For him China is an enigma. It has the highest GDP growth rate but also considerable growth of discontent. The most competitive economy in the world is also the most wasteful and therefore un competitive. These inherent paradoxes led diplomat and author Prem Shankar Jha to unearth the fragility of the Chinese miracle in Managed Chaos. Sarika Malhotra gets an account of the miraculous yet fragile growth model, its sustainability and lessons for India.
•How did the idea of Managed Chaos occur?
I had written a book on the economic transformation of India, China and Russia, looking at the economy of reform. And the key word that I discovered was political economy. The politics of this transformation is as important as the economics. And they determine what strategies will be used for the transformation, and liberalisation; and if you don?t get the two right, then you blow your country. Russia is a perfect example. Managed Chaos is an extension of that model where I got a chance to look at China?s future using the political economy model and discover what kind of problems they face in this transition.
•Citing the examples of the SEZs and gleaming skyscrapers, you mentioned that Indians have decided to treat everything that China has done as a beacon for their endeavours. How viable is this approach?
India can?t, only ignorant people think that India can emulate China. They are ignorant in two ways ? they think that skyscrapers and SEZs make a country ? they don?t. Second is their implicit belief that China?s model of growth is a successful model. The Chinese model is not a successful, sustainable and viable model. No significant political concessions towards getting people to make their own decisions are made ? concessions for the market but concessions towards the empowerment of the people. But if that is not done, and there is no sign of it yet. Even if it is done, it is only on the edges. It scares me to think if some want to emulate China .
•Any lessons that India can learn from the Chinese growth model?
The most important lesson is not to emulate China. China is the only country in the world where the problem that the government faces, is not how to speed up development but how to hold it back. China has around 60,000 township administrations, 5,000 counties, 31 provinces ? all are investing centres, all of them compete with each other to appropriate resources for development. Chinese investments skyrocket because there is no control over them. As a result they get huge increase in investments than their capacity and every company starts failing. But they won?t shut them. This kind of wasteful investment we cannot afford. The Chinese do it because they save and put the money in the banks. The down phases create tremendous political discontent. China has been able to contain it, but you don?t know how long China will be able to control it. So there is nothing to learn from China, except that it?s possible to grow. However, I admire the ease with which orders, and directives given at the top level are followed down to the bottom and how within the Chinese Communist Party there is a high level of accountability. A highly-focussed government that examines its policies and changes them when they know that the policies are not liked by the people. That is Confucianism, not Communism.
•You have cited the 2004 Goldman Sachs Report that estimates India?s growth rate will forge ahead of China’s around 2013. How realistic are the predictions?
One must remember that these are just trend predictions. When you get into a recession, you never know how to trust the Chinese figures and also Indian figures become inaccurate in a different way. Comparing of single numbers is often misleading. Chinese have fewer young people, but their wage cost is much more. Not a single company wants to come to India to produce for the giant world market due to lack of infrastructure. But all go to China. That is not going to change overnight. These predictions are just some kind of rough yardsticks, to help formulate a long-term policy.
•What makes for China?s growth and paradoxes?
There is a competition between central and local centres, which have the right to invest and procure money from the bank. So they are spending all the time dreaming up new projects ? for very new project they try to involve overseas Chinese companies, or companies from Hong Kong or their brothers and cousins who are already in the private sector and the kind of arrangements that are made the Communist Party administrator who is initiating the project gets a sizeable kick in his pocket. After a few years when he is comfortable he resigns from the government job and becomes a private consultant. And this kind of personal incentive, getting unbelievably wealthy in a couple of years is also the other very large spur for investment but this is what creates the maximum social discontentment. Tiananmen was not a movement for democracy of market and capitalism rather a movement for democracy to arrest the shift to capitalist markets. Even the West will not acknowledge this. If you want to know why the students came out, why the workers joined in ? it was to prevent further liberalisation, which was creating corruption and raising income differentials within the society, at a rate they had never seen before. And they wanted a say because they wanted to check it.And now China has undertaken a major infrastructure industrial technology renovation programme by which $586 billion would be spent within 9 quarters, which started from October 2008. By March 2009, 25,000 projects were submitted for approval. And government had to choose 6,000 out of them. Only 10% is spent in household, the rest is going into infrastructure and in the urban areas. A small part is going to boost the consumer demand and will vastly increase the existing unequal distribution ? money will be retained in towns, but it will be financed by the rural areas and peasants are going to be victims. And this will again increase discontent.
•Will we ever see democracy in China?
One thing is clear ? 20 years from now China will not disintegrate. It is going to move towards ever-reinforced authoritarianism. This does not mean there will not be small gestures of empowerment. There will be conservative reforms designed to enable the present totally, Confucian authoritarian state to suffice. By combining this ? with the ownership of private property, the huge increases in income differentials, the emergence of an aggressive capitalist class and its harnessing of nationalism ? you get the making of a very hard state. But not as a democratic state. There are liberals in the Communist Party and they keep pushing for reforms, but the system is very very powerful. At this moment in the middle of the recession, the reformers have no chance.