A Model of Development Worth Building

Letter from India, The International Herald Tribune

PONDICHERRY, INDIA — President Barack Obama arrives in India this weekend, accompanied by a 45-car convoy and a retinue that occupies two jumbo jets.

His visit coincides with Diwali, the Indian festival of lights, and his meetings will no doubt have a bright, upbeat tone. But his trip is unlikely to ease a nagging sense in India that ties between the two countries have suffered something of a downgrade under his administration.

The anxiety stems not from any overt hostility toward India, but rather from a perception that Mr. Obama’s much-vaunted pragmatism, combined with a litany of woes in the United States, leave little room for the type of strategic relationship the countries seemed to be building under President George W. Bush. As the Indian columnist Swaminathan S. Anklesaria Aiyar recently wrote, “Obama is focusing on urgent short-term issues and not on the strategic long term.”

The short-term focus is perhaps understandable. But a relationship with India based too purely on pragmatism — on immediate, tangible returns in the battle against terrorism, for example, or in bolstering trade — does not do justice to what is potentially India’s most valuable contribution to the United States. It overlooks the fact that the United States’ true strategic opportunity comes not from what might be called India’s overt power — its military might and economic clout — but rather its symbolic power: the possibility it holds to serve as a model for developing nations around the world.

In recent years, there has been growing talk about an Indian model of development and governance — what Lawrence H. Summers, the director of the White House National Economic Council, recently referred to as the Mumbai Consensus. He positioned this as an alternative to an ascendant Beijing Consensus, which emphasizes the role of the state, plays down the importance of democracy and human rights, and has been embraced by authoritarian regimes around the world, particularly in Africa.

This Mumbai Consensus is far less established than its Beijing counterpart. Still, with India’s economic success now receiving general — and sometimes exaggerated — international recognition, and with a growing number of Indian companies embarking on acquisitions around the world, including in Africa, the outlines of an Indian model that could light a path toward development for other countries are starting to become clear.

Economically, the Indian model is marked by a reliance on domestic consumption rather than exports, services rather than manufacturing, and private enterprise rather than state-led companies and investments.

In all these ways, and particularly in its reliance on the private sector, it represents a striking contrast to the Chinese model. Ashutosh Varshney, a political scientist, points out that, while “India is producing world-class private companies, China is not.” Indeed, in contrast to many Chinese companies, which have benefited from state support, Indian companies have often succeeded, as Gurcharan Das, an author and businessman, puts it, “despite the state.”

The big difference between the two countries, of course, is in their political systems. Mr. Summers contrasted Indian democracy and Chinese autocracy, praising the former as “people-centered” and characterizing the latter as being based on “ideas of authoritarian capitalism that ultimately will prove not to be enduringly successful.”

To an extent, this distinction seems to revisit the Asian Values debates of the past, when many observers attributed Southeast Asia’s rapid growth to authoritarian governments. But the rise of India and China over the last few decades has recast this debate. The question is no longer whether economic growth stems from autocracy or democracy (clearly, it is compatible with both), but rather about the character of that growth. What does India tell us about the kind of prosperity that accompanies democracy?

India’s vibrant private sector may be one of the chief benefits of its democracy. Mr. Das suggests that democracies inherently allow greater room for entrepreneurial activity. “Freedom of enterprise is a function of democracy,” he says, arguing that Indian businesses have more room for innovation than those in China.

Political freedom doesn’t just breed more adept capitalists. It can also contribute to what the author and academic Sunil Khilnani calls “growth with legitimacy”— a path to development that is less unequal and more sensitive to human rights. Although India is certainly struggling with tremendous problems of exclusion, its democratic processes arguably curb the worst excesses of capitalism.

India’s robust private sector and its democratic pattern of development could also mean that the Indian model will ultimately prove more viable than the Chinese one. India’s critics often point to the nation’s inefficiencies to argue that democracy is inimical to growth. But these are not failures of democracy; they are failures of governance.

If in the coming decades India can reform its governance — a big if, admittedly — then its model of democratic growth might ultimately prove more flexible, and therefore more resilient, than China’s top-down, state-centric approach.

For the United States, what’s most striking about the Indian model is the extent to which it embodies values traditionally associated with America. Free enterprise, democracy, equality of opportunity: over the last 60 years, and especially over the last two decades, India has staked its claim to representing these principles as fully as the United States.

This confluence of values represents the true foundation of Indian-U.S. ties today. It also represents something of an opportunity for the United States.

If the Indian model gains widespread currency, if it starts being adopted by other nations as a viable path to development, then that could ultimately enhance the United States’ own influence and soft power around the world.

Washington’s true strategic interest doesn’t just lie in forging closer security or trade links with India. It lies in India’s potential to spread American values.

2 Comments

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  1. Karthik Rao Cavale says:

    Mr. Kapur,

    I dare say that India’s current development paradigm hardly reflects American values. The quintessential American value is individualism, and that is certainly not a value that characterizes any of India’s development paradigms. We have always combined collectivism with democracy; India’s democracy is not the same as that of the United States, nor is it an offshoot of American ideas.

    Secondly, I do not associate equality of opportunity with the United States at all. Anyone who has been to the United States knows how deeply embedded inequality is. The newly emerging development paradigm in India (characterized by the promoters of NREGA etc.) cares much more about equity than any development paradigm in the United States.

    Finally, as for free enterprise, it appears to me that even though Indian companies are privately owned, they are also state-promoted. This is just as true for the United States as for India – the rich&mighty in every country manage to twist democratic processes for their profit. Perhaps in that sense India is just as bad as the United States.

  2. Natasha Oza says:

    Akash,
    Equality of opportunity is one area where India is nowhere close to where we should be. The caste system, the class system, the poor quality of schools that most poor kids attend – all add up to very little true equality of opportunity.

    Of course the indicators are improving. There are more IAS officers from rural areas and poor families, and so also for MBAs and doctors. But still the gaps are enormous.

    If I happen to be born into an upper middle class family in a city, my chances of a decent education, foreign assignments, and joining the IT industry are immeasurably higher than if I happen to be a poor, bright kid from a rural background.

    What has happened though, is that within this already privileged circle, there is more opportunity as the economy expands and generates new kinds of jobs. Thus an MNC operating in India and running a design centre might have previously only hired IIT graduates for its senior technical positions and everyone else would be a technical grad from a top ranked school; today, they need graphic designers, PR people, HR people, as well as engineers, and there are lots more colleges educating all of these professions reasonably well. The pool of opportunity in this segment has both widened and deepened.

    Regards
    Natasha

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