Republics of Fear: India and China

I wrote on the Guardian's Comment is Free section about the rising paranoia between India and China warning of adversarial nationalism becoming part of the two neighbours' dialog.

Here is the Sunday Times' Michael Sheridan making the same point in a piece about the 60th anniversary of the founding of People's Republic.

Curiously, the enemy most often spoken of is India. The censors permit alarmingly frank discussion on the internet of the merits of a war against India to secure the Tibetan plateau.

“Help the Maoists take over power in India to pay them back for hosting the Dalai Lama,” said one contributor.

Veterans who know the PLA from the inside say that despite all its shiny new kit, such grandiose ideas mask the reality of a force that has no recent battle experience and is riddled with corruption. They describe a system of bribes ranging from 10,000 yuan (£909) to get a good post for a private soldier to 30,000 yuan for a place at military college.

“Compared with our last war against India in 1962, our equipment is much better but the devotion to country and people of our officers and men is much worse,” said a retired officer, who cannot be named.

Or, as General Zhang Shutian, a political commissar, put it in a recent speech: “If corruption in the army continues, ideology will decay and open the way for religion, while the promotion system risks causing a mutiny.”

Inequality in India: the scale and consequences

Among poor nations India is supposed to be relatively flat society. Sure there are some people who have a little more than others but it's hardly a place of gaping chasms between rich and poor a la Brazil.

But in remarkable work by Pranab Bardhan, professor of economics at Berkeley, India is shown to be an Asian nation with Latin American disparities.

The measure of inequality is the Gini coefficient which is zero for no inequality, and one for the most iniquitous. India's Gini number was in 2005 agreed to be 0.325 but that is a measure based on spending. Using income data India's Gini coefficient of income inequality comes to 0.535 in 2005 - actually more than Brazil's and outstripping China which has one of 0.387.

It is not just income but the chance to change your position in life that is a crippling problem in India. Hundreds of millions of landless, asset-less, uneducated people trapped with little way out is a recipe for social disaster. Little wonder perhaps that the Indian prime minister is worried about the growing appeal of India's Maoist movement which promises to upend Indian society in a bloody revolution.

Yasheng Huang: Doubting China, Admiring India

Every year Delhi hosts Yasheng Huang, the MIT academic who has made a name for himself as a China-doubter and an India-praiser. Yesterday he was in Beijing and gave an interview to the Hindustan Times which is worth reading because it highlights how China's stimulus plan is compounding the country's obsession with public sector controlled capitalism.

“China is clearly overbuilding. Very little real value is being created. We’re not talking of new technology, innovation...essentially more of the same.”

The stimulus is only delaying reforms, says Huang. “The state sector is advancing and the private sector is retreating. It’s creating an asset market bubble on top of a bubble that has not been burst."

Prof Huang's take is that he "favours India" for its capitalistic approach to development ie building wealth through creating a vibrant private sector.

“India needs to plod ahead on the existing course of privatisation and deregulation. China needs to actively reverse what it has been doing, which is harder," is how he explains it.

The downside of India's story is there for all to see. And I think Prof Yasheng sometimes underestimates the yawning gap in inequality that is opening up. But he's largely right - and was right before anybody else.

However the article by Reshma Patil ends with a good summing up of what anybody with a head for economics thinks when she or he visits China.

Glancing around the lobby flanked by Beijing’s most expensive stores, the professor shook his head over the Chinese obsession with luxury brands.

“India’s income growth is very respectable. The middle-class is buying appropriate purchases like Nano cars. In China, there is a sudden burst of wealth. Nobody knows how they made the money”.