Lee Kuan Yew on India

Atanu Dey of India Economy blog has a very insightful series on Lee Kuan Yew's recent lecture, Nehruism and India's economic development (part 1 and part 2 of Part 3, the lecture).

Plenty of comparison between China and India, and also about the various explanation for the difference in performance, e.g., the myth of blaming democracy. Well, when there are problems in China, we see similar scapegoating as well. I wish there are more people like Atanu Dey in the sino-blogosphere. Criticism are abundant but constructive criticism and suggestion are not often seen here.

Atanu listed incompetent bureaucracy as one of India's problem. I am sure I can just name as many incompetent and corrupted bureaucrats in China. I suspect there is more behind the apparent incompetence and bigotry in these government decisions, in all countries, i.e. an intertwined web of interest parties that is hard to break. Example, China's coal mines.

It would be interested to hear what Atanu has to say about China's problems. The two countries have both made some progress and encountered a different set of obstacles. The road ahead is full of challenges for both. Learning from China's mistake in its manufacture-centric development model may help India better prepared for its future development; and the same applies to China when it turns its attention to the service industry.
  • "Just as China is learning from India to improve its performance in the IT sector, so India must emulate China’s success in attracting FDIs and the jobs they create in manufacturing. It can do this by building infrastructure and educating and raising the skill levels of its workers...The right strategy for India is to walk on two legs: traditional labour intensive industry and modern IT. Both legs need strengthening through further reforms ….”
Down the path, both India and China need to walk on 2 legs.

I am of the opinion that China did not choose manufacturing and India did not choose service consciously as its path to grow. It is the natural selection of free market that did the job. China has a reasonably educated cheap workforce and India an English literate one. The buyer and sellers were matched and evovled by Darwin, not by Deng or Jiang or Nehru's successors. However, what these politician could do (and should do, or have done right) is to create a fair and efficienct envirnment for such econmic darwinism to happen.


ranc said...

By my recent study China has been performing better than India in the past 2 decades mostly because of the former's better historical legacies at the start of reform, e.g., human capital (education and health), rural land distribution, infrastructure, and homogeneity of the Chinese society and the consensus on the need to reform. China's economic structure before reform was also more distorted and so China had more productive forces to unleash via reform. Political regimes (democracy vs one-party rule) and policy differences (FDI, decentralization, etc.) have considerably less explanatory power.

Although China has been doing better than India, the future bodes better for India, however. China has done a better job in economic liberalization, i.e., establishing market, than India, but India is quickly catching up on this front. On the other hand, China lags far behind India in buidling institutions that oversight the market, and institutional buidling tends to be the most difficult part of post-communist reform, far more difficult than economic liberalization.

ranc said...

Forgot one thing: China also had a better worker dependency ratio, hence a higher savings rate, which menas more investment (in things like infrastructure). But demography is changing in India's favor.

Sun Bin said...

thanks. that is what i thought as well. although i think india also has a lot of problem to deal with. and there are a lot of pitfalls for both countries.

Preetam Rai said...

I think in the future India will become more like China and China will become more like India. I predict that large Chinese IT service companies will be owned by Indian companies and Chinese companies will start manufacturing in India. Already for someone like me who parties with equal gusto in Bangalore or Chengdu.. there is not much difference..I would also bet big on Vietnam. Lots of pragmatism coming from there.

Anonymous said...

Vietnam is the only Confucius economy still un-developed in the East Asia.