Never before in China have I seen as much interest in India as I did last month, when I attended the China Development Forum in Beijing. The Forum, founded in 2000, is now recognised as one of the most important international meetings on global economics. The conference was held in the Diaoyutai State Guest House, built in 1959 to celebrate ten years of the founding of the People’s Republic of China, with Mao Zedong’s famous proclamation atop Tiananmen Square. With its gardens, lakes and ornate buildings, the place is a cultural icon of China and served as headquarters for the Central Cultural Revolution Group.
With China eager to step into the caveat being created by the rise in protectionism in the United States, this was a special year for the Forum: There were hints of China’s soft power ambition everywhere, from the décor, the fluent English conversation with the students chaperoning us, to the topics chosen for the various panels and lectures. China’s Premier Li Keqiang gave an eloquent speech in Chinese, talking about his country’s role in today’s troubled world, occasionally pausing to correct the translator’s English; at one point, when the translator said “passions”, he turned to her and she quickly corrected herself, “emotions.” There were lectures by global corporate leaders and prominent economists. Amartya Sen had a special “Nobel conversation” with a charming Chinese journalist.
A sign of China’s effort to project soft power is its changing attitude to religion. Under attack during the Cultural Revolution, Buddhism is no longer anathema. China now has nearly 250 million Buddhists, constituting 18 per cent of China’s population — and 50 per cent of the world’s Buddhists. During a coffee break, a Chinese student accosted me to chat about Sadhguru, from whom he derived “spiritual inspiration”, quite unthinkable a few years ago. He assumed that, as an Indian, I would know all about Sadhguru.
I did not want to disappoint him and so, deciding not to be too fussy about facts, managed a decent conversation about Sadhguru Jaggi Vasudev’s life and teachings.
I spoke in two India-specific sessions, one with the former Chinese Finance Minister Lou Jiwei on “The Future of India and China in the New Stage of the World Economy” and the other, organised by China Finance 40 Forum, at a beautiful, quaint restaurant in Fuchengmen Inner Street. The group’s stylish title derives from the fact that it was formed by 40 finance and economics experts, all roughly 40 years old.
It is an open, argumentative forum, the kind one encounters in America and India. I told them what I believe, that the two countries in the world best poised to grow and become global leaders are China and India. China is ahead of India, having invested in health and education early, and having grown rapidly, between 9 and 11 per cent, since 1980. India’s growth picked up later, in 1994, and breached the 9 per cent mark only in 2005.
There are risks for both nations. China is trying to transition to what was known to be India’s strength — soft power — to connect to the world through the arts, films, literature and science. In the long-run, soft power is more resilient than hard power. That is why Athens, and not Sparta, a more formidable military state, is known as the cradle of western civilisation. That is why the US nurtured its universities to become global centres of learning and outreach. It is encouraging to see China recognise this: But such a switch will not be easy. With its powerful government, totalitarian control and lack of civic freedom, China will have to negotiate some risky turns to get there.
It is for this reason that, I believe, in the long-run, India is the safer bet. India made the difficult investments — in democracy, secularism, freedom of speech, higher education — early. The recent demonetisation was a big mistake. Without it, India would have been growing at over 8 per cent by now. Luckily, the country made decisions that were good, such as the adoption of the GST and the effort to cut down bureaucratic costs.
But India also has risks — they come from the resurgence of the country’s nationalistic right wing, which suffers from a sense of shame about India and an envy of other militaristic countries and chauvinistic cultures. There have been sporadic actions by this group across the country that can destroy the investment India made in soft power, which, once undone, can do immense long-run damage. I hope that the leaders interested in India’s welfare will act to stall these regressive elements.
What needs to be appreciated is that, while economic policy is important, and profits and finance undoubtedly matter, a country’s long-run strength depends disproportionately on culture, social norms, the level of trust among people, the sense of inclusion and pride people have in their society. (And it is worth adding, pride cannot be built by beating up people who do not have it). For this reason, the first World Development Report that I initiated after joining the World Bank in 2012 was called Mind, Society, and Behavior. The Report is a trove of how the mind-set matters — if you repeatedly tell certain groups that they are backward and less intelligent, they begin to perform worse, even when there are no innate differences.
Some of the most compelling studies on this are from India involving caste. How you present the option to get educated can make a big difference in people choosing to get educated. Different cultural backgrounds lead to different choices. And so on. There are serious examples enough in the Report. So, let me close by recounting a facetious tale from my college days, summing up the role of mind-sets. The Catholic Church announced a contest in which people had to name the most important person who ever trod the earth. The winner would get $20.
A Muslim man raised his hand and said, “Mohammad”. “Good try”, was the response of the jury. A Jewish lady offered, “Moses”. No. And this went on. Then an Indian, a Hindu, stood up and said, “Jesus.” The jury broke into a clap, while there was a gasp of anguish from the Hindus in the audience, who rushed to ask why he felt that way.
Tucking the 20-dollar bill into his pocket, the man answered, “Business is business, and must not be mixed with religion.”
The writer, former chief economist of the World Bank, is Professor of Economics and C. Marks Professor at Cornell University