Wall Street Journal: Asia's Tortoise and Hare Story

Major Business News

February 26, 2002

By BRUCE GILLEY

The journeys into town from the airports of Shanghai and Bombay could not be more different. In Shanghai, China's business centre, the traveller speeds along an elevated expressway past gleaming high-rise buildings, into a city scrubbed clean and festooned with exhortative slogans. In Bombay, India's business centre, there is no expressway, barely a road at all, and the path winds through horrendous shantytowns for almost an hour before the breathless visitor arrives shell-shocked at one of the city's outrageously expensive hotels.

This kind of first impression has helped convince many outsiders that China is the one getting it right in the growing rivalry between Asia's two great ancient civilizations and present-day giants. North Asia's colossus appears to be a paragon of efficient government and high growth. Its South Asia counterpart seems mired in political stasis and sluggish growth.

That view is propagated most forcefully by Western investment banks and multinationals, and eagerly embraced by Chinese nationalists and disaffected Indian intellectuals. Yet it is a gross misreading of the comparative achievements of the two countries. A closer reading shows that, in the last two decades, India has done better than China both in social and economic progress and in the expansion of rights and freedoms.

Setting the record straight is important because the flawed conventional wisdom is bad for both countries. India's elites are losing faith in their system, threatening the foundations that offer the best solutions to the new challenges brought by economic growth. China's elites, meanwhile, seem barely aware of the flaws in their system, an ignorance that could spell monumental failure if not addressed. Foreign countries and companies often accentuate the problem by suggesting that India could use a dose of China's medicine rather than the other way around. Debunking the myth of China's triumph over India -- two countries that together comprise a third of the world's population -- matters for everyone.

How much better has life become for the average person in China and India over the past two decades? Many will be surprised by the evidence from the broadest indicator of such progress, the Human Development Index formulated by the United Nations Development Program. The index, which takes into account not only income but also health, education, poverty, life expectancy, and the like, shows broadly comparable improvements in both countries. The rating for China rose to 0.718 (out of a possible 1.0) in 1999 from 0.553 in 1980, a 30% improvement. Over the same period, India's rating rose to 0.571 from 0.433, a 32% rise.

Those figures tell a heartening story of better lives being lived by people in both countries, while highlighting China's higher initial development level than India. They do not tell a story of an Indian failure compared to China. The average Chinese is today living to the age of 70, seven more years than in 1975, while the average Indian is living to 62, 12 more years than in 1975, according to official figures. Across a range of indicators, India's improvements are as good as or better than China's.

This counters the loud rejoicing over a "China miracle" for the last two decades, especially in comparison to an alleged Indian failure. All the more so because while China began market reforms in the early 1980s, India only took that step a decade later. India's per capita GDP growth from 1975-99 was 3.2%, less than half of China's 8.1%. Yet that only shows what a bad indicator GDP can be in assessing overall welfare.

How sustainable are the gains in each country? Environmental degradation, income inequalities and political instability are common to both. But India's income distribution is less skewed its indicators of pollution and environmental degradation less severe and the permanence of its fundamental political institutions more assured than China's.

The one undisputed black mark on India's record is poverty alleviation, where China has done better by comparison. But the overall picture still favours India. Even if China had achieved some sort of short-term "developmental miracle" compared to India since 1980, there would be real reasons to doubt its long-term feasibility. In the event, it has done nothing of the sort.

Material benefits are only one part of the story. Above some minimal level of basic needs, such benefits allow people to pursue their life goals. The other indispensable means for this are guarantees of rights and freedoms. On this score, there has been an "India miracle" compared to China. While quietly racking up economic and social gains comparable to or better than China's, India has remained the world's biggest democracy and has provided its citizens with a great deal of protection for their freedoms.

Chinese are freer than they were, but their freedoms are not guaranteed, while rights remain limited. Beijing's constant jailing of dissidents, religious adherents, environmentalists and others who threaten the ruling regime compares to India's marvellous tolerance for diverse life goals. Unlike GDP, we do not have an indicator to show the gains in welfare when an Indian is able to, say, join an ayurvedic health group run by the Hare Krishnas or parent another child. Nor can we measure the loss when a Chinese practitioner of the Falun Gong meditation [group] is forced to recant under threat of confinement or a farmer's wife is forced to abort an unborn child. If we did, India would be the "growth miracle," China the "growth debacle."

Rights and freedoms can sometimes reduce material benefits. PepsiCo's Indian-born President Indra Nooyi recently praised Chinese officials for their efficient handling of foreign investment projects. Yet one big reason why China attracted $47 billion in foreign investment last year, compared to India's $5 billion, is that its officials are not accountable. They can, and do, chase farmers from their fields and repress union activity to attract foreign investment. That does not happen in India, where rights and property are protected.

More typically, however, rights and freedoms are good for economic and social progress. They make markets more fair and open, give people a stake in the system and ensure policies are legitimate. China faces a major constitutional crisis in the coming decade -- as all Leninist regimes have -- and investment fund managers have begun quietly to take out risk insurance against this looming crisis. In India, the political system is as indelibly fixed in society as sitar and tabla ensembles.

Democracy does not automatically make a country rich and free, only richer and freer than it would be under dictatorship. The fact that China under dictatorship is richer than India under democracy only shows how serious are the costs of dictatorship in China, a country which probably has a cultural and physical endowment rich enough to support much higher living standards (as in Taiwan and Hong Kong).

By 2015, China's 1.4 billion people will be closely followed by India's 1.2 billion. Both countries have made significant progress in past decades, and both could do more. But the assertion -- against all evidence -- that China has somehow outperformed India is both wrong and dangerous.

Like the old fable, China seems to have raced rabbit-like out of the blocks while India has plodded far behind. In this extended version of the fable, however, the tortoise will win not only because it moved at a more sustainable pace, but because it took a better path.

Mr. Gilley is a contributing editor at the Far Eastern Economic Review, a sister publication of The Asian Wall Street Journal.