On India’s Growth Story and Socialism Dying Hard
NY Times reports on India’s Torrid Growth. Some excerpts (highlight mine):
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India is now growing faster than most other economies in the world, and is close to rivaling China, whose emergence as a manufacturing center has left India racing to catch up. … In a study published in May, the World Bank said, “It is easy to be optimistic about India’s economic prospects, but there is growing concern that the basic institutions, organizations, and structures for public sector action are failing — especially for those at the bottom.” … Still, economists and analysts warned that by itself, business dynamism is not enough for the long term. The high growth rate could taper off if the liberalization campaign of the 1990’s is not followed by a second wave of policy changes to share wealth more equitably and make it easier to invest and do business in India, the World Bank report on India warned. If those policy changes are slow in coming, it is in part because the Congress Party-led governing coalition is beholden to the communist parties whose votes it needs to muster a majority in parliament. The communists oppose most of the measures that investors are calling for, including sales of government stakes in businesses, relaxing labor laws and opening the banking and insurance industries to foreign takeovers and competition. “Has the pace of reform slowed down a bit? Yeah, it probably has,” Franklin Lavin, the American Undersecretary of Commerce for international trade, said by telephone from Washington. “Frankly,” he added, “you find more hangover socialism in India than in China. You don’t find someone arguing against you on the basis of Marxism in China.” |
That highlighted quote captures the paradox of India. There is a small, but influential minority in India that is wedded to a romantic version of socialism, the “fabian socialism” of 1920’s UK. I have some close friends in that camp, and for them growing inequality only validates their socialist theories. Accoring to them, the fact that India stagnated for 40+ years and went nowhere economically with socialism is because, well, “we never really practiced real socialism” (thank God!). Socialism got Indianized, and became a gentle, bureaucratic beast, causing stagnation, keeping people in poverty, but not inflicting any obvious extra misery, at least none that anyone could directly attribute to it. The fact that India never experienced the horrors of Stalinist purges nor a Cultural Revolution means that romantic illusions could be nurtured without the harsh dose of reality getting in the way.
Now, with the Reserve Bank of India fully committed to the Alan “Bubbles” Greenspan program of unlimited, easy liquidity - to sterilize the deluge of dollars coming India’s way - India’s growth, just as America’s, is extremely lopsided. Credit-fueled specualtion, recently finding home in the spectacular real estate boom in India, pays far better than any kind of productive economic activity. The result is rising inequality, which socialists seize on to have their “I told you so” moment. Result: real economic reform is stalled, and freedom is the loser.
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