Awakening Giants

From the first chapter (free PDF) of Pranab Bardhan’s new book titled Awakening Giants, Feet of Clay: Assessing the Economic Rise of China and India

Many decades of socialist controls and regulations stiled enterprise in both countries and led them to a dead end. Their recent market re­forms and global integration have inally unleashed their entrepreneurial energies. Their energetic participation in globalized capitalism has brought about high economic growth in both countries, which in turn led to a large decline in their massive poverty. The two countries are now full of billions of “new capitalists” striving to ind their place in the sun. Although India’s performance in this respect has been substantial, it has been overshadowed by the really dramatic performance of China both in economic growth and poverty reduction. China has now become the manufacturing “work­shop of the world.” China’s explosive industrial growth in the past quarter century is hailed as historically unique, even better than the earlier East Asian “miracles.” Like those “miracles,” China’s is often regarded as an­other successful story of a “developmental state,” with an active industrial policy and a state­inanced and ­guided program of industrialization.

China’s better performance than India’s suggests that authoritarian­ ism may be more conducive to development at early stages, as we have seen earlier in South Korea, Taiwan, and Singapore. In the Chinese case, however, regional economic decentralization provided some dispersal of power and more autonomy and incentives to local people, and even with­ out democracy it led to broad­based local development (unlike in Russia, where regional decentralization led to collusion between local governments and oligarchs, only recently curbed by a semiauthoritarian and centralized Putin administration). Global capitalism, however, has inevitably brought rising inequalities, more in China than in India, and this may portend some problems for the future political stability in China, as it does not have the capability of democratic India to let off the steam of inequality­ induced discontent. But all is not lost for democracy in China. The pros­pering middle classes will, slowly but surely, demand more democratic rights and usher in democratic progress in China, as they have in South Korea and Taiwan.