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Crouching tiger, problem-ridden dragon

By Kevin Steel ⋅ April 23, 2007 ⋅  Email this post ⋅  Print this post ⋅ Post a comment

India is booming, and the Asian tiger has a few advantages that could give it an edge over the Chinese dragon. Canada should pay attention

When Mira Kamdar woke up early in the morning on March 30, the first thing she did was go to the window. From her luxury suite in the Amarvilas Hotel in Agra, India, she had a postcard-perfect view of the Taj Mahal rising out of the mist off the Yamuna River in the sunrise. But the foreground was a little less spectacular. In between the sumptuous gardens of the hotel–with its fountains and marble arches–and the near mythic beauty of the Taj, was a modest residential neighbourhood, and in front of that a large barren stretch of ground. “There were a lot of neighbourhood boys and men coming out to relieve themselves there,” Kamdar says with a laugh; not a pretty sight. However, the reason for using this giant outdoor toilet was pretty easy to guess: the neighbourhood simply lacked an adequate sewage system.

The day before, in another city, Gurgaon, where she was visiting relatives, Kamdar noticed a similar lack of basic infrastructure. Gurgaon, she says, typifies the exploding India. “It was mall mania. Within three kilometres of where we were staying, there were at least six malls in various stages of construction,” she says. Between the malls, with cows and feral dogs wandering the streets, amid bleak poverty, there were no sidewalks; there were sidewalks directly in front of the malls but they ended abruptly on either side. She found this strange in a country where most people get around by foot, bicycle or cycle rickshaw.

Kamdar is no casual observer. The Seattle-born writer of Indian descent is a senior fellow at the World Policy Institute and an associate fellow of the Asia Society based in New York, where she now lives. She has just published Planet India: How the Fastest Growing Democracy Is Transforming America and the World, a book about the impact of India’s rocketing economy.

The lack of basic infrastructure is evident everywhere, Kamdar says, and it’s not just sewage and sidewalks. “The Achilles heel in the India story is the infrastructure lag. It simply has not built up its infrastructure at any kind of a rate to keep up with the explosion in the economy. There are a number of industries that are just going to run into a brick wall if they can’t ramp up their electrical supply, ramp up roads, ports and airports, because they simply won’t be able to manufacture or move the goods that are fuelling the growth,” Kamdar says.

The Indian economy grew more than nine per cent last year, putting it on pace with rapidly expanding China, and economists predict it will continue to grow by at least eight per cent per year for the foreseeable future. Anywhere you get that kind of growth, there are problems. In India, where the citizens number 1.1 billion, those problems are compounded almost beyond comprehension. Factor in that about two-thirds of Indians live on less than two dollars a day but have rapidly rising expectations, and you’ve got a potentially explosive situation.

But Kamdar is optimistic. India, she believes, can handle its problems. “The mood in the country is by and large very bullish, and that filters down even to the poor who believe life is going to get better,” she says. It is an ancient civilization, but it is a member of the Commonwealth, and as a modern nation it is founded on enlightenment values and institutions, particularly British values, including parliamentary democracy. So it can absorb shocks without stepping backward. “If people grow dissatisfied with the government, they can just throw them out, and they do regularly,” Kamdar says.

That’s actually where India has the advantage over its regional competitor, China, in its ability to absorb the shock of the transition from a relatively backward economy to a modern economic powerhouse.

It’s why James Bennett gives the edge to India. The Colorado-based technological entrepreneur and author of The Anglosphere Challenge: Why the English-Speaking Nations Will Lead the Way in the Twenty-first Century believes, politically, India is about a half a century ahead of China. “India has made the transition to rule of law a long time ago, and they did it under very difficult circumstances,” says Bennett. Just before India’s 1947 independence, in the partition of that year, they had pretty close to an all-out civil war. Over the years, they had three major wars with Pakistan, several quasi wars with China, domestic insurrectionism and the period of emergency under Indira Gandhi. Indian democracy and rule of law have survived all these. Most Third World nations have not managed to maintain rule of law or democracy through far less disruption.

China, in order to continue to grow, will have to make the transition to the rule of law and transparent government, Bennett believes. “Everything we’ve learned from watching development, where it does happen and where it doesn’t, tells us you have to make those transitions at some point or you become just a big racketeer-controlled labour camp,” Bennett says. Right now, the only true regulation in China is the will of the Communist party–if Communists want something to happen, it happens. And in the court system, the person with the best connections to the party wins.

For adjudication to be successful in a region where a business is to be located, it has to be even-handed, predictable to the user, and it has to give reasonably quick decisions. China is terrible on the first two, but it’s not too bad on the third. A one-party state can make things happen. India is quite good on the first two. “But it kind of sucks on the third,” Bennett says. Indian bureaucracy is notoriously slow.

But according to Bennett, it is far easier to take a fair process and make it faster than it is to take a quick but capricious, secretive system and make it predictable and transparent.

China has shown some understanding that it will have to make the transition to the rule of law and democracy. But those changes will come with a loss of privileges to those in power, so they will be resisted. That resistance will no doubt be challenged by those clamouring for change, but in a one-party state they have far fewer options than those who live in a democratic country. Disruptions could be dramatic.

So India’s problems are easier to fix than China’s, Bennett believes. “In the long term, we can say they are all going to go through transitions and then they are going to amaze us even more than they have amazed us in the past 10 or 20 years,” he says. “But the question is, can they get through those transitions without major disruptions, major problems, or even falling back? . . . [A]sk which of the two is more likely to get through its transitions without the soap opera, and it’s probably India.”

India has problems, but its path out is more visible, with fewer huge question marks. India’s problems are more visible than China’s, particularly because it has a free press and an open government. “It’s in our interests, as Americans and Canadians and as members of the developed world, to develop strong trade links with each of these countries. But I think the nature and the depth of the trade links we can create with India are deeper and more significant than the trade links we can create with China, at least for quite some time to come,” Bennett says.

The Canadian government is going to some length to strengthen those links. At the beginning of March, Ted Menzies, parliamentary secretary to Minister of International Trade David Emerson, led a trade mission of about 30 companies through India. They were looking at proposed construction projects like international airports, bridges, new road interchanges and a new deep-water port in Calcutta. “[The Indian government] is looking for the expertise Canadian companies have, and so we were quite wide-eyed looking at all these opportunities,” Menzies says. According to Menzies, Canada and India are very close to signing a foreign investment protection and promotion agreement, which everyone hopes will be inked before the end of this year. The long-term goal, as Minister Emerson has stated, is a free-trade agreement.

Canada, particularly under the previous Liberal administration, expended a lot of effort forging ties with China. This was due in part to high-level members of the party, such as former prime ministers Paul Martin and Jean Chrétien, having personal economic interests in that country. The Harper Conservatives have been criticized for their cooler attitude toward China, putting more emphasis on human rights and linking it with trade.

David Harris, senior fellow for national security at the Canadian Coalition for Democracies, says it makes more sense for Canadian interests to look to India for trade than it is to look to China. “For political reasons, we have a definite interest as a democratic pluralist nation in dealing with a country that has a similarly inclined jurisdiction,” he says.

In that respect, India shows up some of the profound deficiencies in China. “In China, we are, of course, dealing with what might be politely described as a police state, a jurisdiction distinguished by the size of its gulag and slave labour. There are implications as well for economic reliance on slave labour in undermining our own labour rates,” Harris says. Also, any money that China makes in dealing with Canada will, one way or another, be invested in these totalitarian tendencies and in military capacity that directly threatens Canada and its allies, not the least in relation to the freedom of the seas where China is developing a major blue-water naval capacity.

“We’ve seen tremendous adverse use, from the perspective of Canadian interests, of Chinese technology,” Harris says. “As we saw with the Chinese space program, showing its capacity to launch satellite-killing rockets, with the obvious problems this would present to the western world in the event of any sort of hostility with what would amount to a relatively aggressive regime.”

He also believes India is kind of an investment in counter-terrorism. “The same global radical Islamist enemy that is infiltrating and encompassing us and our future has been at war with the liberal democratic state of India for many years,” Harris notes. “Putting these together,” he continues, “I suggest that Canada has a shared political, economic, military and human interest in seeing the success of India’s burgeoning economy.”

[This article appeared in the April 23, 2007 issue of the Western Standard.]