For a number of reasons I follow emerging economies, the biggies being China and India. The BRIC countries (Brazil, Russia, India, and China) generally get lumped in together as the "next big thing", but they are at very, very different stages of development and more importantly are taking different paths. You can easily think of software security as an emerging discipline - despite a lot of talk and papers about Saltzer and Schroeder, we really don't have this stuff figured out.
In a tale rich with incongruities, the Communist-run government of West Bengal State invited the Tata Group, a symbol of Indian capitalism, to set up its plant in an area called Singur. It acquired 1,000 acres from farmers on the company’s behalf.
As the project advanced, some farmers who had sold their land demanded it back. The main state-level opposition party, the Trinamool Congress, led protests demanding that the land be returned. Most people sympathetic to Tata accused the opposition of inducing the farmers to protest, while Tata’s critics said the farmers had legitimate grievances.
The issue simmered for months. But in recent days, protesters began surrounding the plant, blocking roads and preventing Tata workers from reaching the plant. “The existing environment of obstruction, intimidation and confrontation has begun to impact the ability of the company to convince several of its experienced managers to relocate and work in the plant,” Tata said in a statement on Tuesday.
The halt to the plant has caused many Indian business people to warn of a chilling effect on investment in the country. It is also unclear how Tata will be able to keep the Nano’s cost so low, since part of the affordable price reflects the company’s savings on the land in Singur.
There is a fundamental asymmetry between state and markets. It is easier to create markets than it is to create state capacity or to prevent its deterioration. Creating markets is a lot about letting go, establishing a reasonable policy framework, and allowing the natural hustling instinct to take over. In other words, hustling is the natural state. Building state capacity, on the other hand, is quite different. It involves overcoming collective action problems, mediating conflict, creating accountability mechanisms where outputs are multiple and fuzzy and links between inputs and outputs murky, and contending with the deep imprints of history. In Weber’s memorable words, building public institutions is like the “slow boring of hard boards”.
In that light, China’s task of improving its private sector seems easier to accomplish than India’s task of arresting institutional decline. So, while China and India can probably both count on more years of high growth, the odds still favour China pulling off that feat than India. That, and not just the meagre medal tally, should be what India mulls over after the Beijing Olympics.
It's easier to liberalise a functional state than it is to functionalise a dysfunctional one, of any ideological stripe.
