Vinod Khosla's Marshall Plan for rural India

Forget about all that ethanol stuff. Here's something really ambitious: New economy social engineering.

Published January 23, 2007 11:49PM (EST)

The daily drumbeat of biofuel headlines has made Vinod Khosla -- co-founder of Sun Microsystems, former Kleiner-Perkins venture capitalist, and ethanol evangelist/entrepreneur extraordinaire -- a hard man to ignore of late. But Khosla's massive bet on renewable energy as the answer to climate change and peak oil (and big profits) may not even be his most ambitious scheme to remake the world. In 2002, Khosla co-wrote a paper with development economist Atanu Dey sketching out a plan to boost economic growth in rural India. It's hard to think bigger than a bid to upgrade the living standards of some 700 million people -- as the paper notes, one out of 10 people on this planet is a rural Indian. (Thanks to the India Economy blog for the link.)

The paper is titled "RISC: Rural Infrastructure Services Commons." The title may or may not be a pun on the computer term RISC -- an acronym for "reduced instruction set computing"; Khosla was reputed to be a big proponent of RISC processors in his Sun Microsystems days. But the paper is sui generis: a unique mixture of complexity science, new growth theory à la Paul Romer, and new economy Internet hype, all in the service of addressing the immense challenge (and, believe it or not, "Kantian imperative") of incubating economic growth in rural India.

India has to urbanize, declare Khosla and Dey, but a wholesale migration to India's major cities would create a mega-city disaster of megaslums, along with perpetrating a rural-to-urban brain drain that would leave the hinterlands even worse off than before. Conversely, attempting to extend the provision of electricity, telecommunications and other infrastructural services to every hamlet and village in India would be both exorbitantly expensive and criminally wasteful. The RISC model, in contrast, advocates coordinating and consolidating centralized infrastructure hubs in midsize towns. The authors believe that only 5,000 or so "RISC centers" would be necessary to cover all of India.

Even though it is clear that their plan would require a considerable reallocation of state resources and the careful coordination of multiple stakeholders, both commercial and nonprofit, Khosla and Dey are at pains to declare that their prescription is not "an attempt at social engineering through centralized planning" or anything else that might possibly reek of socialism. But the paper nevertheless betrays a distinctly computer programmer-ish approach to manipulating reality like an almighty God (or a SimCity player): If we can just come up with the proper algorithm that distributes X amount of infrastructural resources at Y locations we will achieve Z percent of economic growth per year. "The solution we present operationalizes the efficient deployment of the resources that are already being spent."

Call it new economy social engineering:

Using a chemistry analogy, we hypothesize that ... a critical mass of consumers and producers, a "soup" with sufficient diversity of consumers, producers, ideas, skills, at a sufficient scale and critical mass will become autocatalytic. Economic activity, newly catalyzed business activity, and other surprises will emerge. Emergent behavior, surprising and unplanned, is a well known behavior of complex systems and a manifestation of the invisible hand of Adam Smith. We hypothesize that this complex system ("soup") is what is enabled in the model we propose here. The highly distributed village model is preserved but allowed to mix, via the bicycle commute of the most active ingredients (the entrepreneurs, the skilled, the ideas folk, the knowledge people, etc), so the autocatalytic economic system can emerge. The same resources, the same new investment generates disproportionately greater returns, and growth accelerates.

Economist Paul Romer's key contribution to economics has been a rigorous mathematical "proof" that the long-term trend line of a nation's economic growth can be affected by policy decisions. This is the dividing line now: On one side, old-school Chicago schoolers who believe that government should stay out of the market as much as possible, and new-school new-growth theorists who believe that the right mix of mildly interventionist policy decisions can make a big difference influencing how fast or slow an economy grows.

Khosla and Dey's basic proposal, however, is simple enough that one wonders why it hasn't been tried before. The authors suggest that in part this is because the cost of connecting people with the right level of infrastructure and associated services was too great. But the same information and communication technologies (ICT) that have enabled Indian programmers to compete on a global stage can now also enable entrepreneurial rural Indians to gain access to the ideas and information necessary to boost their nascent business operations on a local level. "ICT is therefore the enabling technology that empowers the model," write the authors.

(There's an interesting side story here. It wasn't so long ago that Sun Microsystems was doing its best to make its business synonymous with the Internet -- the company was the "dot" in "dot-com." And it is true that for a time, Sun computer servers handled a disproporationately large slice of the Internet's backbone of operations. So the company Khosla co-founded played a not insignificant role in enabling the explosion of telecommunication interconnection that has given us our globalized world; that has allowed Indian programmers in Bangalore and Chennai and Hyderabad to compete on a global stage.

But here is Khosla now, saying that that's not enough. India's high-tech prowess is not sufficient to lift hundreds of millions of Indians out of poverty. "Rural Indians are relatively unimpacted by globalization," write the authors. "While software exports, business process outsourcing and other exports help general economic growth it does relatively little for the rural masses.")

So far, the RISC proposal has yet to be implemented, though Dey promises on his blog that a pilot could be up and running "soon." We'll be watching.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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