The India / China Debate Continued …

On Monday night, I posted a longer response to a comment on my entry: India: Sourcing and Slums that I thought I'd put on the main page this morning, as I think it's a discussion worth continuing. Why? To understand where India and China sourcing might go, it's important to understand the complexities underlying the truly democratic, eccentric experiment that is India. As one reader remarked to me in an email after my initial post, India is full of such potential from an economic and sourcing perspetive: "Bottom line question is, India has the right potential energy, [but] can they convert that into kinetic energy?” We'll see, but it will be a fascinating economic experiment to see how India's free-market, democratic, unplanned (dare I say cow-wandering) growth contrasts with China's open-market, communist, centrally planned growth. As further reading, here's my response to the comment posted initially:

"Thanks for your thoughtful comment. India is such a complex place. The paradox of extreme wealth and extreme poverty; the dissolution of the official cast system, yet the lingering remnants of a cast-based society; unbelievable high-quality engineering programs at the university level, yet the inability to build and maintain basic roads and infrastructure -- in short, the place never ceases to make one think. I love the fact that India maintains such a strong democratic spirit, yet it is fascinating how China (with a per capita GDP which is not much higher than India) has done much to offer, on the surface, a much higher quality of living for the working class than it's neighbor to the East (this is based on my subjective observations of working and living conditions in both countries, not an economic-based analysis). Clearly, central economic planning and infrastructure build-out has brought serious short-term benefits to China's growth (even if they have come at the expense of true economic and political freedom).

Personally, I believe strongly in property rights and hate the concept of zoning. Philosophically, if the slum dwellers owned their property, I would argue they could do what they wanted to with it. But the truth is they do not and the self-perpetuating system of "a vote in exchange for free rent" is holding up progress, and overall growth in the region. I would hope that the democratic spirit and capitalist progress that much of India (though not all) is making will guide the local politicians and business leaders to make the right decision with the airport. Personally, I think it's a blight that will hinder economic growth and outside investment from an aesthetic perspective (first impressions matter!) But more important, it's holding up new runways and terminals that will improve the economic situation for all.

Long-term, if India can get it right, the democratic fervor and common law legal system will give it an advantage over its competitor to the East from an FDI perspective. But given the arcane system today, who knows what will happen in the short-term. It will be fascinating to see what it is like to land in Mumbai in 2020! Any bets on which direction it will go?"

Jason Busch

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