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Indian Lessons

Author: Jagdish N. Bhagwati
February 28, 2006
Wall Street Journal

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Talking to Indian reporters on the eve of his visit to India, President Bush recalled Mahatma Gandhi as “so spiritual that he captured the imagination of the entire world.” He was no doubt alluding to Gandhi’s great achievement in teaching us all the virtues of nonviolence. But if he were to study India’s accomplishments and failures in the years since its independence, he would also detect lessons for his current foreign policy preoccupations.

After all these years of Realism in U.S. foreign policy, the Bush administration is appropriately interested in the spread of democracy worldwide. Yet as the U.S. goes about its business of pressure-cooked democratization in Iraq, we need to appreciate that Indian democracy succeeded because her political institutions were a legacy that evolved over decades under British rule. During those years, the rule of law, elections, the judiciary, even NGOs, developed through the land. Iraq’s difficulties illustrate, by contrast, how hard it is to transplant functioning democratic institutions.

Nehru’s India—1947 to 1964—showed well how the give-and-take of democratic practice managed to hold the country together against the separatist tendencies that confronted a nation of many languages and religions, despite the massacres and population transfers that followed its partition in 1947. Nehru typically tried to impose “rational” solutions, but often gave way when confronted by continuing agitation. Given India’s size, even if a tiny fraction took to the streets, you were dealing with huge mobs! Accommodation of minorities and dissenting viewpoints, rather than confrontational politics by the majority, is what Nehru practiced; and that remains a role model that the U.S. needs to study when nudging nascent democracies abroad.

But starting with Nehru, and way beyond his death, we know that India’s economy took the wrong turn and embraced a “socialist” model whose pillars were near-autarky in trade based on self-fulfilling pessimism about export potential; a hugely restrictive policy on inward investment based on fear; a knee-jerk set of controls on production, investment and trade; and a lovefest with public sector enterprises that proliferated beyond utilities while making huge losses. Many of these policies began to be substantially reversed, starting particularly in 1991 when the present prime minister, Manmohan Singh, was finance minister. Overhauling the old policy framework was a gigantic task that is still ongoing. Besides, the coalition with the communists, and the return of the old, discredited socialists within the Congress Party, has created difficulties in sustaining the momentum of reforms.

But President Bush, no more than many Indians themselves, needs no lesson in the virtues of an open economy integrated into the world economy through trade and investment, and exploiting private initiatives, innovation and enterprise. These reforms have taken the Indian economy to a significantly higher growth path and, more important, have finally made a noticeable dent in poverty. After all, it is reasonable to suppose that rapid growth will produce more jobs and pull more of the poor into gainful employment. So reformers interested in reducing poverty can only rejoice; and the president should be able to tell the Doubting Thomases: Go and see for yourself in India.

Yet the last Indian election created the absurd presumption that the rejection of the ruling BJP was a rejection of economic reforms—that these reforms had increased poverty and inequality. But the fact is that urban and rural poverty had finally declined. As long as India was mired in policies that produced little growth, the poor had seen few benefits and their numbers had increased, with the consequence that the poor kept voting in the ruling Congress Party because they regarded their poverty fatalistically—a phenomenon I have called, on these pages, the “non-revolution of falling expectations.” Once the reforms that the left likes to call “neoliberal”—in contrast to their prescriptions which might, in riposte, be called “neanderthal”—took root, poverty declined; and the poor, who had improved their incomes, began to ask for more, precipitating a “revolution of perceived possibilities” (or a “revolution of rising expectations”).

These aspirations had little to do with inequality between rural and urban areas; it was almost entirely self-referential: If I had become less poor, then I believed that I could do even better if I elected a government that promised me more. India’s democracy, with its nearly three million NGOs, opposition parties and a functioning judiciary, translated these aroused aspirations into politically effective demand, resulting in the loss of elections by nearly all incumbent state governments.

By contrast, China’s greater economic success has led to increased social protests in the rural areas; we hear constantly of “land grabs” leading to disruptive demonstrations. A concerned Chinese government has translated these protests into the erroneous view that they are primarily the result of rural-urban inequality. But, this explanation is a witless repetition of the mistaken focus on inequality as the prime mover in political reaction. In China’s case, it is evident that if a commissar’s cronies grab your land, a phenomenon that may reflect also the fact that increased prosperity makes land more valuable to grab, there is no redress because there are hardly any NGOs, no opposition parties, no free press and no independent judiciary. So you turn to the streets. The Chinese rulers cannot face up to the fact that their antidemocratic structures are at the heart of the problem of increasing rural unrest; they cling to the self-serving view that economic inequality is the cause.

India’s democracy and the institutions that go with it give her the edge in long-term stability and sustainable growth, relative to authoritarian China. Economic and political freedoms make a powerful cocktail: President Bush, who values democracy and economic freedom (in the sense of a judicious use of markets and embrace of freer trade), will find in India’s experience a confirmation of the fundamental soundness of this approach to development.

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