How will the emerging superpowers China and India do in 2030? will they be the major states in the world or the ticking bombs have imploded them by then? Maria Bartiromo from CNBC explores.
Two of the fastest growing economic engines on the world stage in recent years have been China and India. They have taken optimal advantage of globalization, with its dynamic access to advanced technology, investment and communications.
But any projection out 10 to 20 years or more must take into account huge inherent problems in each of these societies − political, economic, educational and cultural. They must also look at endemic corruption, a colossal lack of modern infrastructure and inadequate healthcare for their often-impoverished rural populations in contrast to those in relatively well off urban centres.
This intrinsic disparity between urban and rural populations in both countries poses potentially serious threats to their continued political stability and economic vitality. It does not overstate the situation to say they represent ticking time bombs which, unless addressed and corrected by government at all levels − national, regional and local − could produce major disruptions.
A few broad brush strokes should provide some insight into these problems.
An estimated 700 million of China’s 1.3 billion people live in rural villages.
Since the bloodshed in Tiananmen Square in 1989, where disgruntled workers joined students in demanding democratic reforms, the Communist Party hierarchy has paid much closer attention to the needs of the urban masses, providing greater freedom to spend their rising incomes on consumer goods and providing better social services, while promises of greater village democracy, educational opportunities and improved medical services in rural areas have been largely ignored.
China’s emerging middle class is in position to organize to oppose, for example, the construction of a noxious factory in their communities and thus draw government attention and sometimes support. But despite thousands of protests from villagers, for instance, against corrupt local officials seizing farmland to sell to developers, their voices are usually either ignored or brutally suppressed.
As an example of the lack of infrastructure, an estimated 40% of China’s villages have no running water. Education is supposedly free through the ninth grade, but destitute peasants are often required to pay for textbooks, and the quality of teachers is generally very poor. Health clinics are sometimes provided, but inadequately staffed and provisioned with medical supplies.
Even peasants who have been living for several years in cities are still classified as rural residents and are thus denied urban welfare, having to go back to their village of origin for even meagre medical attention.
In contrast to China’s tight control by the Communist Party, India is a fractious democracy, but with many similar problems.
IIn India, the cost of doing business − whether for foreign or domestic investors − is heightened by widespread corruption. It is reportedly impossible to expand industries, or to establish new ones, without massive doses of bribes. Contracts are often ignored.
The domestic infrastructure, which cries for massive and systematic investment, generally speaking continues to deteriorate. The investment that’s needed for new electric power plants and grids, upgraded port facilities, and roads and railroads is not being provided, particularly in the hinterlands. This adds to the cost of doing business in India and it means that most entrepreneurs − foreign and domestic − are reluctant to build manufacturing plants in the rural areas where jobs are needed.
In part as a result of such impediments, direct foreign investment in India was about US$ 12 billion last year, compared to US$ 65 billion in China.
In campaigning in Uttar Pradesh, India’s most populous state, Ms Mayawati’s BSP party charged that the Indian National Congress was riddled with corruption and nepotism, and substituted high-flown rhetoric for a genuine commitment to alleviating rural poverty. While much of the peasantry is illiterate, they rushed to her banner in large majorities.
The Communist Party in India is relatively small, but often plays a pivotal role in parliament, helping to either swing passage of, or defeat, legislation depending on how it votes. It has only 65 votes in the 545 member lower house, but since the ruling coalition does not enjoy a majority, those votes are often of critical importance. Prime Minister Singh has described the Communists as “the greatest internal security threat faced by India since 1947.”
As one example of the Communist Party’s inordinate leverage, it is currently attempting to block an historic deal with the United States which would bring India access to American commercial nuclear technology for expansion of its sorely inadequate electric power grid. It would also herald a closer strategic relationship between the two countries. Talk of the tail wagging the dog.
I would therefore tend to agree with two basic trends highlighted by the Young Global Leaders report. To wit:
INCOME AND INEQUALITY: The income gap between countries will narrow and the global middle class will expand but with growing income inequality within countries.
ARMED CONFLICTS: More intra-state conflicts will occur.
China and India, of course, within the next two decades could forthrightly try to rectify these fundamental problems. But, if they fail to do so effectively, their fortunes and their futures will suffer.
Maria Bartiromo
Young Global Leader of the World Economic Forum
Anchor, CNBC's Closing Bell and Host and Managing Editor, Wall Street Journal Report, CNBC, USA
This article is brought to you in partnership with the World Economic Forum curremtly holding its annual meeting at Davos.
