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M O V I N G I N T O P O S I T I O N : T H E
R I S I N G P O W E R S ( B A L A A M C H.
El texto habla de los BRICS, aunque Fatima nos hace leer las páginasde India y China.
INDIA: FROM INDEPENDENCE TO A MIXED
ECONOMY
In the early years of colonization, Britain discouraged Indian manufacturing, and instead the British East India Company made India into a subservient provider of raw materials for the factories of the United Kingdom. Then, during the era of the British Raj from 1858 to 1947, Britain invested in a massive network of railways, roads, canals, bridges, and telegraph links to transport and coordinate India’s vast quantities of raw goods for subsequent export, mainly to England. The spread of property rights, the English language, and a broad political and legal framework aided the eventual emergence of India’s democratic institutions. Following independence in 1947, India’s first prime minister, Jawaharlal Nehru, promoted a self-reliant, import-substitution-led model of growth that was as independent of foreign capital as possible. Mistrusting the global capitalist sys- tem, Nehru drew inspiration from the Soviet Union and chose a path of moderni- zation through industrialization. Although India chose a foreign economic model, unlike the Soviet Union, India retained democracy and private property. However, central planning and a large bureaucracy stifled the private sector. Nehru hoped that by following a socialist development strategy, India would eventually be able to compete globally once it had built up enough capital and infraestrucutre. He realized that foreign investment and technology transfer were necessary for an industrializing economy, provided that they served the state’s interests. This Green Revolution played an important role in stimulating auxiliary sectors of India’s economy such as irrigation, transportation, and manufacturing of fertilizers and agrochemicals. Additionally, the Green Revolution shifted India’s subsistence agriculture to a more capitalist model of farming. Critics blame Nehru for trying to modernize by mimicking some of the policies of the Soviet Union—an already industrialized and militarily powerful country. The persistence of state planning throughout much of India’s first four decades of independence reduced incentives for private investment. Despite large-scale capital investment during the first thirty years of independence, India averaged a modest annual economic growth rate of only 3.6 percent, and the annual GDP per capita growth rate was a mere 1.4 percent.
POST REFORM PERFORMANCE
Despite a noticeable acceleration of growth in the 1980s following liberalization and a modest engagement with the global economy, India faced a distortion of trade and aid due to the end of the Cold War and the fragmentation of the Soviet Union, India’s primary trading partner. Additionally, the 1990 Gulf War led to a spike in oil prices, driving India’s balance of payments into a crisis in mid-1991. India’s foreign debt had climbed to $72 billion, making India the world’s third largest debtor at the time. In response to the 1991 crisis, India borrowed $6 billion from the Inter- national Monetary Fund and accordingly was required to adopt a series of reforms aligned with the Washington Consensus. The minister of finance at the time (and current prime minister), Manmohan Singh, devalued the rupee, reduced the num- ber of industries reserved for the public sector, and allowed MNCs to have a 51 percent (majority) share in Indian firms. By 2012, annual exports of software and information technology services alone reached more than $60 billion. Com- panies such as Infosys Technologies, Reliance Industries, Tata Motors, Wipro, and Jet Airways have become familiar names in the international business community. India’s new development model tenuously combines protectionist state-led growth with neoliberal, market- driven growth. India has skipped to a service-driven economy, largely bypassing a labor-intensive industrial revolution. Only a major increase in factories and manufacturing facilities will provide them with employment opportunities. Despite economic liberalization, businesses complain that rigid labor laws make it very difficult, legally, to fire an employee. (qué horror, vaya) Left behind has been the peasantry. Economic reforms in the 1990s included the elimination of most agricultural subsidies, lower prices supports, and encourage- ment of cash crops like cotton that left many farmers at the mercy of market forces. As many farmers fell deeply into debt between 1995 and 2010, 250,000 of them committed suicide—“the largest wave of recorded suicides in human history”. Another pressing issue is a substandard education system that deprives many youth of proper primary schooling.
OUTLOOK FOR THE FUTURE: THE CRISIS AND BEYOND
Compared to the 3.6 percent annual growth rate during India’s first thirty years after independence and the 6 percent rate during the 1980s, GDP grew on average more than 8 percent annually from 2004 to 2011. India’s economy was hot, driven in part by foreign capital inflows. However, India is still a very poor country: its Gross National Income per capita in 2011 (in purchasing power parity) was only $3,600, and 69 percent of the population in 2010 made less than $2 a day. These statistics point to the potential for India to enhance labor productivity, particularly beyond already-vibrant industries such as pharmaceuticals and chemicals. With over 60 percent of Indians employed in low-productivity farming, the need for increased employment opportunities in manufacturing and services is clear.
accurately viewed as one from classical socialism to market socialism. Migrants from rural areas have filled many of the new jobs in export-oriented manufacturing facilities, the backbone of China’s booming economy. China has used its surplus to buy U.S. Treasury bills and accumulate reserves of dollars and euros. In addition, it has invested in property and stocks overseas, most recently in Africa, where it is pouring billions of dollars into new energy, minerals, and infrastructure projects. This buildup of assets has created tensions with lawmakers in the United States and other nations, which will be discussed in following sections. Rapid growth has fueled tensions between the Chinese population and the Communist Party leadership. Hu Jintao, who assumed the role of China’s Paramount Leader in 2002, advanced a set of policies designed to balance the imperative of rapid growth with the goals of decreasing income inequality and protecting the environment. s the effects of the U.S. real estate and financial crises spread throughout the global financial system, demand for Chinese-produced goods fell. Thousands of factories closed in the Pearl River Delta. The government responded swiftly— both through crackdowns on protests and a massive stimulus plan to boost domestic demand. One of the reasons for China’s worsening terms of trade—the ratio of prices of exports to the prices of imports—is the rising cost of imported commodities and minerals. In addition, China’s rising wages and modest currency appreciation are making its goods relatively less competitive in the world. Economic uncertainty following the global downturn has put into relief the contradictions arising from China’s development strategy. Beijing must nurture its own consumer culture and boost domestic spending balanced against efforts to maintain political control and impose social transformation. It must also balance its mercantilist–realist aspirations with the humbling reminder of its global economic interdependence. At the same time, it must adapt to global norms and institutions that it sometimes sees as standing in the way of its own aspirations for superpower status.
CONTRADICTION I: FOSTERING A CONSUMER SOCIETY DESPITE
REPRESSIVE POLICIES.
Its long-term challenge of maintaining a minimum level of growth is as much a matter of expanding domestic consumption as it is protecting trade advantages. Fostering domestic market growth is in Beijing’s interest because selling more Chinese goods inside China will provide a more reliable and stable economic model. A shift to more consumption of domestically produced goods will require costly adjustments to the production and logistics infrastructure of the export economy. Export-led growth has been ingrained with a host of social habits and cultural expectations—not the least of which is modest personal consumption Still, consumerism has been developing in China’s burgeoning metropolises. In the late 1990s, there were only a few malls in the country; there are now hundreds, stocked with high-end Western brands and tagged with equally high prices that are out of reach for many Chinese consumers. Late in 2008, Beijing introduced an economic stimulus package worth more than four trillion Yuan (over $500 billion), aimed at curbing the worst effects of the global recession and expanding infrastructure. Despite some problems, economist Arvind
Subramanian points out that since the beginning of the 2000s, the average Chinese citizen has enjoyed rising consumption. He doubts that China’s economic transition can be stopped: by 2030 China will probably be the world’s economic powerhouse, based on existing data trends. In contrast, structuralists point out that the middle class has been rising on the backs of the rural population. More than 200 million farmers have left the countryside to look for work in cities. Members of this “floating population” are, in effect, illegal immigrants in their own country, excluded from many of the social services available to urban dwellers and often exploited by emploiters without recourse. China experienced tens of thousands of small protests in 2009 by laid-off workers, those whose land has been reclaimed by the government, and employees with a variety of workplace grievances. Structuralists also argue that in its singular pursuit of industrialization the Communist Party has disregarded the health and safety of its own people, as is evident in the spread of lung diseases, poisonings, tainted products, water pollu- tion, and workplace injuries. Three-fourths of the world’s most air-polluted cities are in China, and 70 percent of its rivers are seriously polluted. China has a notorious record of maintaining strict control over public discourse and exercising force when necessary to maintain conformity. The government widely restricts Web access, censors media, and monitors cell phones. Therefore, decades of economic reforms have not been accompanied by much political reform. In fact, the Communist Party sees its ability to maintain economic growth as intimately tied to its ability to maintain political power. These conditions pose important questions for IPE theories. Does economic liberalism depend on political liberalism and freedom of expression? Are development of a mass consumer culture and widespread inequality compatible with the continued rule of an information- shy, single party? China’s president for the next ten years, the party is experiencing infighting between different factions, including the military, Maoists, and reformers. Project found that half of the Chinese respondents believe that corrupt officials are a major problem, and four fifths agree with the statement the “rich just get richer while the poor get poorer.
CONTRADICTION II: MERCANTILISM THAT RUN SON GLOBAL
INTERDEPENDENCE
Other key questions are these: How long can China behave like a mercantilist- nationalist power in the face of global interdependence? Will it be able to engage in currency manipulation, violate the intellectual property rights of MNCs, and build up the military while maintaining its pledge to abide by economic liberal norms embodied in international institutions? China’s mercantilist policies and trade de- cisions are intimately tied to—and limited by —its dependence on export markets. Many Western pundits and politicians accuse Beijing of playing unfairly by keeping the value of the renminbi artificially low, providing export subsidies, and dumping products overseas. This has been a source of concern for many neoconservatives who believe the United States should use its global primacy to spread the values of freedom and democracy.
can be sure that China will be shaped as much by internal changes as by the way it is treated by its rivals in the rest of the world. CONCLUSION Most scholars of IPE agree that the countries we have discussed in this chapter are reshaping the global economy and will play much more pow- erful roles in the coming years. They often disagree, however, on what precisely those roles will be and whether or not they will lead to a more secure and equitable world. Broadly speaking, some IPE theorists fear the emergence of these aspiring powers, while others see their success as laying the foundation for mutual benefit from globalization. Each of the BRIC countries is finding its global niche. Due to its service-oriented growth model, India has been described as the “back- office” of the world. Because of its large FDI in- flows and relatively open trade regime, China has come to be known as the world’s “workshop.” Russia is a major energy producer and continen- tal power with many nuclear weapons. Brazil is coming into its own as a huge exporter of food and natural resources. Along the way, Brazil has faced debt burdens and inequality. Russia has suffered deindustrialization and various social ills, turning into some- thing of a rentier state. India has left too many poor people by the wayside. China cannot shake off authoritarianism. Nevertheless, China has maintained dramati- cally better performance since the late 1970s than the other countries. Whatever the paths each of these countries take, their leaders will continue to face demands for freedom, equality, and protection of Rights.
