Yogi & the Mandarin: A Tale of Two Asian

Revolutions

“China and India. Rarely has the economic ascent of two still relatively poor nations been

watched with such a mixture of awe, opportunism, and

trepidation. [They] possess the weight and dynamism to transform the 21st-century global economy.”

August 22, 2005

BusinessWeek

Intuitive

Non-linear

Holistic

Introspective

The Yogi

Efficiency

Order

Goal-oriented

Creature of hierarchy

The Mandarin

Maps

China – 4th largest & most populous country in the world with a population of 1.3 billion people.

India – 7th largest & second most populous country in the world with a population of 1.17 billion people.

January 2008

Historic Silk Route Ties

  The Silk Route is a series of trade and cultural transmission routes that ran through the Asian continent connecting the east and west and extended from southern Europe through

Arabia, Egypt, Persia, India till it reaches China.

50 yrs ago, India and China were among the poorest and economically most isolated countries in the

world.

How did China and India emerge as economic giants?

What are India & China famous for today?

Call centers &

computer engineers

Low-priced consumer goods

People’s Republic of China 1949

• Modern China was established after a violent armed conflict between Chinese nationals and imperialist powers. The communists won under Mao in 1949 giving birth to the People’s Republic of China.

• One party rule. No private property. Collectivized farming. State owned 77.6% of the economy and collectives owned everything else.

• Religious and cultural practices were

suppressed and ethnic minorities were marginalized.

• 40 million people starved to death between 1959 and 1962.

• 1966 Mao introduced the “Cultural Revolution” that involved purging political rivals. 10 million people were killed.

Mao ZedongMao Zedong

China’s entry in today’s Global Economy

• After Mao’s death Deng Xiaoping took over as China’s leader.

• Liberalized Chinese economy in 1979.

• Started with agricultural and economic reforms, set up Special Economic Zones.

Infrastructure• China’s most visible infrastructure project

to date is building new roads and highways.

• In 1989 China had 168 miles of expressways by 2004 it built 21,500miles. By 2020 it plans to have 55,000 miles, which is the total length of the entire American highway system.

• To fulfill its growing economy China has built new coal mines for electricity use, increased natural oil and gas consumption and built a modern power grid.

GDP – real growth rate:  

9.8% (2008) country comparison to the world:13% (2007)11.6% (2006)

GDP-Per capita (PPP-Purchasing power parity):

$6,000 (2008)country comparison to the world:$5,500 (2007)$4,900 (2006)note: data are in 2008 US dollars

GDP – composition by sector:

agriculture: 10.6%industry: 49.2%services: 40.2% (2008)

China – Economic Fact Sheet

Beijing’s Skyline

Beijing Olympics Stadium

China’s One-Child Policy

To accelerate economic growth China decided to To accelerate economic growth China decided to curb its population through the implementation of curb its population through the implementation of

the One-Child Policy in 1979.the One-Child Policy in 1979.

1980s govt. poster advertizing the One-Child Policy

Strict Implementation Urban families can have only one child

whereas rural families can have more than one child, if the first one is a girl.

Under this policy, the government has conducted 10 million forced abortions and 10 million sterilizations

40 million births have been prevented.

30,000 workers in the Family Planning department implement these policies nationwide.

Indian Independence - 1947

India gained independence from British rule in 1947 under the leadership of M. K. Gandhi.

Non-violence and peaceful civil disobedience became hallmarks of India’s freedom struggle.

India’s “Cultural Revolution”:- The freedom struggle involved an agenda for emancipation of women and lower castes through democratic empowerment. India’s diverse ethnic and religious population participated in and flourished during the freedom struggle.

Republic of India

India defines itself as a sovereign, socialist, secular, democratic republic that was officially constituted on Jan 26, 1950.

India’s constitution guaranteed fundamental rights and rule of law.

Multiparty democracy with a parliamentary form of government. The Prime Minister is the elected head of the government.

Special laws for the protection of ethnic, linguistic and religious minorities were included in the constitution.

Mixed-Economy Adopted a socialist-inspired, centrally planned

economic model between 1947 to 1991 under which India’s economy grew at about 3.5% (called the Hindu rate of growth).

Land reforms were carried out to redistribute land more equitably.

This economic era came to be known as the

“License Raj” due to the elaborate licenses and regulations that were required to set up and run business in India. Corruption and red tape flourished under this system.

All these policies and five year economic plans were carried out within the framework of a functioning democracy with routine elections every 5 yrs continuously from 1952 to the present.

Economic Liberalization in India

In 1991 India adopted economic reforms.

Current PM and economist Manmohan Singh is the architect of India’s economic reforms.

These economic liberalization policies reduced government regulation of and investment in the economy, encouraged private business and invited foreign investment. Quotas and licenses were dismantled.

Manmohan Singh

India – Economic Fact Sheet

GDP- real growth rate: 6.6% (2008) 9% (2007) 9.6% (2006)

GDP – per capita (PPP – Purchasing power parity)$2,800 (2008) $2,700 (2007)$2,500 (2006)note: data are in 2008 US dollars

GDP – Composition by sector:agriculture: 17.2%industry: 29.1%services: 53.7% (2008)

Comparing India and China’s Growth Stories

Indicators India ChinaPolitical System

Multi-party Democracy

One-party authoritarian rule

Speed of Growth

Economic reforms started in 1991. Average 6% growth rate in past two decades.

Economic reforms started in 1978. Average 9.5% growth rate in past two decades.

Areas of Specialization

Rising power in software, design, services, and precision industry.

Dominant in mass manufacturing, electronics and heavy industrial plants

Comparing India and China’s Growth Stories

Indicators India ChinaGini index (standard measure of inequality)

36.8

47.0 (up 10 points from 15

yrs ago)

Foreign Direct Investment

6.8% (up from 0.3% in 2004)

17.8%

Future Areas of growth

R&D, bio-technology, high-value IT enabled services (legal, medical, engineering architecture), manufacturing, agro-based industry

IT business, services and continued manufacturing

Comparison… India lags behind china in infrastructure.

China has a weak banking and legal system.

India has the advantage of the English language which has made it easier to participate in the global economy.

What holds India back are bureaucratic red tape, corruption and its inability to build infrastructure fast enough.

According to Peter Drucker, India has managed rural to urban transition in a relatively smooth and peaceful manner, which China is still struggling to do.

The of Costs Growth – Human rights

500 million Chinese people have been lifted out of poverty in a generation….but this has come with a cost.

Suppression of Dissent: In 1989, students protesting against

Communist rule in Tiananmen Square were killed by the Chinese military.

No Freedom of Expression: Internet and media is state controlled.

No Freedom of Religion:Minorities are marginalized – Uighar and Hui

Muslims, Tibetans and Falun gong.

India’s Experiment with the “Mandarin Model”

In Nandigram village, West Bengal, against the ruling communist government’s planned to seize 10,000 acres of land from farmers for a chemical plant. The farmers protested.

4,000 heavily armed police tried to stamp out protests and shot dead at least 14 villagers and wounded 70 more. The Communist party cadres also participated.

The Indian media and civil society protested.

The communists were defeated in subsequent local and national elections in West Bengal.

Urban-Rural Divide- China

• Extreme income disparity in rural and urban china. The coastal and urban locations have benefited disproportionately from the economic policies.

• There has also been an increase in inequality of education and access to health services. Poor households have not been able to afford the high private cost of basic education and healthcare.

• Tens of millions of farmers have become landless in China as developers and government officials seize farm land without compensation to farmers.

• There were 87,000 local protests in 2005

Urban-Rural Divide - India

27.5% of India’s population was living below the poverty line in 2004–2005, down from 51.3% in 1977–1978, and 36% in 1993-1994.

75% of the poor are in rural areas, most of them are daily wagers, self-employed householders and landless laborers.

Rule of Law The authoritarian control of the

Communist Party over all spheres of Chinese society has meant weak rule of law.

Poor people have little chance of getting their grievances redressed if they have a dispute with the Chinese state or powerful businesses. E.g. Sprucing up of Beijing for the 2008 Olympics

Corruption exists in India as well and the judiciary is overworked but India has a strong rule of law.

Democracy & Economic Growth

Does economic prosperity lead to democracy?

No evidence to suggest that prosperity leads to democracy or vice versa.

However, democracy may slow down economic growth but it provides essential checks on excessive power.

Nobel Laureate economist Amartya Sen’s theory of famine and Democracy: "No famine has ever taken place in the history of the world in a functioning democracy.” (Freedom as Development)

Elections and Olympics Chinese Olympics 2008 cost $44 billion.

It was a spectacular achievement for any country, particularly one that was only a generation ago predominantly poor and economically isolated.

In May 2009, the world’s largest exercise in democracy took place in India. - 714 million eligible voters- 828,804 polling centers were set up, including one in Gujarat's Gir lion sanctuary for a single voter -1055 political parties- 6.1 million civil and police officials were on duty- Electronic voting machines were lugged across the length and breadth of India on trains, trucks, cattle and bullock carts in some of the remotest areas. -131 seats reserved for backward castes and tribal groups

The Jury is still out!

As the 21st century unfolds, will the Yogi and

the Mandarin learn from the positive

qualities of each other?

Some Class room Questions

What are the different strengths of India and China’s economies?

What does “economic liberalization” or opening up an economy mean? How did this process occur in India and China?

What are the drawbacks and challenges facing India’s growth?

What are the concerns about China’s economic growth?

Economic growth often pulls people out of poverty and brings about an improved standard of living to those who benefit from it. Does it necessarily benefit all sections of society? How do the stories of India and China throw light on this question?

What are the human costs involved in economic growth?

The End