Using China's mercantilist template as a development model is not the answer for India. One cannot argue with the leaders in Beijing and their ability to manage top-down for their form of mercantilism works at the macro level: China's massive foreign exchange reserve growth is a reflection of an undervalued exchange rate, loan subsidies to its export champions and import restrictions to protect its nascent industries. But if it cannot continue without serious American political backlash in the aftermath of the Great Recession of 2008-09.
The liquidity resulting from China's reserves has been funneled into in a real assets-- we see this in the real estate bubble which will implode one day; unarguably, China is infrastructure ready and has built a world class project management culture --by evidence of the Beijing Olympics, the Shanghai skyline and the myriad "special economic zones" and open coastal cities-- but the continuing sterilization of its monetary reserves cannot go on without ensuing intervention from other countries. In a zero-sum framework of global economic growth, China is screwing its biggest customer by not permitting it to adjust to the disequilibrium in its economy.
In addition, the People's Party Manadarins will face the task of providing a safety net for the citizens. China's economic miracle has been made possible by the tireless toil and sacrifice of its migrant worker; these struggles have been skillfully shown in Fan Xiling's documentary Last Train Home. How long can they be expected to keep going, especially if the target markets fully de-leverage, consumption recedes and the production from the world's factory is no longer required?
Whether one subscribes to the classical liberal view of Peter Bauer or is an adherent to the welfare analysis of Amartya Sen; whether one prefers Paul Collier's top down approach or William Easterly's bottom up focus to economic development, one would have to be in complete denial that economic liberalization has been beneficial to many, specifically the aforementioned middle class in urban centres.
However, most in the country remain desperately poor and are in a worse state of affairs despite liberalization; they have been left off the growth track and in the zeal to placate a corporatist model of development, there has been (in the words of David Harvey) an accumulation by dispossession template followed in rural India which has not benefited society's underclass. The Maoist rebellions in India will not magically go away. Current Indian Prime Minister, Manmohan Singh belatedly admitted:
"We cannot overlook the fact that many areas in which such extremism flourishesare under-developed and many of the people, mainly poor tribals, who live in theseareas have not shared equitably the fruits of development. It isincumbent upon us to ensure that no area of our country is denied the benefitsof our ambitious developmental programmes ."
This is a positive step yet the fear is that the focus will continue to be on the terrorist activities of the Maoist rebels rather than on the narrative, which Sudeep Chakravarti, author of Red Sun: Travels in Naxalite Country, argues should be focused on the failings of the nation, where the disconnect between urban and rural India on matters political, economic and social has given rise to the manifestation of extreme-Left wing movements amongst the rural poor.The reaction from India's media has centered on shame and excuses but some good can come out of the Commonwealth Games fiasco: here are two thoughts that are worth noting from two different worlds: business and humanities.
The first, again from Harvard Business School’s Michael Porter, on the behaviour required of its political and business elites:
“India needs to learn to be more self-critical, more open, and much more honest about what needs to be done.”
The second from Quentin Skinner, Professor of the Humanities at Queen Mary, University of London, citing Cicero in describing the values that potential leaders require is aimed squarely at the country's political class:
“a willingness to subordinate our private interests to the public good; a desire to fight against corruption and tyranny; and an ambition to reach out for the noblest goals of all, those of honour and glory for our country as well as for ourselves”