The worlds two most populous countries are slowing down. Concentrated wealth poses problems for both countries. In India,the collusion between Indian billionaires and politicians,while rampant,is somewhat less direct and more subject to political and media scrutiny. In China,collusion between party officials and commercial interests,especially at the local level,has caused widespread popular anger against arbitrary land acquisition and toxic pollution.
The economist and philosopher Amartya Sen recently argued that India has lagged behind China because it had not invested enough in education and healthcare,which raise living standards and labour productivity. He rightly emphasises that deficient social services and the inequality that results are not just a matter of social justice,but of economic growth as well. But one should not get the impression that progress in social services is by itself sufficient for growth. Exemplary welfare programmes in the state of Kerala in India,and in Sri Lanka,have not been matched by spectacular economic performance. The latter also requires improvements in infrastructure,less cumbersome regulations and a culture that fosters entrepreneurial investment. Sen raises but does not examine a puzzle: why voters in the worlds largest democracy cannot get politicians to effectively deliver social services. This is partly because Indias fractious society has often emphasised uplifting the dignity of former oppressed social groups over basic good governance.
What of the Chinese model? The history of developing countries shows that authoritarianism is neither necessary nor sufficient for development. The Communist Party will find it increasingly tough to manage a complicated economy (without independent regulators) and political system (without an independent judiciary or effective rule of law). Without innovation,China cannot sustain high growth,as the artificially low prices of land and capital for politically favoured firms become difficult to maintain and the supply of cheap labour dwindles. Unlike in India,a significant slowdown could be regime-threatening for China.
On the other hand,Indias experience,like Americas,shows how partisan fragmentation in a rambunctious democracy can undermine effective governance. But India has independent judges,government auditors and a free press checks on corruption that are absent in China.
In both giant countries there are glimmers of hope. China is making substantial advances in energy-efficient technology and improving health care and pensions. In India,voters are starting to demand good governance,and vigorous social movements against injustice caste oppression,sexual violence and environmental degradation are making a dent. But Chinas rigid political system makes it heavily dependent on enlightened consensus among its non-elected rulers,while Indias ramshackle,pluralistic democracy has been surprisingly supple,even if its citizens havent reaped the material benefits yet. They share a fundamental problem a lack of accountability,especially at the local level that,if not addressed,will make it impossible to sustain strong economic growth and provide a social safety net. In India,democracy is weakest at the village level: electoral participation is vigorous,but local elites often capture the local government,leaving bureaucrats little autonomy (or money) to carry out substantial improvements. In China,the failure of accountability is national,and inherent in the authoritarian system.
In the short term,I expect China to do better than India …continued »