)ate in low#inra re'ion6 Labo*r m*st be less eJ in low#inrare'ion to )omensate )oy lo)atin' thr hi'her )osts o rod*)tion res*ltin' rmlow#inraP (La, Ia% C EaLa S (Lb, Ib% C EbLbQ. Firms best able to deal winrastr*)t*re shorta'es more li&ely to lo)ate in low#inrastr*)t*re re'ions as itallows them to ta&e ad/ o )hea F< tht arise in e-*ilibri*m in order or m&ts to)lear. Firm w 3;V0.8 benet rm lower wa'e rates7 0 lower, lower taJ ratesand hi'her 'o/t s)al benets.

=es*lts )ontrols in re'ressions in)l lo'(sales% S rm size, 4G3. 9e'ati/e)orr betwn 4'e + e/. Ind*stry has been later in )omin' to less#de/ re'ions sorms in s*)h re'ions )an be eJe)ted to be yo*n'er on a/era'e. 3J si'n o)oee)ient on lo'(Aales% less )lear#eJ lar'er rms to be more li&ely to lo)ate in

less#de/ re'ions same reasons as lar'er 'rs. Lar'er rms, howe/er are'enerally more )aital intensi/e, so )omlementaries betwn *bli) and te )aitalmay res*lt in a hi'her ro o lar'e rms in more de/ re'ions. K3KB C d*mmy/ariable reresentin' 'r membershi. K3KB )oeD ran'es rm #0.08 to #0.0. 3JK3KB )oe: to be lar'er or yo*n'er rms. oe: o K3KB ar hi'her, morene'ati/e when term )han'ed to K3KBZ4G3)on)l*de tht yo*n'er 'r#aDliatesare more li&ely to lo)ate in less#de/ re'ions. @sin' er as det /ariable loo& U*rer e)on o*t)ome as det /ariable#i 'r#aDliates better able to min )osts olo)atin' in less#de/ re'ions, they shld be wea&ly more rotable in these re'ions/s non#'r aDliates@se =4 + Tobins X. Kean =4 hi'her 'r rms in *nde/re'ions and mean X di:er sli'htly. For non#'r rms both =4 + X are hi'her inde/ than non#de/ states.

4lternati/e eJlanations1. =esondin' to re'*latory distortions + Go/t b*rea*)ra)y an be tht 'rsrestri)ted rm lant eJansions b)*s o a so)ietal bias a'aninst lar'e or',enshrined in the monooly + restri)t/ie trade ra) K=Toint *se o )o#lo)ated )oys. Inrain/estments ha/e hi'h F, more eD)ient to sread eJenses o/er a lar'e /ol oassets.

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". 5= onsideration d*e to (1%, 'rs able to ma&e lie in ba)&ward areas morealatable or s&illed 33s + )an rotate s&illed wor&ers thr* a)ilities in less#de/areason AT assi'nments.. A*ly o in*ts ins*D)ient demand to ha/e an)illiary s/)s. Gr rms alr h/ewell#est s*lier networ&s, able to )oord deli/ery o materials thr* a )or head-. Finan)in' indt rms in less de/ re'ions di: to obtain nan)in' as most oIndias n instit*tions are in e ma>or *rban )entres. 4 'r li&ely to h/r a headoD)e in a ma>or )ity tht handle nan)in' on behal o its r*ral s*b. Kany 'rs *seinternal )aital m&ts.8. =is& + i/ersi)ation 'rs ha/e 'reater size and di/ersi)atn to bear ris&.. Land Intensi/e e)ts C 'rs+ 'o/t b*rea*)ra)y lar'e 'rs able to eJediterezonin' ro)ess d*e to s*erior oliti)al )onta)ts. @s* re to lo)ate ro> w si'land re- in less de/ re'ions, where ty )osts are )heaer.N. 4))tin'

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)hildren + those owned by LT A*harto allies re) a 8. (% Ino on A*hartos deathas)ertain date r*mors 1sthit MA. 3a)h eisode ass*med to )ome to an end whenit was *t to rest by re/elation o new ino or it was reorted tht analysts hada)tored new ino abo*t A*hartos health into Jin' o se)*rities.

=es*lts oliti)ally det rms on a/e lost more /al*e d*rin' theseeisodes than less det rms.

Insert orm*la

3/ents des)ribed abo/e )ant be *sed to iner *ll /al*e o )onne)tionsb)*z asso) r*mo*rs only in)reased the rob tht A*harto wld lea/e oD)e. To est*ll /al*e o )onne)tions re- e/ent in/ol/in' A*hartos s*dden + *neJ remo/alrom oD)e.

=ob*stness o st*dy1. Thiny traded rms i )oy not traded on tht day, re' no J )han'e e/en i Its*:ered de)line in *nderlyin' /al*e. I *n)onne)ted rms more li&ely to ha/e 0tradin' /al*e, what is interreted as e:e)t o )onne)tedness may bemaniestation o 'eneral m&t de)line. 4 smaller de)line in *n)onne)ted rms b)*sthey arent bein' traded.

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se)ial meas*res needed b)*z >aan ollowed same ree m&t + ree trade atternsli&e in @A.

Maans ast e)on s*))ess based on hi'h sa/in's, te)h, hard wor& ander)e )ometition as indi/id*als + enterrises resonded to tht oort*nitiesro/ided in -*ite ree m&ts or )ommodities + labo*r.

9either re/isionists2trad )an s*''est 'ood way or @A to 'et Maan to stowastin' time2reliably indi)ate what is (not% a)hie/able.

9eed a new aradi'm to '*ide oli)y and in &atz oinion, s*)h aaradi'm wld in)l*de these elements1. 4 ?system that so*red e)onomi) model Maanese e)on model was a 'oodme)hanism or t*rnin' a oor )o*ntry into an ind*strial owerho*se in re)ordtime, b*t be)ame )o*nterrod*)ti/e on)e >aan a)hie/ed e)on mat*rity.". ?Go/ernan)e by ne'otiation oliti)al model >aans oliti)al system allow allthe se)ial interest Lilli*tians to se)*re the nat int in millions o tiny threads7heled to ens*re tht raidly 'rowin' e)on ie shared by all. B*t it has let 'o/t*nable to shit 'ears e/en when /ital nat int demand tht it o/errides all se)ial int.@nable to end its obsolete ind*strial oli)y re'ime in the 1!N0s, has tro*bleintrod*)in' m&t e)onomi)s + )ometiti/e oliti)s today.

. 4 =oad Ka To The

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limits on )aa)ity and o2. howe/er, d*rin' sl*ms, rod*)tion -*otas assi'nedro rata based on m&t share and e/erytime ind*stry re)o/ered, rms ra)ed tob*ild new )aa)ity so as to enlar'e their shareanother )y)le o o/er)aa)ity andneed or another )artel C ind*stries s*)h as shib*ildin', )ement, )hemi)als,steel, teJtiles, ma)hinery, ele)troni)s. artels limited J )ometition + heledin)*mbents &ee o*t new)omers. /ertime e)onomy be)ame in)r )artelized, esamon' least )ometiti/e se)torsm&t det J didnt re/ail.

4bility to nan)e a ro> de)ided by oliti)s, not F ro>.

Go/ernan)e by ne'otiation Atrate'y /s ometition small biz were oneo the ?losers to be )omensated. L< dist billions o [ dis'*ised as no#)ollateral'o/t loans to W hald o the nations small biz. Fin Kinistry o/erloo&ed lar'e#s)aletaJ e/asion by small biz as m*)h as 0 o in)ome. Lar'e#s)ale retail store lawena)ted, allowin' small retailers to obstr*)t eJansion o deartment stores,enablin' them to raise J. L< bo*'ht /otes w s*bsidies C by e 1!$0s, more thanN8 o all arm in)ome )ome rm s*bsidies + J s*ort ro'. To&yos ro#'rowtholi)ies 'a/e aid to &ey ind*stries while its anti#'rowth oli)ies handed o*thea/y s*bsidies and ab*ndant 'o/t loans to reser/e emloyment in fa''in'se)tors. Balan)ed shited rm ormer to latter o/ertime.

9eed )omromise)omlian)e)onsens*s Ehy the system so*red as lon' as strat + )omensation remained in

balan)e, system wor&ed b*t in the 1!N0s, demands or )omensation rose beyondability o e)on to meet them. 4s >aan e)on mat*red, no more inant ind*stries.

Maan re*sed to let 'o o the ind oli)y model. Ta)ti)s o rote)tion were now*sed to shield losers rm )ometition at home + abroad. Maan be)ame adeormed d*al e)on Jnal hybrid o s*er#stron' in' ind + s*er#wea& domesti)se)tors. Kany o >aans eD)ient eJorters fed o:shore.

oys still ra&e in )ash and ile * biz sa/in's b*t they ha/e ewer o*tletsor rotable in/estments within >an.

=ise o Tana&a omensation Aeizes The Throne wor&ers )ried o*t orrelie and it was 'i/en as in the 1!N0s, L< was also a)in' a oliti)al )risis. L*st b)*z >aan isaralysed. =e)o' Maan is 'ridlo)&ed doesnt mean a))etin' itsee& en''mentby Maan. LT reorms in nan)ial se)tor and retail se)tor. Koney show fow on thebasis o real ret*rn rather than o*tdated &eirets* ties. @s )an hel shorten yrs o

reorm. @s needs to nd + o)*s on items whr its own desire m&t a))ess)oin)ides w reorm a'enda o ower*l or)es within >aan + whr s*)h )han'es)reate ower*l systemati) rile e:e)t.

emo)ra)y, In)l*sion + an

F*&*yama ar'*es tht liberal demo)ra)ies whi)h seem best to osteroli)al reedom +e)on s*))ess, tend " ha/e illars a stron' 'o/t, r*le o law +demo)rati) a))o*ntability. 4*thor adds in a thillar ree mar&et whi)h are imtto ma&e the liberal demo rosero*s. B*t illars are wea&enin' in ind )o*ntriesb)*z o risin' ine-*ality o oort*nities.

Atron' 'o/t ro/ e:e)ti/e + air admin thro*'h )lean, moti/ated +)ometent administrators who )an deli/er 'ood 'o/t

=*le o law 'o/ts a)tions are )onstrained by a histori)al + widely*nderstood )ode o moral + ri'hteo*s beha/ior, enor)ed by reli'io*s,)*lt*re2>*di)ial a*thority

emo)rati) a))o*ntability 'o/t has to be o*larly a))eted, w lha/in' ri'ht to throw *no, )orr*t2in)ometent r*lers o*t.

4ll ase)ts eJe)*ti/e, >*di)iary, le'islat*re needed to bal one another.Atron' 'o/t emhasized e/en in a de/ )o*ntry.

Atron' 'o/t need to be eoled by those who )an ro/ *bli) 'oods# re-eJertise, moti/ation R inte'rity. B@T 'd 'o/t need to r*n in the =IG5T dire)tion(e.'. hitler didnt r*n in the ri'ht dire)tion%. Th*s, need both r*le o law + demoa))t to &ee stron' 'o/t on e ri'ht ath. =*le o law needed " re/ent tyranny()r*el R oressi/e 'o/t2r*le% o ma>ority tht )an arise in a demo)ra)y R ens*rebasi) ?r*les o the 'ame reser/ed o/er time so tht en/iron is re)titable nomatter whi)h 'o/t /omes to ower. 3ns*re all )itizens ha/e inalienable (not s*b>to bein' ta&en away% ri'hts and rote)tions )onstrain e ma>oritys beha/iortowards minorities. 3ns*rin' redi)table en/iron ens*res biz )an in/est se)*relytoday e *t*re. =*le o law alone wo*ld not be eno*'h to a))ommodate easirations o new emer'in' 'rs2 )onse-*en)es o new idea or te)h. emo

a)tability ens*res 'o/t resonds to wishes o the mass )itizen, allowin' emer'in''rs " 'ain inf*en)e thr* oliti)al ne'o + )ometition w others.

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e/ o ea)h illar in di: so)ietiesnat*re o states we see today is lar'elyeJ by history. hina lon' eriods o )haos, )ometition meant 'rs had to or'themsel/es as hierar)hi)al military *nits w r*lers h/n' *nlimited owers. Ehen a'r e/ent*ally was /i)torio*s, nat*ral or it to imose )ent a*to)rati) r*le toens*re )haos didnt reemer'e. To r*le o/er lar'e 'eo' area o )o*ntry, )hinaneeded a well#de/ elite b*rea*)ra)y and )hose them based on eJams. hina didnot ha/e stron' alt so*r)es o ower o*nded in reli'ion2)*lt*re to imose r*le o

law. In western e*ro, the hristian )h*r)h imosed )onstraints on wht the r*ler)ld do. Ao military )ometition, to' w )onstraints on r*ler imosed by )anon lawled to emer'en)e o both stron' 'o/ R r*le o law. In india )aste system led todi/ o labo*r whi)h ens*red tht entire o )ld n/r be totally de/oted to e ware:ortno ress*re to de/ stron' 'o/t as their war2milirary )om were ne/er asharsh. odes o >*st beha/ior or r*lers ori'inatin' rm an)ient indian s)rit*res)onstrain any arbitrary eJer o ower by indian r*lers. India has wea&er 'o/t,)onstrained *rther by r*le o law.

Free enterrise + oliti)al reedom rm demo a)tability and r*le o law)an be m*t*ally reinor)in'. 4lso, there has to be a air dist o e)on )aabilitiesamon' the )itizenry or the illars to wor& b*t this is not seen stron'ly in india.

Kedian /oter a'rees to rote)t ri)hs ty + to taJ them mod may be ththe sees the ri)h as more eD)ient mana'ers o tht roerty and th*s )reators o

>obs and roserity tht e/eryone will benet rm. To the eJtent tht the ri)h aresel#made + ha/e emer'ed as winners in a )ometiti/e, air + transarent m&t,so)iety may be better o: allowin' them to own + m'e their own wealth, settlin'in ret*rn or a reasonable share o their rod*)e as taJes. B*t i the ri)h are seento obtain weath thro*'h d*bio*s means C m'ed the system and not their biz well,there wld be rotests. =i)h mi'ht 'o to the a*thorities to rote)t their wealth stron' )he)& on oD)ial arbitrariness disaears. Go/t ree to be)ome morea*to)rati). B@T i its a ree enterrise system ()ometiti/e one%, w a l/l layin'

eld, it 'enerally ermits e most eD)ient to a)- wealth. Fairness o the)ometition imro/es le'itima)y er)etions. @nder air )om, ro)ess o )reati/edestr*)tion *lls down badly m'ed inherited wealth, rela)in' it w dynami) + newwealth. The ri)h )an *se indet tht a)) wealth to limit arbitrary 'o/t, s*ort r*leo law + rote)t demo)rati) ri'hts. Free enterrise + demo)ra)y s*stain ea)hother.

Free enterrise system wor&s well when arti)iants enter the )omarena w *ndamentally S )han)es o s*))ess. Gi/en the s*bse-*ent l/l layin'eld, the winners road to ri)hes deend on 'reater e:ort, inno/ation +o))asionally l*)&. A*)h a s)ene is seen in Eestern demo)ra)ies C roserityseems in)r *nrea)hable or many b)*z a 'd ed*)ation whi)h seems to be todays

assort to ri)hes is *na:ordable or many in the middle )lass. Kiddle )lass dontsee e system as air and s*ort e ree enterrise system is erodin'. K*t*als*ort 'i/in' way to anta'onism. Go/t )an )hoose either the most )aableali)ants ositions b*t ris& be)omin' *nre o e )lasses or )hoose re o/erability and ris& erodin' e:e)ti/enessthreatens 'o/t )aa)ity.

Atron'est illar in india is demo)rati) a))tbility. India needs better 'o/t,more se)ialists w domain &nowled'e + eJerien)e. In india, it is o rm other)o*ntries where stron' 'o/t emer'ed 1stollowed by )onstraints rm r*le o law +demo)rati) a)tability. 9eed a balan)e o )he)&s.

Kod*late liberalization a)e to a)e at whi)h e)on )aabilities broadened

)an 'ain *bli) s*ort or reorms. To embed e illars s*ortin' roserity +

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oliti)al reedom, need to )ont to n*rt*re the broadly e-*itable dist o e)on)aabilities amon' l C -*ality ed*)ation, n*trition, health)are, n, m&ts.

hina Fa)t Aheet, "01 data

or K ele)tri)al ma)hinery, etrole*m + etrole*m rod*)ts rm A,Maan.

The Lie The

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@ward mobility within arty in)r. )) has been 1 o the most sel#reormin'olti)ial or'Jis )) will be able to adat to + meet whate/er new )hallen'es

Ka&in' the 'rade the arty itsel weeds o*t )orr*tion a))ordin' to thea*thor. "8 members o the re#1$th)on'ress olitb*ro, only 8 )ame rmri/ile'ed ba)&'rnds. Ka>ority wor&ed + )ometed their way thro*'h e ran&s tothe to. hina ens*res merito)ra)y by the or' det o )). This or' has an elabro)ess o bea*rati) sele)tion, e/al*ation + romotion. Go/t + aDliated or'

re)r*it *ni 'rads into entry#l/l ositions ann*ally into 1 o e state#)ontrolledsystems ()i/il s/), A3, 'o/t#aDliated so)ial or'#*ni2)omm*nity ro'%. r' detre/iew er ( -*antitati/e er re)ords re/iew R eer inter/iewR/et ersonal)ond*)t% + romote thro*'h in)r elite m'erial ran&s startin' &e y*an. F*&e&e* )h*)h*. 33s aths di/er'e at )h* and )an be rotated thro*'h ando*t o all tra)&s2 be sent abroad to learn best ra) arnd the world%. Kosts*))ess*l are romo a'ain to * >* and >* l/ls C assi'nment wld be to m'edistri)ts w h*'e o2)oy. 4t >*, / talented ew mo/e * and ma&e it to artys)entral )omm.

Inno/ate2sta'nate )ond*)t to#down eJerien)e in sele)t lo)ales +eJand s*))ess*l ones nationwide. en's )reation o se)ial e)on zones in

1!$0s C Ahenzhen was to oerate *nder m&t rin)iles rather than di)tates andthe s*))ess o this en)o*ra'ed same imlementation in other distri)ts.

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Li )ites transaren)y international indeJ (TI% to s*ort his /iew tht demoare more )orr*t. 5*an' howe/er, thin&s tht IT is a rod*)t o demo, whi)h*nders)ores tht we &now more abt )orr*tion in demo than in a*thoritarian)o*ntries b)*z demo are by denition, more transarent + they ha/etransaren)y data. Li ts o*t tht 4r'entina +

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the nan)ial system. "ndstrand o literat*re is o the /iew tht de/ o a n systemtht in)l a sto)& m&t + intermediation )ontrib*tes to a )o*ntrys o/erall e)on'rowth. rdstrand ro/ e/iden)e or the lin& + )a*sality amon' law, nan)e + 3Gat )o*ntry, ind*stry + rm le/el.

3Jamine se)tors o )hinese e)on state C all )oy tht 'o/t has *ltimate)ontrol (A3%, listed C listed on an eJ)h + *bli)ly traded, te se)tor C other rmsw /ario*s tyes o te + lo)al 'o/t ownershi.

hinas law + instit*tions, in)l = rote)tion systems, )or 'o/t, a))tin'stnds + -*ality o 'o/t si' less de/ than most )o*ntries in the LLA;. hinas nsystem dominated by lar'e b*t *nderde/ ban&in' system mainly )ontrolled by lar'est state#owned ban&s.

Atate se)tor shrin&in' d*e to on'oin' ri/atisation ro)ess, whi)h in)lrms '' *bli). =es*lts e-*ity ownershi is )on) within the state or rms)on/erted rm the state se)tor + o*nders amilites or the nonstate rms. or'o/t are wea& in listed se)tor. i/idend ratio + rm /al*e o hinese are low)omared to similar rms oeratin' in )o*ntries w stron'er = rote)tion,)onsistent w LLA; redi)tions.

=es*lts on a s*r/ey o 1N entrerene*rs + eJe), " most imt nan)in'

)hannels or te rms d*rin' their start#* and s*bse-*ent eriods are nan)in'intermediaries, in)l state#owned ban&s + te )redit a'en)ies,, o*nders riends Ramilies. Kost loans rm n intermediaries se)*re by Jed assets2 rdarty'*arantees. *rin' rms 'rowth eriod, *nds rm ethni) )hinese and trade)redits imt. Goin' *bli) has benets o in)r re*tation and a))ess to lar'e s)ale*ndin' b*t ris& dis)losin' ino to )ometitors2o*tsiders and in)*r lar'e amt oees. 4lternati/e me)hanisms, d*e to absen)e o ormal 'o/t me)hanisms ha/ebeen e:e)ti/e in te se)tor. =ole o re*tation + r2s. most imt or)e shain')hinas so)ial /al*es and insti related to on*)i*s C dene amily, so)ial order +tr*st. 4nother me)hanism tht dri/es 'ood m't + )or 'o/ is )ometition. Firms

ha/e stron' in)enti/e to 'ain )omarati/e ad/ 'i/en low s*ri/i/al rates d*rin'early sta'es o de/. rdimt me)hanism role o lo)al 'o/t C s*ort + arta&e in'rowth o te se)tor rms.

i:eren)es amon' se)tors )hallen'e law#and#n /iew tht it is the le'alori'in tht )a*se the di: in n systems and the n#and#'rowth /iew tht it is the de/o sto)& m&ts2ban&in' system tht )a*se di: in 'rowth o rms2e)on and )hallen'ethe /iew tht ty ri'hts and la)& o 'o/t )orr*tion are )r*)ial in det n + e)ono*t)omes.

3/iden)e on )hinas le'al + nan)ial systems and 'rowth in the se)torsma>ority o LLA; )o*ntries ha/e better sh + )reditor rote)tion than in )hina b*t amore imt meas*re )hina wld be law enor)ement C r*le o law + 'o/t)orr*tion)hinas meas*res si' below LLA; )o*ntriess*''est that s)ores o)reditor and A5 rote)tion o )hina *nreliable. hinas le'al system isnt ahead oany other ma>or emer'in e)on + is dominated by those tht ha/e en' )ommon#lawori'in. hina ran&s oorly in terms o olti)ial reedom R ty rote)tion ri'htsand thrs a ositi/e )orrelation betwn oliti)al reedom + meas*res o e)onreedom. M*di)ial indt a))t ositi/e e:e)t o )ommon#law le'al ori'in on e)onreedom. B*t a)t tht )hina s)ores oorly b*t still 'row ast )ast do*bt on imt ooliti)al reedom R e)on reedom in LL

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se)tor only, ratio dro, s*''estin' most ban& )redit is iss*ed to )oy in state2listedse)tors. hina has dominan)e by ban&s o/er m&ts stron'er than lls/ )o*ntries.hinas sto)& m&t are relati/ely more eD)ient than& ban&s as well d*e to hi'ho/erhead )osts o )hinas ban&in' system. hinas n system is smaller and lesseD)ient. A)ale and relati/e imt o )hinas eJt m&t not si'. @nderde/ le'alsystemsmall eJt m&t. LLA res*lt on the ne'ati/e relation btwn 'o/t ownershi oban&s + 'rowth o a )o*ntrys e)on seem to aly to )hinas state se)tor7 this hasnot slowed down 'rowth o te se)tor.

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riends in the orm o te loans+ e-*ity are also imt in s*bse-*ent 'rowtheriod. In some )ases, there are no ormal written )ontra)ts between riends2=Aand entre re*tation + r2s based imli)it )ontra)t*al a'reements wor&ede:e)ti/ely. Internal nan)in' (=etained earnin's% also imt. Finan)ialintermediaries also imt so*r)e o *nds b*t not )lear tht state#owned ban&s btnot )lear i state#owned ban&s ro/ )heaest start#* nan)in' )hannel sin)e alls*r/eyed rms tht re) start#* n rm state#owned ban&s alr est )lose r2s w thoseban&s b in)etion. Finan)in' rm te )redit a'en)ies (or oliti)altransormations best a))t )han'es.

ata in 0$ mirrors data set o )laessens, d>an&o/ + lan' w rese)t "/ariables + so*r)es *sed so as " ens*re )onsisten)y.

3ast asia *se*l re'ion to st*dy )han'es to )or ownershi a)ross timeb)*s lar'e data set tht eJists b asian n )risis R insti )han'es tht s*bse-*ently

haened. 0$ is a *se*l t to eJamine whether )han'es has o))*rred b)*s

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s*D)ient time has elased sin)e )risis new arran'ements to )onsol theirositions.

Find tht amily )ontrol remains most dominant orm o ownershi a)rosseast asia, tho*'h widely held ownershi dom in >aan, Taiwan + s*bstantial in&orea, thai.

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names o bod o am#owned rms and oliti)ians in both eJe) and le'islati/ebran)hes o 'o/t. in/esti'ate m+a, ta&e histori)al data to tra)& emer'en)e o )orin data set. ;ariables o)*s is on ownershi tye based on )ontrol ri'hts. Toenable )omarison w ! data, 'r *ltimate owners into# ind, am2domesti) 'o/t,widely held n insti, widely held 'o/t, orei'n 'o/t. one o the abo/e 'r deem toown a rm i ro o o*tstandin' shares eJ)eed wor&in' threshold o 102"0. I "s*)h *ltimate owners, reort s*b> rms to be hal owned by ea)h. ontrol ri'htsSro o o*tstandin' shares thro*'h whi)h /otin' ower )an be eJerdire)tly2indire)tly by *lt owners. =eort le/el o )ontrol eJer thro*'h a 'i/enownershi )hannel to be lowest shareholdin' denomination a)ross tht )hain oownershi. al lar'est owners ) ri'hts whi)h di:er rm )ontrol ri'hts in tht theyrefe)t le/el o n sta&e in )or. F ri'hts o owners are )onsiderably dil*ted d*eto m*ltile intermediate A5 rms alon' the line o ownershi. At*dy o yramids#/al*e o 1 i there eJists Uleast 1 *bli)ly traded )or within )hain o ownershi +0 otherwise. I lar'est sh hold any ortion o it share thro*'h an intermediate*bli)ly traded rmSyramid. ross#holdin's also )at*red#rm holds a sta&e inone o its shde)reased rm ! to 0$. Last meas*re i to member o )ors eJe)board is aDliated w *lt owner er rms tht are held by am, widely held n ins+

)or .aDliation /al*e S 1 i to eJe) related by blood2marria'e + 0 otherwise. Ito eJe) has been in his immed re)edin' emloyment been emloyed by)ontrollin' rm S 1. han'es stem within many re/ listed )or in)l in ! and rmemer'en)e o new )or o/er this time eriod. =easons 'i/en rms tht were in! data set b*t not in 0$ data set not to "00, rms 'one ban&r*t2delisted nreasons2'o/t or am b*yo*t2rms bo*'ht o*t + delisted by a *bli)ly traded )or.Firms are )onsidered to be oliti)ally )onne)ted i one o the )oys lar'e sh is a'o/t a'en)y2ministry2Uleast one o )oys dire)tors is a member oarliament2minister2head o state2)lose relation C so*se, )hild, siblin', arent,)lose riend. In)l*de orei'n oliti)ians + l asso) w a oliti)al arty2'o/t oD)ial.

han'es to )ontrol o lar'est *bli)ly traded )oy in east asia U10+

)*ro:, am ownershi dom tye or both yrs b*t in 1!! widely held ownershidom in >aan, si' in &orea, state ownershi imt in s', msia, indo. In 0$, widelyheld ownershi )ont dom in >aan, s*b in >orea b*t be)ome most imt or Taiwan,in)r mar&edly in thai. Atate ownershi in) in msia, h&. Forei'n ownershi thai +indo had hi'hest le/el. "0 am ownershi dom a)ross both time eriods,moreso in sea than nea.

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'o/t retained si' ownershi in " rms. s' in/ested " rms in indo, 1 in &orea,msia, 8 hiliines, 10 thai, )hina 11.

han'in' )hara)teristi) o am owned rms + their oliti)al ties eJamine sets o indi)ator re'ardin' rms w dom am owner (1%on) o )or ownershi inhands o am ("%aan, aan, aan. Ae o ownershi+)ontrol am#)ontrolled rms remained nearly the same, bi''est )han'es haened orother ownershi tyes whr it in)r or state#owned rms ollowed by rms wheredom owner is a widely held )or. 'reatest le/el in 0$ are rms w orei'n owner asa dom owner.

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A3# /ehi)le to )arry o*t )ontrol o mar&et ro)esses.

For ;ietnam, state a)es )hallen'e o mo/in' )ontrol o e)on thro*'hdire)t ownershi o A3s to 'o/t o non#state rms thro*'h reliable, transarentr*les + instit*tions. Taiwan#style ro)ess is not s*itable or ;ietnam, whr state)o*ld a/oid oliti)al )hallen'es o A3 reorm b*t o)*s instead on m&tinstit*tions tht alied e-*ally to all, allowin' te se)tor to fo*rish + ma&e soesate less )entral to o/erall e)onomy. B@T ower*l A3A, state a'en)ies det on

soes imeded b*ildin' o transarent m&t instit*tions + their )ons*mtion oreso*r)es )rowded o*t te se)tor de/.

Ehy state#led e)onomy6 By ri'ht in ost#)old war era, shown that ri/atese)tors ma&e e)onomi) de)isions and allo)ate s)ar)e reso*r)es more eD)ientlythat state b*rea*)rats. 3/en o*tliets# Ain'aore hel ro/e this r*le. A' ro/b*rea*)rats w h*'e in)enti/es tht hel min di: betwn state + te se)tors. This isnot seen in ;ietnam, where instead it is tro*bled w oor reso*r)e allo)ation,s*bstantial rent see&in' by rms, m'rs. + 33s. Ehy do we still see s*b stateownershi shares in ;ietnam6 A3s en>oys ri/ile'ed a))ess to )aital, land +orei'n >oint#/ent*re artners, monooly, oli'ooly in a /ariety o ind. ;ietnam)omm*nist arty maintains monooly on oliti)al ower + see its leadershi

threatened (oliti)al ris&s% to an *nambi'*o*s re>e)tion o its o*ndin' ideolo'y.3Jistin' A3s &ees s*bs reso*res + are re in 'o/t by interest 'rs tht ear anyma>or str*)t*ral )han'e may lea/e them worse o:. 3' soe 33s who en>oy morerote)tions + s*:er less ress*re, soe mana'ers who wont be rela)ed by moreeJerien)ed wor&ers *nli&e in te se)tors. These 'rs dire)tly in/ol/ed in )*rrentos o soes ha/e ower to slow e teisation ro)ess. broader >*sti)ations orA3 (1% Atate is a more bene/olent, so)ially res owner than any te se)tor =,less strin'ent rotability eJe)tations7 ha/e a *nion+th*s *nable to a/oidre'*lators B@T in /ietnams wea& re' en/iron, A3 )a*'ht in lenty o so)iallyirres a)tions. ("%A3 e:e)ti/e tool " address m&t ineD)ien)ies C state )ontrl o/er

ma)roe)on )hallen'es B@T this ar'*ment ass*mes a wea& state *nable to re'm&t e:e)ti/ely. (%Eea&ness o state (%@na/ =*ssian transition s*bs benetsborne U yramid bottom+ real oort*nities ro/ided or *ward mobility. Broadbased 'rowth in)reased le'itima)y o ;

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". A3s soes )ate'orized either as (1%Firms w state ownershi o 100 )harter)aital in the orm o a limited liability 1 member )oy ("%Firms w state ownershiW80 )harter )aital in the orm o >oint sto)& )oy + limited liability )oy w "2moremembers. lassi)ation o A3s /alid till >*ly 18. A3 )ont to 'd, emloymentalso de)reased. Atron' 'rowth in dom te se)tor + FI se)tor red*)ed role osoes. 9o o 100 state )aital soes droed dramati)ally in 1!!0#"010 b*t statesshare in artially ri/atized soes still s*bstantial. Atate maintained a dom share inmore than a third o artially ri/atized soes, w its share on a/e bein' 8N a)rossall these rms while o*tsiders a)ted only "!.. *ly18 redenes A3 to in)l*de onlyenterrises tht are wholly owned by state instead o )*rrent 81r*le. e)reeN129#< aim to hel soes str*''lin' to meet re- " di/est o*t o their non#)oreareas by a)il sale o non#)ore )omonents to state )aital in/estment)orassets are still in state hands b*t s)i) will be better e-*ied to ta&e a)tionon neJt stes. e)ree 12 9

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tin' them instead towards oort*nisti) + *nrelated eJansions o o s)oe intonon#)ore, low#handin' r*it biz a)ti/itiesleads soes into a)ti/ities that la)&)ometiti/e ad/ + 'o/t )aabilities + whi)h are mostly se)*lati/e + rent#see&in'in nat*re (ban&in', ins*ran)e, sto)& eJ) a)ti/ities, real estate%biz a)ti/ities ostate )or + e)on 'rs in ;ietnam more di/ersied than other )o*ntries. or'o/t o rms in whi)h state owns a sta&e 'reatly )omli)ated by lar'e no o 'o/tinstit*tions in/ol/ed + limited transaren)y in relation to the *bli) and betwninstit*tions. Kany ministries maintain d*al res or mana'in' + re'*latin'A3s)onfi)t o interest where ministries hoe to maintain )ontrol thro*'hownershi d*e to 'reater a))ess to re/ + 'reater *se o re'*latin' tht both res*ltr dire)t ownershino one 'o/t a'en)y res or )leanin' * mess o ineD)ientoerations + 9 ratherthan )o*ntrys oli)ies bein' )ontorted to needs o soesneed to eJli)itly state)ond *nder whi)h state sees a net ad/ or so)iety to maintain state ownershi. Is*)h an ad/ not seen soes sho*ld be ri/atized -*i)&ly, orderly + transarently.A)i) )an a)il this ro)ess. 5a/e to )han'e the idea tht soes deser/e se)ialtreatment, to be ser/ed as a 'o/t tool or so)ial oli)y + m't o e)on. 9o o soesneeds to be red*)ed to those 'o/t has det a )lear + so)ially bene)ial rationaleor state ownershi. 9eeds to en)o*ra'e state )ometition w a air layin' eldwhile trans + )or 'o/t enor)ed to ens*re ;ietnamese )oys, state#owned2otherwise )an better inte'rate w 'lobal m&t.

The Kira'e Kar&etin' To The Bottom The

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rimarily rod*)ers rather than )ons*mers. =eal way to eradi)ate o/erty is toin)rease =34L in)ome o the oor.

Tar'et m&t both rahalad + aer *ses denition or o/erty as ["2day at*r)hasin' ower arity (

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1. asas Bahia# Lar'e retailer in brazil sellin' to#-*ality brands li&e Aony, Toshiba# 4r'*ed tht oor l do desire -*ality dts B@T )ant a:ord them# 4/e in)ome o )ons*mers abt J" min wa'e, so 9T really B< )ons*mers as it iswell abo/e ["2day o/erty line.# Th*s, hi'hly rotable )oy has lil to do w bo roosition.". Iodized Aalt# 3:e)ti/e2ineJ way to re/ent iodine de)ien)y. Aome iodine in salt lost instora'e, transortation + )oo&in' ro)esses. 5LL (5ind*stan Le/el Ltd%, indian

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s*b o @nile/er de/ a rorietary mir)o#en)as*lation te)h to stabilize salt)ontent in salt4nna*rna salt. Fa)t is enetration amon' oor still lil d*e to"N8 J remi*m o salt, many l dont see it as a bar'aindont s*ort boro. I)e ream# 4m*l, a lar'e indian )oorerati/e o*nd instant m&t in 01 when it intro i)e#)reamU a:ordable J.# Beore 4m*l, 5LL was lar'est rm in m&t d*e to radi)al inno/ation whi)h allowi)e )ream to be transorted )healy w2o need or reri'eration whi)h allows it torea)h B< m&ttr*th howe/er is tht on to o )heaer i)e )ream, 5LL de)ided to)omete on di: in 0" in )ities onlyrst rot.

Ain'le ser/e re/ol*tion 4 *d ( a thin' tht doesnt wor& roerly2 is*nsatisa)tory or worthless% ioneer a/inare who intro shamoo sa)hets.4roa)h to en)o*ra'e )ons*mtion + )hoi)e at bo by ma&in' *nit a)&a'es thtare small + th*s a:ordable B@T )laim o a:ordability is alse)oy may reer tosell smaller a)&a'es w lower rot mar'in " en)o*ra'e samlin', oor mi'htreer small a)&a'es d*e to )on/enien)e + m'in' F7

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inormed, bo initiati/e mi'ht e/en lower welare o oor. *d'e or themsel/es how they, as /al*e#)ons)io*s)ons*mers want to send their money to maJimize their *tility%. 5E3;3=, oorare /*lnerable d*e to la)& o ed*)ation, ino + e)on, )*lt*ral, so)ial deri/ations.4 ersons re is malleable + shaed by ba)&'rnd R eJerien)e. 9eed to loo&beyond eJressed re + o)*s on ls )aabilities to )hoose the li/es they ha/ereason to /al*e. Baner>ee + d*fo show, in a s*r/ey, l )ld sa/e more w2o 'ettin'less n*trition by sendin' less on al)ohol, toba))o, ood items li&e s*'ar, s)ie +teadata s*''est oor, >*st li&e the rest la)& sel )ontrol, yield to temt + sendto &ee * w nei'hbo*rs >*st tht the )onse-*en)e or them are more se/ere. Koreoten than not, oor ma&e )hoi)es whi)h are not in their own best int.

*di)es lead women to *se s&in#

li'htenin' dts tht sometimes ha/e ne'ati/e health side e:e)ts. 5ammond +rahalad ar'*es tht oor women ha/e a )hoi)e + eel emowered b)*s o ana:ordable )ons*mer dt orm*lated or her needs b*t T5IA is an ill*sion. It ser/esto entren)h disemowerment. The way to emower a woman is to ma&e her nindt + better ed*)ated need so)ial R )*lt*ral )han'es tht eliminate re>*di)es.Ahld imose some )onstraints in terms o tr*th in ad/ert R *ll dis)los*re oin'redients *sed in dts R ne'ati/e side e:e)tsmore so or who la)& ino +ed*)ation needed to ma&e well#inormed )hoi)es.

Lower ri)es2 =aise in)ome only way to hel eradi)ate o/erty is to raisereal in)ome by either lowerin' ri)es o 'ds )ons*mers b*y or raise their in)ome

earned.

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are also in)reasin'ly re)o'nizin' imli)ations o inno/ations at bo or de/eloedmar&ets.

. Form )riterias based on )ons*mer immersion+ insi'ht (in e' modern, smo&eless, easy to *se sto/e whi)h needs to beasirational s*)h tht )ons*mers want to own one, adhere to 'lobal saety stnd,s)alable#b*ild a biz not >*st a dt, a:ordable while 'eneratin' rot%. The)ritierias be)ame the bo*ndaries o inno/ation sandboJ tht )o*ldnt be /iolated.

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)ontra)ted rdarty w eJerien)e in man* sto/es, b ro/ a ready m&t and te)hassistan)e while in/estment in lant to man* sto/e made by artner.

B< Inno/ations 'eneralizable lessons systems rom the west wontwor& in bo m&ts. Firms ha/e to learn to bal 'lobal stnd + lo)al resonsi/eness.Generalisations1. B< m&ts di: rm de/eloed )o*ntry m&ts. B< not monolith. Eide /ariationseJist witho*t *ni/ersal bo sol*tion. Aol*tions are se)i) to an ind*stry + to a

arti)*lar tar'et within bo.". B< )hallen'es o*r thin&in' by o)*sin' on 4A. Inno/ation m*st start w dee immersion on )ons*mers li/es to 'et insi'htswhi)h allows *s to de/ system o )onstraints within whi)h we ha/e to inno/ate,res*ltin' in the inno/ation sandboJ.. Inno/ation is not >*st a dt. It is de/ an aroriate e)osystem tht allows a newbiz system to Jn.3)osystem allows se)ialization wor&in' to', where a:ordable Jin' o)*sed on/ol*me + s)ale. Fo)*s is on red*)in' )aital intensity to a t where )aital re- CJed assets Rwor&in' )a needs are sread o/er e)osystem and not borne by anyone rm. Eor&fow is e baiss or i)&in' artners to )oo + b*ildin' e)osystems.

e/ bo m&t to ser/e eJistin' m&t more eD)ienty + )reate a new m&t, s*b aneJistin' aroa)h to *lll well#re)o' Jnality. reate awareness R b*ilde)osystems or a)- new )*stomers.

The inno/ation fow shit in emhasis to mo/e rom dt#)entri) inno/ationto o)*s on biz#model inno/ation o whi)h dt is a s*bset. Aystems thin&in' is arere- s*))ess in bo m&ts. Bo m&t re- renewed emhasis on b*ildin'e)osystem as an inte'ral art o inno/ation. Bo )an be a so*r)e o newde/eloments.

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means whi)h are seen as )o*nter#rod*)ti/e as these a)ti/ities dont )oin)idewith rot#maJ ob>e)ti/es o te )aital insti.# =adi)al oliti)al e)onomy erse)ti/e )on)et*alise nation state as a)aitalized instit*tion whose eJisten)e ens*re rerod*)tion o )aitalist mode orod*)tion. Atate seen as relati/ely a*tonomo*s, helin' )aital to a)hie/e itsaims. n the one hand, )aital, re by tn)s needs a system o nation states todeend its 'lobal int. n the other, 'rowin' internationalization o )aital tend toin)rease relati/e ower o tn)s in relation to nation states. Internationalisation o)aital rerod*)es *ne/en de/ within and a)ross )o*ntries. 5ymer labeled thisas ?law o *ne/en de/eloment. Inherent )ontradi)tion in internationalization o)aital ro)ess wor&s a'ainst ob>e)ti/es o nation states and res*lts in )ontin*edinstability)ollase o )aitalism.# oll*sion#and#ri/alry ramewor& *se*l in anal )han'in' r2s btwn states + T9s.9ation states relati/ely a*tonomo*s. Atate#T9 r2s deend on domesti) stren'th+ 'eo'rahi)al s)ales.Insert table here. Eea& nation state needs )aital CT9s to s*stain national'rowth + de/ thro*'h )ont in/estment + rerod*)tion o )aital and may )oll*dew dom2orei'n )aital to s*stain national )ometiti/e ad/. I it ails to attra)t

in/estment rm )aitalists wea& state a)e a le'itima)y )risis whi)h ends in losso ower2leadershi2dominan)e. T9s need system o nation states to eJloit)omarati/e di: in national labo*r and lay o: nation states a'ainst ea)h other.Amall states tend to be more )oorerati/e + able to )ontrol ind oli)ies, e)oninitiati/es. Amaller states, es 4sian de/elomental states more able to )oll*dew )aital to *rther e)on de + nat )omt strat, a)ilitatin' their oliti)alle'itmisation. Amaller s)ale allows )ontainment o di: demands o so)iety +eJer)ise o stron'er oliti)al will in ad/ their strat. Ind2insti in these states also)on)ede more oliti)al ower to e state as a ?'*ardian in rote)tin' )olle)ti/einterest as they re)o' their )onstraints d*e to size. Lar'e states may nd it di:to )oll*de d*e to )omleJ bar'ainin' ro)esses+ower relations. 4 stron' state

not obli'ed to )oll*de es when trans )aital threatena*tonomy2he'emonyotential or ri/alry to oliti)al ower and may limitarti)iation o orei'n rms in state#sonsored )ollab /ent*res. (e.'.@A,3*roe,state eJ)l orei'n rms rm arta&in' in hi'h#te)h )ollab ro>%. stron' state mayimose stri)t re- on lo)al o o orei'n tn)s. B@T L=, stron' state may a)ele'itimation )risis when eJistin' e)onomi) de/ strat be'in to wear o: in )omen/ironment and m*)h sear)h or an alternati/e. This sear)h refe)ts oliti)alstr*''le btn labo*r int + biz demands.

Ain'aore e)onomy + re'ionalization o Ain'aorean rms (/er/iew%Ain'aore now is a d*al e)on se)ializin' in hi'h /al*e#added man* a)ti/ities +

international nan)ial and b*siness ser/i)es.