False Economy - Alan Beattie [142]
Another great advantage China had, by historical accident, was its business-minded diaspora, particularly that in nearby Hong Kong. We saw above, in the chapter on religion, how Chinese minorities often made up the entrepreneurial class in countries across East Asia. China may have been suspicious of Western influence, but Hong Kong provided a source of finance and business expertise that had a familiar—indeed, sometimes a family—face, especially after the former British colony reverted to Chinese control in 1997. The foreign direct investment that started coming into China in the 1980s, after the first moves to liberalize the economy, owed much to personal links. A survey of Hong Kong subcontracting operations in China's Pearl River delta between 1986 and 1989 revealed that over half had exploited either family connections or were investing via companies already present in the area.
China was also fortunate enough to have good models to follow in the region, giving it confidence that it could liberalize its economy while retaining political control. Taiwan, Singapore, and South Korea had all managed to enrich themselves while being run by autocratic regimes. As we saw in the previous chapter, all had the powerful bureaucracy typical of East Asian countries, and China's bureaucracy had long predated communism.
The administration of Chinese law is opaque and can be heavily influenced by the interests of the local party, as anyone trying to get a Chinese court to close down counterfeiting operations could tell you. But Beijing does not violate property rights in quite the same arbitrary large-scale fashion as Moscow. Foreigners invested in China complain about the thickets of regulations and bureaucracy, often designed to help Chinese companies at the expense of overseas businesses. But nothing in China has quite gone the same way as in Russia, where foreign oil companies have been unceremoniously kicked out. China has a way to go on the institutions front, but as we saw in the previous chapter, Chinese corruption does at least appear to be of a relatively benign form. There remains only one party to bribe.
And so to India. In theory, India ought to be able to do everything China can and more. Like China, it has a long tradition of civil service, in India's case inherited from the British empire. It also has a reasonably good history of being a market economy. As we have seen, the British East India Company went there to trade with thriving local textile producers before it decided to run the place itself. British imperial rule may have stunted and distorted the Indian economy, but it did leave it with reasonably good infrastructure, notably in the form of a fairly extensive railway network. And, of course, India is a democracy.
Yet it remains substantially poorer on average than China. And while India's recent growth rates have been impressive, they are nowhere near high enough to catch up with its Asian rival, not least because it has done much less to upgrade its infrastructure. India's recent experience suggests that democracy and bureaucracy can be ambiguous legacies, especially in a society riven by social caste. Political pluralism can mean deadlock. And a bureaucracy without strong political leadership has a way of looking out for its own interests and resisting reform. India got around to undertaking its own package of liberalization only after forty years of independence and under the imperative of a financial crisis.
Despite its relatively free press and open political system, India displays some of the