In the parlor game of which country gets there first between India and China, there are a lot of different opinions. I used to chat with people about it.
They are interesting countries. Large with similar size populations. Diverse. More diverse than the United States by far. Huge landmasses. They have very diverse food cultures from one end of the country to the other. They each have incredible histories and both have been dominated by outsiders for a period of time. They each are in different parts of Asia and rising. They each have physical beauty. I remember once an Indian businessperson telling me that the southern coast of India is more beautiful than the California coast. Someday I’d like to go there and compare. Each is a fascinating place.
What really is interesting to me is their forms of government. China is communist. It was brutal until a short time ago. It’s getting brutal again. Communists will always communist. I grew up in the specter of the Iron Curtain. Never trust a communist or a socialist for that matter.
India is different. My friends that go to India for the first time say it’s unbelievably overwhelming. So overwhelming that they got physically ill. Not from the water or food, but the total experience. It is a cacophony of different smells, colors, noises, rich people and the most abjectly poor people you will ever see in your life.
It’s also a Prime Minister run democracy. Big difference from China.
Hence, we have a structural difference in the way the countries are governed.
China is a centrally planned economy with no freedom. You get freedom when the government gives it to you.
India is a decentralized free market economy with freedom.
Which country wins out in the end and has a better standard of living for all people?
A lot of my friends say China. Once I was chatting with Illinois governor JB Pritzker (we are not friends). He told me about a trip to China where the Chinese told him the next time he came, the squalor he saw below would be converted into beautiful high-rise buildings. He was totally impressed with that. No property rights in China. The government could do whatever they wanted to those people, including imprison them for not obeying. A communist bank backed by the government would finance the building and people could be commanded to live there.
Looking at the way JB governs, it’s no surprise that he is a China aficionado. No debate. Executive order. Central planning. No room for dissent. One person is correct.
China certainly is “winning” the race right now. It’s easier to do when people have no rights. China has tried to tightly control how innovation happens. China has tried to pick who gets what when.
But, I think India will win in the end. Indian people have individual liberty. That allows for freedom of thought and creativity. It’s messier. It takes more time. But, the society you build is a lot more stable than a centrally planned one.
Remember, the Iron Curtain receded slowly, then collapsed all at once. In many cases, you never saw the recision. Sure, there was Poland and Solidarity. But, you never had the feeling that the entire tide would go out until it did. Sort of like the old saw about going broke attributed to Ernest Hemingway. “How did you go bankrupt?" Two ways. Gradually, then suddenly.” Russia was like that.
We might be seeing the beginning of that in China today with the crackdown by Xi.
The thing I know is that corporations, and people, like certainty. When they invested in China, things were a lot more certain than if they invested in India. The process was streamlined. Fiscal capital doesn’t really give two whits about a lot of things we humans care about, it just wants certainty.
But, that is changing. Quickly. I pulled this from the linked Financial Times article. Ironically, the article starts out chatting about an Indian entrepreneur whose hero was Jack Ma. If you know about Jack Ma, he has been taken to, and left in the woodshed by the Chinese government. It would be like the American government putting Elon Musk or Bill Gates or any number of successful entrepreneurs into hiding and limiting their access to society.
India, long a promising but second choice Asian market for investors, has emerged as a leading beneficiary of the divergence in fortunes between the tech sectors in the two countries. This, along with ample global liquidity and rapid internet adoption, has fuelled a private- and public-market bull run in India. China “had sucked the air out of the room in terms of investor attention and focus”, says Timothy Moe, chief Asia-Pacific equity strategist at Goldman Sachs. “But because China is off the boil, it has accelerated investor attention at alternatives such as India.”
For every $1 invested in China in the last quarter, $1.50 went to India.
If India plays its cards right, it will overtake China in the next ten years. There are thousands of people who have emigrated from India to places like Silicon Valley that have networks back in India that can play a crucial role.
It’s not only about deploying capital back into India. It’s about educating the labyrinth of local government about the benefits of innovation and how to regulate with a light touch to let it happen.
When you consider the benefits of cryptocurrency, India is top of mind to me. There are so many niche markets and places that capital can flow to raise up standards of living in India where crypto can fill the gap since it is too expensive for traditional capital to get there. Crypto lowers the opportunity costs.
Of course, there will be booms and busts as there are whenever free market innovation happens. There will be failures. The media will highlight this because they love to report a negative story and have trouble reporting a positive story until it is so sensational they can’t ignore it, or it fits neatly into the rubric they previously organized for themselves.
I am excited for India. Seize the day!
India used to be socialist like China. Maybe worse. In the years after independence from Great Britain, the first Indian Prime Minister, Jawaharlal Nehru, was a big fan of socialism. 5 years plans, 80 government departments to check on “permission” to grow or introduce a business in India. It worked very briefly. Then it didn’t. For decades.
A prime example is the “License Raj.” You can read a good article about that here: https://en.wikipedia.org/wiki/Licence_Raj
When cell phone took off in Asia, India was one of the last countries to adopt them. Why? Local telecomm unions put up roadblocks. They wanted to protect their jobs dealing with landlines! That was one of the last straws.
Finally in the early 1990s a new spirit changed the direction of India’s economy. The government got rid of the old regulations and introduced many market based reforms. And basically got out of the way. Things started out slowly but then they boomed.
In the medium to longer term a free economy always wins over central planning. Millions of people deciding beats the decisions of a few dozen. Also, communist regimes don’t seem to last longer than 70 years. The People’s Republic of China was founded in 1949.
Interesting insight about Pritzker. There are a lot of would-be totalitarians in this country today.