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Interdependency Theory (1)

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China, India, and the West

By Simon Tay

The Chinese and Indian economies often elicit breathless admiration from commentators. In fact, domestic deficiencies and regional tensions mean that the rise of China and India is hardly assured.

SIMON TAY is Chair of the Singapore Institute of International Affairs and the author of Asia Alone: The Dangerous Post-Crisis Divide From America.

In the aftermath of the global financial crisis, the economies of North America and Europe remain fragile while those of Asia continue to grow. This is especially true in the cases of China and India, which both boast near double-digit rates of growth and have therefore inspired confidence around the region. But too many commentators discuss China and India with breathless admiration — extrapolating, for example, that growth will continue at a breakneck pace for decades. In doing so, they treat emerging economies as if they were already world powers, echoing the hubris that preceded the Asian currency crisis of 1997-98.

Pranab Bardhan’s Awakening Giants, Feet of Clay: Assessing the Economic Rise of China and India is a welcome corrective to that view. It succinctly summarizes the challenges facing China and India, including environmental degradation, unfavorable demographics, poor infrastructure, and social inequality — threats that the leaders of China and India understand. Even as others have lavished praise on China, and Chinese citizens have grown stridently nationalistic, Chinese President Hu Jintao and others in the current leadership have been cautionary. As Chinese Premier Wen Jiabao said in 2007, the country’s development is “unsteady, unbalanced, uncoordinated, and unsustainable.” In India, meanwhile, although the government has orchestrated campaigns to highlight the country’s growth and reform, its plans to develop roads and other infrastructure are a prominent and expensive recognition of the country’s enduring gaps.

A more contentious claim offered by Bardhan is that internal reform — not the global market — has been the key driver of both countries’ growth. Rather than focusing on India’s information technology sector or China’s export-led industrialization, Bardhan highlights less glamorous domestic sectors. Examining the rural economy — in which a majority of Chinese and Indians work — he concludes that growth is driven from below. He shows, for example, how China’s steepest reductions in poverty had already happened by the mid-1980s, before the country began attracting sizable foreign trade and investment. The main causes of China’s decline in poverty, Bardhan argues, were investments in infrastructure and reforms to town and village enterprises, which are predominantly agricultural.

The book thus suggests that the fates of China and India are in their own hands — and do not depend on the West, as many assume. If that is correct, then these giants can continue to grow despite the global economic crisis, towing much of Asia along with them. This would have great implications for geopolitics and economics. To the contrary, however, neither China nor India can ignore external conditions.


One of the external circumstances affecting both China and India is their bilateral relationship — and whether it will develop in a healthy or an antagonistic way. Although China and India cooperate in various intergovernmental bodies and trade more than ever — Chinese-Indian trade increased from $3 billion in 2001 to $40 billion in 2007 — there are various ways in which Asia’s awakening giants might step on each other’s feet of clay. Bardhan’s book does not address this topic.

The nadir of Chinese-Indian relations was the brief, one-sided war between the two countries in 1962, which resulted in a humiliating defeat (and the loss of more than 3,000 troops) for India. Relations have improved since then, but elements of cooperation coexist with competition and suspicion. Various geostrategic disputes separate Beijing and New Delhi, including a number of sensitive disagreements about areas along their 2,200-mile border. Tibet shares a long border with India, and when the region is restive, as it has been in recent years, China suspects Indian instigation. This makes disputes over remote Himalayan points — such as Arunachal Pradesh, an Indian state claimed by Beijing — loom large, as does China’s recently intensified criticism of Indian actions in and around Kashmir.

There are also newer sources of tension, including competition over Indian Ocean sea-lanes and the exploration of outer space. There is even tension over the very trade ties that increasingly link the two countries economically. In 2009, India hiked tariffs on telecommunications imports from China by as much as 200 percent in order to limit the flow of Chinese goods into that sector, which New Delhi considers both economically and strategically important.

Underlying these tensions is a power gap. Rising simultaneously, the two Asian giants compete for markets, natural resources, commercial investment, and political influence in Asia and worldwide. Depending on how one measures, China’s economy is three or four times as large as India’s. And whereas China is India’s largest trading partner, India ranks only tenth among China’s trading partners. Yet in government ministries in New Delhi and corporate towers in Mumbai, Indian elites typically refuse to concede India’s status as number two.

Of course, there are forces — especially the Association of Southeast Asian Nations — that seek to promote Asian regional cooperation and weaken the appeal of competition between Asian states. But although it hosts regional summits that include officials from China and India as well as officials from its member states, ASEAN is an association of only small and medium-sized economies, so it lacks the economic heft to direct regional integration. Therefore, although China and India may make shows of solidarity in the ASEAN forum and elsewhere, they will continue to compete economically, politically, and otherwise.

A major factor in the Chinese-Indian competition — and in its perceived significance for the wider world — is that the two countries have such different political systems. Their trajectories, therefore, offer insights into the prospects for development under authoritarianism and under democracy. In addressing this point, Bardhan rightly cautions against the simplistic conclusion that authoritarianism is superior to democracy with regard to growth. Yet he echoes simplistic characterizations of the subject, writing, for example, “India’s experience suggests that democracy can also hinder development in a number of ways” and “in China, there is more decisive policy initiative and execution than in India.” The real debate, especially in the wake of the recent crisis, is over what mix of democratic jockeying and authoritarian decisiveness makes economies most robust.

The challenge for Beijing and New Delhi is to combine power and legitimacy. Only then can the Chinese and Indian governments take measures that may be unpopular in the short run or damaging to some politically connected sectors but necessary for long-term progress: stimulating job growth, alleviating poverty, protecting the environment, or other vital tasks.

One hears often of a “Beijing consensus” but rarely, if ever, of any Indian model of governance. Indeed, India’s case appears to be sui generis, especially since the modern Indian state was born a democracy — unlike other postcolonial states, such as South Korea, which were or remain autocratic. Moreover, New Delhi has not traditionally sought to influence the political practices of other Asian states (lest its own domestic issues become vulnerable to intervention by foreigners). Asia therefore lacks a strong homegrown exemplar of successful economic development under democracy. Indonesia might become such a model, as it has been transitioning to democracy since Suharto’s fall in 1998 and now has annual growth rates of four to six percent. But, for now, autocratic China remains Asia’s lodestar.

This concerns many in the West who warn against China’s model of state capitalism, criticize its human rights abuses and censorship, suspect Beijing of pursuing a manipulative currency policy, and generally see China as a risen dragon seeking domination. According to this view, China’s economy has opened and globalized but its politics remain frozen around the Communist Party. This, in turn, suggests that the Chinese state will remain radically different from, and even opposed to, the liberal states of the West.

End of Part 1 from 2


Written by Theophyle

September 8, 2010 at 10:09 am

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  1. […] P.S. Postari noi pe Paleografia si pe Politeia Digest […]

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