Download India and China: Contrasts in Economic Liberalization

Paper prepared for International
conference on "Liberalizing
India's
Economy: The Cultural
Context and Political
Constraints,"
Centre for Indian
Studies, University
of Hull, 20-21 NOV. 1993
INDIA AND CHINA: CONTRASTS IN ECONOUICLBERALXZATION?
bY
Deepak La1
James S Coleman Professor
International
University
Development Studies
of California,
Los Angeles
UCLA Dept. of Economics
Working Paper #706
December 1993
Address for correspondence:
2 Erskine Hill,
London NW11 6HB
Tel/Fax:
081-458 3713
(till
of
Sept. 1994)
ABSTRACT
The paper
India
compares
in historical
than
differences
begun,
their
speculates
in
on the
the
uncertainties
conditions
as well
as in
course
of
dismantling
are
markets
cultural
over
attitudes,
liberalization
perspective.
It
under
their
reform
the
state
enterprises.
it
China,
because
created
is
argued
of
a greater
were
It
which
though
has
reforms
future,
underlined,
which
the
in
that
a more
popular
and
similarities
and results.
loss-making
unlike
China
greater
which
extent
in
in
finds
of
may now be irreversible,
in
economic
initial
likely
political
for
the
motivation
require
change
recent
and cultural
countries
reforms
the
also
both
The
Indian
marked
consensus
mandarins.
I
M
JEL Classification:
F4,
F13,
Hl,
N35,
053,
P27,
P41,
P52,
Zl
1
Judging
from
reports
economic
liberalization
together
account
the
economic
could
them
for
the
should
Great
judging
growth
bankers
appraising
there
is
emerges
the
economy
pressures
the
cultural
economy
less
the
up China
judgments
In
the
two
important
have
spent
on the
of
this
constraints
task
caveats
two
--
it
these
I undertake
in
a
whereas
at
its
the
over
on paper
the
end
repressed
differing
countries.
politiIn
on liberalizing
see whether
that
the
reader
much of my professional
Indian
economy,
Most
of
open
to much more
I can claim
generalizations
the
in
can
various
reforms
unshackling
the
take
of
what
of
complete
and Mexico)
seem that
initiation
in
be the
could
with
being
conference
to
would
and like
and
assessments
it
difference
reformers
course,
Chile
If
assessing
India's
may be useful,
currently
therefore,
to
fashionable
valid.
comparative
the
as the
which
countries
indeed
and which
successfully
and political
subject
the
Secondly,
India
in
shoals,
the
these
the
of
people.
would
stay
era
China,
economies,
This
to continue
since
and
billion
Asian
markets
ability
of
as a mirror
are
emergent
to be the
India
5.3
(e.g.,
as well
going
completed,
countries
many rocky
The main
impinging
world's
experience
growth
bright.
the
is
giants
much smaller
the
China's
chances
context
--
of
reports
spectacular
the
are
cal
about
Asian
successfully
American
press
1990s
mass poverty.
so-called
no doubt
197Os,
of
are
through
from
as its
2 billion
eliminate
Latin
the
two great
miracles
to
journey
Again
the
press,
But will
from
decade.
the
underway
be able
be an arduous
hold
over
Transformation.
what
of
of
reforms
repeat
in
serious
differences
should
life
in
the
my mind
comparative
in
there
than
than
those
statistical
past
a casual
made about
China
are,
First,
mind.
on the
to be no more
in
paper,
bear
working
and judgments
doubt
this
however,
whereas
and present
China
watcher.
therefore
concerning
bases
of
remain
India.
of
forming
I
some objective
judgment
about
so marked
even
most
of
that
national
income
certainty,
detail
two
when
we try
to
the
hate
1960s
to
This
in
done
caveats
their
strategies
reasons
for
outcome
has been
in
future,
by attempting
There
giant
of
the
are
Asian
Both
income,
there
obvious
in
that
of
mind
we can proceed
the
"independence"
in
the
late
and economic
outcomes.
two
Having
to her
made
officials
be possible.
travellers
to
our
to
China
One would
initial
comparative
it
194Os,
has
their
the
rhetorical
I.
DIRIGISME
tries
the
.
0
respective
to
and what
to peer
question
in
attempts
followed
The third
task.
conditions
The second
stages
countries.
greater
traveller!
out
the
any great
can be deceptive.
type
are
and growth
with
might
made by other
appearances
and the
size
up in
talking
judgments
fellow
countries
performance.)
sets
reform
the
question
and after
reasonable
two
be answered
this
The first
some striking
Eauilibrium
similarities
both
were
stability
in
so that
and
with
was extensive
the
marked
at
relatively
growth
(in
delin-
the
into
which
economic
the
forms
stagnation
Lloyd
past.
in
1940s
--
--
the
The stagnation
Reynolds
which
population
felicitous
leads
history
and recent
"independence"
modest
growth
the
distant
see Elvin).
the
intensive
in
more
economic
(on China
of
cannot
on relative
1993)
the
the
paper.
countries
signs
China
judgments
to answer
economies
cultural
Hindu
to know
3 parts.
at
of
the
a different
is
subtitle
that
1970s
these
the
feel
and
two countries
eate
and
in
concerning
(We take
1985,
to remember
Bearing
in
judgments
has
be merely
development
(in
performance
questions
India.
form
one might
one only
in
with
to
China
and academics,
basic
and population
as compared
visits
But
the
economic
to
the
of
was in
two
my m
per
of
phrase)
a secular
the
by centuries
subtitle
growth
of
capita
the
but
increase
past
no
in
per
capita
having
income.
made near
respective
In
such
over
the
food,
as "an
--
there
clothing,
constrained
traditional
industry
dependent
crude
upon
ores.
economies
India
charcoal
and China
which
maintained
peoples
which
through
different
These
(1988)),
two
countries.
for
millennia,
has
a remarkable
millennia.
tively
(LA
These
stable
(1988)
differences
the
Indian
of
part
Whereas
whereas
shown
envy
in
Secondly,
were:
caste
succeeded,
cultural
India
has been
been
political
political
differences
13.2)
the
system,
did
economies
in
both
decentralized
and
the
the
centralized
not
however
prevent
and what
The main
relatively
were
is
social
autarkic
in
reached,
creating
trap"
living
But
this
(for
for
their
was achieved
organization.
compositions
to
under
of
of
and working
society
unity
form
true
of
ethnic
has been
countries.
was also
and political
homogenous
(Hicks),
run
equilibrium
a multi-ethnic
instability
type
long
ages,
time.
differing
ethnically
the
frontier
middle
level
the
stability
the
(p.
dominant
industries
land
a "high
at
land"
raw materials
smelting
the
the
calls
world
in
This
for
an average
the
is
is
toll.
by
Elvin
the
working
inexorable
yielded
of
of
on organic
metal
their
productivity
land.
once
which
economy
has been
substance)
reflected
has
Revenue
Ch.
Most
economy,
what
forms
China
had
--
in
countries
An "organic"
supply
factor
their
which
was the
differences
fixed
take
the
Their
transport.
will
by
this
fuel.
an organic
India
see La1
and
to both
environments
dependence
(a vegetable
in
returns
Both
a universal
by the
Hence
diminishing
is
part
placed.
bounded
and historically
large
the
had been
--
and
in
to
economy
housing
inevitably
was due
adaptations
an economy
globe
turn
economies
by Wrigley
5).
in
perfect
"organic"
defined
for
This
of
the
par
excellence
a remarkable
degree.
norm
in
India,
imperial
the
I call
cultural
control
village
emergence
predatory
China
rule
of
for
rela-
states
and political
as embodied
communities,
in
in
a polity
which
encompassed
the
more
has
the
"which
only
relatively
when
the
has
brief
However,
equilibrium
based
factor
the
capital
lar
coal,
neither
India
of
both
in
transformed
intensive
feasible.
This
growth
that
economy,
energy
development
those
growth
had
which
the
and free
and
had
shown
could
replacement
trade.
of
But
the
in
type
even
by the
of
particu(r
were
for
entirely
pp.
5-6).
had
become
of
intensive
within
an organic
system
by his
form
would
always
still
constraint
a
provided
prospects
head
the
mercantilist
land
to
(Wrigley,
be generated
the
which
per
from
"high
fuels,
"The
49)
next.
utilization
mass poverty
qualitatively,
the
was the
obtained"
eradicate
to
bounded
engine,
with
p.
no longer
by fossil
output
times
an "organic"
energy.
in
in
(McNeil1
their
from
with
a
to modern
from
is
steam
previously
could
was different,
through
the
in
regimes"
centerpiece
mechanical
output
which
did
represented
of
of
aggregate
Adam Smith
"capitalism"
remain
the
Its
--
one dynasty
productivity
land.
supplies
from
Secular
--
West
compared
mandarins
Sung
escape
rarely
(1988));
by Confucian
from
as the
only
state
between
could
whose
stored
the
unlimited
growth
moving
(La1
from
disruption
or China
production
through
run
politically
of
economy,
of
--
was transferred
without
stock
virtually
of
binding.
Whereas
growth
of
evidence
for
either
that
technological
ally
Heaven
rule
and
an absolutist
market
periods
energy
in
united
of
trap"
mineral
national
fragmented
Imperial
control
remained
Mandate
regionally
under
social
integrated
China,
been
subcontinent
centralized
relatively
fixed
usually
determined
the
India
there
type
occurring
Smithian
is
variety
little
historical
evidence
of
before
the
era,
China
occurred
modern
in
ingredients
were
present
for
the
variety.
Thus
McNeil1
summing
for
Sung China,
emergence
up the
intensive
and
of
effects
there
that
the
of
is
all
technologicthe
the
commercialization
and national
states:
"proliferating
regional
--
of
came into
work
had
coke
fired
coke
they
fossil
fuel
limits
to
to provide
the
mechanical
(pp.
for
economy
despite
this
puzzles,
which
goes
its
explanations
96-7)
is
the
the
household
it
following
Confucian
merchants.
The mandarinate's
were
to maintain
upon
industrial
expansion
were
built
(P.
The market
40).
task
the
into
the
increased
new wealth
and improved
power Chinese
officials
all
relate
held
despised
integrity
commercial
system
economy's
communications
had at their
the
the
is
so-called
one set
was charged
emperor
Empire.
expansion,
of
with
'should
p.
31).
and
that
"Systematic
and military
of political
administration"
flexibility,
and
enhanced
disposal.
-
Needham
recognizing
the
were
historical
soldiers
both,
as
Chinese
(McNeill,
both
of
which
there
which
household'"
that
resonance.
the
that
was to manage
Chinese
the
contemporary
the
fact
great
But
mandarinate,
values
expansion,
the
its
a single
physical
of
But
this
broken
ingredients
stagnation
paper.
[which]
formed
the
this
49).
harnessed
was despite
one of
Confucian
(p.
have
the
century
and had been
this
have
the
Hartwell's
11th
would
is
of
by the
before
all
instance
doctrine
as if
restraint
for
the
"official
Empire
because
and Lin
of
of
Whilst
and steel,
which
This
developed
remit
relevant
creation
the
the
Chinese
as all
so persuasively
4.)
could
energy
creativity
beyond
analyzed
iron
The subsequent
medieval
Jones,
implementing
had
later
Chp.
Sung,
the
and trans-
productivity,
which
by land.
development.
which
McNeill,
they
regional,
200 years
engine
under
total
the
producing
steam
required
needed
that
the
notes
This
shows
to develop
set
in
see Jones,
for
economy
local,
(Also
for
growth
the
Adam Smith
and cooking
intensive
to
26)
furnaces
heating
Needham
consider
29).
p,
blast
for
failed
problem
that
in McNeill,
--
increases
specialization
(p.
of
exchanges
spectacular
operation"
(cited
using
market
allowed
advantages
integration
the
the practical
. . . Discrepancies
resulting
both
between
the ideals
of the marketplace
and those of government
were
real
enough;
but as long as officials
could bring
overriding
police power to bear whenever
they were locally
or privately
defied,
the command element
in the mix remained
securely
dominant
. . . in
every encounter
the private
entrepreneur
was at a disadvantage,
This was so, fundamentally,
while
officials
had the whip hand.
because
most Chinese
felt
that
the unusual
accumulation
of private
wealth
from trade
or manufactures
was profoundly
immoral
...
official
ideology
and popular
psychology
thus coincided
to
reinforce
the advantage
officials
had in any and every
encounter
with merely
private
men of wealth.
(McNeill,
pp. 50-l)
Whether
these
determinant
But
it
of
the
should
promote
the
and were
they
of
till
today
current
economic
Communist
system
intensive
growth
attitudes
too
will
be an important
liberalization
under
probably
in
which
China
China.
sought
strengthened
to
these
industry
relatively
under
economy's
which
prices.
efficiency
discriminated
policy
and
the
establishment
the
worst
famines
house
of
in
had
of
(1988)).
Not
surprisingly,
their
drive
resonant
softer
tones
associated
state
by and
enterprises.
cut
any
in
China
This
and
during
Chinese
of
followed
trade
effects
Maoist
as
promotion
domestic
the
back
the
between
was a disaster.
set
similar
link
directly
I
*
Western-
a democracy.
of
also
in
for
by a battery
Both
it
its
large
Both
deleterious
by taxing
present
with
through
productivity.
history,
in
was also
well-known
communes.
human
by most
accompanied
agriculture
of
adopted
model
progressively
much further
also
industrialization
policies
This
were
(La1
framework
and thence
against
went
the
aegis
trade
controls,
relative
hot
the
autarkic
in
and commerce
Fabianism
Soviet
policy
followed
trade
classes
the
though
industrial
countries
exchange
to
by the
found
--
The resulting
this
form
the
and bureaucratic
industrialization
world
the
that
accentuated
political
heavy
of
be noted
atavistic
therefore,
both
continued
attitudes.
Similar
India,
have
future
modern
traditional
ized
attitudes
and
and
on the
systematically
or
But
indirectly.
Great
It
Leap
led
agricultural
Forward
to one of
productivity
for
establishment
of
By contrast
promote
--
a decade.
the
India
is
switched
trying
to
late
escape
industry
that
from
of
liberalization,
is
Chinese
which
is
of
the
data
have
like
the
World
tions
of
between
the
are
sadly
Bank
World
1965-1990
both
dirigiste
system
DeveloDment
capita
income
level
of
per
discussed
These
figures
41% of
imply
India's.
of
the
estimates
in
per
of
to
the
country
capita
As Srinivasan
the
the
foreign
outline
the
for
this
move to
Asian
income
with
the
to
average
the
rate
India
was $370
for
China
incomes
in
rightly
comments:
China
at
its
and
data
over
growth
rate
(1992,
of
per
period.
$350
1965
implica-
Bank
this
and
the
growth
World
of
in
figures
organizations
by looking
GNP and
of
Chinese
international
for
and
to estimates
national
According
1)
trade
two giant
relating
capita
and 1.9%
1990
of
gradually
section,
of
Indian
per
been
reasons
highlighted
and China.
China
controls
by reputable
of
Table
have
The problems
can be readily
income
1970s.
policies
parts
provide
problems
even
for
the
late
various
to briefly
next
By contrast
Indicators,
the
We need
performance
been
that
countries
might
in
relative
India
towards
suitable
up.
which
secure.
was 5.8%
capita
set
much more
Bank
in
by
Revolution.
by statistical
--
in
1960s
moreover,
used
reversed
system"
ecologically
dirigisme,
bedeviled
mm which
been
led-in
GDP and population.
population
World
the
late
had previously
this
A comparison
the
Green
197Os,
they
consequences
economies
the
was completely
responsibility
in
which
termed
From the
policy
"household
agriculture,
to what
This
for
could
The
India.
only
No knowledgeable
analyst
of the two countries
would subscribe
to
this
relative
value
of China's
GNP per capita
in 1965!
A
plausible
explanation
for these paradoxical
figures
is that
the
figure
of $370 in 1990 as China's
per capita
GNP reflects
the
consideration
that
a more realistic
figure
might
soon make China
ineligible
for loans from IDA, the soft
loan affiliate
of the
World Bank.
(P. 5)
have
*
(Also
see Lardy,
measure
of
period,
1950,
income
of both
error,
it
agreement
the
is
Furthermore
there
Appendix
India
in
of
tic
highly
prices
have
in
however
Table
Chinese
made,
of
in
two,
These
population.
and
All
earlier
numbers
ing
et
of
emerging
female
price
structure
al.,
due
to
the
in
broad
"one
of
ring
truer!
estimates
GDP are
censuses
based
on partial
census
are
child"
in
the
price
and
by problems
were
surveys.
in
in
1982
Moreover
by the
population
GDP
summarized
and
China
marred
domes-
magnitude,
compounded
proper
of
Chinese
are
data
orders
30).
where
of
and
basic
of
(p.
GNP at
estimates
the
margin
make any
its
and by Maddison,
provide
1990
from
base
rates
production,
parity
surrounding
are
marginal
or welfare
Chinese
recent
respective
power
The only
the
births
the
under-report-
policy
(see
Zeng Yi
al.)
So what
till
the
cultural
2.6%
1970s
in
output
introduction
between
can we conclude
late
differences
and
from
the
relative
Maddison
estimates
given
any
capita
Chinese
problems
estimating
and
per
poorer"
et
the
its
1949
"The
the
was the
Purchasing
my judgment,
For
Kumar's:
in
reached
country
capacity
can at best
estimating
low
Kumar).
transformation
these
of
is
and the
or of
the
discussion
which
prices
productive
all
problems
1990.
the
made by Heston
Given
comparisons
the
in
dubious.
been
1.
about
consumption
scholarly
Ma and Garnaut,
was very
arguing
between
the
inference
and China
links
inferences
Rawski,
distortions
few
substitution
Nor has
plausible
worth
the
were
(see
most
not
B.)
in
rates
grew
of
was about
of
1950
the
China
the
the
household
and 1986
India
on relative
it
faster
growth
than
of
same.
p.
In
It
This
between
system)
grain
But
would
the
output
appear
was largely
The rate
China
whilst
20).
India.
industry.
responsibility
was 2.6%;
(Srinivasan,
performance?
of
it
performance
of
(before
was 2.9%,
grew
due
growth
1952-78
that
at
in
2.4%
of both
to
agri-
the
India
in
China
was well
TABLE 1
Comparative
Growth
Growth
Performance
Rates,
GDP
(A)
Heston
CHINA
INDIA
NOTE:
POP column
et
al..
GDP/POP
Estimates
4.6
2.3
2.3
1973-80
5.3
3.7
1.6
1980-88
9.2
7.8
1.4
1960-73
2.5
0.2
2.3
1973-80
2.3
0.0
2.3
1980-88
5.0
2.8
2.2
from
Heston
et
al.,
Per
Capita
GDP
GDP/POP ($1
Maddison
CHINA
INDIA
NOTE:
Growth
rate
GDP/POP($),
estimates
as GDP-GDP/POP
Growth Rates
(% p.a.>
GDP/POP
GDP
Estimates
1950
415
2.76
5.06
1973
774
3.46
5.06
1950
399
1973
513
1.08
3.38
1987
662
1.06
3.27
figures
and
pop
1960-73
derived
(B)
% p.a.
from
are
derived
POP in
(A)).
from
Maddison's
estimates
of
10
below
that
of
developing
the
countries
agricultural
than
areas
was about
China
and 0.34
"Though
India,
the
but
the
in
in
rural
dissimilar
--
social
overall
(the
the
their
in
particular
discussing
induced
distortions
it
created
higher
below
weight
is
their
in
in
(1983),
of
for
in
3.19).
urban
areas
similar"
income
in
both
(Srinivasan,
performance
phases
respective
rural
rural
Table
rural
overall
in
1979
inequality
post-independence
well
reforms
Bank
the
of
particularly
was 0.31
(World
terms
to be better
inequality,
systems,
dirigiste
in
appear
was roughly
II.
In
of
large
distribution
political
in
indicators
1973-76
of
and other
and Pakistan)
a somewhat
because
income
industrialization
coefficient
in
report
India,
of
level
Gini
India
different
two economies
terms
Kenya,Indonesia
the
same
overall
Despite
in
Reported
same sources
distribution
countries
NIC's
(e.g.,
growth.
China
18).
Asian
p.
of
was thus
the
not
too
potential!
REFORM
useful
to
by irrational
distinguish
between
dirigisme
in
the
commodity
policy
and factor
markets.
China
Its
complete
198Os,
early
and
has
the
days
foreign
ality
could
India
too
never
likely
suffered
delinking
reluctance
of
planning
dirigiste
system
relatively
more
balance
to change
the
the
to
state
the
reached
systematically
open
of payments
"mixed"
crises,
controlled
and
the
the
its
Indian
one of which
price
markets.
the
were
early
set
in
control
that
price
of
no economic
they
cases
1966
led
to
in
the
were
the
In
exports.
resulted
trade
Though
structure,
this
the
ration-
structure.
In both
against
in
until
that
meant
extreme.
economy
these
comprehensive
domestic
discriminated
of
prices
domestic
Chinese
all
prices
monopolies
resulting
in
in
and domestic
195Os,
many distortions
to have
distortions
world
through
be adduced
marked
between
in
exchange
had
from
the
periodic
first
abortive
11
attempt
at
drawn
out
various
liberalizing
and
convoluted
forms
effect
of
of
promised
in
reforms
the
public
1985-6)
and
the
response
America
in
repression
(La1
for
the
--
by
to be at
than
an end.
buoyant
damaging
"black"
both
effects
economy
entitlements
into
I have
of
charted
crisis
the
--
streams
because
of
at
three
seek
some stage
means:
internal
by
the
to escape
a fiscal
the
in
in
the
till
the
World
Bank
deficit
or external
of
of
are
are
fiscal
the
economic
relevant
crises
determined
the
micro-
financing
tax
Latin
detail
which
in
and
of
greater
them
revenues
seem
are
less
productivity
inescapable
the
India,
politically
But
of
the
Survey
cycle
crises
means
damaged
and
tariffs),
many parts
this
of
taxation.
by
for
dirigisme
possible
and because
of
however,
system
trade
was not
elsewhere,
by past
has been
and more
of
these
of
was undertaken.
in
anatomy
vast
through
growth
dirigisme,
as more
by
is
all
arms
enacted
First
created
when
One means
the
It
bankruptcy
Two points,
of
arise
the
the
embroiled
liberalization
reform
may be noted.
income
they
at
dramas
La1 and Myint).
growing,
be financed
India
have
Economic
burner.
through
many of
QR's
became
long
licensing
But
units"
international
unsustainability
Second
back
did
industrial
government
attempt
threatened
purposes
to
economy.
serious
unviable
were
exports
process
(replacing
on the
forced
was a replay
1993),
of
as the
1991
macroeconomic
the
entitlements
it,
exit
was put
of
1980s.
my present
caused
only
to
(1987,
system
plans,
which
of
trade
a more
crisis
This
foreign
there
These
to exports.
by some easing
("easing
crisis
IMF that
This
the
boost
on,
against
exports.
administration.
and reform
macroeconomic
of
then
bias
early
merely
scandal
the
Gandhi's
the
sector
remained
Bofors
Rajiv
From
remove
subsidization
some modest
of
sector.
to
was supplemented
reform
and
external
attempts
indirect
providing
liberalization
fiscal
the
rise
taxed
economy.
will
emerge.
borrowing
of
the
With
This
or
the
can
.
0
12
levying
of
the
inflation
markets,
internal
foreign
borrowing.
important
capital
non-resident
inflow
was short
capacity
likely
to
democracy
most
basic
ments
created
already
this
an opportunity
for
India,
for
ization
it
industrial
failed
loss-making
central
With
faut
rescind
passions
(but
of
also
all
the
lies
whilst
the
gainers
are
productivity
are
at
But
action
--
ballot
fiscal
crisis,
reform.
This,
the
the
this
apparently
in
a
The
and
at
it
the
entitle-
losers
productivFor
unknown.
when
too
box.
increased
i.e.,
bang"
this
determined
For
and
some stage
tax.
the
potential,
of a "big
this
the
rub.
from
worldwide
in
politically
the
its
continuing
and
radical
with
the
through
payments
increase
America
countervailing
therein
did
mieux,
licensing,
public
China
to
With
inflationary
for
an advocate
is
Latin
the
-and
not
follow
government.
made some headway
governments,
the
been
as in
investors
Indian,
liberalization
option
riches
these
take
rescinding
the
improvement
only
of
of
capital
a crisis
presents
reform.
a minority
to
tap
volatile.
opportunity
are,
from
I have
it
of
by dirigisme
reason
an echo
to
of
agents
as the
involves
results
course
economy,
as a balance
know who they
which
the
leaves
usual
But
sign
shy
window
level
tried
little
This
appears
a small
in
and hence
as economic
crisis
provides
ity
fright.
domestic
So the
and
form)
term
of
as inflation
ensuing
limited.
Indians-NRIs).
repay
unsustainable,
underdeveloped
this,
the
and
to
take
did
in
instability
hence
is
India
(the
political
Given
borrowing
differences
diaspora
is
tax.
price
in
the
enterprises,
aroused
by
and
major
and
para-statals
the
success
dismantling
controls
one of
in
Besides
the
trade
and
Ayodhya
bloated
the
issue,
in
risky
macroeconomic
mercantilist
stabil-
system
of
But
and exchange
controls.
--
jobs
in
in
State
entitlements
the
politically
secure
bureaucracies
nationalized
banking
and
accompanying
the
the
sector.
and
*
13
political
reverberations,
tions
about
Of
been
the
its
the
future
factor
virtually
for
through
China,
addition
the
workings
collectivization.
life
to urban
in
there
require
some delineation
including
also
But
the
led
to
during
the
visitor:
"the
sun"
(cited
world
in
in
this
century.
was not
reversed
till
private
property
rights
ivity
in
agriculture
of
property
of
a State
--
there
of
land
the
a capital
of
Factor
be no factor
markets!
to
of
reported
the
their
(1990)).
--
communes
told
bottoms
output
system
commun-
agriculture
to have
was the
agricultural
Cheung
its
Chinese
establishment
responsibility
(see
in
famine
markets
property
could
and turned
migration,
Chinese
all
tools
for
Under
had socialized
downed
in
a Communist
market.
is
markets
of
which
the
capital
was extinguished
controls
markets
in
bureaucratically
to exist.
Xiannian
reach
jobs
the
factor
market
has
are
in
its
economy
The resulting
land
not
for
as Li
household
in
command
rights
all
land
rural)
distortions
strict
the
With
250)!
Its
and labor
The setback
did
in
effect
simply
p.
sector.
in
Forward,
Evans,
banking
assigning
denouement.
peasants
and
of
labor
Leap
sector,
distortions
no place
is
organized
severe
in
which
market
nationalized
Whilst
of
factor
The practice
extinguishing
Great
(most
market.
a ward
a rapid
market
with
Specula-
to be stalled.
section.
the
together
individual
land
so-called
of
was clearly
everyone
next
seems
commodity
market.
country
ism with
the
the
the
The major
had
workers,
labor
the
India.
in
process
to
--
labor
those
with
the
in
reform
left
markets
by contrast,
to
froze
are
free
market
market
the
worst
one
to
in
the
the
and productivity
restored
Total
1952
level
till
1983
process
is,
thus,
rightly
factor
(Lin
virtual
product(1990)
p.
1246).
with
The start
of
the
the rural
reforms.
Chinese
They
reform
began
with
the
partial
dismantlement
identified
of
the
14
communes
ing
in
system
but
lessons
the
link
"This
did
not
reach
fruition
till
in
1979.
Their
impetus
was established
historical
--
1962,
between
political
(without
of
China's
food
agriculture
is
in
the
debates
in
history
of
China"
cited
will
(Lin
based
(1990a)
important
transitions
'wu nong
be stable)
p.
farm-
stability.
motto
not
the
dynastic
and social
an often
society
household
was one of
and political
capsuled
agriculture,
policy
year
production
wisdom
a strong
thousand
the
in
151).
bu wen'
the
The results
were
dramatic.
The growth
rate of grain
in 1952-78
was 2.4 percent
per year,
only
0.4 percent
above the population
growth
rate.
The per capita
availability
of grain,
therefore,increased
only 10 percent
over a
quarter
of a century.
. . . Between 1979-84,
agricultural
output
and
grain
output,
respectively,
grew at 11.8 percent
and 4.1 percent
annually
while
population
grew at 1.3 percent
in the same period.
Although
agriculture
as a whole still
grew at a respectable
rate
of 4.1% p.a.
after
1984, grain
production
has, nevertheless,
stagnated
after
reaching
a peak of 407 million
tons in 1984.
,.. The
main reason
was the failure
of the government
to implement
a
market-oriented
price
reform
for grain.
(Lin,
pp. 150-l)
What
growth
the
this
rate
Great
ract,
suggests
was largely
Leap
which
"comes
in
Chinese
version
takes
contract
is
informants
sold
(as
various
to
other
resisted
ibility
not
during
it
belongs
forms
of
more
by
contracts"
of
in
perpetuity"
a visit
in
to
the
tenancy
lucrative
the
to what
form
cadres
arisen
if
minor,
This
they
(1986)
"often
p.
66)!
Western
post-1979
after
the
world
is
is
instead
of
fee
(1990),
p.
23).
whilst
of
of
the
that
is
Whilst
the
land
cannot
or sold,
of
of
up with
a grant
simple;
owners
privatization
end[ed]
disaster
cont-
that
can be transferred
initial
Chinese
responsibility
departure
me that
as the
occupations.
(Cheung
the
informed
the
up ground
in
leases
in
household
leasehold
State),
because
making
(Cheung,
1993
have
rise
was the
The clear,
the
marked
of
basis
close
land.
the
result
Its
very
property
that,
the
Forward.
private
the
is
the
land
several
be
so
lease
move
was not
respons-
15
The liberalization
trade
liberalization
unlike
the
strategic
West
should
because
abandon
the
West.
its
pace
of
of
trade
growth
to
from
that
million
2% in
over
lion)
than
of
with
the
"if
Block's
the
trade
Summers
and
China
in
conclusion
with
China
distortions
Indian
3.4%
Lardy
the
of
after
China's
rose
estimate
it
from
is
of
1980
the
in
1978
as meaningful,
(p.
154).
the
Whilst
to
exports
0.5%
in
it
the
may be
with
(U.S.
$65 bil-
Chinese
to 9.4%
three
1952-55
a firm
as compared
concludes
that:
as meaningful
by 1988.
trade
in
1134
Given
to provide
taken
aver-
(compared
discussion
is
the
$18 billion).
much harder
the
raised
perspective
more
(U.S.
to
victory
world
around
1990
party
over
in
of
11).
the
1990
This
1.25%
exported
openness
GDP in
same period"
11).
in
a detailed
taken
p.
in
India
is
5.8%
15 percent,
stabilize
India)
p.
opening
and
of
share
43 million
and
degree
China
over
figures
China
to
of
1978
India's
these
havoc
the
Soviet
Deng Xiaoping's
from
To put
GDP estimates
of
fallen
to
$62 billion)
economy.
(Lardy,
1950s
for
the
that
process
"between
early
850 million
changing
and Heston
to
the
this
with
By contrast
a vis
more
and
with
(Lardy,
caused
excess
had
of
Chinese
in
trade"
a population
(U.S.
the
have
which
12).
calculation
ratio
2.1%
world
1991.
2% in
p.
Korea
for
of
of world'exports,
1978,
to
partial
However,
Relations
vis
self-sufficiency"
was in
China.
consensus
was reasserted
expansion
by geopolitical
political
back
the
largely
factors.
was that
with
to
leverage
set
began
opening
of
(1993)),
The result
(Srinivasan,
noted
Evans
Four.
"declined
1980s"
seems
Gang of
rate
in
policy
theme
share
0.75%
level
political
the
China's
was a high
this
age annual
by economic
China's
which
(see
"motivated
enhance
long-time
economy
the
times
there
China
in
Nixon's
were
and not
to
markets
following
these
Revolution
But
over
reforms,
improved
The Cultural
commodity
1972,
considerations
not
than
of
rural
. . . were
Union
from
of
ratio
the
...
If
the
rose
earlier
the
16
period
if
the
World
Bank
was the
same as in
1950.
secure,
"the
of
averaged
share
over
1970s
and
12%,
(1983)
to be believed
By contrast
trade
only
to slowly
is
in
to
rise
India,
for
GDP fluctuated
--
decline
to
thereafter
a low
to
of
about
the
trade
which
the
data
until
the
early
less
than
16% in
ratio
in
is
more
sixties
10% in
1979-80"
1980
the
it
early
(Srinivasan,
p.
12).
From
a closed
is
this
than
so judged
agriculture,
it
But
India's?
raises
that
that
the
have
countries.
Thus
productivity
in
-1.
reform
ive
the
sector
China,
and
in
taken
as hard
lia's
estimates
manufacturing
of
and
6.44%
the
for
grew
0.3%
only
at
2.4%
in
the
the
per
3.4%
annum
in
the
the
during
first
previous
half
of
due to
in
the
factor
1980s
in
the
(1992),
these
For
the
two
and in
Bank
Iw
little
1965-76,
factor
15 years.
is
an annual
earlier
the
how
was
at
4.63%
(World
total
a
twice
it
total
trends.
that
in
declined
outlined
of
1990
There
Bank,
sector,
sector
shown
about
in
different
World
as indicating
indicate
in
that
state
difficulties
industry
changes
0.62%
agricultural
merely
(and
combined
at
rate
which
India.
all
has
because
growth
23% in
the
industry
rose
but
at
to
65,
statistical
figures
are
as in
frontier.
investment,
with
of
performance
India's
only
feasibility
investment
according
agriculture
grew
Given
decline
place)
taken
1957-
of
more
Once again,
past
China's
remains
export
than
immediate
as compared
so far
for
its
rate
of
(1980-88)
2.3).
the
China
autarky!
repressed
why is
productivity
41% between
era
in
China
of near
cum trade
question:
lies
40% of GDP in
evidence
to
hype,
"spectacular"
more highly
production
The answer
reforms
even
media
its
point
relative
its
the
and that
by a reference
inside
this
despite
India,
performance
lay
nearly
that
an economy
spectacular
of
appears
economy
only
far
it
India
rate
the
collectTable
cannot
be
Ahluwa-
productivity
as compared
in
with
a
17
This
inference
countries
that
is made more
has
phase
taken
place
methodology
terms
of
the
liberalized
1966-68
1991
(Phase
in
III);
place
since
nature
of
the
the
past
higher
regimes):
1991-(Phase
reforms
1970s
order
of
for
India
in
more
I);
1962-66
(Phase
(Phase
III);
1985-mid
Lardy
argues
For
China
trade
be taken
the
Krueger
categories
(Phase
the
two
Using
(see
phases
1975-85
that
should
compared.
history
IV?).
the
liberalization
study
trade
II);
of
trade
is
1956-62
Mid
late
the
Bhagwati-Krueger
(where
trade
performance
to date
(Phase
its
the
the
1968-75
continued);
of
in
countries
and payments
analysis
taken
two
phases
(Phase
a thorough
the
the
has categorized
following
III
similarity
if
developed
trade
11);
the
secure,
in
Srinivasan
details),
has
about
liberalization
in
that
as
reflecting
a transition
from a stage one to a stage two
liberalization
of an import
substitution
trade
regime.
. . . The
previous
direct
monopoly
on all
trade
transactions
exercised
by
the Ministry
of Foreign
Trade corresponds
to Krueger's
stage one
in which
there
is heavy reliance
on quantitative
restrictions.
Stage two is characterized
by increasingly
complex
quantitative
restrictions
rather
than across
the board restrictions
of phase
one.
. . . China's
increasing
use of import
duties,
export
subsidies,
and other
types of price
measures
designed
to buttress
quantitative
restrictions
is also common to phase two.
(P. 43)
as are
the
exchange
various
which
grew
between
domestic
Lardy's
Table
were
privately
India
(see
and
that
products
and
"in
the
it
is
at
least
at
just
less
by
more
For
exigencies
the
of
large
likely
that
many of
socially.
Lardy
the
the
the
1990s)
the
Evidence
believes
value
2 and
of
continuing
the
prices
phase
on retention
(until
China,
international
based
prices
not
a few cases
as the
Given
than
were
by a conversion
the
schemes
1980s.
international
(1990)).
measured
than
entitlement
profitable
La1
motivated
in
4.2,
Moreover,
trade,
import
added
of
reforms
policymakers
balance
of
(p.
in
to
the
payments,
which
exists
for
the
case
was also
was negative"
3 type
as documented
this
energy
foreign
divergences
exports
of
this
of
intensive
export
96).
India
case
Lardy's
were
for
free
careful
in
18
analysis
suggests
that
liberalization
with
in
a state
imbalance
monopoly
prices
97),
characteristic
a surplus
China's
of
domestic
India
and
Both
inflows.
creation
tion
of
the
direct
place
rural
household
village,
with
investment
it
were
two streams
of
entrepreneurs
the
Communist
more
the
-takeover.
India,
members)
diaspora,
have
the
extension
has
of
of
Indian
Shanghai
at best
the
differing
diaspora
of
the
to mobilize
But
the
to Hong Kong
form
largely
sought
development.
consisted
of
promo-
These
because
could
active
foreign
largely
India
the
the
(at
profession-
and Taiwan,
and Canton
hope
M
-
the
and direct
the
migrated
a reversal
so-called
Whereas
particularly
whereas
its
capital
are
China
different
has
whom had
Thus
for
20).
involved
These
They
diaspora
of migrants.
many of
industry.
like
been
is
represent
enterprises.
has
affluent
Chinese
and
again,
inflow
programs
in
the
foreign
China
to
by
of private
Southern
system
international
of
China
which
be
"reforms
(p.
ventures.
could
shows
up of
in joint
there
p.
when
opening
in
(1985)
even
trade"
past
interna-
currency
the
enterprises
Here
1978,
reform
zones
and collective
the
the
foreign
Bank
their
of
investment
of
classes,
part
pre
economy,
and
stimulated
on foreign
in
in
been
in
World
As Lardy
have
wary
the
trade
unplanned
domestic
domestic
balance.
losses
element
nature
in
frequently
currency
capital
al
was in
system
the
its
balance
Chinese
be any
between
trade
of
of
separation
gradual
measured
on the
nature
least
and exports
economy
non-state
its
not
command
responsibility
of
will
Chinese
has boomed.
capital
there
the
planned
the
economic
township
centrally
to
foreign
taken
behind
according
China
special
lay
system"
An important
of
of
the
because
An essential
policy.
the
trade,
imports
currency
trade
similar
In
foreign
"airlock
foreign
occurrence
date.
of
of
foreign
very
value
or deficit
of
this
(an
to
of
the
However,
tional
terms
China
between
currency.
something
was
after
to mobilize
19
short
run
able
to
capital
get
inflows
foreign
equity
entrepreneurship,
crisis
of
the
large
Latin
variance
correspondence
investment
accounts
has
in
effect
property
and
are
seen
ownership
of
not
in
the
traded.
This
This
into
of
though
the
forms
politically
and workers.
rescind
were,
them.
building
the
not
makes
a debt
hand,
given
such
state
This
to
income
direct
Instead,
there
a cordon
sanitaire
is
of
India
in
an attempt
around
fiction
to work
these
in
non-state
with
China.
streams
been
enterprises,
capitalist
market
the
around
nature,
can be
sectors.
But
In both
has
state
and converting
essentially
there
This
of
capital
similar.
income
reasons
the
shares
are
future
enterprises
capital
fiction
rights
the
on the
from
all
place,
de iure.
a limit
streams
enterprises
to
But
may be practiced
puts
from
taken
these
the
ideological
enterprises
state
sector.
recognized
working
property
political
not
where
has
established
25).
up the
entitlements
for
of
to be little
China,
of preserving
a handicap
most
In both
was
accompanying
of
in
private
are
efficient
private
enforced
the
likely
agriculture
property
rights
de iure
differ,
owners
p.
giving
with
is
sector
outside
"private
without
dealing
profitability
who have
(1990)
in
is
social
imperative
individual's
distortion
other
and
there
bundle
also
On the
rates,
a de facto
de facto
so that
fortunately
problems
of
individuals
(Cheung
be removed
de facto
growth
ideological
name"
it
structure,
enterprise
growth
the
assets,
whereby
the
Chinese
the
and
the
brings,
likely.
price
from
China
(1975)).
recent
to be their
process
cannot
La1
non-state
of
of
private
the
meant
rights
is because
but
of
much of
domestic
and bonds,
Apart
this
less
protective
the
(see
The growth
the
deposits
diaspora.
variety
effective
between
its
of bank
and marketing
in
of
form
from
American
distortions
foreign
the
technology
the
large
in
countries,
provide
to
the
their
unviable
managers
a reluctance
them
by,
to
as it
and ensuring
-
20
that
is
the
that
problem
with
deadweight
growth
in
currently
is
primary
tax
describes
In
rest
of
in
over
the
to
both
the
reduced
or eliminated.
economy,
the
economy
countries
the
sustainability
share
will
they
The
and hence
the
progressively
continue
of
hope
the
to hemorrhage
limited
reforms
place.
particularly
the
deadly
pre-reform
collecting
this
than
enterprises
interim,
in
system.
rather
the
a shadow
The problem
fiscal
of
these
the
and cast
are
contained
of
But
fist
that
the
cost
decline.
the
is
in
the
period,
vehicle
--
as in
China
other
because
state
of
the
Communist
enterprises
communist
were
countries.
the
Wong
as follows:
The pre-reform
fiscal
system in China . . . [had]
overwhelming
dependence
on industry,
and a reliance
on profits
of state-owned
Using
enterprises,
along with
taxes for government
revenue.
administrative
prices
that
systematically
discriminate
against
agricultural
and raw materials
producers
in favor
of industry,
artificially
high profits
are created
in the industrial
sector.
These are then captured
for government
coffers
through
a
combination
of turnover
taxes and expropriation
of profits.
(P. 10)
However,
rights
as the
devolve
to a narrowly
state
(1992)
more
p.
the
of
to
the
enfranchised
property,
enterprises,
erodes
process
7).
the
proceeds
(state-owned)
enterprises
private
government
as China
has
base
sector.
in
even
Furthermore,
revenue
liberalization
done,
the
the
gives
away
government
freeing
of
property
themselves,
. . . By giving
effect
if
"effective
its
hangs
commodity
and perhaps
up control
tax
base"
onto
markets
its
over
(Mckinnon
state
still
as:
First,
the price
system can no longer
be rigged
to keep
agricultural
procurement
prices
-- and thus real product
wages -artificially
low so as to transfer
an easily
captured
surplus
to
industry.
Second,
industrial
enterprises
-- owned by the central
or diverse
local
governments
that had generated
monopoly
profits
-- may now face substantial
competition
from each other
(as
amongst
township
enterprises
in China),
from newly enfranchised
private
or cooperative
enterprises,
and (possibly)
from freer
imports.
The upshot
is that
the industrial
profit
base itself
will
tend to decline
as the monopoly
positions
of the old
21
state-owned
industrial
enterprises
are
undermined.
(Mckinnon,
This
of
is borne
the
central,
GNP in
fall
1978
in
greatly
center
bottle
power
of
to
straint
by
international
based
1984),
but
world
prices,
percent
with
fell
from
34% of
was accounted
the
for
by a
With
regional
divergences
internal
local
(as
has
governments
in
industrial-
barriers
factors
one
This
local
trade
to
contracting
industry.
government.
fears
government
governments
non-state
“protect”
to
forced
local
local
macroeconomic
state
total
the
of
caused
their
income"
prices
of
to
production
informant
by the
their
put
;
it)
of
China
on
budget
own inviability
at
90% of
by 1990
(as
compared
of
the
losses
amounted
being
Chinese
with
relatively
state
enterprises
to
$20 billion,
This
312).
beset
loose
of
still
p.
have
prices
losses
(Evans,
that
both
and
price
export
financial
crises
domestic
international
national
con-
imports
43% in
insulated
have
mounted.
getting
has dire
from
on for
consequences
5
for
balance.
inflations
that
deflation.
which
been
enterprises
With
domestic
the
the
of
The
the
on the
macroeconomic
prises,
to
rise
have
prices.
being
1990
periodic
liberalization
faced
monetary
China
revenue
warlordism!
path
"In
consolidated
fall
has
investment,
and
giving
the
with
large
private
resources
of
in
base
central
by the
of
growing,
tax
form
the
the
7)
state-enterprises.
farming-
the
The resultant
its
tax
revenues
inflows
reportedly
economic
of
that
governments
traditional
share
up domestic
are
from
its
estimate
and most
1989,
concerned
in
's
local
to
increasingly
and
19% in
of
al.
and
a form
eroded
ization
et
remittances"
create
the
also
to only
erosion
effect
with
by Blejer
provincial
"profit
This
in
out
p,
are
ensued
This
then
in
unable
were
effect
to
cured
by
choked
off
finance
the
the
traditional
credit
unviable
to
means
the
state
entitlements
of
enterwhich
the
22
Chinese
in
government
conflict
is
between
socialist
state
those
foreign
exchange
movement
This
debate
between
been
settled
at
concluded
easing
for
the
the
recent
Central
that
the
communique
"not
. . . is
a willingness
the
a built
to
maintain
continuing
control
of
other"
one hand,
(Lardy,
p.
But
the
was issued
traded
off
to preserve
deepening
a consensus
reform
but
some
state
enter-
by
to
to have
Financial
(desired
a failure
and
111).
was supposed
meeting.
keen
debate
centralized
on the
reformers
Committee
which
the
thus,
desire
system
on the
and
to
the
exchange
by conservatives
reflected
in
to
convertibility
is,
and the
"a return
commitment
There
reflected
conservatives
(desired
It
is
and foreign
toward
rescind.
liberalization
who seek
a further
reformers).
of
to
This
planning
rapid
prises)
needs
officials
more
monetary
the
unwilling
enterprises.
between
Times
still
the
a agree.
...
officials
to
x
What
is
lacking
allow
enterprise
higher
taxes,
editorial,
too
of
control
for
implicit
in
central
related
rigid
features
to
the
inter-regional
has not
bank
carrying
that
regional
richer
directives"
labor
than
in
still
economy
orthodox
able
energy,
loss
state
the
more
been
fertilizers,
which
whole
central
its
provinces
must
(Financial
pay
Times,
making
and transparent
to
tackle
the
the
public
distribution
public
macroeconomic
problem
enterprises
of
large
budgetary
system,
and those
and redundant
labor
in
bureaucracies
continuing
to
to accept
and
1993).
despite
and
These
go bankrupt,
to obey
16 Nov.
subsidies
more
and
India,
system
the
to
by central
unviable
entitlements
market.
India,
In pre-reform
There
migration).
there
China,
was little
characterize
(as
in both
labor
state-owned
were
Lardy
that
labor
mobility,
and
applied
on rural-urban
still
"in
are
markets
enterprises
restrictions
notes
countries,
the
largely
were
the
much
following
virtually
and
state-owned
23
sector,
most
workers
finished
their
assigned
jobs
education.
growth
ment
that
in
workers
care,
the
of
all
Southern
except
guaranteed
In
the
Workers
were
dependent
pensions,
non-state
enterprises,
employment
--
had
the
job
security
and retirement
organized
in
rigidities
sector
in
and are
state
based
benefits."
their
has
relaxed
This
has
of
the
housing,
But with
the
led
labor
(see
Cheung
are
at
least
market,
their
(1990)
largely
legislation
require-
--
who maintain
market
on labor
labor.
other
enterprises
labor
their
redundant
of
state.
they
leave
for
benefits
the
or
units
privatization
workers
when
work
government
by the
existing
the
to dismiss
the
virtual
jobs
to quit
and a range
the
India,
no right
on their
be assigned
to
permanent
had no right
retirement
China
for
to be assigned
and enterprises
Furthermore,
medical
continued
p.
23-4).
confined
which
goes
to
back
to
m
the
19th
century,
the
government
made in
the
(which
decline
over
time.
entitlements
case,
reform
of
to
is
deal
to
is
in
near
the
the
future,
China
to
to grow),
the
grow
its
it
is
unclear
for
life
is
around
of
in-
has been
hope
relative
implications
some successful
ideal
has
necessary
other
time
probably
a similar
anything
economy
a job
No attempt
(1989)).
As in
budgetary
of
that
this
weight
will
maintaining
whether,
in
confrontation
either
of
these
interests.
India
experience
the
without
usually
with
observed
dirigisme
the
La1
be allowed
given
vested
problems.
yet
process
in
(see
entitlements,
not
can continue
A crisis
crisis
will
commitment
"non-distorted"
the
But
entrenched
political
these
of
itself
these
have
rest
implicit
enterprises
to rescind
incubus
deeply
as on the
and public
India
by allowing
as well
countries
to go by,
reform
to
deal
with
left
it
too
of
its
such
deep-seated
late
after
labor
market.
macroeconomic
crisis.
But
faced
living
such
with
a crisis
with
-- which
its
1991
The Chinese
if
the
the
dynamic
consequences
may provide
the
24
Chinese
polity
the
entitlements
--
Given
may not
the
and
pre-reform
to deal
far
rather
than
in
conditions,
are
only
current
of
euphoria
with
the
growing
religious
in
the
China
but
rates
seen,
the
both
cases
--
ments,
in
appear
that
-in
and
the
argued,
both
trauma,
horror
14).
it
people
such
about
India
the
Of these
as reform
in
as in
the
of
some
terms
progresses,
circles
--
that,
which
the
of
were
is
labor
this
again
are
of
the
question
would
of
reform
and
is
assured
be deceptive.
political
commitment
in
entitleIt
it
m
As we
of unviable
find
the
contrast
ethnic
bureaucracy.
to reform
in
essentially
systems
and
of
though
China,
by various
course
reform
dismantling
Again,
about
beset
can once
path
summarized
that
have
"commitment,
America
involved
technically
they
never
conditions
the
emerged
necessary
from
competence
"(1)
might
easier
which
is
that
wish
the
to
lives
to return"
second
conditions
to
do so
in
Latin
for
American
at
the
top
it,
on in
the
memory
(Economist,
Nov.
to be met,
it
committed
implement
seems
experience
This,
and consensus".
people
qualified
as hyperinflation,
to which
--
of
countries.
phrase,
Latin
course
as well
two countries?
financial
organized
liberalization
in
the
and
the
The Economist
catch
in
committed
But
the
FUTURE
suggest
in
to
in
effects
--
appearances
India,
a dictatorship
in
other
(2)
might
involve
particular
successful
p.
media
obstacles
Recently
in
in
a democracy.
question
reform
despondency
not
have
than
of
conflicts
determined
to be expected!
future
the
politically
continuation,
similar
III.
What
these
differences
its
the
and growth
above,
with
off!
roadblocks
productivity
summarized
be too
the
"initial"
in
will
similarities
liberalization
boost
necessary
to
it,
a national
(3)
of
voters
as a
13,
L.A.
survey,
as there
are
25
undoubtedly
competent
implementing
which
reform.
give
one
Take
Dr.
Manmohan
of
the
logical
can be no doubt
about
classes.
The press
the
of
socialism
are
La1
e.g.,
standing
in
at
important
"nation-building"
the
dirigisme
unintended
in
which
consequence
of
invoked
of
yet
Lal-Myint
to
a variant
ideoof
by no means
commissioned
some form
system
on display.
wI
sensible
on consumer
commerce
long
intellectual
distribution
again
nor
by
of
as well
goods
evidence
(see
The long-
and
trade
was also
--
as some took
nationalism
by NRI economists!
provides
some hope
comparative
the
--
eminently
countervailing
a prickly
the
(but
the
for
of
maintaining
ban
the
party,
report
public
all
of
written
breeding
and many
the
Rao,
political
and
India
Minister
Narasimha
political
a continuing
continuance
the
the
of
In
Finance
because
--
disdain
explaining
is
the
shibboleths
were
however,
the
Bhagwati-Srinivasan
despite
degree
"Nehruvianism"
of
which
the
ruling
largely
1993
report
themes
is
July
--
conditions
two countries?
of
the
to many of
Brahminical
nationalism,
of
termed,
and
third
is
Minister
hostile
Bhagwati(1993))
an official
Prime
were
essential
as was the
the
minds
for
the
commitment
ministers
sector,
and atavistic
in
by both
poor,
and
What
the
This
The old
public
(1988),
This
the
the
deemed
evidence,
umbrage
the
the
first
of
capable
countries.
members
on the
Finance.
to help
of
other
comments
in
of
has been
casts
countries
the
leaders
parties.
commentators
Minister
imports
still
made
as parts
the
what
that,
--
suggestions
to date
opposition
shadow
press
of
both
commitment.
current
Fabianism
all)
in both
the
and
in
about
regarding
of
be said
major
doubts
to pause
reform
Singh,
same cannot
teams
is
condition
to
there
It
cause
the
commitment
though
technical
rise
foster
disorder,
of
for
study
dirigisme
"order",
the
is
and
leads
as economic
One of
future.
the
role
its
over
of
reform.
time
agents
to
seek
For
the
26
increasingly
to
escape
by nationalists
to
economies.
exact
in
Renaissance
previous
well
in
is
essential
not
to
public
this
its
seem to have
on mercantilism
--
case
an almost
--
liberalization,
as I have
briefly
indicated
if
nationalism
is
economic
strength
without
which
originating
from
this
ungovernable
provides
further
in
undertaken
disorder
Hence
adherents
then
become
see that
has been
the
is
to
the
where
what
dirigisme
thesis.
has helped
opinion,
Liberalization
work
of
disorder,
there
net.
The Indian
acquire
China
Moreover
cycle
may lead
from
about
this
it
in
historical
fits
India,
be safe
hype
order
Europe.
section
official
restore
Heckscher's
parallel
post
the
within
still
in
in
alive
the
and
liberalization
the
nation
or without.
will
The media
context.
a remarkable
empowerment
alteration
of
the
in
the
climate
common man against
of
the
many
.
tyrannies
class
of
hearts
relatively
the
the
hankering
shrinking
private
This
attitudes
against
ed seemingly
undermined
public.
If
Augustan
sense
promoting
this
shift
in
in
attitudes
and
becomes
has
style
service
which
the
the
children
attitudes
have
all
politicians
--
are
increasingly
La1
efficacy
paramount
so far
taken
place
towards
the
market.
now seen
(1985)),
of
the
seek
commercial
in
the
also
past
held
by the
ethical
(in
in
to
the
for
in
Even
helped
the
preference
two alternatives
One straw
favor-
been
as "corrupt"
the
in
and many
consideration.
may have
those
Brahminical
which
markets
the
with
to
nearly
are
many middle
Whilst
long-standing
selfish
corrupt
(1975),
gladdens
as compared
their
the
cultural
over
reformers,
consumerism!
many of
and markets
see Pocock
that
the
public
These
as equally
undermined,
by
to undermine
mandarins
--
from
persuading
contempt
"opulence"
liberalization
Western
mandarins
seen
both
is
after
Banias.
the
--
promised
help
selfless
bureaucrats
former
are
should
by
raj
rewards
sector
careers.
the
permit
the
partial
strengthen
wind
is
the
27
very
different
the
reaction
Mandal
Report
Universities
ment's
brighter
of
with
the
implementation
undertaken
to
in
the
reservations
Against
The major
potential
protected
sectors,
politicians,
1991,
caste
is
lesser
prospects
signs
losers
by
alternative
the
continuing
must
remain
are
from
the
the
the
Permit
Raj
source
of
electoral
commitment
which
Whilst
to allow
them
foreign
investors.
Implicit
threats
and
has played
the
liberalization
groups
(e.g.,
as they
more
dire
with
the
Ambanis)
unlike
their
still
older
not
to
are
in
lobbied
brethren
are
well
in
place;
the
made
liberalization
a faster
feel
they
are
as well
field"
they
might
of
finance
process
for
foreign
newer
of
can compete
as
with
and argued
liberalization
for
it,
businessmen
the
.
0
An
without
playing
that
the
rents
known.
reforms
card,
though,
of
the
gradual
anti-foreign
little)
previously
interests
on an "equal
being
policy
on interest.
economic
amongst
Interestingly
have
based
perpetuating
more
to play
populist
investment.
--
politics,
for
much
so the
businesses
in
losers
liberaliza-
look
sector,
ones
politicians
lobbying
no (or
sector
Supreme
future!
are
is
the
the
The interlocking
the
concessions
tion
together
foreign
their
reform
Indian
various
and direct
to
financed
grouping
internal
public
finance
of
questionable.
BJP which
the
and bureaucrats
already
the
in
bureaucracy.
industrialists
generated
private
with
the
Rao govern-
from
that
implement
from
the
on instructions
the
to
evoked
greeted
in
than
desire
jobs
that
suggested
relevance
hopeful
and
report
have
young
Singh's
government
silence
the
India
job
upper
these
V.P.
in
virtual
of
in
of
Minister
reservations
Some commentators
tion
Prime
on caste
compared
actual
Court.
that
trade
business
liberalizain
global
markets.
The most
the
production
recalcitrant
workers
group
in
public
is
likely
sector
to be the
enterprises
bureaucrats.
who are
the
It
problem
is
not
--
28
they
can be pensioned
white
collar
perks
them
to
more
worthwhile
they
want
only
the
the
to protect
officers
redundant,
in
of
industrial
In
the
central
issue
that
DGTD, whose
the
for
the
millions.
the
All
India
respective
traditional
their
incomes
both
became
not
well
is
no work
them,
are
clearly
many rocks
The technical
competence
of
the
the
there
include
draw
has
the
fist.
not
The
ending
of
Evidently,
their
their
not
to be made
the
future.
are
banks,
and
with
job
framework
have
come to
to
like
The government
redundant
and continue
and seek
nationalized
them will
DGTD still
the
They
efficiency
for
seek
casteist
governments.
functions
of
in
the
so that
status!
unions
is
all
pyramids
but
economic
It
They
Indian
number
augur
fund.
services,
job
the
a large
officers
Renewal
in
karamchari
of
does
National
and state
interests
redundant,
there
merely
the
licensing,
though
when
on top.
also
the
the
their
but
thorny
of
of
not
and
the
numbering
base
jobs
para-statals,
the
and perquisites
enlarge
example
through
bureaucracy,
security,
tackled
off
even
offices
even
pay and
perquisites!
There
reforms.
also
a general
the
in
consensus
politicians
and hence
what
little
of
China?
the
there
those
committed
because
Here
we know
India
all
the
in
is
there,
country
for
credibility
the
path
and
the
Indian
I have
reform,
of
of
but
argued
the
reforms
economic
that
there
commitment
must
still
is
of
remain
doubt.
What
This
in
ahead
would
Deng has
raises
the
he envisages
to
of
than
inner
workings
seem (at
least
as long
as Deng Xiaoping
Chinese
polity
reform
question
in
the
reiterated
of why Deng
to proceed.
of
speculate
the
repeatedly
it
I can do no more
his
clues
Chinese
will
continuing
supported
A few
the
on the
government.
is
remain
support
provided
alive)
for
of
Unlike
that
on top,
liberalization
are
basis
purely
reform.
and how if
in
a recent
at
e
*
29
biography
by a former
emerge.
Deng
Communist
for
whom socialism
try
did
party,
a wide
not
"I
for
the
p.
236).
grace
morale
of
details
means
in
but
learn
turned
to
in
the
all
of
from
reading
for
of
economics.
point
opening
how to
to
implement
that
during
was ready
(p.
146).
Evans
reports
him
made a few
of view.
For
the
outside
it,
I know nothing"
and his
He
I have
one of his
history
on preserving
who]
him.
themes
a socialist
prosperity"
to guide
of
Three
thirdly,
. . . [and
a political
Chinese
and
theory
field
Evans
(1993)).
a man keen
members
quest
from
(Evans
prosperity
the
policy
or specifics
its
with
economic
economic
We also
China
secondly
of
associated
subject,
China's
Deng
the
am a layman
on the
I proposed
"was
to
nationalist,
any particular
as saying:
remarks
and
variety
have
Ambassador
as a passionate
the
to
U.K.
world,
but
periods
speeches
example
as
(Evans
of
dis-
thereafter
I-
reflected
history
this
of
vigorous
less
"education".
Sung,
could
China
ruled
by mandarins
reconcile
a market
"the
'readiness
to
condition
for
to
p.
If
party)
debates
history
of
not
have
under
economy
and
Far
seeing
political
economic
provided
the
China
have
and political
he has
stability
the
sphere
seen
seen
read
vision
which
begat?
It
the
of
a
neverthewould
between
and his
liberalization
liberalization,
he did
dynasty
it
economic
if
him with
prosperity
many outside
in
but
an imperial
the
boldly
from
speculation,
Deng
politica
‘S
1
as a necessary
it
as a serious
and therefore
potential
to development"
219).
commitment
assured,
between
go further
pure
experiment
social
Deng's
is
that
contradictions
conservatism'.
(Evans,
is
the
tolerated
threat
It
that
those
in
economic
the
turns
to
reforms
cannot
be said
who want
to
liberalization
in
the
(as
roulette
of
return
long
the
to
still
wheel
as they
are
controlled
rest
the
party.
planning
continues,
in
intra
of
and those
the
The
who want
and given
party
by
disputes,
the
to
past
it
would
30
be foolhardy
to predict
As in
India
there
of both
administrative
regions
and
Those
in
privatized
ners.
their
the
interest
in
must
appartchiks
of
the
Though
fiscal
the
powerful
army
in
they
and
the
from
their
These
constitute
important
continuing
reform.
in
in
to
reform
may seem redundant
This
contrast
much more
to
forms
discuss
taken
effectively
become
part-
to joint
groups
the
future.
of
have
India,
away
has made
effective
to
sapping
China's
relatives
has also
elite
Centre
all
accounts)
Marx.
the
determining
all
reform,
Deng meets
First,
from
personally
which
in
be when
tendencies.
benefitted
(from
will
authority
more
way.
political
it
and
army
now lie
and
the
conflicting
in
a big
outcome
are
have
enterprise
and commerce
the
officials
South
Second,
ment
what
ventures
whose
self-
co-option
of
makes
the
commit-
credible.
any popular
consensus
about
..
reform
in
a dictatorship,
whilst
authoritarian
another
replace
it,
Heaven!
Here,
as in
Communists
to judge
been
tarred
tion
which
did
enough
can be put
to
has been
in
eyes
of
if
the
India,
the
with
atavistic
dynasty
with
the
visible
signs
accompanied
as regards
of youth
them
now around
together
do spectacularly.
sound
into
the
economic
competence,
and
of
in
the
a team
and
-lost
examples
where
--
a dynasty
could
see
the
established
attitudes.
particular
blatant
It
the
Mandate
of
by
the
is
impossible
reformers
rent-seeking
have
and corrup-
liberalization.
the
economists
world,
it
system
cultural
with
norm
people
Chinese
to maleducation
the
replete
the
dirisgiste
current
technically
of
rule
the
has
is
dynastic
conform
generation
The only
history
how far
Finally,
whole
Chinese
suffer
during
are
it
given
very
is
the
young,
difficult
their
from
Cultural
and
lost
a
Revolution.
though
to judge
head,
having
as India
there
whether
has
are
they
been
able
31
Thus
concerned
remain
remains
for
with
immense
certain
whilst
a modest
decent
gamble,
their
differing
politics
insecure.
as yet
nor
slightly
and culture
So though,
if
only
that
it
will
own people,
do not
the
as ever,
they
investment
they
reasons,
could
but
reforms
the
their
as yet
a certain
in
China
of
from
the
provide
from
market
for
long
term
rags
to
riches!
is
foreign
problems
India
two Asian
it
therefore
funds
of
and
dirigisme,
My conclusion
emerging
road
both
potential
be unshackled
be realized.
in
because
ultimately
giants
is
is
probably
not
that,
a
investors,
32
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