Mounting global debt and the way further

[cntd from previous post]
It does not appear that there is an easy way out.  During 1945-47 when US gross debt crossed the GDP figure they went for large-scale infrastructure development across the country. That in turn spurred sustained growth of economy which finally brought down the Debt/GDP ratio to 32% and made US a technology super-power. The question is what will they do this time? What will Europe do? Looking at the austerity measures of  Govt of UK and US, it seems that they are not sure. They are trying to restrain their expenses, cutting down their public expenditure in order to bring their overall deficit and hoping that somehow once they are in control of the expenses, the economy will slowly recover. People argue that it is slower path and recovery is not guranteed in the long run.
Harvard thinktank suggests that US should invest in innovation in a big way. HBR article argues that it was competition that was the hallmark of US growth. It is the high-tech sector that over the last few decades created the edge and competitiveness of US economy. They, however, showed that in the high-tech sector US trade-deficit drastically went up [ as much as 53% by 2007] since 2000. Outsourcing manufacturing for high tech goods to Asian countries [China, Taiwan, Malayasia] has ridden them of crucial ability to innovate and get better against their competition with better and advanced products. If they must get their economy back to normal, they must focus all their energy together in nurturing competition and innovation. They brought the concept of Commons, the valley of technology workers, which in actual sense, created the ability of the industry to compete and come up with better products. They believed that over the years in the name of focusing on core competency, US companies created a void in the skill requirement that drive innovation and with the depleted requirement, technical resources migrated to different areas. That in turn made these companies lose their ability to innovate. Coming years will tell if US Govt accepted the Harvard line or they chose different plan but as of now, experts in US believe that US is heading towards slower recovery path even with new stimulus package from Fed. For record, here is the Fed Reserve Bank Chairman, Ben Bernanke's latest speech at Jackson Hole.
Eurozone's problem is little deeper, there is lot of gaussian noise in the system without the emergence of any clear direction. With many soverign countries, each at different junctures and assessment of the problem, it is even a question whether Euro monetary model will survive this crisis.
    With the developed countries struggling to take their economies out of red, it is obvious that onus to drive the growth of world economy squarely falls on the shoulders of developing countries, particularly, China, Brazil and India. But are these countries really ready to lift this heavy burden? China and India both have been experiencing high inflation for last one year. Both of late have projected slower growth rate this year. For the first quarter of 2011-2012, India clocked 7.7% overall GDP growth compoared to 9.1% from last year. RBI incidentally downgraded growth projection for Indian economy to 8% from earlier projection of 8.5% for this year and next. RBI also said that inflation is likely to remain above 7% for next 12 months riding on high global inflation. China and Brazil also are facing high inflation overall. Added to that is the pain of corruption in high institutions in these countries.
Dan Rodrick, an expert from Harvard said that India and China must incentivize Innovation if they want to achieve robust economic growth during the next decade. India and China, both for instance are promoting renewable energy sector but what we are seeing today is more of adoption of technologies developed in developed countries compared to developing new technologies. Fact is traditionally [and till date] these countries have been technology adopters rather than technology creators. So it would be a challenge for these countries to create a path for technology innovation. What happens if these countries fail to create ecosystem that foster technology innovation?
There is a substantial risk of these countries becoming the growth market for developed countries. With slow growth of their economies, there are chances that both US and Eurozone will coerce the developing countries to allow open access to the markets of these countries [which the BRIC has resisted this far]. Last time this happened, the countries like India and China were collonies to British empire and industries in UK grew at the expense of the home-grown Cottage Industries in both these countries. If that kind of market access happens again, India and China will retrace their path in the history, though in a new format. IP protection will be the weapon in the new turf.
As an Indian I only can hope that Indian industry leaders come together and convince the Government to create incentive schemes for creating technology innovations and adopt the path themselves even if it means higher short-term profitability risks for them.