Brain drain is a bogus concept

Prime Minister Vajpayee wants to reverse the brain drain. Learned economist Jagdish Bhagwati views the brain drain as a serious leakage out of India. Many economists in past decades have made detailed calculations on how many billions India has lost and the USA has gained from the movement of Indian doctors, engineers and other skilled personnel.

I feel that the brain drain as a concept is misleading if not plain wrong. Some economists say that it costs $5,000 to train an engineer in India and $100,000 to train one in the USA, and so there is a brain drain of $95,000 when an engineer moves from India to the US.

This methodology makes no sense to me. It assumes that the true value of a good or service is the cost of producing it in the importing country, not the exporting country, and calls the difference a drain. Really? Just try applying this methodology to some other areas.

Consider tea. The USA imports tea from India. Does it make sense to calculate the cost of growing tea in India, then calculate the cost of growing tea in the USA, and call the difference a tea drain? We make garments, leather jackets and computer software much more cheaply than the USA, and export these. Does it make sense to say that India is suffering a garment drain, a leather jackets drain, and a software drain?

Even if you accept this terminology, apply it next to the movement of goods and services from the USA to India. The USA supplies jumbo jets and advanced computers that we could not possibly make in India, save at several times the cost.

So, does it make sense to say there is a huge jumbo jet drain and computer drain from the US to India?

Many US technical experts have provided technology to India that we could not have produced even at infinite cost. Does it follow that there is an infinitely large technology drain from the US to India?

Some people will say I am indulging in false analogies. When we get a technical expert from the USA, we pay for his services. But when an Indian doctor or engineer migrates to the USA, India gets no payment. Is that not a drain?

No, because huge flows of brainpower in the reverse direction are free too. The overwhelming bulk of brainpower used in our university courses comes from research and writing done in the West. No Indian pays for the knowledge of Newton or Euclid, or for the huge and constant flow of knowledge in new scientific papers and journals. The West does not pay for the contribution of Aryabhatta either. But let us concede that the overwhelming flow of free knowledge is from the rich to poor countries. Yes, we export free brainpower in the form of engineers. And yes, we enjoy a huge import of free brainpower in a multitude of forms. On balance, we get far more than we supply.

So, I think we need to abandon the concept of a brain drain. But we can indeed talk of flows of brainpower, of global flows of innovations, ideas and creativity.

Brainpower is not just R and D but music, archaeology, literature and all else that is creative or adds to our knowledge. Some brainpower flows as commercial sales, some flows free through journals, seminars and expired patents. But the biggest flow by far is brainpower embedded in goods and services made with the latest technology. On balance, such embedded technology (which constantly improves products and services) constitutes a massive net flow of brainpower from rich to poor countries.

The reverse flow of brainpower embedded in doctors or engineers is tiny compared with the huge flow of brainpower embedded in goods and services.

Most R and D and academic research is done in rich countries. R and D budgets there are huge, the budgets for producing entertainment, books, and all brain-intensive products are huge. Much of it results in not just superior but cheaper goods. The price of computing has fallen to one-millionth of what it was in 1950. The internet provides an avalanche of information and knowledge at the cost of an internet cafi session. The low cost reflects enormous brainpower that went into cost reduction.

Innovation at the frontier of technology is extremely expensive. Rich countries need to spend enormous sums on R and D to progress beyond their current technological limits. But poor countries can leapfrog from traditional technology to modern technologies quickly and at little cost, with little R and D effort of their own.

This gives them a huge advantage: Catching up with technology leaders is much easier and faster than developing new technology.

Rapid catch-up possibilities have enabled developing countries to grow much faster than rich ones. China or the East Asian tigers could enjoy GDP growth of 8 to 10 per cent for years through catch-up using Western technical and managerial inputs. But the main sources of innovation, above all the USA, cannot average more than 3 per cent annual growth.

Okay, you might say, maybe India gets a net inflow of brainpower. But would not our gain be even greater if we did not lose so many skilled people to the West? That is a good question, which I will address further in a future column.

What do you think?