NYTimes writes about the realities in rural India, with absentism driving people to quacks:

India has a vast primary health care system to serve its billion people, with clinics for every 3,000 to 5,000. But the system is often just a skeleton. New studies have documented the startling, damaging dimensions of chronic absenteeism — and not just in India.

Researchers from the Massachusetts Institute of Technology and Princeton, in a detailed survey of 100 villages here in Rajasthan, in north India, found a no-show rate of 44 percent. When combined with absences for meetings and other work-related reasons, these vital clinics were closed more than half the time.

What is starkly clear in India, home to more poor people than any other country, is that the health system is both starved for resources and desperately in need of reform.

India's public health spending is among the lowest in the world — $4 a person per year, less than 1 percent of its gross domestic product, the United Nations Development Program says. The United States spends about $2,000 a person, or almost 6 percent of gross domestic product.

But India's experience also shows that more money alone is not the answer. India sharply increased its health spending in the 1990's, but most went for new hiring and for pay raises to those doctors and nurses who are not showing up for work, according to a World Bank analysis.

The economists coordinating the research [in Rajasthan] — Professors Abhijit Banerjee and Esther Duflo, co-founders of the Poverty Action Lab at M.I.T., and Angus Deaton at Princeton — will work with 120 villages and 100 clinics.

They will add a nurse to each clinic and monitor attendance through a punch clock or dated digital photographs. They also will try chlorinating contaminated well water, fortifying flour with iron to fight anemia and paying parents to have their children immunized.

They will try each strategy in half the villages or clinics, then compare the health of people in villages that got the help with those that did not.

Because the public service is so undependable, the survey found, even the poorest turn to private doctors or traditional healers 79 percent of the time, spending 7 percent of their monthly budget on medical care. Four out of 10 private doctors surveyed had no medical degree.

Chronic absenteeism among government doctors and nurses is a hard thing to stop in widely scattered villages. The clinics have no phones, so it is impossible to check on the staff's presence with a simple call. The local village councils are supposed to ensure attendance, but they have no authority over the medical staff, whose salaries, transfers and promotions are controlled at the district and state levels.

Always-On writes:

Beneath the passionate debate over U.S. companies outsourcing jobs to low-wage foreign workers in far-off countries lies a new and worrisome truth: They're gaining on us.

People in the Third World are rapidly acquiring the skills and knowledge needed to close the gap in the great competitive race against the U.S. It is the race to win -- and hold -- markets around the world.

Robert Hormats, vice chairman (International) of Goldman, Sachs, sums up the issue: "Historically, developing countries have been competing against us on the basis of cheap wages. Now, increasingly, they are competing against us on the basis of high-quality goods. We don't have much alternative to raising the quality of our work force. The answer to the challenge of outsourcing is to address the problems of education and training that we have at home."

In other words, the way to combat outsourcing is not to slap tariffs or import quotas on foreign goods, not to bar U.S. companies from producing their goods and services as efficiently and inexpensively as they can, but to equip American students with the skills and knowledge required to beat the competition in the Darwinian global economy.

We are entering an era when whole countries and individual companies will be valued and rewarded according to the quality and exercise of their brainpower. The most valuable form of capital will be human capital, the intelligence and ideas, the resourcefulness and industriousness of a nation's people.

Companies and other institutions will climb or fall along with their ability to seize upon new ideas, to carve out and capture new markets, to invest wisely in research, and to turn research into useful, marketable, urgently demanded goods and services and to make steady, incremental, day-to-day improvements in their products and services. Steadily improving education will go far to create all that.

In my crystal ball, the next major innovations coming our way will probably be in the convergence of infomatics, genetics and nanotechnology. To participate meaningfully in this revolution is going to require multidisciplinary approaches. People will have to have a high degree of education in more than one of these fields. The problem is that this revolution is still a number of years away. Technology takes a long time to develop. Look at the technologies that have come tougher to create the productivity improvements that have led to our current situation. They're all 30 to 60 years old!

It will probably be some combination of these factors. And, I wholly support getting our children better educated in the physical sciences so that they can help produce the innovations of the nano-bio-info revolution. But, as you know, growing children into educated adults takes a long time. It seems to me that we can’t wait for the nano-bio-info tech revolution. The process of globalization is going on too fast. It seems to me that we need innovations now that increase the productivity on US knowledge workers ten fold so that they can compete globally and still make enough money to buy the products they make. We need innovations in the way we look at corporations, the nature of work and how we organize ourselves. We need innovations in how we fund business and reward workers. And, we need innovations in the way we measure success - corporate and personal.

The European Commission's decision is coming in for a lot of comment. Writes the Economist:

The headline-grabbing €497m ($612m) fine imposed by the European Commission on Microsoft this week is the least of the software giant's worries, for it makes that much profit every two weeks and is sitting on a cash pile nearly 100 times bigger. Far more worrying for Microsoft is the commission's demand that it produce, within 90 days, a version of its Windows operating system stripped of its media-playback capabilities. That sounds trivial, but it would set an important precedent that could be used to make Microsoft remove other bits from Windows in future. Hence Microsoft's recent strenuous efforts to negotiate a settlement to avoid this week's ruling, and its determination to have the ruling overturned on appeal. Allowing PC-makers to pick and choose which bits of Windows they want from an “à la carte” list of features is something Microsoft wants to avoid at all costs.

That is because Microsoft relies on the “bundling” of new features into Windows to protect its existing monopoly and to extend it into new areas. Windows is installed on over 90% of new PCs. So any feature Microsoft adds—a web browser, say, or a media player—quickly becomes ubiquitous. Rival products, such as Netscape's web browser or the RealNetworks media player, which must be installed separately, lose out. Microsoft crushed Netscape this way, and now the commission has ruled that Microsoft's “bundling” of its media player into Windows “is an example of a more general business model which deters innovation and reduces consumer choice in any technologies which Microsoft could conceivably take interest in and tie with Windows in the future.”

The next version of Windows, codenamed Longhorn, due in 2006, will include search, database and security add-ons, and will no doubt inspire new legal challenges. By making Microsoft “unbundle” its media player when asked to do so by PC-makers, who can then substitute an alternative, the commission's aim is both to level the playing field today and pave the way for further unbundlings in future.

If Microsoft's various add-ons were optional rather than compulsory parts of Windows, each one would have to compete on merit with rival alternatives. PC-makers could then differentiate themselves from each other by assembling different software bundles for specific markets.

Far from penalizing Microsoft, Wednesday's decision by the European Commission assures a bright future for the company as a patent licensing operation, according to one representative only two open source interests called to testify before the investigation.

Because Microsoft will be allowed to pursue royalty revenue from the APIs it publishes, Jeremy Allison says that the projects such as Samba, which he jointly leads, may face a prohibitive hurdle. Microsoft's competitors use software such as Samba to access file and print services on Windows machines.

One of the key side-effects of the diffusion of information across all sectors of India will be the ability to adopt innovations. Wrote Atanu Dey recently:

As a development economist, I have often asked myself what are the invariants that underlie development. I know for sure that high technology (computers, internet, cell phones) are neither necessary nor sufficient for development. Most of the developed economies of the world developed at a time when all those were not yet invented. I believe that one invariant is the ability to adopt innovations.

People, societies, economies which can successfully adopt innovations tend to do better than those that don't adopt innovations. The operational word is adopt. Innovations happen all over the place and all the time. Who innovates and how is not what I am concerned about although it is a fascinating subject in itself. What I am concerned about is the adoption of innovation rather than the causes innovations.

Innovations are primarily discovered or invented by what I call 'micro-agents'. That is, the suppliers of innovations are individuals or very small groups of people. These are the real smart people who have understood some problem very well and figured out a solution to the problem. This is hard work and it requires truckloads of inventiveness, intelligence, luck, and all sorts of fortuitous circumstances for innovations to arise. Therefore, the number of successful innovators is small relative to the overall population and so is the number of real innovations very small. But what is significant is that any real innovation has a multiplier effect in its implementation when the innovation is adopted by society at large. We all don't have to invent a wheel or a wheel-barrow. Someone somewhere came up with the innovation of a wheel-barrow and for ever not so intelligent people have been using wheel-barrows to cart stuff around with much less effort than would be required without one.

Ever been to a construction site or a farm where they did not use wheel-barrows? The answer is: depends. I have seen hundreds of constructions sites in India and they don't use wheel-barrows. The one right outside my window, where three massive buildings are being built, don't use wheel-barrows. They pile the stuff up on their heads and carry small loads. The lever and the wheel (two innovations that form the basis for a wheel-barrow) have been known for ages. I have seen the use of wheel-barrows all over in developed nations. But not in India. In India, it is stuff on their heads. Go to a railway station and coolies will be lugging stuff on their heads for the majority of the loads. If you insist they will get a huge luggage cart but then you will have to wait for a while for them to track down one and they will have to charge you extra for that.

So as I was saying, micro-agents invent the stuff and macro-agents adopt them. Micro-agents have to be very smart to invent clever things. The society at large, the macro-agents, don't have to be particularly smart: only smart enough to be able to use them. You have to be a veritable genius to invent the wheel-barrow but you have to be a certifiable moron to not use a wheel-barrow after it has been invented.

Next Week: As India Develops (continued)