Atanu Dey On India's Development

Isn’t China Socialist? What about Motivations?

| 29 Comments

My apologies for not keeping in touch. I am afraid that this dry spell on my blog is going to continue for a couple of weeks more. I am on a road trip and the whole of the coming week I will be on the road to Yellowstone National Park. So I thought I would reply to a few recent comments on this blog.

In a comment to the post “Why Socialism Fails“, Rohit asks,

“Isn’t China Socialist? How is it working for them then?”

A few months ago I met an author who is writing a book on China. He was being shown around by a Chinese guide during a visit to China for research. They were checking out a gated residential area where the houses cost millions of dollars. The author asked his guide how it was possible to have such expensive housing in a country committed to communism. The guide said, “In China, we do what we have to do. If it works, we call it communism and get on with doing what needs done.”

That’s good old fashioned Confucian pragmatism. Deng Xiaoping was led by that spirit when he said, “No matter if it is a white cat or a black cat; as long as it can catch mice, it is a good cat.”

China is working because its leaders like Deng Xiaoping have brains, guts, spine, and vision — four things that are missing in India’s leaders in general but are particularly absent in Congress leaders. The lack of brains, guts, spine and vision is epitomized in the person of Dr Manmohan Singh.

See Prof Pranab Bardhan’s quote from Authoritarianism and Democracy:

India’s experience suggests that democracy can also hinder development in a number of ways. Competitive populism– short-run pandering and handouts to win elections– may hurt long-run investment, particularly in physical infrastructure, which is the key bottleneck for Indian development. Such political arrangements make it difficult, for example, to charge user fees for roads, electricity, and irrigation, discouraging investment in these areas, unlike in China where infrastructure companies charge full commercial rates. Competitive populism also makes it difficult to carry out policy experimentation of the kind the Chinese excelled in: for example, it is harder to cut losses and retreat from a failed project in India, which, with its inevitable job losses and bail-out pressures, has electoral consequences that discourage leaders from carrying out policy experimentation in the first place. Finally, democracy’s slow decision-making processes can be costly in a world of fast-changing markets and technology.

Bardhan is a keen observer of India and China. In 2003, I had posted excerpts from an essay of his titled, “Crouching Tiger, Lumbering Elephant.” Worth re-reading.

I recommend another article by Bardhan. In the Jan/Feb 2008 issue of Boston Review, he wrote, “What Makes a Miracle: Some myths about the rise of China and India“:

When I grew up in India, I used to hear leftists say that the Chinese were better socialists than us. Now I am used to hearing that the Chinese are better capitalists than us. I tell people, only half-flippantly, that the Chinese are better capitalists now because they were better socialists then!

Moving on, back to the comments. DK wrote:

It rewards a lack of merit. And since the majority would like to get something for nothing, they prefer Socialism. Of course you know this, but this point should have been brought out in your post.

This is also the reason why India remains, at its heart, a socialist nation. It is very difficult to convince someone with minimal knowledge of economics (which even our most “educated” people have) that competition and choice is good. We are hardwired to believe that there is always one single pie and more competition means that one’s own share of the pie will be reduced.

And the only way, we can challenge this is by making people (and I mean the ones who vote) very clearly understand that Govt. handouts and doles are simply a way of making them progressively and increasingly dependent on these. Again, the typical Indian would rather look at short term benefits rather than long term ones.

Thanks, DK.

Rex’s tongue-in-cheek comment was

“Socialism? But Chacha Nehru recommended socialism for India, therefore it must be good!”

No, can’t argue with that, can you? Chacha Nehru’s shit didn’t stink, if you were to go by what the followers of the Congress party say. India’s misfortune is that his followers continue to rule the land. It’s all karma, neh?

Thanks to Ketan for referring to Ayn Rand’s Atlas Shrugged. Agree totally.

Dinesh Darme started off his comment with

Incentives are ok. But upto a certain point. Just ask what compelled mathematicians, physicist, writers, etc to work much harder, to burn the midnight oil. It wasn’t fame/material riches/facilities. They did so because of their love for specific fields. They were in pursuit of knowlegde.

I think there is a simple misunderstanding here. The words “incentives” and “motivations” are not synonyms. We all are motivated by incentives. That is tautologically true. If the incentives are missing, we are not motivated to get things done.

Motivations can be internal or external. For a person to burn the midnight oil, regardless of the kind of work, the person has to be motivated. For some, the work is its own reward because they are internally motivated. Einstein wanted to know how the bits that make up the universe work. He was not really “working”; he was playing.

Most of us, especially in poor countries such as India (thanks to retarded leaders like our beloved Chacha Nehru), don’t have the luxury of doing things that are merely internally motivated. Most of us have to work, not play. But I do think that in the not too distant future, more people would have the opportunity to play. See my article, “The End of Work: An Essay on the Dawning of the Post-work World”, for a wild-eyed speculation of that future.

What sort of incentives work depends on what you need to get done. For motivating people to blow themselves up and kill infidels in the bargain, brainwash them with visions of virgins and rivers of wine. This will not work for anyone who is not brought up to believe in fantastically stupid ideologies.

For someone who has a few billion dollars of wealth, the incentive to make another million will not work. But an entrepreneur will work ceaselessly to make her first couple of million bucks.

Love, fame, money, affection: all these are powerful motivators but what works for one may leave the other cold. Still, like all living beings, we are motivated by “rewards” whether internal or external. Remove the reward, and you can be sure that the action will not take place.

Any system which neglects to take into account this fundamental truth falters and fails. The carcass of communism is proof that disregarding the fact that incentives matter is fatal.

Finally, Kaffir asks

Atanu, and what are your incentives (in the sense you used the word in your post) that keep you writing this blog?

Good question. I have mentioned this before but I am too lazy to dig up the references. So here it is in a nutshell.

I am a student of economics because I want to understand why India is poor. It bothers me that India is poor because I find the sight of poverty truly distressing. I feel sick to my stomach. Why? Because I empathize with the poor and I vicariously feel the pain. Why? Because I love comfort, I like good food and drinks, I love music and reading and visiting places — all of which I would not have had had I been poor.

I am primarily motivated by internal motivations. I strongly identify with Bertrand Russell’s motivation:

Three passions, simple but overwhelmingly strong, have governed my life: the longing for love, the search for knowledge, and unbearable pity for the suffering of mankind.

[See this.]

Money does matter to me but not too much. I don’t have too much of it, and neither do I have too little. I have just the right amount. I have no personal ambitions.

I write this blog because it is play, not work.

Be well, do good work, and keep in touch.

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  • http://rexzilla.livejournal.com Rex

    Here’s a thought to the ‘but we have democracy!!11′ crowd:
    Democracy boils down to the people being ruled as they deserve. If you have an electorate that is largely dirt poor and illiterate, expect them to vote only leaders from among their midst- the populist leaders who come to power on hare brained schemes like rice @ Rs. 2 a kilo, or by literally bribing the voters to vote for them. China has wisely not taken this route for now- after seeing what chaos unbridled political freedom brought onto the former USSR. The Chinese leaders maintain an iron grip over the country, but not having to worry about elections also enables them to think in timespans measuring decades.
    The one child policy was instituted in 1976 or so, by Deng Xiaoping. Today China’s population is far less than it would’ve been otherwise, whereas India’s population is poised to overtake China by 2050.

    The Chinese are firmly moving towards prosperity, and the people themselves value stability over political freedom for now. Only when a sufficient mass of people have gained basic education and are aware of their rights (after the basic needs have been met) would they think of asking for political freedom. At that point, with a largely educated population, democracy will truly be successful in China.

    No comment on what to do here in India though.

  • http://krishnabhakt.blogspot.com Karmasura

    Again, JMTs only, but the consistent pillaging of India by Muslim invaders, rampant destruction followed by further pillaging of India by the British has given Indians a defensive mindset. We have rarely been on the offensive in any area of life until now.

    To get success I have seen,

    1) There should be a fanatical streak of perseverance to get what we desire in the material world. (of course, +ve desires)

    2) There should be a sense of perfectionism in whatever we do. We just can’t initiate something intrinsically and then leave it and then start another thing.

    In the absence of such intense passion, any system would fail. I think there are more requirements of success, but you have captured them in different words.

    You should have written more on how to infuse such a spirit into the people.

    1) Perhaps NDA’s “India Shining” campaign was one such attempt, which could have built a dream into the people and aspire them to do anything for that dream.

    2) Special workshops for the unemployed and underprivileged helping them to get self employed can also do wonders.

  • Oldtimer

    The people who are eager to claim China to be in their socialist camp are the dogmatists who need a face-saver post-USSR to help them continue to claim the infallibility of their ideology. Take the CPIM, for example. Or India’s Chinese Newspaper Since 1988. They want to claim China as the alleged “alternative development model” for the allegedly exploitative market economics we are allegedly following. According to these fellows, China is the land where Karl Marx is still triumphing, earlier setbacks in the Soviet Union and the Eastern Bloc notwithstanding. Reminds one of Goldsmith’s Village Schoolmaster:

    In arguing too, the parson own’d his skill,
    For e’en though vanquish’d he could argue still;
    While words of learned length and thund’ring sound
    Amazed the gazing rustics rang’d around

  • Ranger

    Damn… I feel so depressed about India.

  • http://none Anonymous

    ” Yellowstone National Park ” brings back my fond memories of my visit. It is really awesome ! Not just that. It was such a humbling experience for me , a frog in the well thence , assiduously fed the myth (sic) “we alone are the best rest all bad uncivilized” blahblah.

    Americans are REally good people. I simply LOVE AMERICA !!

    It is only through Sri.Paramahamsa Yogananda I came to know about Yellowstone National Park.

  • http://none Anonymous

    Apropos various isms , I am past caring.

    As an Indian I am quite convinced Indians are so incredibly divided with too many fault lines & fissures among ourselves we DESERVE to be ruled over by no nonsense Nations around.

  • http://none Anonymous

    For too long we the people have been maligning our Prime Minister Manmohan Singh.

    Why pick on him whose credentials as an individual are above board ? For that matter P.Chidambaram is a person whose credentials are far superior to the rest as that of Manmohan Singh. But both would ineveitably get derailed/thwarted by the rest of the politicians ( NO , I am NOT referring to Sonia Gandhi or Rahul Gandhi) who are abominably unscrupulous & power hungry.

    India is poor ?!? Where did all that overwhelming amount of money come from during the recent IPL whatever ? It would be prudent to deduce its wealth is misused/abused/stagnating. Btw ,do read Bertrand Russell’s ‘ The World As It Could Be Made ‘.

    A letter written by an Indian living in China for more than twenty years in a regional Tamil newspaper ought to whittle away our audacious penchant for fulminating at China in tandem with periodic comparing with & pathetic insincere ingratiating at China.

    He says China is very much like Singapore. Far , far ahead than India. It is ill informed Indian columnists , opinionmakers endowed with tunnel vision that keep harping on so called ” human rights violations “.

    What I find glaringly lacking in us Indians is lack of Committment. Lack of Sincerity. Lack of Synergy.

  • jb

    If you compare a setup which implements the benefits of socialism to the max (china) with a setup which implements democracy/free market capitalism poorly (india), it shouldn’t be a surprise who comes out looking better.

    Even with China, I would argue that the benefits have not all gone to the Chinese but also to a large extent to the MNCs and Western countries. China wouldn’t be an export leader if it weren’t for Walmart pushing for cheap supplies. You have to look at it as Chimerica as notice that the Chinese policies have been to merely take the advantage of global free trade (that is not socialism). So, China is not even a purely socialistic state any more.

    There are obvious advantages of a command economy over a free market economy but I think it still does not negate the likelihood that over a long period of time a well functioning free market is better than a well functioning command economy (market driven efficient allocation of resources). Its not that socialism suddenly works today, its that free market economies are not functioning as they should, in turn making the comparison look good in favor of socialism.

    As Chanos said, China is turning capitalist to protect its socialist elites and OECD is turning socialist to protect its capitalist elites. That sums it up for me.

  • FriendsofIndia

    How dare you not praise India’s super powers, hard or soft. India is the world’s greatest democracy and its only remaining super power. Pax India rules supreme in the world’s economic, political, and military affairs. Our Tata has been lording over the world industries by purchasing such Western properties as LRJ and Corus, and making these former money pits a big success. Our Mittal has been overwhelming the world’s steel makers by swallowing up Arcelor. Our mobile phones have been out-talking all other countries by growing 100 million users every quarter. Our prime minister has been presiding over these big international meetings by sounding our voices over all these heads of all your minor states. Our super aircraft carriers have been patrolling the world’s oceans and scaring all the Ethiopia and Somalian pirates off their pants. This is because India has the world’s most colorful democracy modeled on the many thousands flavors of our curries, and is the world’s top dog displaying our 2.4 billion buttocks for the world to follow. Submit to your fate under our Hindu colossus, beg our 5-rupee meal middle classes, bow to our super powers. Jai Hind!

  • Manix

    Interesting post, Atanu. Here is another article on the same theme (there is a video of Prof. Pranab Bardhan on there) : http://blogs.reuters.com/great-debate-uk/2010/05/31/pranab-bardhan-on-the-economic-rise-of-china-and-india/

    There is the question of how exactly one defines socialism. Definitions differ. Institutions play a prominent role in regulating markets, and that is what a lot of people in America are saying when they want more governmental regulation. They are not arguing for commune-style living. Part of the problem for India is that there are institutional voids – the courts are broken, there is corruption in politics and there are parts of the country where even the basic rule of law simply doesn’t apply.

    P.S. Have fun at Yellowstone. It is fabulous!

  • http://none Anonymous

    Manix ,

    ” corruption ” is actually understating the state of affairs. Our institutions are broken down due to the quality of our own people. The total lack of alignment between thought & word , naturally followed by actions full of discrepancies.

    Our education does not really impact a person’s character I have come to realise. We carry all our negativities very much including dishonesty wherever we go. For everything we take refuge under ‘ karma ‘ theory.

    Unless we acknowledge & admit how can any kind of cure take place ?

  • http://iyerarchi.blogspot.com iyerarchi

    Hi Atanu

    This is related to the Once Laptop Per Child (OLPC) program. I found this link with a glee Kapil Sibal holding up a low-cost laptop, apparently costing $35.

    What’s your take on this? I remember you had once ripped apart this concept in one of your posts.

    http://timesofindia.indiatimes.com/india/An-IIT-IISc-designed-laptop-for-just-Rs-1500/articleshow/6202207.cms

    Arvind

  • http://none Anonymous

    Very insightful with dollops of humour too ! About India’s malady.

    http://www.newstodaynet.com/col.php?section=20&catid=30

    Oh, my God!
    By TR Jawahar.

  • Surya

    are there any think tanks in India? Iam very much in favor of them…anyone?

  • surya

    Progress is dependent on more than clean administration people. The international trade environment is very competitive and big corporations thwart competition in any which way they can. Read this piece in a Nepali daily:
    “India and the 27-member EU have been negotiating the market-opening pact since June 2007 to boost bilateral commerce.But progress has been stymied by differences over intellectual property rights and efforts by Brussels to link trade with climate and India’s social sector performance in such areas as child labour. India has opposed incorporation of what it calls “extraneous” non-trade issues into the EU talks.Other issues include the seizure of Indian generic drugs meant for Third World countries as they pass through European ports. India claims developed countries are using the cover of a fight against counterfeit medicines to protect pharmaceutical giants and suppress legitimate generic drugs.”

    See? India needs lot of bargaining chips in its bag and use them cleverly as needed. Chinas belligerent attitude by befriending rogue nations helps it a lot at the negotiating table. Have you all forgotten how the cryogenic booster technology was denied to India citing the dual use element involved. Indian space ambitions were perceived as a commercial competition by the exclusive members of the then space club. What Iam saying is, not only that India has internal impediments to overcome but also has to face a lot of big bad bullies out there to knock it down in global trade.

    The cheapest car and cheapest computer in the world news gives India a lot of free publicity internationally. Hope it will be used as a trademark in the long run. Indian scientist winning a Noble prize this past year and kids wresting the spelling bee trophies, and not to mention its many physicians, educators and CEOs already flying the flag high in US, will all help sell anything Indian in the west. Not all is gloom and doom. Chin up.

  • http://www.acuvueoasys.us acuvue oasys

    Interesting the different comments here.

    India has some of the brightest minds in the world in just about every field imaginable. Given the right political set up, it is definately a country of the future and this is coming from an American in Texas.

    Just one thing though, out of all those people – why don’t you guys have a soccer team? :-)

  • larissa

    I think perhaps part of the problem was that India never had a “revolution” in the full sense of the world–I think India just had some petit bourgeois people wearing home spun clothing in non-violent protests… what has this resulted in? A fourfold increase in population (yes in the forties if you can imagine, not being trampled by crowds like now!!! India had 3/4 less people–its the quality of people not quantity that counts)…I mean what has India’s independence really resulted in? the same family ruling always in the name of democracy. India has no real national ideals or direction, it just moves along in a flaccid way–some are entreprenurial and make $$ but thats about it, the economic growth is the growth of some middle class (technicians and engineers have an easier time finding jobs and the corporations like Tata and Ambani–the Chinese have national goals, you might not agree with them or like them, but they have something, a plan of action. India has no strategic thinking (something by the way an American who worked with the Indian on defense said recently on an interviews)…For those of us who can’t stand what modern India represents (I mean the modern Indian icons like Bollywood and cricket…) India is just a mediocre country becoming even more mediocre, there is hardly any intellectual life there, the Chinese are competing with Europe and America…India is just a bigger version of Bangladesh…Unless a country is able to mobilize and sacrifice for ideals and fight for something in a manly way it is finished….Indians are
    just ruled by self-interest today…
    In short Hindus have become errr “effeminate”

  • larissa

    I think perhaps part of the problem was that India never had a “revolution” in the full sense of the word. India just had some petit bourgeois people wearing home spun clothing in non-violent protests… what has this movement resulted in? A fourfold increase in population (yes in the forties ( if you can imagine, not being trampled by overwhelming crowds like now!!! ) India had 3/4 less people–it’s the quality of people not quantity that counts)…I mean what has India’s independence really resulted in? the same family ruling always in the name of democracy. India has no real national ideals or direction, it just moves along in a flaccid way, apes the West without thinking of consequences-–some are entreprenurial and make $$ but thats about it, the economic growth is the growth of some middle class (technicians and engineers have an easier time finding jobs now and the corporations like Tata and Ambani increase their profits–). The Chinese have national goals, you might not agree with them or like them, but they have something, a plan of action. India has no strategic thinking (something by the way an American who worked with the Indian government on defense said recently on an interview)…For those of us who can’t stand what modern India represents (I mean the modern Indian icons like Bollywood and cricket and all the other mind numbing national pastimes which is what modern India has to offer…) India is just a mediocre country becoming even more mediocre, there is hardly any intellectual life there, the Chinese are competing with Europe and America…Some gems of smart people are to be found there, but the odds against them are stacked very high…India is just a bigger version of Bangladesh…Unless a country is able to mobilize and sacrifice for ideals and fight for something in a manly way it is finished….Indians are
    just ruled by self-interest today…this sums it up
    In short Hindus have become errr …how shall I put it “effeminate”?

  • larissa

    Well I think Indians have become flaccid and effeminate in that they tolerate filth, dirt (walk around you on any street with all the garbage), corruption (the current leaders and its cronies are there only because sheep like people tolerate them), lack of respect for nature and the environment, poverty and immorality–there is not much manliness in the culture to take a stand against the above–India has been independent for over 60 years now and has only itself to blame, the white colonials left a long time ago…
    What is there to be proud of when India is just known for Bollywood, cricket and computer technicians? The achievements of Indians abroad does not count but only proves that Indians have to be eslewhere than in India to make something out of themselves…

  • larissa

    take a look at this: India is on Par with Sub Saharan Africa. Do not care what delusional Indians think!

    Box: 1. Where the hungry people are
    http://www.nature.com/news/2010/100728/full/466546a/box/1.html

  • larissa

    The more I read about India and what happened after Independence, the more I am convinced that India is the way it is because it never had a real “revolution”…some petit bourgeois people wearing home spun clothing and making non-violent protests does not constitute a drastic change in a nation’s heart–it was all half-hearted…all the patriots who could have lead India to a better direction were done away with by the Congress party, so only foolish Indians continue to be kicked around internationally as a country, India has no national strategy or direction or goals excpet to breed more people and become ever more crowded. A nation does not change until the will of the people leads it to have a great change of heart…The Chinese had a revolution. Now you might not like the ideals of it, and what it stands for, but they had “something”. Gandhi might have helped to create nationalism but he was not the type to lead a nation afterwards–after all, look at his choice of PM (dandy Nehru)…India still suffers as a consequence, and now with four times the population it has, I doubt the harm done can ever be erased…I myself feel completely alien from what modern India stands for (it’s corrupt form of governance in the name of democracy, its mind numbing national icons (cricket, Bollywood)…and what not, the educational system that just produces technicians, the lack of intellectual life there, the lack of a liberal education and sense of history among peoples and so on…Indians have to first come to the realization that they are on par with sub saharan Africa and need to change, if they are to ever amount to anything as a nation…

  • larissa

    Hey Anonymous I understand your frustration…you know my husband used to also be optimistic about India a three years ago…but after the “democratic” party was sworn in again, he also shed his delusions and realized that Indians are a useless lot…What is this 8% growth that they tout so much? Some middle class Indians now have an easier time finding jobs, Tatas, Mittals and Ambanis increase profits, some business school graduates and technicians get job easily now…thats about it…The rest of India still remains in the “heart of darkness”…and is quite unlikely to ever come out at this rate…What progress is there? There is not a single Indian city with water that runs all day, without power shortages, garbage and filth on the streets, atroucious amounts of beggars on streets, and human crowds what will literally “trample” you over if you are not careful. What is this progress that is being touted so much? Why the hype over nothing? What is really scary to me is how delusional, ignorant, self-satisfied, placid most Indians are witht the state of affairs. Nothing seems to really bother them anymore they are used to being flaccid and passive…when you speak the truth they get irritated at you and say you hate India…God forbid if they find you hate ‘bollywood’!

  • surya

    lariss you said “There is not a single Indian city with water that runs all day, without power shortages’

    ever heard of Gujarat?
    My brother (not a gujju)lives in Surat and had emphasized the above are a thing in the past. They dont store water at all, just as here in USA. They dont know what power cut means…

    Its congress stupid…cheers.

  • surya

    anonymous,

    someone said ‘a truck load of rice is ALWAYS accompanied by a van load of hatemongering missionaries’. ( Thanks to some exeptional ateists declaring war on religion, the evengelists’ lethal grip on west is easing now, we can live in peace and harmony in USA)

    But otherwise you rock. Do read and comment (if you are not already doing so) on some Indian Newspaper blogs like, The NewIndian Express, The Hindustan Times, Toilet Times of India, Anti Indian NDTV and antiindian CNN IBN.

  • surya

    larissa,

    my brother lives in Surat (we are not gujjus), he said power cut and water shortage is a thing of the past.

    It is congress stupid. Cheers.

  • larissa

    “Indians are CHEATS & THIEVES. Wherever they go will continue to cheat , lie , bribe & steal.”

    Ok Anonymous, this is getting a bit tiresome. You started off with some valid criticisms and I can see your frustration against Indians, but you seem to have a chip on your shoulder.

    What exactly are you trying to say here?
    “surya spouting weighty words like mimamsa yadayada OUGHT NOT to forget what Almighty Krishna says :-

    ” Whatever name you invoke , whatever form , whatever be the mode of worship everything ACTUALLY is directed towards ME “.

    Do you mean to say ” rice denying & letting them rot in godowns” holier than thou hindus are great devotees of our Maker ? Some soothsayer has to prod the rotund hindus to part with their illgotten wealth willynilly in return for getting some ” favours ” from God.”

    Again you seem to have a chip on your shoulder. It is one thing to complain about general corruption in India, and the bad form of governance etc., etc. under which HIndus are passive but this is beginning to border on the nonsensical. Hindus are not the only ones with “ill-gotten” wealth…If you reside in the Gulf lets hear why that place is better than India in your opinion? We might learn something?

  • larissa

    No, I want to know how life is better in the Gulf region where you live, as you seem to be stating that life is better there. How so? “Ignorant” people like me might learn something.

  • Economicsmate

    When i read your post i remember an Article Titled “Karl Who? – China is a Communist country, but I have yet to meet an actual Communist” written by Daniel Gross in Slate Magazine on November 25, 2009. I thought of sharing this with you. Here is the link http://www.slate.com/id/2236703/