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Jewish World Review Oct. 5, 1999 /25 Tishrei, 5760

Mort Zuckerman

Mort Zuckerman
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Econophone

India at center stage

http://www.jewishworldreview.com -- IF ONLY its economy could equal the success of its democracy

One of the greatest events of our times is taking place, and the world barely notices. The largest democracy in history–India–is counting the votes of close on 370 million of its citizens, roughly the number of voters in the United States, Canada, and Europe combined. It is a fair bet that the final results on October 10 will also receive scant attention. We have, it seems, eyes only for China.

This is shortsighted.

Both China and India are vast commercial markets, each with about a billion people or more, growing at about 6 percent per year. India is a working democracy, with the kind of decentralized federal system necessary to govern large market economies, along with a highly evolved system of law and widespread use of a language–English–that the West understands. China, by contrast, is increasing- ly unreliable politically and may well be spinning out of control. Yet China receives 20 times more foreign direct investment than India– and far more political attention.

Pride of place. As Mahatma Gandhi once put it, India is "a house with all the doors and windows open." It is pluralistic and diverse, with 35 different languages each spoken by more than a million people, yet in the years since independence it has managed to create a sense of national identity. It is an ancient civilization, and it is right to be proud of its democracy. It would be formidable indeed if it could match its political success with a similar achievement in its economic policies. In fact, it has regressed: Its share of world gross domestic product has fallen from 2 percent to 1.4 percent in the past 50 years. It has mass illiteracy, poverty, disease, and hunger.

Its defense of these failures is the democratic system that attracts such admiration. A democracy, the argument goes, cannot push through economic reforms with the speed and zeal of the more authoritarian East Asia tigers.

But it was not really democracy that delayed India's advance. It was the hangover from the nostrums of state socialism that became so fashionable in the wake of the Great (capitalist) Depression, the apparent success of the Soviet five-year plans, and the genuine success of the government-directed Marshall Plan in Europe. India adopted an economic system that limited the growth of the private sector. It was allowed to expand only with government permission, rarely granted.

Competition and rational business practices were frustrated by labor laws and job protection. Incompetence was masked by subsidies. Trade was stunted by quotas and high tariffs. These policies rewarded failure and punished success, permitted the politicians and bureaucrats to become parasites, and depressed the energy, resilience, and talent of the Indian people.

Only the threat of bankruptcy in 1991 made possible limited reforms and pushed the "Hindu rate of growth" from 3.5 percent a year to 6 percent. Should the Indians extend reforms and deregulate the economy, they could well grow at about 8 or 9 percent a year.

They will need support and encouragement to do this. The sad truth is that the world began to pay more attention to India only after it exploded the nuclear bomb last year. The United States reflexively imposed sanctions, despite the fact that India is prepared to join the nonproliferation regimes. India's record of responsible international conduct should separate it from rogue states such as Iraq and North Korea. The rationale for sanctions–hurting the innocent as the only way to punish the guilty–makes no sense when a country is contending with threats from Pakistan and China.

The expansion of U.S. involvement with India is long overdue. It would serve our common interests in controlling the Islamic terrorism that now stretches from the Caucasus through Afghanistan and Pakistan and in influencing a more constructive policy from Iran. India, for its part, must continue to liberate the energies of its remarkable people. The new government will have the political stability necessary to disabuse the notion that Indians are incapable of greater control over their future. They well know Mahatma Gandhi's great notion that there is no easy walk to freedom.



JWR contributor Mort Zuckerman is editor-in-chief and publisher of U.S. News and World Report. Send your comments to him by clicking here.

Up

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04/21/99: No time to go wobbly
04/13/99: The Evil of two lessers

©1999, Mortimer Zuckerman