Monday, June 13, 2005

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.
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.


At 1:33 p.m., Blogger Greg said...

Thanks B. I have been arguing India's case for months with a collegue. I agree totally.

At 2:31 p.m., Blogger chip said...

I'm not so sure. Throughout SE Asia, it's the ethnic Chinese communities that dominate the economies, not the ethnic Indians. And democracy is fine as an ideal but not necessarily essential for high standards of living. Otherwise, the Philippines and not Hong Kong would lead the world in per capita wealth. Singapore is a de facto one party state, but it's people enjoy a standard of living that exceeds most Western countries, and this they accomplished in just a few decades.

It's been said that the Chinese government is looking at the Singapore model for the future. If so, it may not become a ''free'' country in our eyes, but it would probably make it a power to rival the US quite quickly.

At 2:41 p.m., Blogger Walsh Writes said...

It is obvious that the west ignores India and its self determination. Much of what China does these days is due to heavy western investment and involvement. On the other hand, China is far ahead of India in some degrees re: refinement of output. But China does appear to not be shaking off communism very well either. India is hemmed in and has questionable ties to Russia and likes to flout itself as leader of the underworld group of up and coming underachievers. I still think that China's rampant nationalism is what makes it the bigger concern in the long-run.

At 2:41 p.m., Blogger Declan said...

It's true - a society without democracy can never develop economically - just look at Singapore and Malaysia - um, never mind.

Also, I don't really get the part about copyright violation - India is not exactly a beacon of anti-'piracy' vigilance.

Furthermore, India has always been much wealthier (per capita) than China ever since communism pretty much detroyed the Chinese economy, so it's not surprising that they remain ahead on a GDP/capita basis for now.

There's no doubt that government restrictions can limit the economy in some ways, but the real threat to the Chinese economy is not the government clamping down on the entrepreneurial spirit, it's corruption, shortages of resources (esp. energy), environmental bottlenecks, a weak banking sector etc. etc. Trust me, I've known lots of Chinese people, a very high percentage of whom were heading to China to start one kind of entrepreneurial venture or another - they face a ton of problems going forward but lack of creativity /resourcefulness etc. of the native population isn't one of them.

These things are way more complicated than Stein admits. For example, the most important thing China has done to secure the future prosperity of its citizens (and the worlds) is something that a democratic government might never have been able to do, shut down population growth.

Of course, total influence is related to total population so continued population growth might work in India's favour if the goal is world domination, but if the goal is propserity and living in balance with the environment, the Chinese are moving to a much better trajectory than the Indians.

At 2:42 p.m., Blogger Declan said...

ah - I see that Chip beat me to the punch on the Singapore issue.

At 2:48 p.m., Blogger Declan said...

Sorry, I guess I was a bit dated with my assessment of India being wealthier than China:

I guess China has passed and pulled well ahead of India over the last 15 years or so, I had thought they were still behind.

Or see here as well:

At 3:47 p.m., Blogger Babbling Brooks said...

Nobody's touting this as the "Malaysian and Singaporean Century" in which those two less-than-free nations wrest the mantle of Global Hegemon from the U.S.

And just to make myself perfectly clear here, I'm not saying China or the Chinese people are economic slouches. But if they are to surpass the Americans in political influence and economic clout, as so many predict, I maintain that they'll have to become a free and open society. And that won't be easy.

At 8:08 p.m., Blogger Declan said...

"Nobody's touting this as the "Malaysian and Singaporean Century" in which those two less-than-free nations wrest the mantle of Global Hegemon from the U.S."

Sure but that's a function of their population, not their political system.

Given a 4-1 advantage in population and a much more powerful state sector, if the Chinese get anywhere near the levels of economic development achived by Singapore and Malaysia they will already have surpassed the U.S. in total economic might.

The U.S. of course has lots of allies (Europe / Canada / Aus/N.Z. Japan) which China doesn't and it also has numerous advantages of incumbency as the world's reserve currency and so on, but still, I'm not convinced the Chinese government will be forced to open up for it's economy to grow that much.

I hope they do become freer over time (assuming it happens in a controlled manner, not in the destructive way it happened in Russia) but I don't see it as a necessary condition for economic development.

At 9:41 p.m., Blogger chip said...

Whenever Chinese populations are given a modicum of stability and a semblance of rule of law, they flourish like no other. It's estimated that if all the overseas ethnic Chinese tallied up their economic output, their combined GDP would rank just behined the US and Japan.

And Declan is right about the populations of singapore and Malaysia. Singapore has just 3 million citizens yet foreign reserves of well over $100 billion and zero government debt.

What makes the Chinese so successful? A social conservatism that emphasizes strong families and hard work -- things that we in North America, and particularly Canada, seem to be losing.


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