The game of nations: India & China

Wherever I turn these days, the talk of the town is the economic rise of China and India. Everyone seems to be in on the secret, and everyone seems to think they can make money off it, or atleast look knowledgeable by talking about it. The absolute lunacy of the some of the arguments and scenarios posed by people these days is appalling. I can tell you about atleast five seperate arguments I have had with people over the issue and amidst all of them, I have realised that besides a basic understanding of the two nations and their politics, people have no idea what they are talking about. Moreover, they are inept at understanding the complexities that go hand in hand with the rise of two new major actors on the world stage. Or, as a the BBC calls them, Emerging Giants.

I think the outlook on these two nations should be very different rather than similiar, as has been the general case with the media's reporting. India and China might be on the same ladder, but they are quite far apart when it comes to how much they have both climbed. China is much farther up on the development ladder than India; moreover, it has numerous advantages that India sorely lacks. China invests in technology, they invest in it heavily. This is the route to development of a larger scale. It does not pay much to have someone else come into your country, use their technology to produce a product with your country's labour. That just adds employment to your country, and yes, it does lead to development in terms of nominal living standards, education, health etc., but it does not lead to long term development. What happens when a company like Cisco Systems decides they no longer want to have a call centre in Bangalore, or when Intel decides that their production needs are better met in Thailand instead of India- what happens is that they get up and leave. They bail and leave you scrambling to justify your development when all signs point to a momentary rise in employment and nothing else. This is what is being billed as development in India. Companies have not bailed yet, and they might never do so- but the fact remains that the development process is flawed.

Most importantly, such development leaves nothing in your country except wages, all the profit whether grounbreaking or nominal leaves the country as soon as it is put into the books - India sees nothing of it. This is Foreign Direct Investment at its most lethal. It can cripple a country and it has crippled many a nation in the past.

I am simplifying the case, admittedly. Employment is not the only thing getting better in India. It has a burgeoning highway system that is being built to support the goods criss crossing the nation. It also has an education system that is trying to catch upto increasing demand so that it can stay afloat when more companies come to India and hire a younger generation. These are all great things at face value and yes, they are helping India; but, there is a downside. A downside that is seldom spoken of. When a country looks to develop its infrastructure ie. its roads, highways, electrical systems, communication systems, education etc., it looks for loans. These loans are usually provided by the World Bank and the IMF. Without these loans you cannot attract a company to produce in your country, because they want to be able to produce stuff, then transport stuff all the while staying connected with their associates worldwide. This rerquires infrastructure of a massive proportion. Everything has to be up to date from airports to ports to railway system to highways- and thats just the transportation size. In essence, what happens is that for atleast the first twenty years of its development stage (a stage which India now finds itself in,) a country is borrowing money to stay afloat on the market, and it is paying back money.

Any wage increases or positive employment statistics are symptomatic of a localised development rather than a general betterment. The government is left with few options as it has to pay for and account for things that will keep it abreast on the world economic market.
Therefore, the lack of government options and its inability to pay for general betterment programs belies the proclamation of "development for all". Moreover, with foreign companies extracting their profits immediately, and leaving India with just wages, the country is left with an unceratin future. It is unable to invest in itself and therefore, unable to forge ahead on its own, rather it is dependent on foreign aid, which propels it forward.

India is a developing nation and indeed, it is much farther ahead on the scale than many others. However, it needs to find businesses other than textiles and foodstuffs that reinvest in the country. Produce its own technology which it can then control and use, in essence "exploit' other countries. After all, this is the core value of capitalism and if you have embraced the system, you might as well learn the rules. Without investments in your workforce and your own land, a nation is not utilising itself to the full capacity; hence, it will be exploited on the world market.

India is considered, as is China to be an emerging giant because of its population base. However, this is a simplistic view of the reality and a damning one if taken at face value. Such an analysis is flawed because even though there a lot of people in India and China, most of them are still struggling to attain what some in this world would consider a basic necessity like clean water, a fridge or even a fan for the summer months. This is the true reality, that China and India cannot harness their true buying power (in other words, their disposable incomes) until the majority of their populace has these basic needs being met. If you venture out of metropolises like Bombay, Delhi, Bangalore, Shanghai, Beijing etc., the reality becomes clear- these nations' development at this stage is superficial. It needs to be nurtured rather than hyped up at this stage or else the working class will see only a momentary lapse from subsistence living.

Having drawn some comparisons between China and India, I must point out that the two nations are also vastly different in their development levels. China is much better situated to take on the role of an emerging giant, while India is more of a regional giant, dwarfing nations like Pakistan, Sri Lanka and Bangladesh due to its ever attractive investment opportunities. A cleart line of definition has to be drawn when speaking about the two nations. Their is a clear difference between them that can be lost if one tries to lump their progress into a neat little package. Such presentations are foolhardy and show a lack of understanding both in terms of economics and history. This has happened before, and its has not always gone as planned.

I am not trying to deflate India's ability to rise and play a major role in world economics. Infact, I am certain that India will do quite well in the coming decades. However, this psrocess will take time. China has three times the highway space India does. It has an excellent education system that truly does affect all regions of the country. Above all, China has the capital to invest in itself, and it is investing in itself heavily. Japan has been scared for many years that China will soon overtake it on the world stage as a leader in new technology. This is becoming a reality with ever year that passes- be it in pharmaceutical reserach or electronics.

The more acute question for the curious should be who will sustain their developement for longer? and who will, for lack of a better word, 'win' in the end? I this respect, I would have to favour India's chances. The stability that India harnesses through its free market, democratic government is a stark contrast to the still-close minded Chinese government. The presence of a free press, the ability of each citizen to vote in India and moreoevr, to gain from the election system sets ist political system on the opposite side of the spectrum from that of China. India is a stable nation, in many ways an anamoly in the region: It has embraced democracy when countries like Pakistan have struggled to keep military dictators out of power; India has faced far less internal issues than say Sri Lanka which has been dogged for half its history by communal conflicts; It has befriended the world while nations like China, Pakistan and Sri Lanka have found themselves ostracised.

Meanwhile, China rise as an economic power has overshadowed longstanding problems with equitable disbursement of incomes, government systems and environment. China will face a crisis in these areas if it does not invest heavily in its soft infrastructure soon. Its all well and good to have a well established infrastructure when it comes to transportation and communication; however, it does not mean much if education within the country is still lacking, or as is the case in China, some people have never even used a phone much less a communications network. These differences between China and India will count in the end. Even though India's rise to the global stage will be slower than that of China, it can look forward to better prospects in the end.

The key to understanding this issue (the game of nations, as I call it) is that there are numerous complexities that go along with becoming a major world player both in politics and in economy. With the rise of China in the region, it is essential for other major players to prop up their own horse in the race, so to speak. Only one nation in the world can counter the true might of China, and that is India - of course, the might of China, that I refer to is its massive population. It is fortunate for major actors such as the US and Europe that India is also experiencing rapid development. It is thus easier for them to counter China's rise with investments in India. Counterbalancing China with an increasingly powerful India will ensure that China does not gain too much power and support in the region.

There you have it, my thoughts on the rise of the next global powers. I'm sure I can think of more stuff to say, but its usually a good time to stop when your wristbone starts swelling from the incesssant typing.