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Book Review: India and China: The Battle between Soft and Hard Power by Prem Shankar Jha

August 23, 2010

Reality check for Asian titans
Reviewed by Sreeram Chaulia
Asia Times
August 21, 2010

Views about the inexorable rise of China and
India to global dominance have multiplied as the
two storm ahead with impressive economic growth
rates amidst a worldwide downturn. Speculation
that these Asian giants will reconfigure the
international order with their accumulating might
has assumed an air of certainty, a matter of "when" and not "if".

But it is worth inquiring whether the
market-based modernization in both countries is
proceeding in a stable direction or setting up an
implosion. Veteran Indian political economist
Prem Shankar Jha plays the skeptic in a new book
about China and India's abilities to reconcile
economic growth with equity. Combining acute
analysis of the history of capitalism and
domestic weaknesses in the two fast galloping
economies, he offers a caveat to assumptions about their ascent to greatness.

One paradox of China's record economic growth
that Jha highlights is incomplete privatization.
Half of industrial output is still generated by
non-market entities allied to the state. Chinese
Communist Party (CCP) cadres of the central
government and from five tiers of local
government are engaged in competition for
investable resources, leading to a chaotic
misallocation of capital. Rivalry between these
two strata of the CCP has bequeathed a unique
problem of overheating and a struggle to bring
down the rate of feverish investment and GDP growth.

Since "cadre capitalists", who form an
"intermediate class", are part and parcel of the
Chinese government, Jha shows how "every corrupt,
predatory action that comes to light threatens
the stability of the state" itself. He contrasts
this to India's intermediate class of
rent-seeking small and medium enterprises, which
used to leverage the state to the detriment of
big businesses, but "did not become the state".
(p 55) Discontent and stress fueled by economic
changes will therefore, Jha argues, be more problematic in China.

China's central government has often failed to
mitigate exuberant investment sprees by local CCP
authorities. Provincial administrations are
responsible for unsustainable expansion of bank
credit to finance real estate and special
economic zone (SEZ) booms. Jha plots a series of
overproduction and excess capacity bubbles
succeeded by recessionary slowdowns to reveal the
risks to stability posed by China's
cadre-capitalism. The Chinese economy's
inefficient use of raw materials and energy
compared to India is also a harmful offshoot of
cadre-capitalists piling up "dead investments"
and duplicating industrial structures across provinces.

Jha argues that extortion of private land and
excessive taxation of the lower classes has
"undermined the legitimacy of the Chinese
political system in the eyes of its people". (p
108) Mass alienation from the regime is the
reason, the author says, "why a country with such
an astounding rate of growth should be suffering
so much public discontent". (p 128) The
government is aware it is "living on top of a
volcano", he writes, but is determined to stave
off the only genuine solution - democratization.
China is thus saddled with what Jha terms as a
"predatory state that does not know how to reform". (p 273)

Resorting to physical violence to quell protests
has become common as local cadre ensure that
people's grievances are not taken higher up the
party chain. Jha reproduces the judgment of the
purged former CCP leader Zhao Ziyang from 2004
that "what China has is the worst form of capitalism." (p 238)

On the ills of India's economic metamorphosis,
the author uses the refrain of intra-capitalist
class conflict between large industrial houses
and an "intermediate bourgeoisie" that flourished
on artificial shortages. This tussle continued
even after the economic liberalization of 1991,
with myriad product category restrictions and
bureaucratic foot dragging to protect tens of
thousands of parasitic small and medium-sized
enterprises. Only after 1997 did these
intermediate firms shut down or reinvent
themselves to become competitive through a managerial revolution.

The advent of an unfettered market economy in the
last decade has, however, wrought new social
strains. With the poor feeling abandoned by the
state, a Maoist revolt rages across the breadth
of central India. Market-dictated reorientation
of funds from agriculture to industry and service
sectors has triggered a gigantic rural crisis.

State-level governments in India are siding with
the "new aggressive capitalist class" (p 282) on
land acquisitions and wage depression, short
changing the poorest sections of the peasantry,
unorganized sector workers, and indigenous
communities. In Jha's estimate, the central
government's rhetorical ideal of "inclusive
growth" has been undone by "an aversion to any
reforms that will dilute the power of the newly
empowered bourgeoisie". (p 309) He attributes the
uptick in armed challenges to state authority in
India to "the absolute powerlessness of the poor
to obtain redress through legal expedients". (p 296)

Undemocratic China's time horizon to enact
governance reforms for preserving social
equilibrium is shorter than India's, but Jha
contends that India too is facing a ticking bomb.
The latter's democratic advantage is, he
believes, "in danger of being lost" (p 328)
through coalition politics and diminution of the
central government's capacity to manage
market-engendered social conflict. Neither
country, he concludes, is assured of a rosy
future bereft of instability if losers in society
are ruthlessly trampled by the process of capitalist transformation.

A noteworthy contribution of this sobering book
is to offer valuable insights into the multiplier
effect of economic recessions on social and
political instability that is inherent to the
path of developmental "progress" adopted in China
and India. The dangers of regime collapse in
China and intensifying Maoist war on the Indian
state are aggravated when growth engines slow
down periodically and offload more onerous
burdens on the shoulders of the downtrodden.

Jha's healthy dose of pessimism comes at a
critical juncture when Asia's two behemoths are
pressing on with astounding pace on the road to
modernization. His book is a reminder that dark
realities and high human costs lurk beneath the
glitter of spreading market economies.

India and China: The Battle between Soft and Hard Power
by Prem Shankar Jha,
Penguin Books,
New Delhi , 2010.
ISBN: 9780670083275.
Price US$13, 398 pages.

* Sreeram Chaulia is associate professor of world
politics at the OP Jindal Global University in Sonipat, India.
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