India at center stage - NEWSWEEK editorial
If only its economy could equal the success of its democracy
One of the greatest events of our times is taking place, and the world
barely notices. The largest democracy in history–India–is counting the
votes of close on 370 million of its citizens, roughly the number of
voters in the United States, Canada, and Europe combined. It is a fair
bet that the final results on October 10 will also receive scant
attention. We have, it seems, eyes only for China. This is shortsighted.
Both China and India are vast commercial markets, each with about a
billion people or more, growing at about 6 percent per year. India is a
working democracy, with the kind of decentralized federal system
necessary to govern large market economies, along with a highly evolved
system of law and widespread use of a language–English–that the West
understands. China, by contrast, is increasingly unreliable politically
and may well be spinning out of control. Yet China receives 20 times
more foreign direct investment than India– and far more political
attention.
Pride of place. As Mahatma Gandhi once put it, India is "a house with
all the doors and windows open." It is pluralistic and diverse, with 35
different languages each spoken by more than a million people, yet in
the years since independence it has managed to create a sense of
national identity. It is an ancient civilization, and it is right to be
proud of its democracy. It would be formidable indeed if it could match
its political success with a similar achievement in its economic
policies. In fact, it has regressed: Its share of world gross domestic
product has fallen from 2 percent to 1.4 percent in the past 50 years.
It has mass illiteracy, poverty, disease, and hunger.
Its defense of these failures is the democratic system that attracts
such admiration. A democracy, the argument goes, cannot push through
economic reforms with the speed and zeal of the more authoritarian East
Asia tigers. But it was not really democracy that delayed India's
advance. It was the hangover from the nostrums of state socialism that
became so fashionable in the wake of the Great (capitalist) Depression,
the apparent success of the Soviet five-year plans, and the genuine
success of the government-directed Marshall Plan in Europe. India
adopted an economic system that limited the growth of the private
sector. It was allowed to expand only with government permission,
rarely granted. Competition and rational business practices were
frustrated by labor laws and job protection. Incompetence was masked by
subsidies. Trade was stunted by quotas and high tariffs. These policies
rewarded failure and punished success, permitted the politicians and
bureaucrats to become parasites, and depressed the energy, resilience,
and talent of the Indian people.
Only the threat of bankruptcy in 1991 made possible limited reforms and
pushed the "Hindu rate of growth" from 3.5 percent a year to 6 percent.
Should the Indians extend reforms and deregulate the economy, they
could well grow at about 8 or 9 percent a year.
They will need support and encouragement to do this. The sad truth is
that the world began to pay more attention to India only after it
exploded the nuclear bomb last year. The United States reflexively
imposed sanctions, despite the fact that India is prepared to join the
nonproliferation regimes. India's record of responsible international
conduct should separate it from rogue states such as Iraq and North
Korea. The rationale for sanctions–hurting the innocent as the only way
to punish the guilty–makes no sense when a country is contending with
threats from Pakistan and China.
The expansion of U.S. involvement with India is long overdue. It would
serve our common interests in controlling the Islamic terrorism that
now stretches from the Caucasus through Afghanistan and Pakistan and in
influencing a more constructive policy from Iran. India, for its part,
must continue to liberate the energies of its remarkable people. The
new government will have the political stability necessary to disabuse
the notion that Indians are incapable of greater control over their
future. They well know Mahatma Gandhi's great notion that there is no
easy walk to freedom.
If only its economy could equal the success of its democracy
One of the greatest events of our times is taking place, and the world
barely notices. The largest democracy in history–India–is counting the
votes of close on 370 million of its citizens, roughly the number of
voters in the United States, Canada, and Europe combined. It is a fair
bet that the final results on October 10 will also receive scant
attention. We have, it seems, eyes only for China. This is shortsighted.
Both China and India are vast commercial markets, each with about a
billion people or more, growing at about 6 percent per year. India is a
working democracy, with the kind of decentralized federal system
necessary to govern large market economies, along with a highly evolved
system of law and widespread use of a language–English–that the West
understands. China, by contrast, is increasingly unreliable politically
and may well be spinning out of control. Yet China receives 20 times
more foreign direct investment than India– and far more political
attention.
Pride of place. As Mahatma Gandhi once put it, India is "a house with
all the doors and windows open." It is pluralistic and diverse, with 35
different languages each spoken by more than a million people, yet in
the years since independence it has managed to create a sense of
national identity. It is an ancient civilization, and it is right to be
proud of its democracy. It would be formidable indeed if it could match
its political success with a similar achievement in its economic
policies. In fact, it has regressed: Its share of world gross domestic
product has fallen from 2 percent to 1.4 percent in the past 50 years.
It has mass illiteracy, poverty, disease, and hunger.
Its defense of these failures is the democratic system that attracts
such admiration. A democracy, the argument goes, cannot push through
economic reforms with the speed and zeal of the more authoritarian East
Asia tigers. But it was not really democracy that delayed India's
advance. It was the hangover from the nostrums of state socialism that
became so fashionable in the wake of the Great (capitalist) Depression,
the apparent success of the Soviet five-year plans, and the genuine
success of the government-directed Marshall Plan in Europe. India
adopted an economic system that limited the growth of the private
sector. It was allowed to expand only with government permission,
rarely granted. Competition and rational business practices were
frustrated by labor laws and job protection. Incompetence was masked by
subsidies. Trade was stunted by quotas and high tariffs. These policies
rewarded failure and punished success, permitted the politicians and
bureaucrats to become parasites, and depressed the energy, resilience,
and talent of the Indian people.
Only the threat of bankruptcy in 1991 made possible limited reforms and
pushed the "Hindu rate of growth" from 3.5 percent a year to 6 percent.
Should the Indians extend reforms and deregulate the economy, they
could well grow at about 8 or 9 percent a year.
They will need support and encouragement to do this. The sad truth is
that the world began to pay more attention to India only after it
exploded the nuclear bomb last year. The United States reflexively
imposed sanctions, despite the fact that India is prepared to join the
nonproliferation regimes. India's record of responsible international
conduct should separate it from rogue states such as Iraq and North
Korea. The rationale for sanctions–hurting the innocent as the only way
to punish the guilty–makes no sense when a country is contending with
threats from Pakistan and China.
The expansion of U.S. involvement with India is long overdue. It would
serve our common interests in controlling the Islamic terrorism that
now stretches from the Caucasus through Afghanistan and Pakistan and in
influencing a more constructive policy from Iran. India, for its part,
must continue to liberate the energies of its remarkable people. The
new government will have the political stability necessary to disabuse
the notion that Indians are incapable of greater control over their
future. They well know Mahatma Gandhi's great notion that there is no
easy walk to freedom.
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