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Monday, October 20, 2003

Where China scored over us

Kaushik just wrote about the potential for social discord because of skewed development.

BTW Paul Krugman has written about the difference between Red and Blue America too. Read this and this

But I wanted to write about China. It has its share of problems about inter-regional disparities too.

However, one of the least advertised aspects of Chinese economic reform (atleast in India) is the widespread support for reform in rural China. There exists a large rural constituency that broadly supports economic reform.

You see, the first reforms to affect China's economy were instituted between 1979 and 1984. A major thrust of the reform was agriculture.

In China, the economic reform program decollectivized agriculture through a contract responsibility system based on individual households. The people's communes established under Mao were largely replaced with a system of family-based farming. The rural reforms successfully increased productivity, the amount of available arable land, and peasant per capita income. All of these were major reform achievements. Their success stimulated substantial support in the countryside for the expansion and deepening of the reform agenda (read this)

If I remember right, Minxin Pei pointed out in the Foreign Affairs article, "China's Governance Crisis" last year (membership required) that despite all their troubles the peasantry in China still have a lot of faith in the central party leadership. They blame their current troubles mostly on the corruption, venality and incompetence of local officials.

No such constituency for reform exists in rural India.

Infact, economic reform in India has meant starving the countryside of public investment (in irrigation, new agriculture research etc). Remember agriculture supports 70% of India's population.

Little wonder then that political parties are so hesitant to embrace reform. Economic reform can hardly take off in a democracy bypassing two-third's of the population.

The right reform strategy should take the rural India along with investments in irrigation, agri-research, rural roads etc. Do that, create a "vote bank" and no trade unions will be able to hold you hostage over disinvesment. Good policy is also good politics.

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