Published June 18-21, 2020
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China killed 20 Indian soldiers. India also probably killed some Chinese soldiers, but we will probably never know that. Even as anger rises in India, there is also the realisation that in a straight contest between the two, China’s military superiority will overwhelm India. China is more powerful than India. Hence, China can bully India and get away with it. It is not a good outcome. It should make us rightfully angry. The question is: who should we be angry against? The Chinese leaders who made China powerful or the Indian leaders who kept India weak?
Until the late 1970s, India and China had very similar per capita income and problems. Both had large populations and both had been impoverished by singularly bad leadership over the previous 30 years. And then, as we know, something extraordinary happened. China transformed itself; India did not. Today, the average Chinese has a per capita income that is five times that of the average Indian. This chart below from Hindustan Times (Jan 18, 2020) shows the diverging fortunes of the two nations over the past 40 years.
Since India and China are comparable in population, the per capita GDP difference is also the difference in total GDP: China’s income is five times India’s GDP. China’s consistent higher income over the past four decades also means that China is certainly over 10 times wealthier than India.
Therefore over the decades, the might of the Chinese economy has enabled it to invest in a very powerful military. India’s defence investments have languished on the back of a weaker economy. And with power has come China’s aggression – knowing full well that none of its neighbours can fight back. That is why China can bully and kill, and all India can do is to meekly watch. We can fret and fume, but we know we cannot hit back. China is simply too strong for India.
How did it happen? How did China become so dominant? Why did India not do? What did China do right, and what did India do wrong? This is the introspection we need to be doing. We lost our past and fumbled our present. What will it take for India to win in the future?
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There are many explanations about how China became rich and powerful. One of the best books on China’s transformation is “How China Became Capitalist” by Ronald Coase, winner of the Nobel Memorial Prize in Economic Sciences in 1991, and Ning Wang (published in 2012). From its introduction:
How China Became Capitalist details the extraordinary, and often unanticipated, journey that China has taken over the past thirty five years in transforming itself from a closed agrarian socialist economy to an indomitable economic force in the international arena. The authors revitalise the debate around the rise of the Chinese economy through the use of primary sources, persuasively arguing that the reforms implemented by the Chinese leaders did not represent a concerted attempt to create a capitalist economy, and that it was ‘marginal revolutions’ that introduced the market and entrepreneurship back to China. Lessons from the West were guided by the traditional Chinese principle of ‘seeking truth from facts’. By turning to capitalism, China re-embraced her own cultural roots.
I want to focus on what I think is the single biggest determinant of why countries prosper or flounder: political leadership.
Consider China in the late 1970s. Battered by Mao’s Great Leap Forward and the Cultural Revolution. Communism, famines and government action has killed tens of millions. And then Mao dies. A new leader emerges. Deng Xiaoping. He begins the process of transforming China. Step by step. He sees a future very different from China’s past. He lays the foundation for a rich China. Which in turn creates a powerful China.
What does Deng Xiaoping do? Many things. Deng junks the old policies that kept the Chinese poor. He opens up the Chinese economy to foreign investment in manufacturing. The Chinese people respond. And so does the world. Manufacturing shifts to China. That creates jobs and lifts hundreds of millions out of poverty. It lays the foundation for China’s military prowess as China becomes prosperous.
Rarely is economic change bottom-up. People can overthrow governments but cannot create prosperity. For that, there needs to be a leader who overturns policies that had kept people poor. (In the case of the US, leaders like James Madison, Alexander Hamilton along with others crafted the rules via the American Constitution in 1789 that created the conditions for growth and prosperity.) Deng was that leader for China.
And what were India’s leaders doing while China was booming? They were keeping Indians poor.
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Picture India in 1950. The British have exited, and Jawaharlal Nehru and his team have taken over the management of an India ravaged by nearly 200 years of colonial rule. Nehru stands tall with no equals after the deaths of Mahatma Gandhi and then Vallabhbhai Patel. He can do anything he wants. What does he do? Socialism. His daughter Indira Gandhi takes over in the late 1960s. What does she do? More Socialism. More economic controls. And precisely as could have been predicated, the socialist control of the Indian economy leads to more poverty. And so it goes on through the 1970s and 1980s. Even after seeing what China is doing, India’s leaders do not open up the Indian economy. Half-hearted attempts are made by Narasimha Rao in 1991 followed by Atal Behari Vajpayee a decade later. Both miss the Deng-like transformation opportunity.
It doesn’t end there. The policies that have created perpetually planned poverty are now seeped deep into the psyche of the political leaders because in their minds that’s what helps them win elections. Manmohan Singh has 10 years in power, and Narendra Modi has had 6. Have they changed anything? Nothing substantial. It is the same old socialist stifling of the economy. Every Tokenism here and there goes by the name of second-generation reforms.
By and large, Indians stay poor. The gap between China and India keeps widening. India’s leaders still don’t see the writing on the wall. China’s power keeps growing and India does demonetisation. As if the economy wasn’t damaged enough already.
Every Indian leader has failed the people. And almost everyone has won re-election, validating every bad policy. So, why should the leaders wish to change the failed socialist policies?
And then one day, 20 Indians are killed and there is outrage. We realise that we cannot really fight back. All we can do is to mourn our dead soldiers, make a few grandiose statements, threaten to uninstall Chinese apps from our phones and put some trade restrictions on China (which will impose costs on Indian consumers by increasing prices of locally made goods). We are angry. But at whom? China is doing what the bully does – hit the weak. The question to ask is – why are we weak? Who made us weak? Did the Chinese make our policies? Did the Chinese elect our leaders? Did the Chinese re-elect our leaders? All we need to do is to look into the mirror for the answer.
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India cannot take on China – not until its economic might – and therefore military strength – increases. It will take a generation or more of rapid and sustained economic growth. Till then, just as we are now learning to live with the virus, we will need to live with the bully. No one in the world is going to come to help us. The US can yell and scream at China for the virus but look at its actions. See this headline from a few days ago in the Wall Street Journal:
The June 14 story goes on: “China has retaken its mantle as America’s largest trading partner, emerging as a rare bright spot for U.S. farmers and other exporters as the coronavirus pandemic constrains global commerce. Trade between the two nations rose to $39.7 billion in April, up nearly 43% from the month before, and enough to once again surpass Mexico and Canada. The jump followed the signing of a trade pact in January in which China agreed to sharply step up purchases of U.S. farm products and other goods.”
This US will come to help us? The joke’s on us.
What India needs to do is to start fighting back with a different playbook. We need to start strengthening our economy with bold measures – actions no Indian political leader has ever taken even though everyone of them had the same authoritarian streak that China’s leaders have had.
- Create War Cabinets because the neta-babu jugalbandi cannot see us through the triple guns, germs and steel crises that we face – borders hurt by China, bodies hurt by Covid, and bank balances hurt by Cashlessness.
- Launch Mission 10-20-30 to replace 10 crore Chinese workers with 10 crore Indian workers in 20 months with each job having a monthly minimum income of Rs 30,000 or more, Let’s hit them where it really hurts.
- Show immediate intent of seriousness to transform by liquidating Lutyens Delhi
Every Indian political leader has failed the people of India. While we see what China is doing to our soldiers, we don’t see what the damage that the domestic policies of our own leaders are doing to us. Let’s open our eyes and demand the change. We have had enough of the failed policies of the past. What India needs is a disruptive political entrepreneur who can transform India. (Narendra Modi promised that during the 2013-14 election campaign. That’s what got him the support from many of us – me included.)
China is the villain outside our borders. What about the real villains within our borders? Will we demand the real political and economic changes that India needs to truly take on China? Because our children will one day ask us, “Mummy, Papa, you saw all that was happening. Why didn’t you do something about it?” What will we answer them?