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Rhetoric or reality: Focus on per capita

by Index Investing News
February 15, 2024
in Opinion
Reading Time: 4 mins read
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Did we celebrate that moment? Don’t worry, it’s a rhetorical question.

You and I own companies that both make handmade shoes. Yours is several years older than mine. So when mine started operations, naturally yours was producing far more shoes than mine. But my company is much larger—it has recruited 10 times the number of shoemakers that you employ. Inexorably, then, my company catches up to and overtakes the output of yours.

Is either company surprised when that happens? Rhetorical question again.

One final situation for your contemplation. The Agarwal family has mother, father, and two kids, all with large appetites and no interest in exercise. Thus, all four cut rather portly figures. Collectively, they weigh 400 kg (bear with me, this is a thought experiment). Their neighbours, the Manchandas, are far more health conscious—they eat wisely, play football regularly and are all slim and athletic people. They are a larger family than the Agarwals: mother, father and six kids (bear with me again).

As a neighbourly joke, both families weigh themselves on the same day each year and compare the numbers. Put together, even with eight members versus four, the Manchandas have always weighed less than the Agarwals. Until the year the youngest Manchanda kid turned 18. At that weighing, the Manchanda total was also 400 kg.

Should the Manchandas throw a party to mark this milestone? Is finally equalling their neighbours’ collective mass a remarkable achievement? Yes, still rhetorical questions.

But, you will agree that if you did answer all these rhetorical questions, you’d most likely say “no” each time. Naturally your company will produce more shoes than mine—yours is 10 times larger. Naturally India will have more cricketers than England—India has nearly 20 times England’s population. Naturally the Manchandas will eventually equal and then go on to outweigh the Agarwals—there are twice as many Manchandas as Agarwals.

In each case, a better comparison might be with “per capita” numbers. Divide the families’ respective weight totals by their count. You find that individually, the Agarwals comfortably outweigh the Manchandas, 100kg to 50kg. So much for a milestone. I don’t know how many cricketers England and India, respectively, have—except that India must have many more. But even if India has nearly 20 times as many people, I suspect India’s per capita cricketer count is about the same as England’s; certainly not 20 times greater. At best, it might be somewhat larger, given that cricket is not the favourite sport of the English in the way that it is of Indians. As for the shoes: At the moment my company equals the output of yours, my per capita production—call it productivity—is one-tenth of yours. Yet it surprises nobody in either company that my production matches and overtakes yours. That’s only inevitable, given how many more shoemakers I have on my rolls.

Perhaps you know what has prompted all this rhetoric—apparently feel-good stories like these:

* Last week, Microsoft’s Satya Nadella told a gathering of “developers and technological leaders” in Bengaluru that India was “expected to overtake the US as the largest developer community on GitHub by 2027″. This made headlines, because for some obscure reason we love to hear that we have “overtaken” the US at something or the other—in this case, the number of people who use the world’s premier platform for creating and sharing software.

* Earlier this year, a meme made the rounds that made this claim: As fractions of the whole Indian economy, Uttar Pradesh’s economy has overtaken Tamil Nadu’s—9.2% to 9.1%. This came as mellifluous music to certain UP-friendly ears, because they have grown tired of hearing of UP’s backwardness in comparison with states such as TN or Kerala.

* India is now the fifth-largest economy in the world, behind only the US, China, Germany, and Japan. It has overtaken countries like the UK and France, and by 2030 it will have overtaken Germany and Japan as well. Somewhere along the way, India will also become a five-trillion-dollar economy. This is lapped up whole and regurgitated by certain folks in the media and others who have grown tired of hearing of India’s backwardness compared with other countries.

There’s more, but let’s look at just these three. To start with, let’s be sure: There’s some truth in all these stories. But as ever, they could do with a closer examination.

* The GitHub story: Largely by virtue of having a much larger population than the US, India produces many more engineers and software developers annually than the US does. I have seen estimates of 1.5 million and 100,000, respectively. I don’t know how accurate those are, but that there is a wide gap is obvious. Plenty of those will write software and share on GitHub.

Therefore, even if the US had a head-start for various reasons, the numbers themselves mean the Indian presence on GitHub will eventually outstrip the Americans.

* The fifth-largest economy story: Take Germany, earth’s third-largest economy. Germany’s economy is at about $4.4 trillion, whereas its population is about 85 million. Per capita, that’s about $52,000. India has 1.4 billion people to enjoy the fruits of its $3.61 trillion economy: about $2,580 per capita. And that—$52,000 vs $2,580—is a far more instructive comparison than chest-thumping about our ranking. Not just that. India’s vast population itself makes it inevitable that our economy will eventually outstrip nearly every other on the planet—$5 trillion being just a number on the way.

* The UP-TN story: There’s a lot to question and dig into there, but let’s take this claim at face value. UP’s population (240 million) is three times that of TN (80 million). The Indian economy is at just under ₹300 trillion. So, if both states have about the same—9.2% and 9.1%—shares of the Indian economy, that’s about ₹27 trillion each. Divide that by the respective populations to find that TN’s residents are three times better off than UP’s. That’s the real story here. Anything else is just propaganda. As Palanivel Thiaga Rajan, TN’s minister for IT, summed it up in a recent article, such propaganda has “removed every shred of intellectual content…and darkened the environment into one filled with a cultish, vacuous chanting of inane noise.”

So yes, if intellectual content matters, pay attention to the per capita. Because let’s face it: Becoming collectively heavier than a numerically smaller family is, well, a pretty lightweight achievement.

Once a computer scientist, Dilip D’Souza now lives in Mumbai and writes for his dinners. His Twitter handle is @DeathEndsFun.



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