The Economist Expects India to Overtake China; I Do Not

Last week’s issue of The Economist featured a cover story, and then a 3-page business briefing that prognosticates India’s economic eclipse of China.  The Economist elaborated on all sorts of quantitative and qualitative indicators that suggest that India has better fundamentals for long-term economic growth and competitiveness.  India has a large and rapidly-growing working-age population, a democracy that has been functional (though not always clearly-utilized) since 1947, and a vibrant entrepreneurial spirit, manifested in many decentralized cottage industries with global distribution.

The Liberal Ironist still thinks this sounds like the set-up for an elaborate joke in very bad taste.  But for its many strengths, India is a fragile country in ways for which post-Mao China provides no analogue.

One problem with even the current level of reliance on outsourcing of jobs to India as a basis for economic growth is the “giant sucking sound” that Ross Perot once claimed could be heard en route to Mexico; many manufacturing jobs sent to lower-overhead, less-regulated factories in Mexico were ultimately lost to China, which, though obviously harder to ship from, could produce even more-cheaply and in greater bulk, and at times with greater reliability.  The point is, as painful as outsourcing sometimes is for parts of the workforce in the developed country, the developing country that get those jobs can lose them just as easily if they are undercut on bulk costs to produce a good or provide a service.  This is true for the same reason the outsourced jobs were moved to their country in the first place: simplicity and portability.

More-serious are are India’s many, real problems of internal and external instability.  This blog already previously highlighted the problem of India’s vast Naxalite rebellion, which has consumed the country’s coal-producing eastern uplands.  There is no proper analogue for this situation with post-Mao China.  The Maoist Naxalite insurgency isn’t the only rebellion inside India, though it is certainly the largest.  There is also the festering state of insurgency in northeast India, currently at a lull but not fundamentally resolved; much as with the more-intractable Naxalite conflict, a sense of disenfranchisement by the elite, the poverty of the population and the geographic isolation of the region interact to make this a candidate for a recurring-problem area of India.  Then of course there is the Kashmir conflict, which has deteriorated visibly.  Since this province wasn’t specifically assigned to India or Pakistan during the British partition, India claimed that Jammu and Kashmir legitimately joined India on the basis of the resident prince’s decision–made in response to a Pakistani invasion of the majority-Muslim principality.  The Pakistani government has since professed to desire a plebiscite for the region, but it seems to think a plebiscite will endorse its desire to annex all of Jammu and Kashmir; India, meanwhile, maintains that a plebiscite isn’t necessary.  Meanwhile, Kashmiri separatist militants constitute a 3rd political faction, and drive the ongoing state of civil war in Indian Kashmir.

Then there are the communal riots.  India is not, as the recently-prosecuted Ayodhya riots which killed about 2,000 people in 1992 might suggest, a simmering cauldron of religious ressentiment.  However, there is a serious risk of riot recidivism endemic to certain provinces.  As Professor Steven Wilkinson of Yale noted in his recent book Votes and Violence, provinces where the Hindu nationalist parties like Bharatiya Janata Party are competitive sometimes experience anti-Muslim riots in advance of close provincial or parliamentary elections.  (The rationale, apparently, is to stimulate a certain level of reciprocal violence or at least hostility between Hindus and Muslims so as to turn out the Hindu nationalist base vote.)  While India is certainly a consolidated democracy and these riots have remained a local phenomenon, the seeming incorrigibility of these riots can make these regions an unappealing investment option; it goes without saying that they complicate national politics for the worse.  At the end of September, the Allahabad High Court felt compelled to place a temporary ban on bulk texting to prevent incitement to riot over the outcome of the court’s expected ruling on the legal status of the Ayodhya mosque that was destroyed in the previous riot.  While such rioting is local and political rather than part of some hyped “clash of civilizations,” they reveal our own “Culture Wars” for the normal politics it is.  Consider how often liberals suggest that Republicans resort to culture warfare as a way of taking the air out of certain substantive issues, and we might be able to understand the way that communal riots in India can be both an effect and a cause of unaccountable institutions.

Finally, India has current border disputes with China over several mountainous vantage points.  Past efforts to initiate dialog to resolve this extended border dispute have been disappointing; lack of progress on these border disputes also serves as a pretext for China’s maintenance of a strategic relationship with Pakistan, which further encourages India to invest in controversial military expenditures.  Obviously, Chinese or other efforts to encourage Pakistan’s role as a check on India’s strategic influence exacerbates the security dilemma between these 2 nuclear-armed lifelong rivals.  Both India and Pakistan have already transferred discretion over the tactical use of nuclear weapons to military commanders in the field, a decision which increases the probability of a nuclear exchange both numerically and temperamentally.

 

As irresponsible as Asif Ali Zardari is, the shift of agency for nuclear weapons deployment in both India and Pakistan to field commanders can only multiply the risk of their preemptive use.

 

In sum, a large fraction of India’s formal land area is not merely in dispute but even practically a no-go zone for the government.

While these challenges to India’s sovereignty and ongoing international boundary disputes provide some of the clearest indications of contemporary instability, there is the issue of urban poverty and the poor quality of infrastructure in India.  This is well-conveyed by an extensive infographic in the current issue of Foreign Policy.  While the numbers clearly portend a lower rate of urbanization in India (involving fewer people) and less of a need for future floor space and transportation infrastructure, the fact remains that China has more money with which to provide that floor space and infrastructure, more-extensive experience with providing it, and a government structure that will impose consent on plans to prepare the country’s infrastructure needs.

The Liberal Ironist doesn’t mean to discredit India’s democracy, which has given the country a stable system of government since 1947 and which has been competitive since the end of the Cold War.  Alternately, the point is not to extol China’s single-party state, which tends to settle a major political impasse with violence or threats of violence, as well as subtler forms of coercion.  Several Indian cities are globalization’s bright spots, notably New Delhi, Mumbai and Bangalore.  India’s problem is the weakness (notwithstanding its stability) of the state that encompasses them.

This post is a response to the optimism of The Economist and others who allow an otherwise-commendable preference for democracy to expect favorable prognostications where found, and to seize uncritically on the supporting evidence.  The Liberal Ironist shares The Economist’s concern that ill-intentioned leaders in developing countries will point to China and conclude (misleadingly, simplistically) that authoritarian government will better-promote economic development than democracy.  The Liberal Ironist thinks that China and India are both big-enough to be exceptions: China gets a pass on trade and political reforms because its market is simply too big to ignore, and India will need more than functioning democratic institutions just to consolidate, because of the vastness, physical isolation and poverty of much of its population.  Granted, it’s a big World out there, and China and India are both big countries.

Let’s just say that, with the lack of institutional resources at its disposal to face its current material problems, it’s going to take a pretty big black swan for India to become the shining example for to rest of the developing world that The Economist wants, let-alone to reproduce the development record of authoritarian China, the country that is simply too big to ignore, and which uses coercion both to prepare the infrastructure of the future and to maintain order at the expense of almost all forms of dissent.

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2 thoughts on “The Economist Expects India to Overtake China; I Do Not

  1. Kukri

    I wonder how big of a factor will be China’s increasing labor shortage on the continuing growth. This shortage is not only a result of the one-child policy, but of the fact that economic success has driven so many rural people into the cities and therefore emptied the countryside of much-needed labor. Younger generations of Chinese, seeing the growth and great potential of their rising country, are simply not content anymore with either living out on the farm or working in dirty factories.

    Reply
  2. mang

    Differences between region to region in terms of its ideology and politics makes more flexible of Indian economy.Democracy must be the end product of Communist.

    Reply

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