May 16 2014, 6:27pm CDT | by Forbes
Bulls on India were snorting after Narendra Modi’s big win for prime minister this week, even as Chinese Asia was fretting over incipient conflict and other troubling signs in that still-bustling trade zone. Were these simply polar opposite realities?
Maybe not, soon enough.
For now, the ousting of the largely sclerotic Congress Party coalition gives Indians hope that at least some business development will prosper. Modi’s record in Gujarat state, while hotly contested, does point to more infrastructure progress, and that would help the wheels of commerce turn faster. Favored promoters will stand to gain, too.
The leader-in-waiting’s background is unusual to say the least, so much of India and the subcontinent will be watching anxiously. The economic question will center not just on the pace of change, but the nature. Is the largely-untraveled Modi going to bring India more into the swing of its neighbors and the world, opening doors to investment and competition for the sake of modernism and opportunity? His BJP Party has a general India First bent, and even under the more liberal government of Manmohan Singh, Indian trade negotiators were notorious for gumming up the global works. Will the nationalist and presumed foreign-policy hard-liner Modi prove to be–if only for GDP purposes–a Davos Man?
That will be a significant test, contrariwise, for whether the intellectual brooding of Oxford’s Ian Goldin is on the mark. In a part of his latest book, The Butterfly Defect: How Globalization Creates Systemic Risks, and What to Do about It, the World Bank veteran grows worried that lagging prospects of the world’s poor (of which India has a few hundred million) is erecting barriers to openness that rightly achieved could help them. They won’t countenance what they don’t perceive to be in their interests. In responding to his mandate from India’s unhappy electorate, Modi can choose to defy that outcome, so self-defeating of opportunity, or succumb to a Hindu-centric autarky that is familiar enough.
How, then, to connect this to the frightening events in Vietnam this week, as mobs attacked an industrial park ostensibly in reaction to China’s incursions on drilling territory in the Paracels, claimed by both nations? The street marauders, acting on guidance or instinct, trashed factories and threatened mayhem on their managers. The targets, however, were not just mainland Chinese but Taiwanese, South Koreans and Japanese as well. Was this just a confusion, as they are all bidding for cheaper Vietnamese labor? Or was the naval standoff just a pretext for a “Seattle riot”?
Yen Chen-shen, research fellow at the National Chengchi University in Taiwan, had this to say to the Wall Street Journal: “The influx of foreign companies in Vietnam in recent years has widened the wealth gap there. For the locals, prices have gone up, but wages haven’t caught up. [Vietnam also has gone through a credit hangover.] Although the protest is about China’s oil rig, the core anger and fear is against foreign exploitation of the country.”
Well, hello, Dr. Goldin!
If the proletariat of Vietnam, a nation with all the world before it if only it could shake off remnant Communism, is ready to toss aside foreign investment, what hope will there be for the really difficult cases of Asia and beyond? What of China, for that matter, which is nervous over a slowdown that could get suddenly worse if a housing bubble pops? An actual outbreak of hostilities, perhaps as a balm for either population, would be horrendous for all in the short term. Prolonging the troubled peace would get us over that hump but then where is the basis for medium-term prosperity if suspicion toward the outsider is now on call?
The thoughtful voices–including China’s rulers–will make a case for multilateral order. Some will trot out the Trans-Pacific Partnership ideal for another round of blather. But what Asia-Pacific and the world could use, surely ahead of the gunboats blazing, is a bold unilateral move to break down some commercial barriers, even those with old foes. Calling Mr. Modi…
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