I seemed to be seeing the past and the future galloping head to head without end. A recent visit to India made me realize the so very dramatic contrast between two social and political realities that lie behind contrasting economic results. India and Mexico show that it is not only economic policy that determines growth: perhaps as important, if not more, is the recognition or social rejection to the creation of wealth.
Mexico resolved many essential issues of infrastructure many decades ago and, nevertheless, got stuck along the way. The grand highway construction and electrification programs began in the last century during the thirties. In India, these have been an issue of the last twenty years. While it is rare for a Mexican town not to have electricity and even telephone service, in India this was the norm until only two decades ago. Independently of the manner in which one wishes to evaluate the success of Mexican development programs, I have no doubt but that during the last century there was a clear attempt to take infrastructure to the remotest nook and cranny.
In India, the extreme poverty that characterizes the society (which only a few years ago had a per capita income less than 10% of Mexico’s) was the product of a failed strategy inspired by Soviet socialism. As soon as it started to free itself from those ideological and bureaucratic bonds, its economy began to grow in a sustained and accelerated fashion. In only twenty years, India achieved quadrupling its GDP per capita.
Today India confronts the type of dilemma that has plagued our process of development in the last several years, but it finds itself with a much better capacity to deal with these. Although attacking essential problems such as poverty is difficult in all nations, it is infinitely easier within the context of an economy that expands, because that fact alone generates favorable conditions. But perhaps the great difference between India and Mexico does not reside in the economy itself, but in the attitude of its people: even in the midst of crushing and lacerating poverty, Indians maintain a “can do” attitude rather than a “why it can’t be done” one.
For a population that had never before known economic opportunities, the priority is to generate income and an environment of accelerated growth produces one opportunity after another. Despite the lack of government programs devoted to attending to problems of poverty and economic informality, the population acts: its incentive is to break the vicious circle in which it lives and its responses are not foreign to us: those who can, send their children to the best school, not to the one that corresponds to them; what’s important is to generate activity, which Indians seek until they find it, an attitude that has procreated millions of small businesses in all ambits. Some of these grow, others disappear, but living standards rise one family at a time.
An Indian university professor mentions that the most popular language is not English, but “Windows”, because that’s how many perceive their ticket to ride toward the future. For those who have had access to the technical schools that proliferate throughout the country, a degree in Engineering changes life in a millisecond. India illustrates how a regulatory framework that propitiates entrepreneurial activity (by design or by default) can be unbeatable. In this respect, China and India are contrasting in that they have followed models of development that emanate from their very distinct social as well as political characteristics.
A sharp observer of India explained that comparisons between India and China were logical but not very useful. These are two nations that share a region of the world, but radically opposite circumstances and characteristics. The only thing that they appear to have in common is that, after a long period of paralysis, they suddenly woke up, becoming important economic growth engines. In China everything is order, in India disorder; both believe in celerity, but their sources of growth are very distinct: in China there is much foreign investment and big local enterprises, essentially governmental; in India there is an enormous and vigorous entrepreneurial class and a government that, over recent decades, has withdrawn and favored the development of self-starters at all levels. The disorder in India reflects a democratic system that is complex in the extreme, which is in contrast with the order emanating from an authoritarian government in China.
Returning to Mexico, it seems to me that the main lesson shown by the transformation in India of recent decades is that the key does not dwell on having a perfect regulatory framework, with all of the reforms that would be desirable or with a hyper competent government, though all that would obviously makes success more likely. What’s critical is to have an environment that makes economic growth possible. What appears to enliven the success of this Asian nation has more to do with the milieu of freedoms, a contentious political system that generates checks and balances, and above all, social appreciation of the economic boom and of personal enrichment. When individuals identify success with enrichment, their incentive for investing, assuming risks, and viewing the future with optimism ends up being irrepressible.
In Mexico we lost our way at the beginning of the seventies in the past century (fifty years ago!) and, however numerous the significant advances have been, our disputes are not about how to govern us better or how to promote growth, but rather how to come into power and stay there. Compared with India, we have everything to be successful, and we had it many decades before they could even have imagined it. This makes one think that the great difference between the economically successful years of the 20th Century (1940-1970) and the present has less to do with the specific economic strategy than with the legitimacy that the society grants to those responsible for generating wealth.
Nations that during the last several years became emblematic in economic terms follow development strategies that are so dissimilar that it is impossible to attribute success to a single factor: more or less investment or expenditures, the existence (or absence) of a strategy against poverty or the exact nature of private-sector participation. All these obviously matter. But China, India, South Africa, Indonesia, Brazil, and other nations that have grown at a brisk pace do not share any common economic strategy: each of these nations follows its own rationality. Each has achieved high growth rates thanks to a significant political change.
A long time ago Aesop said that “Men often applaud imitations and hiss the real thing”. It seems that he understood our dilemmas better than we do.
@lrubiof