Monday, 30 November 1964. Seoul.
South Korea’s exports have reached $100 million for the first time. The date will be kept. It becomes Export Day, and the name changes to Trade Day in 1987.
The country that has just passed this mark sells almost nothing abroad. Its exports were about $28 million in 1952, and in 1962 it held 0.04 percent of the world market. President Park Chung-hee’s government has made export promotion the centre of its strategy, and a Korea Times history of the period says export promotion became “a religion”, under the guiding principle “Export in All Industries”. The state offers exporters tax breaks, subsidised credit from nationalised banks, state guarantees on private borrowing, tariff exemptions and preferential access to imported inputs. Each month the president chairs a National Trade Promotion Meeting where officials and business leaders face the figures, and awards go to the firms that export best.
Joe Studwell’s How Asia Works calls this export discipline. In one review of the book, South Korean policy aims everything at export capacity and tolerates the bankruptcy of leading conglomerates that fail the test. The credit is a reward for passing it. This chapter calls that examiner the strict teacher.
Notice the order: a number is reached, a day is named after it, and the day is kept for decades. A country that celebrates an export total each year is telling its firms what it will measure. The monthly meetings said the same thing in private.
The cost of that climb did not show in the export figures. In the 1960s and 1970s the Peace Market, a clothing district in Seoul, was known for sweatshops criticised for poor conditions. A young tailor there, Jeon Tae-il, was said to have worked about fourteen hours a day as a shop assistant before he became a tailor, and tailors there suffered widespread tuberculosis from poor ventilation. On 13 November 1970 he joined a sit-in with about 500 employees from three markets. When police and security guards broke it up, he set himself on fire. He died at 10 that night, aged twenty-two. His death prompted the formation of several labour unions, among them the Clothing Workers’ Union at the Peace Market.
Keep both halves of Korea in view. The teacher was strict with firms, and the firms were often strict with their workers. The staircase carries a country up, and people are hurt on it.
A staircase also gives a country a picture of itself. Bong Joon-ho, whose film Parasite won the Palme d’Or at Cannes in 2019, told the festival’s press conference that the rich family’s house in his story has a vertical structure, second floor, first floor and basement, each space connected by stairs, and that his crew had joked they were making a “stair movie”. He also said that Koreans in a semi-basement live underground but want to believe they are above it, because sunlight reaches their rooms, and that the family fears sinking further. Stairs run both ways, and the film uses both. This book borrows the picture. A country climbs, or it does not, and the fear of sinking is part of the climbing.
1984IndiaTuesday, 21 August 1984. India.
From today an employer with one hundred workers, not three hundred, must ask the government’s permission to lay off, retrench or close. Chapter 5 told how the line was drawn and lowered. This chapter is about the wall built beside it.
The same year the product list gained a statute behind it. The list of products reserved for small units, which had begun with 47 items in 1967 and was recast at 807 in 1978 and 836 in 1989, gained statutory backing in 1984 under Section 29B of the Industries (Development and Regulation) Act. A mid-1980s count puts it at about 873 items. On the list, in the mid-1980s, were garments, the kind of goods that fill the second step.
A product on the list could be made only by small units. Firms above the line that already made a listed product were allowed to carry on at capped output, unless they exported 75 percent of it.
The list grew in steps. In 1967 it held 47 items. By February 1970 there were 55, by February 1971 128, by February 1974 177, and by June 1976 180. In April 1978, after the Janata government’s industrial policy of December 1977, it held 504.
Minoo R. Shroff, in a lecture of February 1978, called the policy statement a “mixture of politics and economics” and noted that reservation had risen sharply from about 180 items to 504.
The two walls worked on the same firms. The list said which products a big firm could not make; the line said what it would cost a firm to become big. Whether owners stopped at 99 is disputed, and chapter 6 laid out the evidence. What is documented is the shift to contract labour.
60 workers — you can still hire and let go freely.
Hire the hundredth worker and you can never let anyone go without permission
From 1976, a factory with 300 or more workers needed government permission to lay off or close; an amendment passed in 1982, in force from 1984, lowered the line to 100. Drag the slider.
Source: Industrial Disputes Act, 1947, Chapter V-B
See the numbers
| Rule | Factory size | In force | What it requires |
|---|---|---|---|
| 1976 rule | 300 or more workers | From 1976 | Government permission to lay off or close |
| 1984 rule | 100 or more workers | From 1984 (amendment passed 1982) | Government permission to lay off or close |
The figure above is a stylised picture of the incentive, not a measurement of what owners did.
Contract labour went from 20 percent of employment in firms with 100 or more workers in 2000 to 38 percent in 2015. A buyer’s order that would need four hundred workers can be filled on paper by workers who belong to somebody else. That is a factory that can grow without ever being counted as big, and the same sources give no sign that it learned what a big one learns.
If owners had been parking at 99, the count just below 100 would stand out. In Hsieh and Olken’s count it barely does, which is why this chapter treats the line as one wall among several.
What the walls cost is a matter of measurement. Chang-Tai Hsieh and Peter Klenow compared plants of different ages. A 40-year-old US plant employs almost eight times as many people as a typical new one. A 40-year-old Mexican plant employs about twice as many, and in India surviving plants show little growth in either employment or output. Their simple models put the cost to aggregate manufacturing productivity in India and Mexico at roughly 25 percent against the United States. The chapter does not claim to measure what a small firm fails to learn; it notes only that the gap in plant growth is large.
One dot is one worker. Every new plant starts with ten (left); the block on the right is the same plant forty years later.
An American factory that survives grows sevenfold; an Indian one merely doubles
Employment in plants that survive forty years, relative to a typical new plant. Hsieh and Klenow estimate the stunted growth could cost India around a quarter of its manufacturing productivity.
Source: Hsieh & Klenow, The Life Cycle of Plants in India and Mexico, QJE 2014
See the numbers
| Country | Multiple of a new plant | Dots drawn (new plant = 10) |
|---|---|---|
| United States | more than 7× | 70 |
| Mexico | about 2× | 20 |
| India | about 2× | 20 |
Mid-1980s: more than 800 products reserved for small firms, 873 in one count.
batches removed: 51 items (2002), 79 items (2008), last 20 (2015)
A list that grew from 47 products to more than 800
In a reserved sector a new large firm was simply forbidden. Garments, footwear and toys sat on the list for most of the years China was building its export machine. (Labelled squares are illustrative positions.)
Source: BCAJ; DC-MSME notifications; Lok Sabha answers
See the numbers
| Moment | Reserved products |
|---|---|
| 1967 | 47 |
| Mid-1980s | More than 800 (873 in one count) |
| 2002 | 51 items removed |
| 2008 | 79 items removed |
| 2015 | The last 20 removed; none left |
Talent goes around a wall. On 19 November 1984 the new government’s computer policy cut import duties on peripherals, allowed foreign equity in IT companies, relaxed limits on importing computers and recognised software companies as an industry of their own. The next year Texas Instruments started operations in India, the first multinational to set up a software design centre there and the first to install a satellite dish to export software.
Software was not on the reserved list and needed no factory licence. That is one reason, though not the only one, that talent went there. It is a real success, and the chapter calls it a lift: it can carry people very high without a step beneath it.
= 1 million people
5.8M
India’s tech industry, FY2025
about one working Indian in a hundred
301M
China’s rural migrant workers, 2025
The lift carried 5.8 million. The staircase carried 301 million.
India's IT industry employed about one working Indian in a hundred in FY2025. China still counted 301 million rural migrant workers in 2025, the people its factories and building sites absorbed.
Source: NASSCOM Strategic Review 2025; NBS China, 2025 migrant worker survey
See the numbers
| Group | Millions | Dots drawn |
|---|---|---|
| India's tech industry, FY2025 | 5.8 | 5 whole and one at 80% |
| China's rural migrant workers, 2025 | 301 | 301 |
In 1992, 63 percent of India’s workers were in agriculture; by 2025, 41.6 percent (modelled ILO estimates, not a measured count). The farm share fell more slowly than manufacturing grew, and this chapter states no cause.
On 1 January 2005 textile quotas ended. In the first nine months, US imports of cotton trousers rose 1,094 percent from China and 100 percent from India. It is not a clean test of the saw. In May 2005 the United States applied safeguards to Chinese cotton trousers, cotton shirts and underwear, as China’s World Trade Organization terms allowed through 2008; India faced no such cap. The comparison shows where the order book went, not what India would have won with a free hand.
In India the list was shrinking by notification. On 28 March 2005 108 items came off, 30 of them textile products, after 85 in October 2004, leaving 506. The last 20 items went in 2015.
Bangladesh is the instructive neighbour. In the same 2005 nine months its cotton-trouser exports to the United States rose 99 percent. In 2015 Bangladesh supplied 5.9 percent of world clothing exports, Vietnam 4.8 percent and India 4.1 percent, and in 2010-15 their clothing exports grew 12, 16 and 10 percent a year.
In 2017 Leslie Martin, Shanthi Nataraj and Ann Harrison published, in the American Economic Review, what removal had done: districts more exposed to dereservation saw higher employment and wage growth. The wall came down too slowly to matter the way it would have in 1985, but it did matter.
By 2023, India’s manufacturing value added in current US dollars was about $466 billion and China’s about $4.57 trillion, against a world total of about $16.4 trillion: roughly 2.8 percent for India and 28 percent for China. Manufacturing in India fell from 17.0 percent of GDP in 2010 to 13.5 percent in 2025.
Share of world manufacturing
1995 → 2023, per cent of the world’s total
India: manufacturing, % of GDP
1990–2025, World Bank
China's share of world manufacturing rose sixfold; India's barely doubled
Left: shares of world manufacturing on NITI Aayog's count. Right: manufacturing has never been much more than a sixth of India's economy, and has drifted down since 2010.
Source: NITI Aayog via ThePrint; World Bank WDI NV.IND.MANF.ZS
See the numbers
| Measure | Year | China | India |
|---|---|---|---|
| Share of world manufacturing | 1995 | about 5% | about 1.5% |
| Share of world manufacturing | 2023 | nearly 32% | 3.2% |
| Manufacturing, % of GDP | 1990 | — | 16.6% |
| Manufacturing, % of GDP | 1995 | — | 17.9% |
| Manufacturing, % of GDP | 2000 | — | 15.9% |
| Manufacturing, % of GDP | 2005 | — | 16.0% |
| Manufacturing, % of GDP | 2010 | — | 17.0% |
| Manufacturing, % of GDP | 2015 | — | 15.6% |
| Manufacturing, % of GDP | 2020 | — | 14.1% |
| Manufacturing, % of GDP | 2025 | — | 13.5% |
In 1985 the other giant was still arguing about something more basic: how to price what its factories made. That September it took the argument onto a river.