Comparing India and China’s Potential for Economic Growth

December 30, 2011

The cover for The Economist of October 2 – 8, 2010, placed a bet on India in an economic race with China.

The Economist wants India to win this race, because India is a democracy as is the U.S., but what isn’t mentioned is that China is evolving into a republic closer to the original republic that the United States was in 1776 with a Chinese twist, which is what Dr. Sun Yat-sen wanted.

Some claim China is ruled be a dictator today but that is not true. China is a republic that is guided by the word of law, which is the essence of a Republic.  In 1982, China wrote a new Constitution that spelled out the law and China’s schoolchildren are taught what these laws mean and how to live with them. However, the Chinese Constitution is not the same as the one in the US, so the laws are different.

I opened The Economist magazine and read the two pieces the cover was about. One was India’s surprising economic miracle and the second piece was A bumpier but freer road.

On page 11, I read, “many observers think China has done a better job than India of curbing corruption…”

On page 77, a Western banker was quoted saying, “It’s much easier to deal with the well-understood ‘organization chart’ of China Inc than the freewheeling chaos of India.”

Corruption exists in every country and Transparency International attempts to define and identify what global corruption looks like. Comparing China and India, we discover that while India’s corruption appears to be getting worse, corruption in China is improving due to the evolution of its new legal system.

In fact, in the past 3 years, the perception of corruption in India was 74%, [in the United States that perception was 72%], while in China it was only 46%.

In addition, the BBC reported recently, “Widespread corruption in India costs billions of dollars and threatens to derail the country’s growth…”

After I read both pieces in The Economist comparing China with India, it was obvious that India would never beat China economically without controlling its corruption, shrinking severe poverty and increasing literacy. Overall, the latest World Bank data shows that India’s poverty rate is 27.5% [330 million people], based on India’s current poverty line of $1.03 per person per day and an illiteracy rate of almost 26% [312 million people].

In comparison, literacy in China is more than 94% and the World Bank says in 2004, people in China living in poverty represented 2.8% of the population.

There are more reasons The Economist is wrong about India winning this economic race just because it is a democracy. One reason is that America’s Founding Fathers hated democracy and had a good reason.

Live Journal goes into detail on this topic. Live Journal says, “It would be an understatement to say that the (U.S.) Founding Fathers hated democracy. They warned against it vehemently and relentlessly. They equated it–properly–with mob rule.”

 

The Founders of the US, who hated democracy, built a free country [a republic]. Our [meaning many Americans] ignorance of history, which has led to a love of democracy, is causing the US to surrender its freedoms at an alarming rate.

Dr. Sun Yat-sen (1866 – 1925), known as the father of modern China [by both China and Taiwan], said he wanted to model China’s government after America but by combining Western thought with Chinese tradition.

When he said this, it was 1910, and America, by definition, was still a republic. Once you read the two pieces in The Economist, you may understand why India’s democracy cannot beat China’s growing republic.

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Lloyd Lofthouse is the award-winning author of The Concubine Saga. When you love a Chinese woman, you marry her family and culture too. This is the love story Sir Robert Hart did not want the world to discover.

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 This revised and edited post first appeared October 13, 2010.

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A Snapshot of Democracy in Asia – Part 5/6

October 1, 2011

Among the so-called Asian democracies, India is next.  The Guardian says of corruption in India “All your life you pay for things that should be free.”

The Guardian reported that “one ordinary man” had to pay at least a third of his income to survive. “Of the 40,000 rupees (£520) I earn a month from my restaurant, I pay at least a third in bribes,” Vishal, 26, said. But bribery also extends into his personal life. Vishal has two young children and to get the eldest into the best local school he paid a “donation” of 25,000 rupees (£340) in cash to the headmaster.”

Economy Watch.com said, “India’s underground economy is believed to be 50 percent of the country’s GDP – US$640 billion at the end of 2008,” and Janamejayan’s Weblog goes into detail of one scam that cost $40 billion, which is 3% of India’s GDP.


Poverty in India, 2011

In addition, there is confusion over how many live in poverty in India.

In 2009, the United Nations Development Programme reported that literacy in India was about 74 percent, while the CIA Factbook set the literacy rate at 61 percent (literacy and poverty are linked), which explains The World Bank’s estimates of poverty in India at 41.6 percent.

However, the Hindustan Times says for 2011 that there are 406 million poor in India, which is a third of the population—an increase of 8% since 2009.

In addition, a study by the Oxford Poverty and Human Development Initiative using a Multi-dimensional Poverty Index (MPI) found that there were 645 million poor living under the MPI in India

In 2009, India’s population was about 1.2 billion and the country had 6 nationally recognized political parties and about 46 recognized state/provincial parties. Source: List of Recognized Political Parties in India (Wiki)

India has been the world’s largest democracy since 1947, and although India claims to have reduced poverty from about 53% in 1973-74 to  25.6% in 1999-2000, the definition and difficulty in reporting the exact numbers casts doubt on this claim.


Poverty in Calcutta

However,  in the same time span, China reduced poverty from 64% to less than 3%, and China is not a multi-party democracy.

In addition, according to Time’s Global Spin, a blog about the world, its people and its politics, “The size of India’s middle class was 50 million in 2005, according to this report by McKinsey,” and McKinsey may be wrong and the number may be lower.

In contrast, Martin Trieu, President of Tourmaline Capital, estimates “there are at least 250-300 million people (in China) who now fall into this (middle class) category.”

Helen H. Wang of Forbes Magazine’s China Tracker agrees with Trieu, and says, “Today, China’s middle class is already larger than the entire population of the United States and is expected to reach 800 million in fifteen years.”

Continued on October 2, 2011 in A Snapshot of Democracy in Asia – Part 6 or return to Part 4

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Lloyd Lofthouse is the award-winning author of The Concubine Saga. When you love a Chinese woman, you marry her family and culture too. This is the love story Sir Robert Hart did not want the world to discover.

To subscribe to “iLook China”, look for the “Subscribe” button at the top of the screen in the menu bar, click on it then follow directions.


India Falling Short

October 22, 2010

On October 13, I posted Comparing India and China’s Economic Engines, which referred to a flawed opinion piece in The Economist predicting that the future economic growth of India would eventually surpass China.

I felt that The Economist’s opinion was flawed because it was based primarily on a multi-party democracy being superior to the one-party republic in China.

However, reading that issue of The Economist painted a grim picture for India. It is as if The Economist were promising that India was going to sprout wings and fly – then the piece goes into a long list of facts that prove it cannot happen anytime soon.

The China Law Blog chastised me for being unfair to India. The Blog said, “that he wanted me to provide a super-quick summary of The Economist cover story comparing India with China, but it (I) did not,” which was correct.

In fact, I don’t see how I could have quickly summarized the complexity of India’s economy.

To create an in-depth profile of China, I’ve written hundreds of posts.  To talk about the reason India’s economy will not surpass China for a long time led to this post, which may be the longest single post I’ve written.

Sorry, it isn’t a super-quick summary. At thirteen hundred words, it’s just quick.

Next, Manjeet Pavarti challenged my opinion in a comment to the post.

It is obvious that Pavarti must be a nationalist who loves his country—an admirable trait except when a patriot is misguided and possibly misinformed.

In Pavarti’s last comment of October 16 at 01:33, he challenged my sources—a photojournalist (Tom Carter) with extensive experience traveling in China and India, and my use of evidence from The Economist.

To correct the shortcomings of the first post on this topic, I talked to Gurnam S. Brard, the author of East of Indus, My Memoires of Old Punjab. He agreed with my opinion and said there are many in India like Pavarti that refuse to see the problems that hold India back from achieving its potential.

I also talked to Alon Shalev, author of The Accidental Activist. Shalev told me of his extensive trip through India with his wife and his impressions were the same as Tom Carter and Gurnam Brard.

Next, is Foreign Policy magazine’s Prime Numbers, Mega Cities, where there are no opinions—just facts. I’m going to list “three” that are roadblocks to India future economic growth.

WATER — From National Geographic we have Mumbai’s Shadow City by Mark Jacobson—a slum holding 12 million people, who live in the middle of India’s financial capital.

Then there is Delhi with 17.3 million residents. One third of the city’s residents have little access to clean water. See Life in the Slums of Delhi, India

Foreign Policy magazine says, “In India, service delivery (of fresh water) will fall woefully short of demand in coming years across most urban infrastructure sectors.”

China, on the other hand, has long-term infrastructure projects and is drilling the world’s longest tunnel to carry water under hundreds of miles of mountains to reach Manchuria in the northeast from the Yangtze River.

Then in Tibet, China is building reservoirs to catch water from glaciers that are melting due to global warming while building villages to relocate Tibetan nomads who discover that the high altitude grasslands they once depended on to feed their herds has dried up and turned to desert due to lack of rainfall.

LITERACY — For a republic or democracy to thrive and survive the population must be literate to understand the issues and support a complex modern society.

However, only 66% of India’s 1.2 billion people are considered literate—that’s more than four hundred million people who cannot read.

In China, literacy is 93.3% up from 20% in 1978.

“Prior to 1978 … Adult literacy was given first priority in literacy campaigns designed to ‘sweep away illiteracy’ (saochu wenmang). Because 80% of adults were illiterate, they were targeted as crucial for securing new China’s economic security.”

It may sound cliché, but reading was (and continues to be) power, and leaders knew that the literate could have considerable influence.” Source: China Philanthropy

The World Illiteracy Map says, “Illiteracy is one of the major hindrances that come in the way of economic growth. Literate manpower helps a country in developing.”

POVERTY & THE MAOIST REVOLTForeign Policy magazine reports that rural poverty in India is turning a Communist Revolt in to a raging resource war. “For India this is no longer rural unrest, but a full-fledged guerrilla war.”

“Economic liberalization has not even nudged the lives of the country’s bottom 200 million people. India is now one of the most economically stratified societies on the planet… The number of people going hungry in India hasn’t budged in 20 years.…

“New Delhi, Mumbai, and Bangalore now boast gleaming glass-and steel IT centers and huge engineering projects. But India’s vaster hinterland remains dirt poor—”

China, on the other hand, has managed to contain the Falun Gong problem and the Tibetan and Islamic separatists over the objections of Western human rights activists that cannot stand how China manages unrest.

Due to what many in the West would call brutal measures, harmony and economic progress continue as planned for the vast majority of Chinese.

In addition, in rural China, “Living standards soared in the early 1980s—average incomes doubled in both the cities and the countryside, while there was a boom in both food consumption and the availability of consumer goods.” Source: Socialist Review Index.org.uk

“Growth in (China’s) peasant income, which had reached a rate of 15.2% a year from 1978 to 1984, dropped to 2.8% a year from 1986 to 1991. Some recovery occurred in the early 1990s, but stagnation of rural incomes marked the latter part of the decade.” Source: Asia Times

In fact, the last five-year plan extends electricity to rural China and subsidizes the cost of appliances for rural villages once the electricity is turned on

Tom Carter, one of my sources for this post, is currently living in a small rural village in the tea-producing region of China near Hangzhou and has internet access from a village of twenty people.

I agree that India has the potential to surpass China, but I doubt that will happen in the next few decades due to the economic long-term problems that have to be overcome.

I don’t know where Manjeet Pavarti lives, but I suspect it isn’t outside of the gleaming glass and steel cites like New Delhi, Mumbai or Bangalore.

People living inside these economic growth bubbles may have no idea how serious it is outside and probably don’t care or India would be dealing with these challenges as China has been doing since Mao died in 1976 when Deng Xiaoping and his supporters ended the Cultural Revolution and rejected Maoism.

India became a democracy in 1947, which means it has had more than sixty years to solve these problems, while China has had less than thirty since 1982 when the Republic got its new constitution.

Isn’t it ironic how the West seldom hears about India’s problems but always hears about every bit of negative news that happens in China.

See Democracy, Deceit and Mob Rule and Two Republics

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Lloyd Lofthouse is the award-winning author of the concubine saga, My Splendid Concubine & Our Hart. When you love a Chinese woman, you marry her family and culture too. 

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