How will the global South fare in our likely future of energy shortages, climate change and resource nationalism (and wars)? India has China’s population mass, but lacks its industrial dynamism and human capital. Africa has Russia’s energy and mineral wealth, but not the military power or social coherence to defend it. South America’s prospects appear brighter – it at least may have the crucial degree of strategic isolation, industrial infrastructure and energy and agricultural wealth to eke out a comfortable (if not luxurious) existence in the turbulent times ahead. In the next few posts, I will assess the future prospects of these three regions in the post-peak oil world, starting with India.
A 2007 Goldman Sachs report estimated India’s GDP growth potential at about 8% until 2020, reinforcing the hype of recent years over “India shining” and the vigorous IT industry springing up in oases like Bangalore. This may well be realistic, even despite India’s manifold social problems (low human capital, creaky infrastructure, caste-based inequalities, an unwieldy bureaucracy, sluggish courts, etc), under a global “business-as-usual” scenario. That however is highly unlikely, for the hard numbers suggest that India will be economically and geopolitically squeezed out of the resources it needs to prosper or even survive by its massive eastern neighbor, China. There are limits to growth on our planet and no guarantees that they will be distributed fairly or equitably in the coming age of scarcity industrialism.
Why India is not China
The two countries share fundamental similarities. Both have more than a billion inhabitants, sustained by great rivers like the Ganges, Huang He and Yangtze that are fed by the (melting) Himalayan glaciers. Both rely on coal to meet the bulk of their primary energy needs and will need to import ever more hydrocarbons, metals and food products from abroad to power future growth. Both are ancient hydraulic civilizations that got left behind during the Industrial Revolution and are now determined to make up lost time. But to realize these dreams, they must compete with each other – directly or indirectly – for the same global energy, mineral and water resources.
Unfortunately for India, its Chinese competitor is dominant across practically all indices of national power one cares to compare.
|GDP / capita 2009||2900$||6600$|
|Literacy rate 1995-2005||66%||93%|
|Manufacturing sector (current prices) 2008||190bn $||1800bn $|
|Internet penetration 2008||5%||22%|
|Planned infrastructure spending 2008-11||240bn $||725bn $|
Let’s now look at the significance of each of the above. First, the average Chinese is now substantially richer than the average Indian. This matters because state power is tied to the surplus it can extract in taxes from a recalcitrant citizenry. There is no better proof of the importance of technological advancement and per capita productivity than 19th century Qing China, which although still the world’s largest economy during the Opium Wars got casually trounced by British gunships with modern artillery and steam power. We aren’t talking about that kind of gap between India and China, of course, but it does exist. The Chinese are now simply better able to actualize advanced industrial and military technologies that they buy (or steal) from the developed world into forms of power that matter – renewable energy, supercomputers, naval C&C, etc…
China leapfrogged India despite the ruinous economic legacy of Maoism, which was surely far worse than that of the “License Raj”. The best way of explaining this puzzle is in terms of China’s better educational profile. The main determinant of long-term economic growth is a country’s human capital (see 1, 2, 3), which for the most part consists of the educational attainment of its population (which in turn is strongly correlated with its level of national IQ). Not only has China implemented basic schooling far more comprehensively than India (see the literacy rates), but in the past decade it has also charged ahead in tertiary enrollments. And there is some evidence that the Chinese have a big structural advantage in IQ over Indians; if that is truly the case, then convergence will be nigh impossible in principle.
As a result of its huge pool of well-educated workers, China enjoys an almost total industrial supremacy over India. China’s manufacturing sector was worth nine times India’s in 2008. This is reflected in practically any sector one cares to survey. Last year, China produced near half the world’s steel and almost ten times India’s output, and 13.8mn automobiles to India’s 2.6mn. In the most fundamental industrial sector, machine tool building, China was global first with 15bn $ of output, relative to India’s insignificant 268mn $. In summary: China is charging past America; India lingers at the level of France, Brazil and Russia.
No matter the hype around IT services off-shoring to India, its eastern rival is more “informatized” (despite the debilitating effects of China’s Great Firewall). Not only is China’s infrastructure already leagues ahead of India’s, it continues to spend three times as much on expanding it further.
Finally, China has a military edge over India – not only in numbers, but also qualitatively in crucial sectors such as naval, space, strategic nuclear and cyberwar. The PRC has a third of the world’s shipbuilding capacity (India has the world’s biggest shipbreaking industry) and some projections indicate the PLAN could have more warships than the USN by 2020. India does not have the industrial strength to embark on such an ambitious enterprise. Plus, a significant part of its military budget is tied up in maintaining military superiority over Pakistan on land; as a result, resources get diverted from the all-important Navy.
India in the Age of Scarcity Industrialism
Though both Asian giants are essentially world-islands (that is, civilizations so deep and self-contained as to constitute their own worlds), they are increasingly tied to the larger world system of capital and resource flows. Their economic progress and rising affluence has to be supported by outside energy sources. Meanwhile, trends such as climate change and urbanization are slated to suppress their agricultural yields, necessitating more imports of “virtual water” in the form of food from abroad. As such, it is vital for both China and India to develop both ways of paying for these life-giving imports (e.g. selling goods, accumulating foreign currency) or if necessary seizing them by force (using gunboats and expeditionary forces). Thus it is their common geopolitical prerogative to safeguard the sealanes carrying their bulk commodity inflows from the Middle East, Africa and South America.
Chinese naval modernization is proceeding in tandem with a far-sighted “string of pearls” strategy of naval base construction on its outlying coastal islands and friendly nations such as Myanmar, Sri Lanka, Bangladesh, and Pakistan (they will host radar stations, anti-ship batteries and logistics hubs for naval operations). India has no such project at sea, while on land it is constrained by the hilly jungles of Indochina to the east, the impenetrable Himalayas to the north and a hostile Pakistan to the west. Though it does have a thin slice of access to chaotic, mineral-rich Afghanistan and Russian-dominated Central Asia, it is hard to see how India can marshal the political will and capital resources to build the necessary infrastructure to exploit them.
It should not be forgotten that India faces severe challenges managing its own subcontinent. Contrary to popular opinion, the Pakistani military is not the foremost strategic threat to India – even the worse-case scenario, a full-scale nuclear exchange, will not kill more than 1% of the Indian population. Far more worrying is the specter of the collapse of the Pakistani state. The region contains a 168mn strong population, growing at more than 2% a year, in a desert only made habitable by canal systems drawing on the Indus River, which is dependent on Himalayan glacial runoff for 90% of its water volume. Perpetually capital-poor, indebted and overpopulated, Pakistan faces the specter of a drying Indus by the 2040′s (if the more pessimistic studies are correct)… after that come the climate refugees, the collapse of the Punjab breadbasket, the raids from the Baloch highlands and general nuclearized anarchy. Bangladesh, most of whose 160mn people live just one or two meters above sea level in an area the size of England, could literally find itself underwater as the 21st century grinds on. No wonder India is pouring 1.2bn $ into a border fence sealing it off.
(Incidentally, the prospect of failed states spilling mass columns of refugees into India would make a great leverage point for China. By supporting Pakistan and Bangladesh just enough to prevent them from collapsing, they would become its vassals…)
India too will experience diminished river flows because of melting glaciers, but not to a critical extent like Pakistan, because the Ganges and Brahmaputra are far more monsoonal. (Nonetheless, like China, India has some very ambitious water megaprojects on the cards). In an abrupt reversal from the earlier successes of the Green Revolution, the rapid depletion of the fossil aquifers used for irrigation in India is contributing to stagnating food production. Though China also suffers from the same problem, it is better equipped to weather it by virtue of its economic strength (foods for goods deals) and strategic foresight (e.g. buying foreign farmlands).
India’s best strategy now is to push the Japan-Korea-Russia-India strategic alliance concept beyond mere rhetoric. If these countries remain splintered in the face of a waning American superpower, Chinese hegemony in the Pacific and Indian Oceans becomes near inevitable. On the other hand, Japanese and Korean capital and knowhow, Russian energy and military technology and Indian manpower and potential economic dynamism could balance out China (and their foreign policy experts worry at the prospect). This diplomacy should be pursued in conjunction with increased spending on ballistic missile defense (to neutralize the Pakistani strategic threat), buying back Sri Lanka (to break China’s string of pearls) and most importantly naval expansion (to exert control over the Indian Ocean littoral).
Some commentators believe India has a long-term advantage over China because of 1) its vibrant liberal democracy and 2) younger and more fertile population. I disagree on both counts.
First, there is no empirical evidence showing that democracies develop faster than authoritarian regimes; indeed, the converse is often true, since the latter can often suppress living standards to squeeze out more resources for investment (on the other hand democracies tend to be freer of the megalomaniac delusions indulged in by some autocrats and hence experience fewer absolute train-wrecks). There may well be a case to be made that a more authoritarian Indian government could have provided mass education and infrastructure better and earlier. Or maybe not: as Amartya Sen theorized in The Argumentative Indian, they do have a traditionally open and discursive culture, one that seems far closer to the West than “Oriental despotism”. Regardless, I think it is safe to say that at least until both Asian giants become fully developed – which will take decades if it ever happens at all – democracy won’t give India any significant advantages.
Second, the idea that China will grow old before it will grow rich is one that should die already. If you don’t want to read this Goldman Sachs report, consider that China’s current development level is the same as South Korea’s in the late 1980′s; its fertility transition lags by only a decade or so (Korea’s fertility fell below replacement level rates in 1983 and is now at 1.19 children per woman; China’s in 1993 and is now at 1.77 children per woman*). Doesn’t exactly sound like the makings of a demographic apocalypse. Meanwhile, India’s huge (and still growing at 1.3% per year) population will sooner be a liability than an asset.
In the final analysis, demography and democracy count for little in the hard, cold (or should that be hot?) world of the post-peak oil future. What matters is India’s capacity to build a modern, sustainable society, solve its environmental challenges and overcome its geopolitical dilemmas. So far it has been largely unsuccessful on all three fronts. Development is largely confined to urban oases, at the cost of further environmental strains and geopolitical dependencies. Its policy-makers do not appear to be pursuing a coherent grand strategy. And when it comes to the manifold impacts of scarcity industrialism – diminishing energy and food sources, climate change, failed states – India is subject to forces beyond its control. It is hard to avoid the conclusion that India faces an increasingly bleak future in a world of limits to growth.
* Adjust down to 1.60 to take into account the male-female gender imbalance.