July 22 (Bloomberg) -- U.S. Vice President Joe Biden is visiting India this week to, among other things, drum up fresh business for American companies. The magnitude of his task can be judged by the fact that a few days before his arrival, steelmakers Posco and ArcelorMittal SA canceled huge projects in India because of land disputes. Wal-Mart Stores Inc. has shown signs of pulling out as well, despite new laws supposedly allowing foreign ownership in the retail sector. The Indian government’s latest desperate attempt to reverse the flight of foreign investment and the fall of the rupee -- by opening up telecommunications to 100 percent foreign ownership -- doesn’t look any more likely to change minds.
Is the “India Story” over, as many commentators have begun to observe? Actually, the more relevant question today is: How did it grow and circulate as widely and rapidly as it did? Unlike China, with which it was routinely and inaptly compared, India never undertook extensive land reforms, nor did it adequately train its workforce or set up large-scale labor-intensive manufacturing -- three crucial enablers in the rise of almost all East Asian economies.
The country has a youthful population. But long and deep investments in education and public health, not to mention vastly improved physical infrastructure, would have been needed to realize the country’s demographic dividend. Could the information-technology sector alone help a country lift its 1.2 billion people out of poverty and flatten the world? Thomas Friedman certainly thought so, hailing Bangalore’s “Zippies” as the winners of globalization, certain to put their American counterparts out of work.
Even Americans much less prone to oracular pronouncements succumbed to what seemed, in Fareed Zakaria’s phrase, a “powerful package”: India, the world’s largest democracy, a potential strategic partner and a rising economy to boot. (Interestingly, Chinese investors and commentators assessed India’s progress much more cautiously.) The widespread impression of an irresistibly rising Asian power prompted Biden himself, then a senator, to push for lifting sanctions imposed by President Bill Clinton on India in 1998 and to support President George W. Bush’s 2005 deal for civil nuclear cooperation between the U.S. and India.
India’s upper caste, endowed with a fluency in English and a confidence distinctly lacking in its Korean or Japanese counterparts, went out of its way to reciprocate American attention. A U.S. diplomat in Delhi was proudly shown two chests containing $25 million in cash -- money to bribe members of the Indian Parliament into voting for the nuclear deal. Visiting the White House in 2008, Prime Minister Manmohan Singh told a startled-looking Bush that “the people of India deeply love you.”
In a conversation disclosed by Wikileaks, Arun Jaitley, a senior leader of the opposition Bharatiya Janata Party, urged American diplomats in Delhi to see his party’s anti-Muslim rhetoric as “opportunistic,” a mere “talking point.” As Jaitley saw it, the great promise of friendship with the U.S. easily transcended the State Department’s visa ban on Gujarat Chief Minister Narendra Modi, the hardline Hindu nationalist expected (largely by India’s corporate-owned media) to be India’s next prime minister.
Jaitley himself had multiple “personal and commercial connections to the U.S. (several U.S. corporates are legal clients).” He enjoyed the “typical” good standing of the Indian middle classes in the U.S.: Several of his nieces and sisters lived there, and he had “five homes to visit between D.C. and New York.”
Jaitley exemplifies the New Jerseyfication of Indian political and economic discourse in recent years -- something largely attributable to an Indian elite with existing, or aspirations to, strong American connections. India’s foreign policy, for instance, has come to be premised on the continued willingness of the U.S. to play global policeman (needless to add, that stance has left India in the lurch in Afghanistan and facing a suspicious China on its eastern border). Even debates about the direction of the Indian economy have borrowed their terms from the East Coast, as expressed presently by the staged standoff in the Indian media between Jagdish Bhagwati and Amartya Sen, two luminaries at Columbia University and Harvard University, respectively.
The sociological -- and psychological -- factors behind the swift Americanization of India’s elite, and the related making of the “India Story,” are not so hard to figure out. Stumbling out of an absurdly protectionist and uncreative economic regime, which forced many of their relatives to immigrate to the U.S., Indian politicians, businessmen and opinion makers were eager for a new redemptive vision in the late 1980s and 1990s.
As it turned out, this quest was too easily fulfilled by the post-Cold War ideology of free markets -- a dominant orthodoxy that, even as it faced an early Waterloo in Russia in the early 1990s, made even East Asian economies appear a successful example of minimal governments.
Having abandoned the delusions of a regulated economy, India embraced the fantasies of an unregulated one. All governments needed to do, we were repeatedly told, was get out of the way of buoyant and autonomous entrepreneurs, and stop subsidizing the poor and the lazy. Never mind that, as recent crony scandals reveal, successive Indian governments were firmly pro-big-business -- as opposed to pro-market. Gurcharan Das, author of “India Unbound,” was among many claiming to see an Indian revolution brought about by self-motivated individuals: “India’s real success,” he claimed, “lies with its self-reliant and resilient people.” He added, “in India society has triumphed over the state.”
Furthermore, India’s success seemed to be virtually guaranteed by the success of Indian-Americans -- Vikram Pandit, Anshu Jain and Vinod Khosla, among others -- who had come of age during Ronald Reagan’s adventures in supply-side economics and gone on to share the prosperity of Bill Clinton’s deregulated America. Indeed, the Indian-American elite was given the resonant voice of mediators and arbiters in the posh echo chambers of Delhi and Mumbai.
A new book by Anita Raghavan, “The Billionaire’s Apprentice: The Rise of the Indian-American Elite and the Fall of the Galleon Hedge Fund,” reveals how well-placed men like Rajat Gupta, the investment banker recently convicted for insider trading, expedited close links between American and Indian political and business leaders.
Indian academics perched on well-endowed chairs and journalists hired by the American Enterprise and Cato institutes could be trusted to recite the mantra of privatization and deregulation in tune. Right-wing bloggers and tweeters perennially lurking in a shadow intellectual economy helped entrench Ayn Randian pieties, increasingly discarded or challenged in the U.S. and Europe, in India’s influential English-language press.
Very quickly, the notion that India was, as Foreign Affairs proclaimed on its cover, a “roaring capitalist success story” assumed an extraordinary persuasive power for Indians and Americans alike.
Those of us who pointed to the very obvious frailty and unevenness of India’s economic growth were denounced, most passionately by long-distance Indian nationalists in New Jersey, as sour party-poopers, if not dementedly “anti-Indian.” Some of this may have been due to what V.S. Naipaul, visiting India for the first time, described as an upper-caste “defect of vision,” before the overwhelming fact of mass wretchedness -- a blindness marked by “smugness” and “the refusal to see.”
But the viciousness of these attacks on a tiny minority of dissenters also suggested that the self-image of many well-off and rising Indians had become hopelessly entangled with the conviction that India, once a shamefully poor country, was now an emerging economic powerhouse. The myth of a rising India had to be zealously protected in order to maintain one’s self-esteem at an artificial high.
These Indian illusions about the self and the motherland now seem to be the most enduring outcome of close India-U.S. collaboration, which has yielded little of the political and commercial bonanza hoped for by leaders like Biden. The U.S., ever innovative and resourceful, can of course afford to look elsewhere for investments and alliances. It is its weaker partner that must now undergo a radical self-reckoning.
There are some signs that this is indeed happening. Even such once-fervent cheerleaders as Gurcharan Das now admit that a strong, efficient state capable of building physical and social infrastructure is essential to India’s growth. “An Uncertain Glory: India and its Contradictions,” the new book by Jean Dreze and Amartya Sen, spells out the importance of a vigorous - - and participatory -- democracy to this process. This narrative with its conspicuous lack of Zippies doesn’t seem particularly thrilling. But its sober realism may accord better with foreign expectations and India’s own needs than does the exuberant surrealism of the “India Story.”
(Pankaj Mishra is the author of “From the Ruins of Empire: The Revolt Against the West and the Remaking of Asia” and a Bloomberg View columnist, based in London and Mashobra, India.)
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