Reality check for Asian titans
India and China: The Battle between Soft and Hard
Power by Prem Shankar Jha
Reviewed by Sreeram Chaulia
Views about the inexorable rise of China and India to global
dominance have multiplied as the two storm ahead with
impressive economic growth rates amidst a worldwide
downturn. Speculation that these Asian giants will
reconfigure the international order with their accumulating
might has assumed an air of certainty, a matter of "when"
and not "if".
But it is worth inquiring whether the market-based
modernization in both countries is proceeding in a stable
direction or setting up an implosion. Veteran Indian
political economist Prem Shankar Jha plays the skeptic in a
new book about China and India's abilities to reconcile
economic growth with equity. Combining acute analysis of the
history of capitalism and domestic weaknesses in the two
fast galloping economies, he offers a caveat to assumptions
about their ascent to greatness.
One paradox of China's record economic growth that Jha
highlights is incomplete privatization. Half of industrial
output is still generated by non-market entities allied to
the state. Chinese Communist Party (CCP) cadres of the
central government and from five tiers of local government
are engaged in competition for investable resources, leading
to a chaotic misallocation of capital. Rivalry between these
two strata of the CCP has bequeathed a unique problem of
overheating and a struggle to bring down the rate of
feverish investment and GDP growth.
Since "cadre capitalists", who form an "intermediate class",
are part and parcel of the Chinese government, Jha shows how
"every corrupt, predatory action that comes to light
threatens the stability of the state" itself. He contrasts
this to India's intermediate class of rent-seeking small and
medium enterprises, which used to leverage the state to the
detriment of big businesses, but "did not become the state".
(p 55) Discontent and stress fueled by economic changes will
therefore, Jha argues, be more problematic in China.
China's central government has often failed to mitigate
exuberant investment sprees by local CCP authorities.
Provincial administrations are responsible for unsustainable
expansion of bank credit to finance real estate and special
economic zone (SEZ) booms. Jha plots a series of
overproduction and excess capacity bubbles succeeded by
recessionary slowdowns to reveal the risks to stability
posed by China's cadre-capitalism. The Chinese economy's
inefficient use of raw materials and energy compared to
India is also a harmful offshoot of cadre-capitalists piling
up "dead investments" and duplicating industrial structures
Jha argues that extortion of private land and excessive
taxation of the lower classes has "undermined the legitimacy
of the Chinese political system in the eyes of its people".
(p 108) Mass alienation from the regime is the reason, the
author says, "why a country with such an astounding rate of
growth should be suffering so much public discontent". (p
128) The government is aware it is "living on top of a
volcano", he writes, but is determined to stave off the only
genuine solution - democratization. China is thus saddled
with what Jha terms as a "predatory state that does not know
how to reform". (p 273)
Resorting to physical violence to quell protests has become
common as local cadre ensure that people's grievances are
not taken higher up the party chain. Jha reproduces the
judgment of the purged former CCP leader Zhao Ziyang from
2004 that "what China has is the worst form of capitalism."
On the ills of India's economic metamorphosis, the author
uses the refrain of intra-capitalist class conflict between
large industrial houses and an "intermediate bourgeoisie"
that flourished on artificial shortages. This tussle
continued even after the economic liberalization of 1991,
with myriad product category restrictions and bureaucratic
foot dragging to protect tens of thousands of parasitic
small and medium-sized enterprises. Only after 1997 did
these intermediate firms shut down or reinvent themselves to
become competitive through a managerial revolution.
The advent of an unfettered market economy in the last
decade has, however, wrought new social strains. With the
poor feeling abandoned by the state, a Maoist revolt rages
across the breadth of central India. Market-dictated
reorientation of funds from agriculture to industry and
service sectors has triggered a gigantic rural crisis.
State-level governments in India are siding with the "new
aggressive capitalist class" (p 282) on land acquisitions
and wage depression, short changing the poorest sections of
the peasantry, unorganized sector workers, and indigenous
communities. In Jha's estimate, the central government's
rhetorical ideal of "inclusive growth" has been undone by
"an aversion to any reforms that will dilute the power of
the newly empowered bourgeoisie". (p 309) He attributes the
uptick in armed challenges to state authority in India to
"the absolute powerlessness of the poor to obtain redress
through legal expedients". (p 296)
Undemocratic China's time horizon to enact governance
reforms for preserving social equilibrium is shorter than
India's, but Jha contends that India too is facing a ticking
bomb. The latter's democratic advantage is, he believes, "in
danger of being lost" (p 328) through coalition politics and
diminution of the central government's capacity to manage
market-engendered social conflict. Neither country, he
concludes, is assured of a rosy future bereft of instability
if losers in society are ruthlessly trampled by the process
of capitalist transformation.
A noteworthy contribution of this sobering book is to offer
valuable insights into the multiplier effect of economic
recessions on social and political instability that is
inherent to the path of developmental "progress" adopted in
China and India. The dangers of regime collapse in China and
intensifying Maoist war on the Indian state are aggravated
when growth engines slow down periodically and offload more
onerous burdens on the shoulders of the downtrodden.
Jha's healthy dose of pessimism comes at a critical juncture
when Asia's two behemoths are pressing on with astounding
pace on the road to modernization. His book is a reminder
that dark realities and high human costs lurk beneath the
glitter of spreading market economies.
India and China: The Battle between Soft and Hard Power
by Prem Shankar Jha, Penguin Books, New Delhi, 2010.
ISBN: 9780670083275. Price US$13, 398 pages.
Sreeram Chaulia is associate professor of world
politics at the OP Jindal Global University in Sonipat,
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