Author: Sreeram Chaulia
Publication: The Financial Express
Date: October 28, 2010
URL: http://www.financialexpress.com/news/beijing-bullies-mumbai-entices/703418/0
On a recent visit to India, Lawrence Summers,
the outgoing Director of the US White House's National Economic Council, played
music to the hosts' ears by proclaiming that a Mumbai Consensus would become
the pre-eminent economic model by 2040. Explicitly comparing it to the neo-liberal
Washington Consensus and the statist Beijing Consensus, Summers hailed India's
domestic consumption-driven development as people-centric and hence more attractive
for emulation.
That India is a less threatening emerging
economy compared to China was reinforced by the heartburn caused by the latter's
undeclared export quota restrictions on rare earth minerals to Japan, the
European Union and the US. Without resorting to a formal ban or slowdown of
rare earth exports, which are critical components in high-technology, defence
and energy industries, China tried to explain its provocation as a spontaneous
reaction of Chinese entrepreneurs whose 'feelings' had been hurt by a tiff
with Japan. Beijing also claims that mining, processing and refining of rare
earths have harmful consequences for the environment and that they have to
be limited for ecological reasons.
However, this green alibi does not wash. China
actually treats its virtual monopoly over rare earths as a weapon to wage
economic warfare. Former Chinese patriarch Deng Xiaoping's maxim from the
early 1990s that "the Middle East has oil, while China has rare earths"
is a giveaway of Chinese strategic planning to attract maximum foreign investment
into its own high-value-added industrial sectors by rendering rare earths
scarce in the rest of the world.
China's beggar-thy-partners policies have
an underlying narrow self-interest that is zero-sum in tenor. According to
NYT, China's industry and information technology ministry has emerged as a
bastion of economic nationalism and is formulating blueprints for Chinese
manufacturers to grab 'global leadership' positions. Summers took a swipe
at this very troubling aspect of Chinese behaviour while addressing the Indian
business community in Mumbai earlier this month. He praised India for not
being motivated by mercantilist capitalism or exports, traits that are trademarks
of Chinese trade, currency and investment policies.
Since the global downturn of 2008, China's
image-managers have consistently projected it as a saviour of the world economy
by virtue of its unrelenting growth that provides best value for money to
multinational corporations and shores up demand for raw materials and fossil
fuels. The notion that China is an important engine of world economic recovery
has been trumpeted ad nauseam by Premier Wen Jiabao at international forums.
But the downsides of China's growth juggernaut
vis-à-vis the positive externalities of India's relatively slower but
still significant growth chariot are being laid bare. It is India, not China,
which offers a silver lining on the edges of the economic darkness characterised
by a slumped demand for consumer goods. The flooding of the West with easy
money and the corollary excess consumption and financial misdemeanours were
facilitated by unnaturally low domestic consumption and high savings rates
in China. Getting China to shift resources from state-favoured investors and
producers into the hands of ordinary consumers remains a central rebalancing
task that has not been achieved despite Beijing's self-promotion as an indispensable
catalyst to nurse the world economy back to health.
India, on the other hand, is showing that
its consumerist growth is structured in such a way that the benefits accrue
not only to its own growing middle class but to foreign producers of goods
and services who are desperate for a demand revival. It would be ideal for
worldwide economic recovery if China reformed its economic structure to resemble
that of India, and not vice-versa.
The Beijing or Shanghai Consensus does stand
out above the nascent Delhi or Mumbai Consensus in rapidity of poverty reduction.
But from a global perspective, the Indian example spreads gains globally while
Chinese neo-mercantilism symbolises a foreign policy of pauperisation and
confrontation with peers.
Responsibility is the flip side of power.
China is currently more powerful than India but far less responsible. In the
long run, this could make all the difference as to which Asian giant ends
up as a world leader with greater following.
- The author is vice-dean, Jindal School of
International Affairs
