The Pursuit of Growth: An Eastern Perspective

Readers may remember my earlier post The Pursuit of Growth: A Western Perspective discussing ramifications of globalization on the developed world. Globalization although contentious in certain aspects has definitely been instrumental in lifting millions out of poverty. There is also little doubt that some of the developing economies have reaped greater absolute rewards from the process. However, westerners with right attitude need not dread them and realise that the starting point for emerging economies was way behind their own individual mark. Also, even the most optimistic projections do not expect emerging economies to surpass per capita level of wealth enjoyed in Europe and America.   

Recognizing the growth potential in the emerging world, Jim O’Neil an economist at Goldmansachs coined the term BRIC (Brazil Russia India and China) in 2001. The acronym gained political mileage resulting into BRIC summits (starting from 2009) for heads of states to meet and discuss future strategies. In this article I want to present my analysis about the recent growth in the BRIC nations. The phrase “Eastern Perspective” in the title indicates that the discussion is formalized on my experience in India and readings about China. The new wealth and growth in certain countries have raised questions and issues warranting scrutiny at various levels.

China has surprised a lot of pundits and commentators through phenomenal growth in previous decades. India after the reforms in early 90’s have also reported healthy growth rates and it is specifically believed that with proper policies there is a lot more to come. As mentioned earlier and cited frequently, growth has lifted millions out of poverty but fact remains that “millions” form still a small fraction of the population living in these countries. It is clear that as a country starts to develop, the fortunate already having access to education, health care and other amenities become early movers to reap advantages. The rise of an affluent upper middle class and recent rise of billionaires in all the BRIC nations re-certifies the trend. Historically in the west also people at the tip of the iceberg benefited the most with industrialization in the 19^th Century. People like John Rockefeller, Andrew Carnegie, and Robert Bosch did leave the ordinary masses way behind in accumulating fortunes. However, western countries with manageable population sizes, impartial policies and philanthropist visionaries were successful in establishing civilized prosperous societies. For the countries now seeing “healthy growth rates” it is important for governments to include masses in the growth process. Failing to do so would lead to an alienated section of the society with a lot of despair. BRIC nations feel proud about the number of Billionaires they possess in the annual Forbes list. However, whether the modern day “BRIC-llionaires” match the greatness of a Carnegie or a Gates is to be seen and would test the character of these societies.

BRIC nations have numerous challenges like citizens expecting quality of life, fair justice and access to good health care and employment opportunities. Following fundamental issues remain at the core of most the challenges:

·         Nations already have huge populations living in poverty

·     Weak political and social institutions (recent problems in Nigeria after the discovery of oil shows the importance of public institutions)

·    Most countries are seeing only a particular sector driving growth. The advantages from exploiting Russia’s natural resources and Indian services industry may not necessarily spill over to all other sectors of the economy immediately. However, I hope this to change in future

·        Increasing mistrust towards governments plagued with corruption scandals

Irrespective of the well-known problems listed above, most probably these countries would continue to gain importance in the world economy. The main test is about the growth path, whether the countries chose to grow in a controlled responsible manner (sharing the pie responsibly) or continue with the existing trend leading to social divide and unrest. With the latter option the world is bound to see a transition in which the largest economies in the world (likes of China and India) may not be anymore the richest, prosperous and best places to live. This would also change the world dynamics as until now it is preconceived that the biggest economies are also the richest nations in the world. Recent turmoil in the Arab world which was described as an uprising against authoritarian rulers, I feel had the underlying social divide as a major driving force. Of course the governance methodology had its major shortcomings but as being seen in Pakistan, an irresponsible/incompetent democratically elected government might face similar consequences. Not limited to the developing world, the “occupy-wall-street” movement in the west which might not have met all its desired objectives but did remind democratically elected governments about a problem brewing in the contemporary world. Great scholars of our time including Nobel laureates Amartya Sen and Joseph Stiglitz have been critical of a mad “Pursuit of Growth” limited only to numerically measuring the Gross Domestic Product (GDP). This practice has unfortunately been readily adopted in the developing world and an example is seen in the recent pressure Indian government came under after “growth rates” have dropped to the 5% mark. Agreeing to the grates I feel lot of countries need to adopt an inclusive growth map else a huge social divide would make our habitat too dangerous to live.

The rise of countries like China and Russia also pose an interesting aspect for the world and democracy to an extent. Normally in media and discussion forums the world is mostly described through a western perspective. Basically, the concept of only democratic free market economies being successful is widely propagated. This notion is being challenged by the rise of China and to a lesser extent by the hiccups observed in the Indian growth story. It is worth to be noted that already the second biggest economy in the world is not a democracy with hardly any chances of a transition in near future. The argument of a rising middle class derailing a communist system is still to show effects in China following state driven capitalism. In very near future world’s largest economy would not be a democracy, which may cause some rule books to be rewritten.

It shall be interesting in future to note societies’ attitude towards governance. Is a fragile coalition government elected democratically better than an authoritarian state? Democracies modeled on western institutions have a lot of expectations primarily on the basis of its past successes. A democratically elected government in a society with huge extremes, I feel may not be representative and can easily attract comparisons with a principally inferior communist system. Therefore, I see huge societal extremes as the biggest threat in the times to come.