Exporting manpower and importing technology

Rajiv Malhotra
Rajiv MalhotraJan 11, 2021 | 17:57

Exporting manpower and importing technology

The AI-driven revolution will have an unequal impact on different segments of humanity, that will eventually lead to digital colonisation. An exclusive excerpt from Rajiv Malhotra's latest book.

Artificial Intelligence is only partially visible, like an iceberg. To understand it fully, we must look beneath the surface. The positive side is that technology is making machines smarter. However, the deeper view explained in Artificial Intelligence And The Future Of Power shows that AI is also making a growing number of people cognitively and psychologically dependent on digital networks.

Artificial Intelligence and The Future of Power argues that the AI-driven revolution will have an unequal impact on different segments of humanity. After analysing the society’s vulnerabilities to the impending tsunami, the book raises troubling questions that provoke immediate debate: Is the world headed toward digital colonisation by USA and China? Will depopulation become eventually unavoidable?

We present an exclusive excerpt from the chapter titled Exporting Manpower And Importing Technology.


main_front-cover-ai-_011121053537.jpgArtificial Intelligence and the Future of Power | Publisher: Rupa & Co | Rs 795 | 520 pages


The telecom and information technology revolution, including the spread of the internet, mobile telephones, and social media, has been largely pioneered by Western firms. But it is fair to say that Indian engineers played a significant role as employees and contractors working for the companies that own the intellectual property.

At the same time, India has become one of the largest markets importing these technologies. India is proud of having the fastest-growing installed base of mobile users, but the technology used in the networks is largely US and European, and the handsets are mainly Chinese. India takes pride in that it has the second-highest number of internet users in the world, and this number is growing faster than any other country. India also has among the world’s largest installed bases of users on Facebook, WhatsApp, Instagram, Twitter, and YouTube. Indians buy mostly Chinese hardware and use it to access US digital platforms. These facts indicate Indians’ eagerness as consumers of foreign products and services, but also highlight the failure of domestic technology developers. Even when manufacturing is done in India due to cost advantages, the research and engineering controlled by foreign entities give them power over intellectual property.

My concern is that India has failed to adequately educate the youth and enable them to realize their potential. The civilization that was once a world-class knowledge producer and exporter has become the biggest importer and consumer of foreign products and services—from agriculture to technology. Even in the realm of accolades, Indians chase Academy Awards, Nobel Prizes, Pulitzer Prizes, Rhodes Scholarships, Fulbright Scholarships, and various other international awards, much more than domestic recognitions of achievement.

To understand how India has slipped, consider the following analogy. Suppose a contractor recruits poor villagers from Bihar and brings them to Delhi as labourers on a construction site. The labourers do not own any equity in the project, not so much as a single brick. The bricks they install belong to the client who owns the building. When the construction project is completed, workers must look for the next job, and then yet another one. Their labour does not translate into any equity or long-term security. But the contractor organizing this labour makes a handsome profit quickly with little effort or value-added.

At first, this arrangement looks promising for the workers, because they can send money home to support their struggling families. And they may earn enough money to buy some consumer goods that are the envy of people back in the village. Maybe they own a fancy smartphone or a scooter. Compared to others in the village, their lifestyle is superior. They are the village heroes, and their parents are proud. They are sought after as a good catch for marriage.

India’s software lead was similarly based on labour arbitrage with foreign clients, which is inherently a rickety business model in the long run. The middlemen in India hired computer programmers for low salaries compared to Western levels. They marked up the rates and sold cheap Indian labour to foreign, particularly the US, companies. Clients saved money because the wage rates in the US were much higher than in India even after the markups. This system appeared to bolster India’s economy. But in the long run, labour arbitrage is self-defeating as explained below:

  • It only works if Indian wages remain sufficiently low compared to the client country. Indian tech workers must be kept below a wage ceiling for the model to remain viable. But suppressing wages merely encourages the best minds to leave India in search of fair compensation.
  • Other developing countries also enter the same field using their own low wages as an advantage, and they may underbid Indian wages.
  • Client countries inevitably tighten immigration laws to save their own jobs. India’s export becomes contingent on the internal politics of the client country.

Only in the past few years did India’s government and corporations wake up when the US started clamping down on outsourcing, and when Indian tech workers sent to the US also faced increasing competition from American professionals. Labour arbitrage does have value for the short term, bringing quick employment and helping train the local workforce. But the middlemen should not accumulate wealth at the expense of workers, and government planners should not consider it as a sustainable strategy.

Last updated: January 11, 2021 | 17:57
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