How Chinese philosophy can help PM Narendra Modi fire up the economy
German existential philosopher Karl Jasper in his book, The Origin and Goal of History, called 800 BC to 600A D the “axial period” of mankind. He became fascinated by the fact that figures like Pythagoras, Buddha and Confucius were all alive at exactly the same time, and that China, Greece and India, in the axial age, saw emergence of contending intellectual schools, each group apparently unaware of the other’s existence.
In India, Asoka embraced Buddhism; in Rome, Constantine turned to the Christians; in China, Han emperor Wu-Ti adopted Confucianism. Of the three, only Wu-Ti was ultimately successful: the Chinese empire flourished for 2000 years, almost always with Confucianism as its official ideology.
In Constantine’s case, the western empire collapsed but the Roman church blossomed. Asoka’s project foundered; his empire fell apart and got replaced by fragmented kingdoms.
Fast forward 1400 years, both China and India are focused on regaining their rightful place under the sun. Let us first analyse the journey of the two countries in last 30 years.
In 1980, India’s GDP per capita was $266 comparable to $307 of China. And now China’s GDP per capital ($6,807) is 4.5 times that of India’s ( $1,499).
India and China are very different from other countries in the world. Both India and China are vast, varied, and confusing; no different from what they were during axial age.
Today, PM Modi’s biggest challenge is to put India back on sustainable high growth track. Growth rates take some time getting used to and India is learning the same.
There is a rule used by statisticians called the rule of 72 (ref. Michael Spence’s book on The Next Convergence): it says that the time it takes in years to double in size at a specific annual growth rate is that growth rate divided by number 72. It sounds weird but it works.
So, for example, at 1 per cent growth, income doubles in 72 years. At 7 per cent growth, income and output double every 10 years. It takes decades for countries to make the transition from poor to advanced. The poorest countries have median income of $500 per person and advanced countries have incomes of $20,000 above.
At 7 per cent per annum growth, China is all set to enter the advance country club in 25 years and it will take India 35 years to get there. PM Modi and team are trying to fire up the economy by focusing on:
1) Urban infrastructure
2) Fiscal balance
3) Reversing income inequality
4) Financial inclusion of the bottom 500 milliom people
5) Peaceful borders
6) Control population growth (India is at 1.4 per cent against China’s 0.6 per cent), among many other things.
However, only economic policies alone can’t deliver the desired outcome, leader and his wisdom would matter. Let us turn to Confucianism: it is not a religion; it emphasises virtue and righteousness.
One essential teaching of Confucianism is that leadership expressed through moral example is superior to rule through law. This obviously contradicts today’s conventional wisdom about the importance of rule of law as a foundation for economic growth, but it has served China well.
The principle does not contradict the need for an administrative bureaucracy; rather it implies that bureaucrats use morality and subjective judgment to guide their decisions.
Meritocracy is another potent guiding principle emphasised by Confucius, as a counterweight to the human tendency toward nepotism and corruption. Also, citizens may not impose the requirement that the government be of and by the people, but an effective government that is, and perceived to be, for the people is essential.
When Deng Xiaoping decided to change direction in late 1970s, he knew that the economy that they were dealing with was extremely complex. Deng approached the then president of the World Bank, Robert McNamara, for help in transiting to socialist market economy.
Deng was clearly driven by the Confucius dictum that knowledge cannot be substituted by capital and the growth is an interplay of capital and execution. Deng famously described the journey as “crossing the river by feeling the stones.” India is by far the largest democracy to set out on this journey and there are a lot of people who very much want it to succeed
