[Overseas view]Development and democracy

As long as India remained socialist, she slumbered. From the time of independence in 1947 until the early nineties, the country posted 3 percent annual growth, just about keeping pace with population growth. Real increase in per capita income, if any, was negligible. This state of affairs seemed so normal that Indian economists decreed 3 percent to be the target growth rate. Early Indian leaders, Jawaharlal Nehru and later Indira Gandhi, were content to let things be. India had a state-planned economy, very much in keeping with the dominant trends in development economics of the sixties.
The Permit-Licence Raj was the hallmark of immutable India. No company could be set up without a plethora of government clearances. India considered countries like Korea and Taiwan clients of America and of little importance. Providentially, property was not nationalized. Thus, unlike Chinese peasants, Indian villagers did not die of starvation. Better still, thanks to the initiatives of two agronomists, the Indian M.S. Swaminathan and the American Norman Borlaug, Indian agriculture reaped the benefits of the Green Revolution of the seventies with agricultural production doubling in the space of ten years.
1991 became a turning point: India was now a country on the move. Two events shook India out of her slumber: the Chinese take-off and the collapse of the Soviet Union. The latter had been India’s chief supplier with trade based on a system of barter. The new Russians demanded dollars which India did not have. And so India opened up to foreign investors, allowing entrepreneurs to export goods to rake in foreign exchange.
With the end of the quota Permit-Licence Raj, India saw a spontaneous blossoming of capitalism as small enterprises sprang up everywhere. Unlike China where the state picks the winners, India’s entrepreneurs set out to conquer the world. They exported their goods, began buying foreign firms and penetrating distant markets, familiarizing themselves with modern business practices.
Competition from China spurred the country on. India’s growth rate almost matches that of China (10 percent against 11 percent in 2007) but she has followed a different path. Chinese development is immediately visible to the foreign observer, whereas India’s dilapidated infrastructure tends to obscure many achievements. Thus at first glance, it appears that China’s dynamism has allowed it to outpace India. But this is a superficial observation. In China, the central and provincial governments are all-powerful, leaving no space for civil society. The Chinese have opted to concentrate investment on a few urban centers and spectacular infrastructure. The poverty in the countryside is hidden. In India, on the other hand, the state is relatively weak, lacking the financial and political clout to promote grandiose projects. The development that has taken place is due mainly to the endeavors of small enterprises scattered across the country, a reflection of Indian society and democracy.
Does India’s success in the field of information technology suggest a new path to development, one which favors the service sector over industry, unlike what happened in Europe, Korea or China? In economic terms, the IT breakthrough is negligible, accounting for no more than 2 to 3 percent of total production, far behind textile exports. What it has done is put the Indian economy on the world map and given the country a psychological boost. But the IT companies can hardly be expected to provide employment to millions of unemployed peasants. For that, India will have to compete with Chinese companies and prove to be capable of manufacturing electronic goods, textiles and cars for the world market. There is still no known alternative to industrialization and the rural exodus: this is the iron rule of development.
Certainly, democracy is slowing down India’s industrialization. Infrastructure projects get bogged down in concerns for the environment, the habitat and the preservation of tribal culture. The Chinese government is quick to implement whatever it has decided, irrespective of the people’s wishes; in India, there is endless argument on the pros and cons of anything. The construction of a hydroelectric dam can displace millions of Chinese villagers with barely any protest being heard; in India the displacement of a single tribe is enough to mobilize the judiciary, the media, public opinion and political parties. Eventually, the dam will get built, but several years later on a less ambitious scale. Obviously, the foreign investor, who plays a crucial role in the development of both countries, will favor China. This may be a good choice in the short term, but not so good in the long run.
The slower pace due to democracy in India guarantees sustainable development, even if it causes delays in building infrastructure and industrialization. Since 1991, various political parties have come to power, ranging from the nationalist right-wing to a leftist coalition which includes the communists. But the overall strategy, the openness to the world and the spirit of enterprise, remain unchanged. Perhaps the right is more wary of foreign investment and the left more attached to the public sector, yet these differences are marginal and do not alter the general consensus.
Both in India and China, development is changing the countryside, the towns and the people’s way of life; the world is becoming increasingly uniform. Is this a cause for concern? Foreign tourists come to India looking for the exotic, but what do Indians want? When they fought for their independence under Mahatma Gandhi and Nehru, they were also fighting for development. They had no wish to remain steeped in poverty to preserve the diversity of civilizations. We have many misconceptions about the India of Gandhi’s dreams.
Gandhi was not averse to progress, as is often said in the West. But he was opposed to injustice and wanted progress that addressed the needs of the poorest of the poor.
Can democracy and the market economy help realize Gandhi’s vision? The Green Revolution has ensured that India does not lack food, but some of her people are too poor to afford three meals a day. The market economy remains the most effective way to take them out of the grip of poverty. M.S. Swaminathan is persuading villagers to engage in profitable activities so that they can increase their income. In Tamil Nadu for instance, he has introduced groundless mushroom cultivation, helping low-caste landless women make a living through their own efforts. Certain things, however, have more to do with culture than economics. Open-air defecation, a major health hazard in India, is one such practice. The government awards prizes to villages which build latrines but often nobody is willing to clean them.
Indians no longer challenge the efficiency of the free market or its capacity to redistribute wealth. The ongoing debate is about how quickly widespread prosperity can be achieved so that even the poorest of Indians enjoy the fruits of economic progress. Unlike China, the great virtue of Indian democracy is to ask this question ceaselessly and experiment with new solutions.

*The writer is a French journalist, economist, philosopher and civilization critic.

by Guy Sorman