Stop Talking Down to India About That Rising Tide

Feb. 28 (Bloomberg) — When BBC television aired a show about India's economy recently there was something predictable about the language.

"Does India care about its poorest citizens?" asked the host, Allan Little. Little had a guest in the New Delhi studio, Gurcharan Das, formerly Procter & Gamble Co.'s top executive in India. "Are you an advocate of trickle-down theory?" Little asked.

"Everyone doesn't rise equally, but eventually studies have shown all boats do rise," Das answered.

The program then took phone-in statements about India's economy. The ones from India tended to side with Das; the outsiders leaned toward Little. This, too, came as no surprise.

Why the familiarity? India's growth rate, forecast at more than 9 percent this year, has everyone in the world re-examining the Indian model and what India can do for its poor.

The language echoes that of U.S. or U.K. policy debates. Indeed, you can go further and say that when Westerners talk about income distribution in India, they are often really talking about themselves as well.

Consider the dynamic. Just last year, as her determination to run for president was hardening, Hillary Clinton of New York told the Democratic Leadership Council that the U.S. should "replace trickle-down economies with rise-up economies." She was trying to invoke Franklin Roosevelt's New Dealers, who spoke with disdain about "trickle down."

Policy Vindication

The argument was feeble since a lot of the U.S. wealth in the past few decades has trickled quite nicely. In the U.K., the Labour Party has been at war with itself ever since Margaret Thatcher's policies vindicated the rising-tide concept.

India still has enormous poverty, and so provides a more logical backdrop for an income-distribution argument. Those who write traditional aid policy have already grasped this. So have some politicians.

In 2005, when he was preparing for his presidential run, John Edwards traveled to India to tell an audience that the world "must also do more to help the millions of children in our countries who grow up poor." Did Edwards care about malaria or AIDS? Yes. Was he also trying to improve his case for higher taxes or other redistributionist efforts in battleground states such as Ohio? Absolutely.

And this, of course, isn't the first time that Westerners have imposed their preoccupations — economic or political — upon India. Aside from the obvious example of colonial rule, it is important to remember the postcolonial influence: the philosophy of the British and U.S. inspired India's economic policies for so many decades. After all, former Indian Prime Minister Jawaharlal Nehru got his ideas in the U.K., first at Harrow and then at Trinity College.

Go Left

Westerners likewise blessed Nehru's decision to follow the far-left model of the Soviet Union. They told the Indians that while economic redistribution, or import substitution, might not be right for the U.S., they made sense for India. John F. Kennedy was the one who first uttered the "rising tide" phrase while addressing Germans in 1963. But Kennedy's choice for ambassador to India, economist John Kenneth Galbraith, emphasized government controls and redistribution in his work.

The consequences of such Western-Indian interactions were worse than negative for India, as Das himself has pointed out. In an article in the journal Foreign Affairs, Das noted that while average per-capita gross domestic product growth was 3 percent or so for the developing world between 1950 and 1980, it was half that for India with its Five-Year Plans.

Lee Kwan Yew, Singapore minister mentor, recently provided a blunter analysis: "Like Nehru, I had been influenced by the ideas of the British Fabian Society. But I soon realized that before distributing the pie I had first to bake it."

Role Reversal

Nowadays, India seems to be transcending that past. It has already succeeded in reversing the growth ratio. Rather than lagging behind other developing countries, India is outpacing them. GDP per capita is rising, too.

As Das noted on the same BBC show — to the displeasure of a caller from Vancouver — the recent growth has lifted about 200 million Indians out of poverty. The sort of softer measures that redistributionists like also make the recent policies look good.

The United Nations Human Development Index quantifies national wellbeing by considering gauges such as literacy and infant mortality, and then ranks the countries. Since 1975, India has risen 10 spots, while Bangladesh is up four and China seven. The market-oriented policies that produced this acceleration have been endorsed repeatedly by Indian voters.

Genuine Goodwill

Given this record, it is surprising that anyone in the U.S. or Britain even dares to advise, let alone ask, as the BBC did, whether India can consider itself a success story.

Still, they persist. Geopolitics may be one concern: Leaders in both capitals want to keep India stable and friendly. Genuine goodwill is another.

There's a third reason: they want to moralize, to influence.

This is a shame, for retreating into a policy of redistribution is about the last thing the Indian government should do right now. The best policy, therefore, is to forgo having our say and let the Indians have theirs.

(Amity Shlaes, a Bloomberg News columnist, is a visiting senior fellow at the Council on Foreign Relations. The opinions expressed are her own.)

© Copyright 2007 Bloomberg

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