Jonathan Powers Posted on 06/19/2004 7:48:49 PM PDT by CarrotAndStick
LONDON - India is now in the middle of what many Chinese would give their right arm for- a general election. Yet China is the power that gets all the attention. When president Richard Nixon first went to China it was widely assumed at the time that the reason he ignored India and courted China was that China had nuclear weapons and could help balance the Soviet Union.
Since 1998 India has possessed nuclear weapons and can balance China. Slowly Washington is waking up to the fact that the tortoise soon might overtake the hare. Still the investors and the press continue in their old ways. Last year the inflow of foreign capital into China was two and a half times that into India. The press barely covers the Indian election whilst every day there is a story out of Beijing.
Jonathan Powers
This skewed appreciation has been going on since the time of Mao Tse Tung. Whilst in the 1960s and 70s China basked in accolades, India's economic planners were widely abused. India was mocked for its "Hindu growth rate". China's people were fed, housed, clean and tidy, while India's were ragged, hungry and sinking into a trough of despondency- "a wounded civilization" wrote V.S. Naipaul.
Neville Maxwell of Oxford University was one of the more prominent of the legion of Western intellectuals who in the 1960s and 70s thought China had found the answer to underdevelopment. In 1974, he wrote, "Mao and his party triumphed where Stalin cruelly failed, basically because Mao understood and trusted the peasantry". It was hog wash.
With the 1981 famine we could see, to use George Watson's phrase, "the intellectuals were duped". As Watson exposed the romantic gullibility of Beatrice and Sydney Webb, Stephen Spender and Andre Gide and their glowing reports of the Soviet economy in the 1930s, so too the China seers of the 60s and 70s were held up to the harsh light of day. China had to beg around the world for grain whilst India had managed to survive the savage drought of 1979 without having to import a sack.
Now with Mao long dead and the capitalistic reforms of Deng Xiaoping well into their stride the story is being repeated but in a more complex way. To many China's economic progress has been nothing less than spectacular. But inflationary pressures, bad bank loans, a fast increasing maldistribution of income and crime all threaten its economic stability.
India meanwhile has been gradually but with increasing speed loosening up its old Fabian socialist system. After a major economic crisis in 1991, finance minister Manmohan Singh (now Sonia Gandhi's principal economic advisor) introduced major promarket reforms and fiscal expansion and India's economy has never looked back. Annual growth averages above 5% and now thanks to a good monsoon is 8%. Singh believes that with more reforms than the present government has so far countenanced an average annual growth rate of 6.5% is sustainable- which is what he privately thinks China's over-hyped growth rate actually is.
In reality India is better placed for future growth. Its capital markets operate with greater efficiency than do China's. They are also much more transparent. Companies can raise the money they need. India's legal system whilst over slow is much more advanced and is able to settle sophisticated and complex cases. Its banking system has relatively few non-performing assets. Its democracy and media are alive and vital which provides a safety valve for the incoherent changes that modern day economic growth brings. India has religious riots, secessionist movements, urban squalor and bitter rural poverty. But the voters know they can throw the rascals out, and regularly do.
Moreover the massive flows of foreign investment into China are a two edged sword. It has become a substitute for domestic entrepreneurship. Few of the Chinese goods we buy are in fact made by indigenous companies. And the few that exist are besieged by regulatory constraints and find it hard to raise domestic capital. Its remaining state owned enterprises remain massive but bloated and possess a frightening number of non-performing loans from China's vulnerable banking system. It is India that has created world class companies that can compete with the best in the West, often on the cutting edge of software, pharmaceuticals and biotechnology.
India's trump cards are its language, English, its emphasis on maths in its schools (begun in Indira Gandhi's time), and the talents of its diaspora. For decades China has benefited from the wealth and the investment potential of its diaspora and the economic energy of Hong Kong and Taiwan. After years of ignoring its diaspora India is now welcoming them back- and they have much more "intellectual capital" to offer than China's, much of it coming from Silicon Valley where the Indian contribution has shone.
Watch the tortoise continue its course as the hare starts to lose its breath.
Precisely. And the person who rolled in the change is now their prime minister.
I think you will find this of interest.
Chinese exporters of furniture face tariffs from U.S.
http://www.freerepublic.com/focus/f-news/1156711/posts
I don't think that Sonia Gandhi, the Italian widow of Rajiv Gandhi, was "elected to be the leader of the country". Since this is a parliamentary system, as leader of the Congress party, she could be expected to become Prime Minister, but the elections were for MPs, not her. In fact, because she was foreign born, and because she was not Hindu, there was a lot of negative reaction against her becoming Prime Minister. So the Sikh was chosen instead.
Even the fact that Sonia is an important political figure shows how screwed up Indian politics is. The Congress party has this veneration of members of the Gandhi family, which is an odd, atavistic nostalgia for a monarchy/nobility in a supposedly modern social democratic party.
It is true that the economic and political elite can make compromises across the various religious and ethnic lines.
However, at the local village level and at the urban slum level, the religous superstitions and religous hatreds run deep.
There is also the matter of language and ethnic divisions. The author of the article says that English is an advantage for India. However, English is the second language only for the top slice of society.
It is amazing though, how the Chinese managed to get the 'MADE IN CHINA' label from nearly nowhere a decade ago, to nearly in every store on earth. Scary, but amazing.
China's over-hyped growth rate
the massive flows of foreign investment into China are a two edged sword. It has become a substitute for domestic entrepreneurship. Few of the Chinese goods we buy are in fact made by indigenous companies. And the few that exist are besieged by regulatory constraints and find it hard to raise domestic capital. Its remaining state owned enterprises remain massive but bloated and possess a frightening number of non-performing loans from China's vulnerable banking system.
Boy, this guy sure has China's number amongst all this stuff about both countries.
After years of ignoring its diaspora India is now welcoming them back- and they have much more "intellectual capital" to offer than China's, much of it coming from Silicon Valley where the Indian contribution has shone.
And a thank you for welcoming us to your country and providing opportunities, America! Is that asking too much of India?
Japan is much, much smaller - twelve times smaller and with tiny area of usable land. When China or India "stops" at Japan's level each will be stronger than USA.
Why? The political systems evolve in the cycles: monarchies changes into aristocracies/oligarchies, then the later changes into republics/democracies, then after short anarchy the monarchy returns. (It can happen under misleading disguise though)
Democracy is not the end of history, it it not the Kingdom to Come which will have no end.
China is focusing on building an unsustainable export economy, while India seems to be developing its own middle class.
China has the advantage of more natural resources. China has Hong Kong which has a great capital market and is technologically advanced. China is close to japan, south korea and taiwan and trades heavily with them all.
India's advantages are that they speak english and they have more democracy. India is also disadvantaged by having a hostile pakistan on the border, while china's borders are mostly peaceful.
Overall, I like china's advantages over india's.
Although the real question is how the US will ever bring the current account/trade deficit into something more manageable than now. Even if the deficit with china were eliminated tommorrow, the US trade deficit would still top 360 billion per year.
Overall, that's an idiotic liking. What major natural resources did Japan have before it became the economic giant that it is now?
It is extremely naive to think that more resources mean more industrialisation. Look at the Middle East(where Israel is the exception).Look at the whole of Africa(South Africa is the shining star there.). Help me recollect any original Chinese brand that's gone international.
When free people make achievements, there is an intrinsic savage beauty in it that awes all. It takes a fool not to feel that. Such fools don't deserve freedom.
India is riven with caste, religious, and class distinctions which will severely limit India's progress.
You hit it right on the nose. Economic growth occurs when government and cultural restrictions are reigned in.
If India fails and China succeeds, as per the opinion of several prominent voices on this post, there is a lesson for a lot of countries to stick to authoritarian rule and shun democracy.
"...draconian over-regulation, ..., confiscatory taxation (on corporations), a large government sector, ..., some wage-and-price controls, little protection for private property, ..."
I can see how some call it socialist.
Thank you for the exlanation.
Presumably it does, although politics is a function more of group psychology which is basically product of human nature. Multiple complex factors were also present in the past.
Either way the technological changes could shift the balance toward high tech despotism as well as toward participatory benevolent republic.
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