Singapore Pundit on China (and India, and Singapore)

(My good friend whom I’ll call Singapore Pundit is a businessman who speaks Chinese and has been in Asia, first Hong Kong, then Beijing, now Singapore for many years. SP read this post, and had a few comments. I pass on his thoughts with his permission.)

I read your post on the blog. It is a little like a University of Chicago dinner conversion in cyber-space.

China versus India? Well, I think that both the Chinese in power and the Indians in power both believe that economic development via free markets is the right path. They know that FDI and WTO are important. They also seem to agree that social and international stability are critical factors to economic growth. Interestingly, India has the Kasmir issue and China the Taiwan issue which are both lighting rods for the nationalist in their respective countries. A wrong step by either country over these issues could derail their economic development and unfortunately these issues are so emotional and sensitive that they could blow up.

I would observe that both China and India are very complex countries in all dimensions. Just think of the US and how complicated a place it is and add a few thousand years of history and triple the population and speed up the growth rate and social change and the place is wildly complex and difficult to fully understand.

So, both China and India are difficult to comprehend, hence I agree that the average American doesn’t have a good change to really understand what’s going on either place. Frankly, even the experts don’t agree on many points and have what are strange opinions and outdated views.

I have mentioned to you before that I don’t think that the central government in China and the party are that all powerful and in control. If they are unable to provide steady economic growth and the resulting prosperity and social stability, their reign of power is not going to last and they know it. They very much look to the west and other countries developed countries for models and experience to help them succeed. The big threat to the “Communist” is regional leader completely going their own way and destabilizing the whole country. The leadership in China must look at what is happening in Iraq in fear and cite it as an example of what could happen if they lose control. My impression is that debate and information is much more free in China than what people in the US realize. There is also I believe a desire in large parts of the government to get to more democratic institution and more open society. Deng Xiaoping completely changed China from a truly Soviet-style state to something that in the seventies the US government would identify as a free society (something like Korea, Thailand or Taiwan). Now all of the countries have become democracies with relatively little bloodshed (Taiwan didn’t have any major unrest, where both Korea and Thailand had their militaries killing a significant number of their citizens). This should give us hope. It is possible that China could behave like Germany and Japan in the thirties, but my gut tells me that leader don’t have that mentality.

Most of my Indian friends think that it is very difficult to get things done in India. If the government want to build a road, getting the rights-of-way is almost impossible so infrastructure needed for economic growth is not getting built fast enough. This is hampering economic growth. They actually like the way thing get done in China. It seems that India has a well developed legal system, but it is undermined by corruption.

I am going to slightly change the subject and try to rap up my comments. I saw the national day rally speech of the Singapore Prime Minister. I think you would find it very interesting. All kinds of stuff on being open and critical, taking risk, being Singaporean and patriotic. Singapore is a special one party state. And I suspect that both China and India are interested in what Singapore says and does. Perhaps this is a model of English institutes/ideas married with Chinese administration and politics.

India and China

This comparison is almost becoming a clich�. But, still, it is an interesting one and potentially enlightening, if handled properly.

This book Asia’s Giants: Comparing China and India got a good review in the current Foreign Affairs, which came in the mail today.

Palgrave’s catalog page: says this:

This edited volume reconsiders the conventional wisdom, which argues that comparative performance (in economic, social, political, as well as diplomatic arenas) of China has been superior to that of India. The book brings together ‘new paradigms’ for evaluating the comparative performance of two countries. Essays show that if not outright wrong, conventional wisdom has proven to be overly simplified. The book brings out the complexity and richness of the India-China comparison.

Any challenge to this conventional wisdom is greatly appreciated. The FA review says the issue of China’s unreliable statistics is addressed, and its about time, too!

“Complexity and richness” are nice buzzwords. I am waiting for someone to make the point that Jim Bennett has repeatedly made, e.g. here:

There�s a link between strength of civil society and civil society institutions and entrepreneurism and prosperity. If this is true at all, and it just seems to be overwhelmingly true, sooner or later India is going to overtake China in the nature and pace of its economic development, and I think shortly after it overtakes it, it�s going to far outstrip it.

I think that India�the rise of India is going to be one of the big stories of the 21st century and the relative problems of China, once they get another two or three decades down the road, is going to be another big story and one that a lot of people aren�t expecting. All you�re�people are mesmerized by the growth curves in China right now. They see pictures of the big skyscrapers in Pudong and, you know, they�re extremely impressed by this, but they�re not looking the fact that China is on the wrong side of a huge transition problem.

If you look at these transition problems in small countries like Taiwan and South Korea, which have very similar social structures, this was a big crisis. It was a huge crisis in Japan, which is not so similar, but had some similar issues, and it led to a, you know, major world war.

China�s got big problems. I hope they work through them peacefully, without an enormous amount of disruptions; but, you know, I�m not going to lay odds on that it�s anything like 80 percent chance of success there. I think they�ve got a 50-50 chance of getting through their democratic transition without major problems and disruption, which are going to be I think the big international crisis of the 2030 or 2040.

China is, as of now, still on the wrong side of a politico-legal transition that India has already made over the course of two centuries. Leaping that chasm is a problem that Japan and Korea, for example, have both made, and not without much turmoil. China will probably not be able to “scale up Singapore” and have developmental autocracy forever. The predation and corruption in this system will choke off growth unless the Chinese move ahead with real reforms at some point, that actually cede power from the gang that runs the place now. China has some major challenges ahead and everybody is just whistling and looking the other way. Meanwhile, India has hidden strengths which will, I hope, surprise the world.

Note on India

A&L notes a Foreign Policy article, “The India Model”, that may interest. Sample argument:

India’s greatness lies in its self-reliant and resilient people. They are able to pull themselves up and survive, even flourish, when the state fails to deliver. . . . Indian entrepreneurs claim that they are hardier because they have had to fight not only their competitors but also state inspectors. In short, India’s society has triumphed over the state.

But in the long run, the state cannot merely withdraw. Markets do not work in a vacuum. They need a network of regulations and institutions; they need umpires to settle disputes. These institutions do not just spring up; they take time to develop. The Indian state’s greatest achievements lie in the noneconomic sphere. The state has held the world’s most diverse country together in relative peace for 57 years. It has started to put a modern institutional framework in place. It has held free and fair elections without interruption. Of its 3.5 million village legislators, 1.2 million are women. These are proud achievements for an often bungling state with disastrous implementation skills and a terrible record at day-to-day governance.

. . . . Even though the reforms have been slow, imperfect, and incomplete, they have been consistent and in one direction. And it takes courage, frankly, to give up power, as the Indian state has done for the past 15 years. The stubborn persistence of democracy is itself one of the Indian state’s proudest achievements. Time and again, Indian democracy has shown itself to be resilient and enduring — giving a lie to the old prejudice that the poor are incapable of the kind of self-discipline and sobriety that make for effective self-government. To be sure, it is an infuriating democracy, plagued by poor governance and fragile institutions that have failed to deliver basic public goods. But India’s economic success has been all the more remarkable for its issuing from such a democracy.

I especially liked the observation that it takes courage to give up power. Democacy requires a deferential libertarian vision as much as an assertive one.

India Photos — and Globalization

A Chicago Boy who is working in Pune forwarded some slice-of-life photos. The photos are informative and amusing, and the work he’s doing is interesting because it’s on high-tech financial stuff that wasn’t being done in India a few years ago. Indian economic liberalization, combined with tech advances that are globalizing every activity that can be done over the Internet, now make India a land of opportunity for guys in Chicago. Who’d a thunk it?

UPDATE: I have edited this post slightly to make clear that I did not mean to suggest that the people in these photos are amusing to look at.

Holy Cow!

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