India, not China

Babble on.

Mark Steyn says to a wide audience what I've been saying to friends and relatives for a couple of years now (generally as their eyes glazed over, and they fell into their soup in an induced narcolepsy): India's the emerging powerhouse, not China.

The internal contradictions of Commie-capitalism will, in the end, scupper the present arrangements in Beijing. China manufactures the products for some of the biggest brands in the world, but it's also the biggest thief of copyrights and patents of those same brands. It makes almost all Disney's official merchandising, yet it's also the country that defrauds Disney and pirates its movies. The new China's contempt for the concept of intellectual property arises from the old China's contempt for the concept of all private property: because most big Chinese businesses are (in one form or another) government-controlled, they've failed to understand the link between property rights and economic development.

China hasn't invented or discovered anything of significance in half a millennium, but the careless assumption that intellectual property is something to be stolen rather than protected shows why. If you're a resource-poor nation (as China is), long-term prosperity comes from liberating the creative energies of your people - and Beijing still has no interest in that. If a blogger attempts to use the words "freedom" or "democracy" or "Taiwan independence" on Microsoft's new Chinese internet portal, he gets the message: "This item contains forbidden speech. Please delete the forbidden speech." How pathetic is that? Not just for the Microsoft-spined Corporation, which should be ashamed of itself, but for the Chinese government, which pretends to be a world power but is terrified of words.
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India, by contrast, with much less ballyhoo, is advancing faster than China toward a fully-developed economy - one that creates its own ideas. Small example: there are low-fare airlines that sell £40 one-way cross-country air tickets from computer screens at Indian petrol stations. No one would develop such a system for China, where internal travel is still tightly controlled by the state. But, because they respect their own people as a market, Indian businesses are already proving nimbler at serving other markets. The return on investment capital is already much better in India than in China.

What's the fundemental difference between the two? Democracy, liberty, and the rule of law - including property rights. While I will not gloss over the gross injustices, including colonial racism, that have marred India's history over the course of the past two hundred and fifty years, I will say that overall, British rule set that nation on a course of steeper ascendancy than any other country on the planet right now. Which is not to say the Indians themselves have had nothing to do with their own success, nor to overstate the success of a society still mired in caste and always hovering at the edge of a pointless war, but rather to acknowlegdge the role of the British foundation in the grand edifice of state the Indians are building.

With the developed economies of the West looking for competitive advantages in an increasingly flat labour market, the opening of China attracted scads of capital, which has had the predictable effect of supercharging their economy. But as wages rise along with standards of living, this influx of money will taper off, and the Chinese economy will have to grow on the merits of Chinese abilities. What will drive that growth in a totalitarian society? As Steyn so perceptively notes, the Chinese haven't invented anything of note in five hundred years, and they certainly aren't formenting creative thought in their population.

No, the Indians have tackled the more difficult issues of democracy and liberty up front, freeing their economy to grow sustainably for decades to come. China, on the other hand, has set itself up for a fall by failing to create the conditions for long-term prosperity. Only once China has resolved the dichotomy between personal freedom and economic freedom in its society - and eventually it will be forced to deal with the issue, and the associated chaos and upheaval - will we see which of the two emerging giants stands tallest.

Babble off.