Democracies are peaceful, representative – and terrible at boosting an economy. Or at least that’s the conventional wisdom in Asia, where for years growth in India’s sprawling democracy has been humbled by China’s efficient, state-led boom.
The idea that there is a trade-off between economics & politics is ingrained in the minds of many policy-makers and business executives in Asia, as well as the West. But that idea has never been systematically proven. If India, with its noisy, chaotic, and lumbering political arrangements, can grow, then no other poor country must face a Faustian choice between growth & democracy. A deeper look at the two countries shows that they have succeeded and failed at different times for remarkably similar reasons. Their economies performed when their politics turned liberal; their performances faltered when their politics slid backward. Now, as many poor countries grapple with similar political & economic choices, we must understand this dynamic. It is high time to get the China-India story right.
India’s untold history
That story doesn’t begin in 2008. It’s a horse race that goes back decades, and one that tells us much about the relationship between democracy & growth, governance & prosperity. From an economic perspective, it is not the static state of a political system that matters, but how it has evolved. The growth India enjoys today sped up in the 1990s as the country privatised TV stations, introduced political decentralisation, and improved governance. Contrary to conventional wisdom, India stagnated historically not because it was a democracy, but because, in the 1970s & 1980s, it was less democratic than it appeared.
Many scholars blame India’s first PM, Jawaharlal Nehru, for adopting a development strategy that caused India to stagnate from 1950 to 1990. But this view is unfair to Nehru, and it shifts the blame from the real culprit – Indira Gandhi, PM during much of the period from 1966 to 1984. Nehru’s commanding-heights approach was the reigning ideology in many developing countries, some of which, like South Korea, were quite successful. The issue is not how harmful Nehru’s economic policies were, but why India intensified and persisted in this model when it was clearly not working. To answer this question we have to understand the lasting damage that Indira Gandhi inflicted on Indian democracy.
The idea that there is a trade-off between economics & politics is ingrained in the minds of many policy-makers and business executives in Asia, as well as the West. But that idea has never been systematically proven. If India, with its noisy, chaotic, and lumbering political arrangements, can grow, then no other poor country must face a Faustian choice between growth & democracy. A deeper look at the two countries shows that they have succeeded and failed at different times for remarkably similar reasons. Their economies performed when their politics turned liberal; their performances faltered when their politics slid backward. Now, as many poor countries grapple with similar political & economic choices, we must understand this dynamic. It is high time to get the China-India story right.
India’s untold history
That story doesn’t begin in 2008. It’s a horse race that goes back decades, and one that tells us much about the relationship between democracy & growth, governance & prosperity. From an economic perspective, it is not the static state of a political system that matters, but how it has evolved. The growth India enjoys today sped up in the 1990s as the country privatised TV stations, introduced political decentralisation, and improved governance. Contrary to conventional wisdom, India stagnated historically not because it was a democracy, but because, in the 1970s & 1980s, it was less democratic than it appeared.
Many scholars blame India’s first PM, Jawaharlal Nehru, for adopting a development strategy that caused India to stagnate from 1950 to 1990. But this view is unfair to Nehru, and it shifts the blame from the real culprit – Indira Gandhi, PM during much of the period from 1966 to 1984. Nehru’s commanding-heights approach was the reigning ideology in many developing countries, some of which, like South Korea, were quite successful. The issue is not how harmful Nehru’s economic policies were, but why India intensified and persisted in this model when it was clearly not working. To answer this question we have to understand the lasting damage that Indira Gandhi inflicted on Indian democracy.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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