The India rising illusion


by Sunny
31st July, 2008 at 1:13 pm    

One of the common arguments in that recent discussion about nuclear power went like: OMG how dare you diss capitalism, its just helped like hundreds of millions of Indians and Chinese to come out of poverty!

Don’t get me wrong – I’m a believer in free markets, but capitalism is overrated. Chinese capitalism for example has been incredibly tightly government controlled, so its rather difficult to compare with American capitalism when talking about lifting people out of poverty.
And then there’s India:

The long-term future of the Indian middle class is secure. The factors that have driven its success — a sure grasp of English, a facility with technology, a talent for innovation — will continue to be important in the global economy.

But the 300 million or so Indians living in acute poverty are being crushed by inflation. If they thought washing the floors, driving the cars and cleaning the windows of the middle class would open the doors to a better life, they know now that they were wrong. With prices rising, their savings are being eaten away. Higher food and fuel prices are being driven by big changes in the global economy that look set to continue. Even the most cheerful optimist in the past decade has seen the huge divide between the haves and have-nots, but the hope has persisted that it would somehow go away. Inflation has set like cement into that divide, solidifying the gap between the two Indias. The future for the country is two futures: rosy and grim. Indian companies will buy more foreign businesses and more Indian children will starve. In economic terms, India has become neither the U.S. nor Sudan, but something in between — a Latin American republic with an entrenched class chasm. Higher levels of crime and social unrest are almost certain to follow.

So not only is there the myth that Indian capitalism’s benefits are trickling down to everyone, but people are explictly ignoring the dangers that come with an incredibly class-divided society. I would argue that it should be an aim of any government to prevent its society becoming more materially unequal. Not only does that indicate that there is huge market failure, but it doesn’t bode well socially.

My point is that economic growth has to be managed. I much prefer the open economy India has now compared to the old tightly regulated ‘license Raj’. But let’s not kid ourselves about the downsides to unfettered capitalism and pretend its the only solution to how society works.


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Filed in: Economics,India,South Asia






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  1. Global Voices Online » India: On Capitalism

    [...] Pickled Politics on the idea of capitalism as a panacea for India being rather inadequate. Posted by Neha Viswanathan  Print Version Share This [...]




  1. MaidMarian — on 31st July, 2008 at 1:25 pm  

    Sunny –

    the arguments about India/China in the other thread were actually about the odd implication that somehow India/China throwing up coal-fired plants at a staggering rate was somehow an irrelevant sideshow in a debate about GLOBAL warming.

    I don’t remember anyone claiming that India/China were equal places or implying that capitalism was working to the benefit of everyone.

    I just think that fewer people living on rubbish dumps or whatever is better than lots of people living on rubbish dumps. Whatever force takes them there.

    The wider long-term question is whether India/China are just economic paper tigers with big, well funded armies. Time will tell.

  2. Rumbold — on 31st July, 2008 at 2:08 pm  

    China has benefited immensly from unfettered capitalism. Yes, the government controls the economy, but it is capitalism which allows Chinese companies to sell their wares to the rest of the world, thus enriching them. As to India, it is partly the government’s policies and failure to control inflation that have led to this situation.

  3. douglas clark — on 31st July, 2008 at 2:22 pm  

    MaidMarian,

    The other wider long term question of course is whether China and India can afford to destroy their countries in pursuit of wealth using a carbon economy, or whether they can leapfrog over us.

    Being an optomist by nature, I’d vote for the latter.

  4. Avi Cohen — on 31st July, 2008 at 2:29 pm  

    “The long-term future of the Indian middle class is secure. The factors that have driven its success — a sure grasp of English, a facility with technology, a talent for innovation — will continue to be important in the global economy.”

    Not necessarily. Indian companies are even now starting to outsource to Bangladesh, SE Asia and China. So whilst India may continue to benefit the people may not.

    Equally western and middle eastern companies can bypass India and go to the same regions themselves.

    Indian scientists ability to innovate is only good as long as they stay in India.

    India needs to adapt much like parts of SE Asia, Japan and Israel in keeping its scientist in the country rather than losing them as is happening with say African and Middle Eastern countries.

    Even in Israel there was a article recently about the need to groom further scientists to continue the countries role as a tech leader with a growing worry that people are leaving for the USA. Africa is openly complaining about this problem.

  5. cjcjc — on 31st July, 2008 at 2:51 pm  

    Nowhere is there “unfettered” capitalism, is there?

    But capitalism – or let us say secure private property rights combined with the market mechanism for resource allocation – is the only way forward.

  6. MaidMarian — on 31st July, 2008 at 2:54 pm  

    douglas clark -

    China possibly can do the leapfrogging but I am less sure about India.

    The one that the article perhaps misses is Russia’s false dawn, though I think I may well be eaten alive for saying that.

    I also suspect that Europe is perhaps stronger than it looks – a position not outwith history.

  7. Parvinder Singh — on 31st July, 2008 at 3:36 pm  

    While it is true, as the article suggests, that India is experiencing and has been for sometime now, uneven development, the most important impediment to it is the problem of power.

    Imagine for a moment here in the UK or anywhere in the west, electricity is turned off all day Monday, comes back on for a couple of hours for the next few days and then goes into 5 hour power cuts over the weekend. While the rich have their generators, the majority have to stop work, the farmers have no power to run their tube wells to water the crops and without power there is no water coming out of the domestic taps. Productivity goes down, less crops grown, less stuff manufactured, the labourers sit idly as drills, stone cutting machines and cement mixers gather rust.

    This happens almost every week of every year in India. The only solution to drastically change this is to go nuclear and that’s why the government has been trying to get the US commercial nuclear deal sorted of late. Renewable or change to energy light bulbs will mean jack to this huge problem in this huge country. But then, with your GreenPeace sandals on, you reject nuclear. Having lived in India for a year and started off very anti-nuclear, I can see no other way but to advocate it in order not only to help the countries’ economy, but to help the poor get over the simple hurdle of switching the light on we all too well are used to in the west.

  8. Cover Drive — on 31st July, 2008 at 4:09 pm  

    India has spent more on higher education than basic education. As a result, it produces a lot of well-trained graduates who go on to be doctors or work in IT companies and other service oriented businesses, but it has low levels of general literacy, especially among women. The people who stand to gain any benefit from the current economic model are the well-educated middle classes. I’m afraid the poor people living in the countryside are largely untouched, so ‘India rising’ means nothing to them.

    China’s economic growth looks more sustainable and tends to mirror the UK’s. It draws unskilled labour from agriculture into basic industry. The new industries create entrepreneurs who diversify their business and achieve greater sophistication of their products. Like many other countries in East Asia, China has made basic education available to most of its population. The result is better productivity and greater specialisation in its output.

    The problem with both the Chinese and Indians is that they have generally been very very resistant to change and foreign influences. On the other hand, Europeans have always been very receptive to change. The most important component to development is pluralism. It’s important to ask questions and to innovate; otherwise you really are not going to make much progress. That’s the great thing about free markets – it encourages pluralism and no single voice.

    I think it’s still a bit too early to write off India. People today enjoy a greater degree of freedom than they did before independence and in turn that will only aid economic progress.

  9. shariq — on 31st July, 2008 at 4:12 pm  

    Sunny, as Maid Marian said, you are conflating the issues.

    The way forward for India is continued economic growth. To achieve this it will require energy. At present this is coming from hydrocarbons. Nuclear would be an environmentally friendlier way of achieving this.

    To prevent the rise of permanent inequalities the government will need to take some different steps. Improving income tax collection, continued investment in public education and environmental regulation to name a few steps. The fact that it is a democracy should help it achieve some of these aims.

    Btw, some of the reasons for greater inequality i.e rising fuel prices is precisely the type of thing you are trying to limit by going nuclear. Also rising food prices is definitely a problem but as the article says, it is more to do with structural issues in the global economy.

  10. Ravi Naik — on 31st July, 2008 at 5:48 pm  

    I think it’s still a bit too early to write off India.

    Most people don’t. India’s rising is far from an illusion, and in my opinion, far more sustainable than China because its massive economic growth has been despite the government. India’s richness is in the hand of the people (even though there is great unbalance), whereas in China most billionaire industries are in the hand of the Chinese government. I can’t see how the Chinese government can sustain forever specially since there is growing discontent among the people. When it does, expect a huge social and economic revolution. India is far more resilient when it comes to government change.

  11. Ravi Naik — on 31st July, 2008 at 5:50 pm  

    The way forward for India is continued economic growth. To achieve this it will require energy. At present this is coming from hydrocarbons. Nuclear would be an environmentally friendlier way of achieving this.

    You also need to improve infrastructures, sanitary and health conditions and improve education at all levels.

  12. Cover Drive — on 31st July, 2008 at 6:19 pm  

    You also need to improve infrastructures, sanitary and health conditions and improve education at all levels.

    This is easier said than done. The central government in India does not have the kind of authority the central government in China or any other developed country has. India is a federation of states that differ in many ways than one. Add to this is a lot of unnecessary bureaucracy and corruption and it becomes very difficult to push forward any change in India.

    In China the government rules with an iron fist. Anyone that offers resistance is likely to be pushed aside, but this is also China’s main flaw. The system doesn’t encourage pluralism and often the consequences can be failures of enormous scale (e.g. the Great Leap Forward).

    In India rapid economic progress has largely been a result of the liberalisation process only started in the early nineties, but liberalisation by itself is not enough. You need to improve education, health care and infrastructure. Until you improve those things the country will never reach its true potential.

  13. Ravi Naik — on 31st July, 2008 at 6:49 pm  

    This is easier said than done. The central government in India does not have the kind of authority the central government in China or any other developed country has. India is a federation of states that differ in many ways than one. Add to this is a lot of unnecessary bureaucracy and corruption and it becomes very difficult to push forward any change in India.

    Not sure what you mean by “kind of authority”, but it surely has the power to make these kind of changes, which are essential for India if it wants to continue with economic growth.

    India’s biggest stumble is lack of vision, leadership, thinking big and ahead. Corruption and bureaucracy are just symptoms of this condition.

    You need to improve education, health care and infrastructure. Until you improve those things the country will never reach its true potential.

    That’s exactly what I said, and you replied with “Easier said than done”. :)

  14. Cover Drive — on 31st July, 2008 at 7:50 pm  

    Not sure what you mean by “kind of authority”, but it surely has the power to make these kind of changes, which are essential for India if it wants to continue with economic growth.

    China is a one party system. So the government doesn’t face any opposition in whatever action it takes. Being autocratic it isn’t particularly concerned about public opinion very much.

    In India you have states governed by their own state government. I think what happens in a state is largely decided by the state government and not by the central government. This is where the quality of the state politicians plays a big role.

  15. sonia — on 31st July, 2008 at 8:47 pm  

    it would be interesting if you expanded more on your economic ‘beliefs’ sunny. what people mean when they say ‘free markets’ is often radically different, as i’m sure you are fully aware.

    question: what’s your personal opinion of the Chicago school and the impact it has had ?
    and have you been following the recent discussion of Obama’s link to the Chicago boys?

  16. douglas clark — on 31st July, 2008 at 9:02 pm  

    In case anyone is reading this who hasn’t read the previous thread, I’d like to refer them back to Desi Italiana’s post on the previous thread here:

    Sorry to bring in a South Asian angle…

    I haven’t looked into the pros and cons of hydro-electricity, but if I’m correct, if Nepal’s hydroelectric potential (one of the largest in the world) were properly harnessed and run in Nepal,there would be enough power for all of South Asia (Nepal currently taps around 0.3% of its potential). The problem is funds, infrastructure and sources to build hydroelectric plants.

    Here are two links on energy in South Asia:

    http://www.eia.doe.gov/emeu/cabs/nepal.html

    http://www.ris.org.in/pbno8.pdf

    Regional cooperation to meet needs of South Asia by focusing on hydro-power:

    http://www.kuenselonline.com/modules.php?name=News&file=article&sid=2079

    This is a resource that is currently being wasted which I would have thought should get equal consideration to nuclear. I’d have thought it had the potential to be as important to the sub-continent as oil is to Arabia, with the added benefit that it won’t ever run out. Subject, of course, to stopping climate change.

    A pick and mix energy policy from clean power sources ought to make sense. These are capital intensive at the construction stage but have, as I understand it, very low maintenance costs. In Scotland we’ve had hydro electricity generation for yonks and our mountains are like plooks compared to the Himalayas.

    I wonder if schemes like these could attract investment capital, or seed capital from the World Bank?

  17. douglas clark — on 31st July, 2008 at 9:32 pm  

    Sonia,

    Would you agree with me that the Chicago School is merely a way of entrenching wealth for the few and hang the poor? They seem to have had enormous influence on both the IMF and the World Bank and their prescription of Republican, right wing, US capitalism as the only solution, it seems to me, has caused nothing but grief. The trickle down approach to economics – not my specialist subject, I know – seems to me to be a busted flush. But, then again, I don’t actually have a specialist subject.

    Oh, Naomi Klein seems to think that way too, and I haven’t even read ‘The Shock Doctrine’.

    If there is evidence that Obama is buying into this doctrine, I’d be very worried. Is there?

  18. sonia — on 31st July, 2008 at 9:34 pm  

    Dear douglas, very good points, and Scotland seems eminently sensible…

    I fear your World Bank suggestion is a tad idealistic and somewhat naive though. (sorry) The World Bank isn’t really out to invest in these things…and if it did invest, it would be through some private investor who wouldnt be thinking about the public good.

  19. sonia — on 31st July, 2008 at 9:35 pm  

    Somewhow India rising is always going to be an illusion until we:

    a) stop being such traditionalists
    b) stop being so racist and divisive
    c) therefore can stop being so anti-the concept of an equality of man

  20. Cover Drive — on 31st July, 2008 at 10:02 pm  

    So the white European settlers of North America weren’t racist? They annihilated virtually the entire native population but today America is the largest economy in the world.

    India and China were pretty much on par with the rest of the world a few hundred years ago. There’s no reason why they can’t do it again. It’s just that they have been too closed for the last few hundred years.

    The civil servants of China (‘mandarins’) wanted to preserve tradition and ritual. The result was a massive stagnation in Chinese economic activity. Both India and China are now more open to the rest of the world and the markets. It is inevitable they will both rise but the degree and speed remains to be seen.

  21. Laban — on 31st July, 2008 at 10:19 pm  

    Utterly off topic … but I thought some Pickler might know …

    two of the most common Lancastrian surnames, Gill and Butt, are also common among those of Pakistani descent. Gets very confusing when they then move to Lancashire.

    Anyone know why these names ? There aren’t loads of Pakistani Postlethwaites or Sutcliffes. Why Gill ? Why Butt ? What do they mean in Punjabi/Baluchi/Urdu/whateveri ?

  22. douglas clark — on 31st July, 2008 at 11:08 pm  

    Sonia @ 19,

    I accept that my idea was naive.

    It was supposed to be.

    The point with being satirical is that it is supposed to be about taking the piss. When folk think you are being serious, you have failed, big time.

    I am such a failure. @18, obviously, elsewhere, well you decide. Naomi Klein is much better at it than me.

  23. shariq — on 1st August, 2008 at 10:54 am  

    Laban, I don’t have a precise answer but I’ll give it a stab in the next open thread.

  24. ashik — on 1st August, 2008 at 11:02 am  

    In the subcontinent govt led investment as opposed to private enterprise can lead to uneven regional development. This often exacerbates existing divisions and injustices.

    For example, my Indian Bengali and Sylheti acquaintances complain that the Indian govt favours North India (Indo-Aryan racial stock) and Maharashtra/Mumbai more than South India (Indo-Dravidian racial stock) eg. Bangalore and the Eastern Seven sisters states. Hence internal migration to these economic hubs which leads to tension with locals eg. the anti-Bihari and Anti Bengali Assamese riots/bombings.

    In Pakistan there are similar Balochi and Kashmiri complaints against the ruling Punjabis. In Bangladesh many Sylheti Bengalis are alienated from the state because of the lack of state support for the region.

  25. persephone — on 1st August, 2008 at 11:08 am  

    @ 22 answering off topic (apologies!) as to Gills etymology:

    Alot of Sikh Gills settled in India (many in Malwa, Punjab region where there are 40 Gill villages) but there are also Muslim Gills who may have come via Afghanistan/iran to india. The Gills geneology is linked to the Assyrian/Greeks via those of Alexander the Great’s entourage who settled in India (some in what is now Pakistan)

    As to meaning of Gill there is a commonality in that:

    Northern English, Middle English Gil and Old Norse Gil mean ‘ravine’ or ‘stream’ (The Old Norse personal name Gilli may lie behind the name in northern England). In modern English it means a fish gill

    Similarly with a watery reference is Asian Gill(a) which means wet (or prosperity). There is a story that a rajput maharani’s child was left by a river bank and the child was refered to as Gilla/Gill thereafter.

  26. Dalbir — on 2nd August, 2008 at 8:00 am  


    two of the most common Lancastrian surnames, Gill and Butt, are also common among those of Pakistani descent. Gets very confusing when they then move to Lancashire.

    Anyone know why these names ? There aren’t loads of Pakistani Postlethwaites or Sutcliffes. Why Gill ? Why Butt ? What do they mean in Punjabi/Baluchi/Urdu/whateveri ?

    Is Butt an English surname? There was a Pakistani boy with the surname Bhatti, when I was at secondary school. Back in those days all students were called by their surnames. Every time his name was called out in assembly, 300 odd boys would burst out in laughter (cruel bastards they were).

    Later in life I was to meet lots of Sikhs with this same surname.

    In answer to your question:

    Gill and Butt are common surnames of Panjabi peasant (Jat) clans. These cross over the regions religious divides as historically some members of these clans converted to Islam and some to Sikhism whilst many remained Hindu.

  27. cam balkon — on 12th August, 2008 at 11:41 am  

    thank you for sharing

  28. Usman Butt — on 20th August, 2008 at 1:34 pm  

    Well being a pakistani from Gujranwala I want to clear the misconception of Dalbir about Butt. Gill is surely a jatt surname and found only in punjab region of pakistan and india, it is more prevalent in india than in pakistan. Bhatti is a rajput surname again found both in indian and pakistani punjab, but it is more prevalent in Pakistan than it is in india.

    Now come surname Butt, well this is common in Pakistani punjab only, virtually absent from indian punjab. Most of the people who use surname Butt in Pakistan especially from central punjab region of pakistan are kashmiri immigrants in the region of pakistani punjab whose ancestors moved to cities like Rawalapindi, Jehlum, Gujrat, Gujranwala, Sialkot and Lahore about 200 hundred years ago because of famine in kashmir at that time.

    As for as the meaning of Butt is considered, well Butt is derived from Sanskrit word “Bhat” which means religious Scholar of vedas. kashmiris pronounce it as Butt because in kashmiri language “Bh” changes to simple “B”. Moreover in Pakistani punjab kashmiri immigrants of diverse origins all use most of the time Butt as their common surname as an indicator of their kashmiri ancestory. I hope this help.

  29. Dalbir — on 20th August, 2008 at 3:40 pm  

    Usman. Thanks for the info.

    The story on the other side of the border seems more complex than that. I’m pretty sure I have come across Sikhs with the Bhatt variation of the Pakistani Butt. In fact Hindus also have it. Remember the famous actress Poooja Bhatt. But you are right in that it is infinitely more common amongst Pakistanis than Sikhs.

    What is interesting is that surnames(gots) which are considered Rajput by Pakistanis and very often considered Jat on the Indian side. Bhatti is an example of this as is Rathor. I’ve heard a few theories on why this is, but personally I believe that many Rajput converts to Sikhism adopted a Jat identity after conversion because it had higher status within that community whilst the converse was true in Muslim communities.

    Regarding the origins. A bhatt was also the name of a traditional family record keeper or genealogist.

    ——-
    According to Nesfield as quoted in W. Crooke, The Tribes and Castes of the North Western India, 1896, Bhatts are an “offshoot from those secularised Brahmans who frequented the courts of princes and the camps of warriors, recited their praises in public, and kept records of their genealogies.” These bards constantly attended upon or visited their patron families reciting panegyrics to them and receiving customary rewards. They also collected information about births, deaths and marriages in the families and recorded it in their scrolls. These scrolls containing information going back to several past centuries formed the valued part of the bards’ hereditary possessions.
    ———

    Are these the ancestors of the Muslim Butts?

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