Which model is better for Pakistan? Messy democracy like India or China’s model of economics. Pakistan can learn a lot by choosing a path from its two giant neighbors.
http://www.philly.com/mld/inquirer/news/special_packages/sunday_review/13736520.htm
India’s messy democracy or China’s model of economics?
By Trudy Rubin
**DAVOS, Switzerland - **You could almost hear the tectonic plates shifting at this year’s World Economic Forum, where the giants of capitalism and their political leaders gather every year to discuss the state of the world.
This year’s spotlight wasn’t on the American economy. Nor was the focus on Europe. The stars of Davos 2006 were the world’s new economic giants, India and China, with more than two billion people between them.
A raft of panels discussed the emergence of China and India. But a constant subtext of the discussions was one of the most fascinating questions to emerge from this year’s forum: Is China’s top-down model of economic development better for business? Or can India’s messy democracy provide an alternative model for growth?
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So far, China is growing faster than India, attracts 10 times the foreign direct investment, and has proved far more successful at building infrastructure to get goods to market. This month, China became the world’s fourth-largest economy, passing Britain. But the confidence of young, dynamic Indian high-tech whiz kids is infections.
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At a glitzy cocktail party at the posh Belvedere Hotel, one of several thrown by Indian firms this week, elegant saris could be seen among the business suits, the spicy canapés were garnished with mint and yogurt, and the logo of the host firm, an Indian high-tech leader named Infosys Technologies Ltd., proclaimed: “Powered by Intellect, Driven by Values.”
Around 150 Indian businessmen, journalists, government ministers, and top state officials swept into Davos, along with a massive promotion campaign on the Web and on posters, proclaiming: “India - the world’s fastest growing market democracy.”
Only a decade ago, India retained a socialist mind-set, and businessman was a dirty word. Economic reforms got going only in 1991 and didn’t take off until the last few years. Even today, the tens of millions who staff India’s high-tech industries and outsourcing firms live only hours away from impoverished villagers. India still suffers from widespread illiteracy, bad roads, and an infuriating bureaucracy.
But the Indian attitude toward entrepreneurship has changed (perhaps in part because of the success of neighbor China’s capitalist model). “Twenty years ago,” says Indian Commerce Minister Kamal Nath, “everyone asked me to get them a job in the public sector. Now, they want me to get them a job in Infosys.”
And India’s democratic openness and rule of law have encouraged a wave of technological innovation that China still lacks. “There is a degree of freedom that creates aspirations,” says Anand Mahindra. This Harvard M.B.A. returned home and now is vice chairman of a family firm, Mahindra & Mahindra Ltd., that produces automobiles and farm equipment, among other items. Indian democracy means that no one censors Google, and the country is way ahead of China in the information-technology sector. Independent thinking also produces better managers.
Although it receives fewer foreign and investment funds, India uses the capital more productively, I was told by Massachusetts Institute of Technology professor Huang Yasheng at Davos. Maybe that productivity comes from the fact that managers and local officials aren’t protected from scrutiny the way they often are in China. India’s democracy provides a check on corrupt government officials.
“Previously, people argued that China did well economically and India politically,” says Huang. “But I argue that there are economic advantages of having good governance. It will help India overcome caste and lack of basic education of the workforce.”
And democracy keeps voter pressure on government officials to eliminate barriers that keep Indians from making further economic progress. Infosys president Nandan Nilekani says the Indian public will press officials to eliminate the bureaucratic barriers that block small entrepreneurs and that keep their children from getting an education.
“There is no choice,” Nilekani says. “Democracy will ensure that the restrictions to job creation are lowered. No one can stop this.”
Maybe it’s the crush of visible talent at the Infosys party that makes me want to believe democratic India can do as well as China. The issue really isn’t which model is better. Rather, one hopes that India can prove that messy democracies are no obstacle to creating prosperity in a developing country. When you talk to Indian entrepreneurs at Davos, this is easy to believe.