The sequencing error

It is fashionable in countries like India to blame socialist policies for what are commonly categorized as “inefficiencies”. And there is a plethora of superficial advertising out there that tries to create the impression that since the onset of neoliberal policies starting in the early 1990s, things have mostly been rosy for India. And similarly, there is a lot of analysis that tries to make it seem that all of China’s progress since the early 1980s is due to the adoption of capitalism. For example, commentary in magazines and newspapers like the Wall Street Journal abound in such superficial analysis.

In fact, in the case of India, not only is this a gross distortion of the truth, it completely mischaracterizes the reality. If you look at basic indicators of progress like poverty rates, literacy rates and the human development index, very little has changed as far as rates of amelioration go since the liberalization policies started. The neoliberal phase of the last nearly twenty years can’t escape the responsibility for the gargantuan failures in the areas of human development during this time. It can’t be allowed to take credit for a lop-sided growth that favors the super-wealthy while trickle-down brings scant relief to the destitute masses at the bottom.

In the same way, the “ socialist “ policies of post-independent India from independence in 1947 till the beginning of the neoliberal phase can’t be blamed for all of India’s failures till then, and not be given credit for the good things that happened during that time, and since then. After all, the superstructure on which the recent lop-sided high-growth phase and the recent spurt in exports in fields like software are based was created by the “ socialist “ framework of the past. This eagerness on the part of proponents of laissez-faire to forget the contribution of the “ socialist “ phase to later growth has been characterized by one Indian politician as “ the vulgar kicking of the ladder “. After all, recent mushrooming of private engineering colleges offering software degrees notwithstanding, the scientific and technical pool from which the Indian software companies drew their talent were to a large extent from government-run and highly subsidized engineering colleges. These colleges, whatever their defects may be, were necessary in order to identify, train and promote engineering talent from a broad pool, irrespective of economic status. How can the successes of the Indian software companies and their contribution to India’s foreign exchange security be ascribed purely to laissez-faire policies when “ socialist “ policies regarding education helped identify and train a broad talent pool for them ?

The other aspect that seems to get missed is that “ socialism “ can’t be blamed for those ills of post-independent India where it hasn’t had a chance to function. In many ways, “ socialism “ in India was a “ socialism for the relatively rich “ and “ socialism for the urbanites “. Rural development was ignored to a large extent while entrenched power groups jostled for political influence. You can’t blame socialism for the economic travails of rural India when the kind of socialism India practiced wasn’t designed to bring rapid development in rural areas.

Opinions can be divided as to how much of post-1980s China is capitalistic and how much of it is socialistic. After all, a country’s export sector doesn’t necessarily typify its economy. Government-owned companies have played and still play a pivotal role in the functioning of the Chinese economy. Also, just like in India, China’s success in the export sector cannot be disentangled from the communist regime’s policies in the fields of poverty, health and education. A near-universal literacy rate by the early 1980s cannot possibly be brushed aside when it comes to analyzing China’s subsequent economic successes. Commentators like Amartya Sen have made this argument for countries like Taiwan and South Korea, which reached high levels of literacy under dictatorial regimes before their growths sky-rocketed. What applies for dictatorial capitalist regimes also applies to dictatorial communist regimes when it comes to education and health serving as a basis for subsequent growth.

The basic error in many of these analyses is that too much emphasis is placed on systems, and too little emphasis is placed on “ stages of development “. This is especially true of developing countries, and analyses that take a parochial view that systems matter way more than stages of development will inevitably lead to erroneous conclusions.