Professor Deepak Lal has pooh-poohed claims of ‘Beijing consensus’ or Beijing model of State Capitalism. Rightly so. But, pretty much all the criticisms levelled at Beijing model apply to the ‘Washington consensus’. Both proponents made and make the mistake of generalising from a context specific approach to eocnomic growth that worked. Both have or should have SELL BY and ”Not to be sold here’ warnings.
This key observation of his on whether China is in danger of becoming a Japan deserves to be taken note of:
So, is the latest adherent to the “Asian” model likely to meet the same fate as its parent? I do not think so. This is because China, unlike Japan in the eighties, is still in the “catch-up” phase of economic growth. And with savings rates remaining high, until the “demographic dividend” ends in 2025, with an elastic labour supply in relatively free labour markets, and abundant industrialisation opportunities for expansion beyond the coast, China should be able to maintain high growth rates in the next decade.
The dangers are longer term, once the catch-up phase ends.
On whether Indian growth model is superior to that of China – as he seems to be alluding to here – this blogger thinks that Professor Deepak Lal needs to update his views. India’s growth of the 1992-2002 years (with some years of middling growth during this period excluded) was not due to a full State-led capitalism model nor a genuine grassroots devolution model that China practised in the 1980s as Yasheng Huang narrates in his book.
It was not deliberate but accidental because policy did not do much to get the State further out of the way of bottom-up, entrepreneurial growth. That is evident in the acts of policy omission and commission in the decade to 2010, including that of the NDA rule up to 2004.
The growth rate of the period 2002-07 owed itself largely to the global boom and low commodity prices up to 2004. Further, it was low interest rates globally that kept domestic interest rates low. But, it fostered mostly an unsustainable investment boom. It was growth alright but not healthy growth.
Hence, China’s model may be flawed now or might become increasingly inappropriate for China but India has not got it right either. In fact, there are many things that need fixing in India now. For a list of things that are languishing for want of attention, see here and here.