Wednesday, October 15, 2008

In the past, China taught India the importance of social investments and economic opening.

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The economic dividends of political reform don’t appear overnight, which skews the time line and confuses the cause.

China has built critical networks, such as power stations & transportation links, but since the mid-1990s Chinese leaders have wasted massive resources on urban skyscrapers that have no economic benefits. And the financial costs of these projects do not even begin to approach their opportunity costs – those investments in education and health China has failed to make. China constructed nearly 3,000 skyscrapers in Shanghai and added 30 million illiterate during the same decade is truly remarkable. The economic dividends of political reform don’t appear overnight, which skews the time line and confuses the cause. But by using nearly every metric, political liberalisation has spurred rather than stunted growth in China & India.

After a long hiatus, China’s leadership has rhetorically returned to a vision of the 1980s – that political reforms should be a priority. Rural China has begun to recover from the neglect of the 1990s, and rural income has grown the fastest since 1989. Consolidating these achievements will require a more substantial undoing of the illiberal policies of the 1990s. How India managed to emerge from its own long shadow of illiberalism offers some valuable lessons. In the past, China taught India the importance of social investments and economic opening. It is time for today’s China to take a page from India – and from the China of the 1980s – that political reforms are not antithetical to growth. They are the keys to a healthier and more sustainable foundation for the future.


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Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist).


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