Tuesday, September 09, 2008

A Rising Post-American India

Note: I wrote this essay for the Breakthrough Institute Blog. This first appeared here. The Breakthrough Institute, founded by Michael Shellenberger and Ted Nordhaus, is a progressive think tank focusing on environmental issues.

Fareed Zakaria's new book, "The Post American World" is thoroughly engaging and insightful. It is, he says, "not about the decline of America but rather about the rise of everyone else." About half the book is devoted to describing how China and India had lost their creativity and their dynamism over the last few centuries, and how today the spread of modernity is bringing a new vitality to these societies. Zakaria is a perceptive observer and provides an engrossing account of how these two societies are negotiating modernity and globalization in their own different ways. It is all very compelling and thought provoking. Being an Indian, I read these sections on India with particular interest.

Zakaria is all praise for modernity and economic growth. He discusses India's post-1991 economic reforms. "The new economic vigor is stirring things up everywhere," he says, and "you can feel it even the slums." The central point that Zakaria makes in his book is that new-found economic vitality in countries like China and India is fundamentally changing our world, resulting in the "rise of the rest."

But how does this new transformation play out in the "post-American" countries? Who welcomes it? Who opposes it? What can be done to improve it? Here, I explore some of these issues with respect to India.

Mixed Views on Economic Reforms

Zakaria provides a fascinating description of the exuberance generated by India's growth story at the World Economic Forum in Davos, Switzerland in 2006. Paradoxically, nothing resembling that has ever been on display in the Indian heartland. Most ordinary Indians appear to be merrily unaware of the fact their country is now being viewed differently by the world -- as rising new "post-American" power.

Zakaria touches upon this Indian ambiguity, at one point calling the recent economic reforms "stealth reforms," hinting at the necessity felt by the reformers to fly below the public radar. He attributes this to the normal chaotic workings of Indian democracy. While that is partly true, I do think that there is more to it than just that.

Widespread Indifference

The vast majority of Indians are either indifferent to the economic reforms, or only mildly supportive. The reason for this is simply that most Indians lie outside the scope of the new economic miracle. I believe that the biggest failure of India's economic reforms has been its narrow scope. While these reforms have energized the corporate sector, they have never been extended to the "informal sector" that employs 90% of India's workforce. True, there are trickle-down benefits for everybody. But the direct and most substantial benefits accrue to only a tiny percentage of the Indian population.

There is great potential for broadening the scope of economic reforms in India. But for now, the Soviet-inspired "License Raj" still rules over the informal sector. Consider, for example, the cycle-rickshaw (pedicab) business in Delhi. Most rickshaw-pullers in Delhi are newly arrived migrants from villages, with neither the money, nor the desire to buy a rickshaw outright. They rent rickshaws from rickshaw-fleet owners, most of whom are themselves enterprising rickshaw-pullers who started small but after years of hard work have come to own fleets of rickshaws. Without paying any heed to this reality, Delhi's rickshaw regulations stipulate that one can ply a rickshaw only if he is the owner of the vehicle. In addition, the officially sanctioned quota of 99,000 rickshaw licenses in Delhi is ridiculously out of proportion with the actual demand, with cycle-rickshaws on Delhi's streets currently numbering around 600,000. Because of stifling restrictions and quotas, almost all of Delhi's rickshaw pullers are forced into a web of illegality where they have to pay frequent and arbitrary bribes just in order to carry on with their livelihoods.

If only the dysfunctional and restrictive "License Raj" in India's informal sector could be reformed to make way for more economic freedom and initiative, it would enable many millions to overcome poverty through their own enterprise and hard work. Unfortunately, the architects of India's economic reforms seem totally disinterested in broadening the scope of the reforms beyond the corporate sector.

Vocal Opposition from Eco-Romantics

In India there exists a small but vocal school of thought that takes a very negative view of modernity, development, economic growth, etc. They view modern India as a society in rapid decline -- quite the opposite of Zakaria's exuberant view of India rising. Their ideal is some vaguely defined pre-modern pre-Enlightenment Golden Age, where society lived in "harmony" with itself and with nature. In this view, India should give up its vain attempts to achieve progress and growth, and instead revert to a society where people are engaged in traditional occupations, where needs are limited, ambition is absent, and subsistence production is sufficient to keep everybody happy.

Typical of this world-view is this statement from Vandana Shiva, a prominent eco-romantic,

Modern concepts of economic development, which [economist Jeffrey] Sachs sees as the "cure" for poverty, have been in place for only a tiny portion of human history. For centuries, the principles of sustenance allowed societies all over the planet to survive and even thrive.

While these eco-romantics are very vocal, they enjoy only very limited support within India. In fact, the eco-romantic world-view is grounded in the West, and seems to be more celebrated in the West, especially among environmental and anti-globalization circles, than in India.

Dalit Support for Rapid Economic Growth

In India's traditional hierarchical caste system, untouchables, who now call themselves Dalits (meaning "oppressed"), lie at the bottom of the pyramid. Dalits are still the most disadvantaged section of Indian society. How they view modernity and development is especially relevant since eco-romantics like Vandana Shiva claim to be upholding the interests of India's poor and the downtrodden in opposing modernity and development.

Typical of the Dalit outlook is the view expressed by Chandra Bhan Prasad, a Dalit columnist. While conceding that there is still a long way to go, he insists that Dalits are indeed benefiting from economic growth. He says that Dalits are now able to afford some consumer goods, like cell phones, shampoos, and occasionally, even cars. He notes with satisfaction that while less than 0.85 percent of Dalit families used shampoo in 1990, 81 percent use it regularly in 2007. According to Prasad,

The untouchable has been touched by India's growth. Dalits are coming out from hunger and humiliation ... Capitalism is beginning to break the caste system.

One of the main reasons that eco-romantics oppose modernity and development is that it threatens traditional lifestyles and livelihoods. Dalits, on the other hand, welcome modernity and development precisely because it threatens traditional lifestyles and heredity-based livelihoods, which they consider to restrictive, bigoted, and exploitative.

Future Direction of India's Economic Growth

India's growth story is just beginning. The future holds immense promise. Zakaria puts it very aptly when he says, "it is as if hundreds of millions of people had suddenly discovered the keys to unlock their potential." He proclaims that it is nothing less than "the birth of India as an independent society -- boisterous, colorful, vibrant, and, above all, ready for change."

Along with immense promise, the future also holds immense challenges. How to broaden India's economic growth and make it more inclusive remains the greatest of all challenges.