We analyze and compare the social, cultural and historical determinants that influence the international competitiveness of China and India. Starting with the discussion why pure economic determinants cannot solely explain a country's competitiveness, we will analyze previous qualitative research and evaluate quantitative data to assess which country has more favorable socio-economic factors influencing its economic performance in the long run.
Few days pass without a headline on China and India in the global press. The Economist stands not alone asking “What's to stop China and India?” (Edition of 27.10.2005). The world's workbench and its research laboratory do not only fascinate investors, politicians, or scientists, but also the general public.
The People's Republic of China and the Republic of India are not only the two most populous states in the world, but also two of the fastest growing economies in the last years—and increasingly important engines of the globalized economy. China has been growing with nearly two-digit rates since the first reforms in 1978 and is the world-leading receiver of foreign direct investment today. Since 1980, India has been generating an average real growth of 6% per year, constantly surpassing the 8% landmark since 2003. In the years to come, economists still expect growth rates above the global average. Wilson and Purushothaman [
For these reasons, there is a large and steadily growing number of (popular) scientific publications on China and India asking why both countries have become increasingly competitive, denoting them as giants on the rise. Communalities as their immense population, economic dynamics, or geography are seductive to pigeonholing both countries and looking at them without sufficiently taking into account the complexity of such a comparison. The apparent differences between both countries and their unique characteristics can teach important lessons though. In addition, discussion is largely focussed on the prognosis of growth rates.
We will thus highlight further important factors that determine the economic performance of China and India and that have only lately entered the discussion on the factors that make a country internationally competitive or not—central traits of its society, cornerstones in history, or its cultural shape. Starting with the discussion why pure economic determinants cannot solely explain a country’s competitiveness (Section
In increasingly open and integrated markets, a country's competitiveness is the central prerequisite to succeed on international markets. The common literature provides ample definitions of the term “competitiveness” which concentrate on the macro-, meso- as well as on the microeconomic level. However, in addition, economic performance is to a large extent determined by socioeconomic factors of a society and thus by determinants beyond the economic sphere.
When discussing competitiveness, problems start with trying to define the term. Neither in theory nor in praxis there is a common definition of the term competitiveness. In particular, problems occur when trying to define the notion of competitiveness of a country whereas the definition on a microeconomic basis is widely acknowledged. An enterprise is said to be competitive if it is able to improve the quality of its products above average or to reduce the costs of its production to an extent that it can enlarge market share or profit compared to its competitors. On a national basis, however, competitiveness can not be defined simply in analogy to the microeconomic notion. The distinction then is much more difficult. The OECD defines competitiveness as the extent to which a nation is able to produce goods and services that can be traded on international markets under the conditions of free trade and just market conditions simultaneously to an increase of the real income of the inhabitants (OECD, World Competitiveness Report 1997). The cornerstones free trade, competition, economic growth, and the ability to increase the sales of own products on international markets are also applied by other attempts to define competitiveness [
Even more difficult than a definition of the term competitiveness is a categorization of the determinants that may explain whether a country is competitive or not. If understood as growth, neoclassical and endogenous growth theory can provide insights into the determinants of competitiveness. Neoclassical growth theory emphasizes the role of accumulation of human and physical capital for the long-term development of an economy. The higher the investment of a region in its stock of capital, the higher the level of regional income per capita. But this impact of investment on growth reaches a border, continuous growth can only be achieved by technological progress. Technological progress, however, is not endogenous in the model (Solow [
The aspects of trade are the issue of the traditional and the new trade theory. In traditional trade theory, going back to Adam Smith and David Ricardo, countries are equipped with different production factors which are used by trade in the form of comparative advantages. In the framework of international work sharing, nations specialize on products in production, the production of whichhascomparative advantages. Efficiency gains generate higher growth rates. Through international free trade the factor costs for labor and capital adjust and the resources of single countries complement each other [
However, the determinants of competitiveness in fact lie on the level of entrepreneurial behavior. Schumpeter realized that entrepreneurs create technological and financial progress to survive in a framework of increasing competition and declining profits. Innovation is one main factor of entrepreneurial activity [
Thus, the question has to be changed: the central question is in which surroundings an enterprise can develop innovational potential, which framework does create a fertile ground for competitive action?
Based on this reasoning, the strategic management has contributed largely to the empirical analysis of competitiveness, the most influential impulses coming from Porter. Porter [
This approach has become popular as Porter's Diamond, that aggregated many former ideas on competitiveness. The diamond is based on extensive empirical work, so that the advantages of the approach lie in its great proximity to practice and less in the elegance of modelling. However, from his heuristic approach, it is possible to deduce patterns and regularities [
Apart from the overall macroeconomic and political framework and the institutional surroundings, enterprise performance depends on long-term social determinants of a country and thus on primarily noneconomic factors. The concept of systemic competitiveness developed by the German economists Esser et al. [
Today, China and India are outstanding. In fact, China had been outstanding before. In the year 1600 AD, the Chinese empire was the greatest and most developed among all unified empires in the world. At the same time, Russia had only started growing together, India was scattered between Mogul and Hindu reign, and the giant empires of Mexico and Peru had fallen [
In the first years of the People's Republic of China, economic development was ambivalent. Between 1952 and 1975, GDP grew on average by 6.7% on an annual basis, yet consumption stagnated. Education, social security, and medical care were improved, and the share of industry in total output grew from 20 to approximately 45%. This development was largely based on mobilization of additional human resources while investments in capital stock became more and more inefficient. Only Mao's death in September 1976 and the takeover of Deng Xiaping in 1978 opened a gateway for reforms that were responsible for the economic jump start.
The start of reforms in China is commonly dated the XI Congress of the Communist Party of China in December 1978. Neither precise reforms were concluded nor a time schedule was elaborated, yet there was an ideological change. Deng Xiaping's pragmatism won over Maoist dogmatism of Hua Guofeng; economic development was declared as the primary goal of party policy [
In 1978, China was fairly isolated from East and West and hence one of the least open economies in the world. Foreign trade accounted for only 14% of GDP in 1978 whereas world average was 34%. In 1979, however, central government decided to extend foreign trade and allow foreign direct investment. Two provinces were chosen to experiment with these reforms; in 1980, four special economic zones were created—Shenzen, Zuhai, Shantu and Xiamen—that were granted various privileges. For example, projects for foreign direct investments up to USD 30 million could be granted independently. Market institutions and private property were tolerated here [
During the third plenum of the XXIV. party congress in November 1993, the most important decisions were made with regard to a modern system of enterprises. The concept of socialist market economics was filled with a rich reform agenda that became the basis of following reforms [
In India, average annual growth between 1950 and 1980 was only 3.7%. Poverty and social inequality as well as the lack of education were not overcome. In the era of Indira Gandhi (1966–1977), encompassing regulation (licence raj) was created and huge parts of the financial sector and external trade were nationalized. When she tried to nationalize the essential trade of grains, the climax of Indian isolation was reached. It was her son Rajiv Gandhi that initiated deregulation and liberalization [
First steps of liberalization were made since 1980 and accelerated in 1985, even though they lacked stringency and received little attention. Imports, especially imports of machinery and raw materials that were not produced in India, were more and more liberalized. Incentives to export have been created especially since 1985. With regard to the domestic market, the number of industries working under governmental license was reduced by 31 sectors, even though important branches such as steel, coal, textiles, and chemicals remained under governmental control. Nevertheless, huge enterprises were usually subject to many restrictions and could not benefit from these measures of liberalization. Yet, the threshold for being a huge enterprise was lowered, so that approximately half of all huge enterprises were no longer classified as such. Devaluation of the rupee contributed to high exports during the late 1980s [
Since 1978, China has experienced enviable growth, as Figure
GDP per capita (in current USD). Source: own presentation based on World Bank data.
In its most recent ranking for 2009-2010, the Global Competitiveness Index ranks China as the highest among those for future economic giants, 20 places ahead of India and even more of Brazil and Russia. GDP growth has taken an impressive average of 9.8 and 6.2%, respectively, yet, GDP per capita remains modest (Table
Selected Indicators for the BRIC Countries.
GCI | GDP (USD billion | GDP per capita in USD | GDP CAGR (%), | Population (millions) | ||
2009-2010 | (out of 133) | (2008) | 1991– | 2008 | 2050 | |
China | 29 | 4,327 | 3,259 | 9.8 | 1,336 | 1,409 |
India | 49 | 1,207 | 1,017 | 6.2 | 1,186 | 1,658 |
Brazil | 56 | 1,573 | 8,295 | 2.9 | 194 | 254 |
Russia | 63 | 1,677 | 11,807 | 1.9 | 142 | 108 |
Source: Geiger and Rao [
Yet, it is not to be denied that some problems China and especially India face remain severe. Whereas 42% of the Indians still lived below the extreme poverty line of USD 1.25 a day in 2005 compared to 54% in 1988, extreme poverty in China has been reduced from 54 to 16% in the same period. Life expectancy is lower and infant mortality higher in India than in China, and also in purely economic terms, the gap remains large. FDI into India in 2007 was a quarter of the inflows into China; China's exports are more than India's overall GDP [
Trade balance (in percent of GDP). Source: own presentation based on World Bank data.
Often, analysis is focussed on forecasting growth rates that are per se not sufficient for evaluating a country's competitiveness. Nevertheless, comparisons in the literature are abundant; both countries are praised as future giants of world economy and mentioned as a couple. Bloom et al. [
Determinants of competitiveness compared.
China | India | |
Macrolevel | ||
Politics | + relative political stability due to improving living standards [ | − variety of religions, ethnicities, and languages; rigid caste system [ |
− potential of social disruptions given the Communist Party's monopoly of power [ | − tensions with Pakistan [ | |
− neglection of human rights [ | − frequent changes of government and minority governments [ | |
Demographics | + population growth allows for extensive growth [ | + population growth allows for extensive growth [ |
− population growth likely to have negative impact on p.c. GDP [ | − population growth likely to have negative impact on p.c. GDP [ | |
− aging population challenges social security system [ | + young people allow for intensive growth if education is supported [ | |
Labor market | unemployment rate of 4.2% in 2008 (World Bank) | unemployment rate of 5.0% in 2004 (World Bank) |
− pressure on labor markets is rising [ | − employment in public sector has fallen and was not backed by increases in private economy [ | |
− quota regulations for scheduled castes have led to demoralization and unsatisfactory performance in public sector [ | ||
Fiscal and monetary policy | + relatively low debt and deficit [ | − expansive fiscal policy [ |
− fixed exchange rate regime, requiring capital controls [ | + restrictive monetary policy [ | |
External relations | + huge FDI inflows | |
+ trade balance surplus | − trade balance deficit | |
Meso- and microlevel | ||
Industrial structure | + China as the global workbench, including high share of high-technology exports (29% in 2008; World Bank) | − high dependence on services sector [ |
Business environment | Doing business ranking 89 of 183 in 2010 (World Bank) | Doing business ranking 133 of 183 in 2010 (World Bank) |
Entrepreneurship | + large share of high-growth expectation early-stage entrepreneurship (Global Entrepreneurship Monitor) | − small share of high-growth expectation early-stage entrepreneurship (Global Entrepreneurship Monitor) |
Education | + high priority on education, consistent programs [ | − still, securing primary education is main task [ |
Source: Own presentation.
One determinant—and only one among many others—for future competitiveness is socioeconomic characteristics of both countries. The short summary above has shown that economic reforms were able to induce a process of astonishing growth and catching up; yet they relied on the respective cultural framework.
With regard to Eastern European transition countries, Brockmeier [
Thus, a functioning economic order cannot simply be prescribed. People have to get acquainted with new formal institutions to learn how to deal with them. This process will take a lot of time and will only work out if there is at least a small intersection with old informal institutions. China and India share a lot of such informal institutions that are conducive to market economy, as the following discussion will show. Hence, socioeconomic determinants are one piece in the puzzle that gives the full picture of their competitiveness.
Max Weber in his 1904 classical treatise “The Protestant Ethic and the Spirit of Capitalism” was the first to investigate the relation between culture and economic development. Weber argued that Calvinist doctrine of human predestination demanding commitment to work and social dedication and at the same time applying economic success as the benchmark of divine mercy fostered economic development. In his later work, Weber postulated a negative connection between Asian Confucianism and the development of capitalist economic structures [
In more recent past foremost, new institutional economics picked up this approach and acknowledged the relevance of informal path-dependent social systems of rules and norms for a successful industrial development (esp. [
The following paragraphs will compare and evaluate the manifestation of cultural values and norms in China and India. By focussing on the development of social capital and the analysis of the political-economic orientation, two especially influential sociological factors will be analyzed. The results will be used to derive implications for the international long-term competitiveness of both countries.
Culture is a system of basic common norms and values, informal institutions, cognitive schemes, and daily activities, that altogether coin human behavior within a society [
Chai and Roy [
Indian Hinduism, in contrast, claiming divine salvation by asceticism, promotes individualism and undermines the yearning for material wealth and economic success as well as the accumulation of savings. The abjuration of all earthly wealth that was claimed by Ghandi as well does not favor economic progress. In addition, obvious strengths of Hinduism such as tolerance and diversity seem to convert themselves into weaknesses such as a lack of organization and assertiveness [
In addition, the caste system, though officially abolished by constitutional decision in 1949, but still present in everyday life, influences economic activity negatively since it limits the freedom to choose a profession and the chances of cooperative behavior and sets negative incentives, given the impossibility of social advancement (Chai and Roy [
Both countries share reluctance concerning external influences rooting in historical experiences of foreign occupation. In India, this assumes such proportions that branches of the US-American fast food chain Kentucky Fried Chicken are perceived as a national danger [
Yet English imperialism also bequeathed a working administrative system, democratic structures and modern institutions. An efficient legal system that guarantees the implementation of laws and property rights exists.
Historical and religious characteristics that form a country's culture influence social attitude towards work, technological progress and education and thus economic development. We will therefore analyze respective questions from the most present World Values Survey (2001) and evaluate the answers for both China and India.
The World Values Survey is the most encompassing globally-conducted survey on socio-cultural, moral, religious, and political convictions. The poll is realized by an international network of social scientists of leading universities; the results are freely accessible on the organization's website. In each country, questionnaires are filled in within personal interviews. The questionnaire of the last survey is formed by about 250 questions. In 2001, 1,000 people were interviewed in China and 2,002 people in India. The key sociodemographic figures of the interviewees are summarized in Table
Sociodemographic features of the interviewees.
China | India | |
---|---|---|
Number of interviewees | 1000 | 2002 |
49.4% | 56.8% | |
1960.72 | 1953.91 | |
Higher education (in %) | 4.3 | 23.3 |
Intermediate education (in %) | 53.9 | 24.3 |
Lower education (in %) | 41.8 | 51.9 |
High household income (in %) | 23.4 | 40.9 |
Intermediate household income (in %) | 34.5 | 37.4 |
Low household income (in %) | 37.5 | 20.8 |
Source: own presentation based on World Values Survey 2001.
In the survey, the attitude towards work is sampled by the means the following of four questions: is work important in life? does work make life worth living? is one obliged to work towards society? should the meaning of hard work be conveyed to children?
Figure
Attitude towards work in China and India (approval in percent). Source: own presentation based on World Values Survey 2001.
The question whether technological progress should receive more attention was answered with “yes” by 96.7% of the Chinese but only 56.7% of the interviewees from India. In addition, the attitude towards technology and progress in India is highly correlated with the educational background. Only 44% of all respondents with lower education, but 80% of those who had higher education acknowledge the importance of technological progress.
Likewise, scientific progress receives higher valuation in China; nearly 80% of all interviewees think it helpful. Interestingly, especially those interviewees with lower education share this opinion. Only 60% of all Indian interviewees evaluated scientific progress as helpful for the overall development while 17.3% assumed harmful influences.
The World Values Survey does not poll the attitude towards education. Delong [
Chinese culture as well attaches great importance to education. Confucianism with its inherent appraisal for education and knowledge is deeply routed in Chinese society and manifests itself in high motivation shown by Chinese pupils and students [
Being compared, historical and religious influences on Chinese and Indian culture may suggest a social attitude more beneficial to economic development in China. The analysis of attitude towards work, technology, and education however, backs this assumption only partly. Only the more positive attitude towards technology and progress favors China. India, in contrast, profits from more Western mentality, left behind by British imperialism, its institutional heritage, and the wide distribution of English as
A society's social capital is as well a source of economic development and prosperity as human or physical capital. Social capital is productive in the sense that it opens up opportunities that otherwise could not be realized or only at much higher cost.
Whereas human capital denotes the individual capabilities of single members of a society, social capital is the structure of social linkages within a society [
In scientific literature, two types of trust are distinguished: Interpersonal trust is the trust between individuals whereas systemic trust means confidence in the political, economic, and institutional system [
Interpersonal trust reduces the necessity of sophisticated contracts and trials and thus reduces transaction costs, while simultaneously increasing the propensity to take entrepreneurial risk. This is especially crucial for small and medium-sized enterprises that are more exposed to risk by nature but play a significant role for national competitiveness. Interpersonal trust raises horizontal and vertical links between enterprises and alleviates the emergence of industrial clusters.
Knack and Keefer [
Using average annual growth in per capita income over the 1980–92 period, the social capital variables exhibit a strong and significant relationship to growth [
Trust is thus the fundament of social capital and has an outstanding importance for economic development: “Virtually every commercial transaction has within itself an element of trust, certainly any transaction conducted over a period of time. It can be plausibly argued that much of the economic backwardness in the world can be explained by the lack of mutual confidence” [
Whereas sociologists are mainly interested in how social networks produce or inhibit trust, economists emphasize trust as a way of reducing transaction costs and its role as a lubricant of the economy. In any economic contract, there needs to be a productivity advantage or norm assuring traders that the other side will hold up its end to the deal. Legal contracts, third-party assurance, family solidarity, or credible threats of violence may provide such assurance albeit being costly; trust is cheap.
Especially trust-sensitive transactions include those in which goods and services are provided in exchange for future payment, employment contracts comprising tasks of the employee that are hard to monitor, or investment or saving decisions relying on assurances by banks or government that they will not expropriate the assets [
Thus, high-trust societies provide a framework in which individuals need to spend less to protect themselves from being exploited, where written contracts are less likely to be needed and thus do not have to specify every possible contingency, and where litigation may be less frequent; efforts to protect oneself from unlawful violations of property rights can be reduced. In addition, high levels of trust can substitute for formal institutions. As government officials may be conceived as more trustworthy in high-trust societies, policy pronouncement may appear more credible and thus foster investment and economic activity [
In addition to the direct effects of trust on economic activity, there may as well be indirect improvements through political channels. Both trust and civic norms can improve governmental performance and the quality of economic policy as they affect the level and character of political participation. Large-scale participation and profound knowledge of politics by a large number of citizens both enrich politicians and bureaucrats and narrow interests they are allied with [
In contrast, low-trust environments discourage innovation as more time is needed to monitor potential malfeasance by business partners or employees, time that could otherwise have been spent on innovation efforts. Hiring decisions are influenced by personal attributes of applicants as blood ties or personal knowledge more than by educational credentials. In turn, the returns to acquisition of educational credentials are reduced and thus the incentives to their acquisition [
Similarly, norms of civic cooperation can be linked with economic outcomes. Such norms act as constraints on narrow self-interest and thus create incentives to contribute to the provision of public goods of various kinds. Technically speaking, internal as well as external sanctions—guilt, shame, ostracism, and so forth—associated with norms alter costs and benefits of cooperating and defecting in prisoner's dilemmas [
Social networks fasten information flows within a society, enhance trust, and promote cooperative behavior. To conclude, positive forms of social capital help make economic processes more efficient, so there is a positive correlation between social capital and growth. Raiser [
Huntington [
India as a Hinduist country in contrast kept its cultural identity throughout history without being bound to a political framework; here, politics was always practised in secular forms [
For analysis, we again utilize different categories from the World Values Survey 2001. We will use the question whether most people can be trusted as an indicator for interpersonal trust; questions on satisfaction with and trust in politics and institutions will measure systemic trust. In addition, corruption will be used as an indirect negative indicator for interpersonal trust. Membership in associations is used as a proxy for the intensity of cooperation and networks.
Whereas 54.5% of all Chinese interviewees trust most people, only 41% of the Indians believe that most people can be trusted. In particular, interpersonal trust decreases with rising education in India whereas higher education is linked to higher levels of trust in China.
The following questions were included in our analysis: satisfaction with the government and the degree of democracy, trust in the government, parliament, political parties, public administration, labor unions, the media, and police.
In China, 72.9% of the interviewees are more or less content with governmental work, compared to 59.7% in India. Differences with regard to the satisfaction with the state of democratic development are more pronounced. Surprisingly, almost 90% of the Chinese were satisfied with the degree of democratization, but only 63.4% of the interviewed Indians. Also with regard to the mentioned institutions, the polled Chinese demonstrate higher levels of trust. Especially striking is that almost none of the Chinese is completely dissatisfied with the state of politics or has no trust at all in the different institutions. In India, however, the share of this group is above 10% in all categories and reaches a maximum of 28% when asked on trust in political parties.
The question, whether corruption can be justified, is answered with never by 83.5% of the Chinese and 85% of the Indians. Yet, 6.5% of the Indians think corruption is always justified whereas only 0.2% of the Chinese were of the same opinion.
The World Values Survey covers the question on membership in one of 14 distinct organizations, ranging from religious communities to educational institutions or sport clubs. In both countries, the degree of participation is relatively low. Yet, the share of members in India of 8.4% is still significantly higher than in China, where it reaches only 2.7% on average. In both countries, education highly influences the likeliness to be member of an association (Figure
Membership in voluntary associations (according to degree of education, in percent). Source: own presentation based on World Values Survey 2001.
These results that mirror a higher degree of interpersonal and systemic trust in China but also more cooperation and networking in India can be explained and qualified by historical and social developments.
India is a pluralist multiethnical state with a huge religious, lingual and social diversity. This constellation complicates the emergence of trust and across-the-board networks. Thus, Knack and Keefer [
Bronger and Wamser [
Vanneman et al. [
Social networks in India are limited to close circles. Tharoor [
Such tight radii of trust in which group members feel only bound towards each other and to which outsiders have no access hinder widely-stretched networks and aggravate the emergence of civil society and working institutions. Fukuyama [
In China, Han-Chinese are the state-carrying element with a share of population of over 90%. In addition, there is a uniform spoken and literary language, and Confucianism dominates spiritual life, even though the states pursue an atheist ideology [
In spite of the more homogenous preconditions, radii of trust are also limited in China, and social networks are often limited to the family and guanxi—a close network of personal relationships between single people, but not between groups and/or institutions [
Vertical command structures are supposed to promote social capital in China, but only
As a conclusion, both China's and India's economic development is aggravated by a lack of social capital. Social networks are characterized by tight radii of trust that do not go beyond family and friends. This is fertile ground for corruption but forecloses across-the-board cooperation and thus creates negative externalities. In India, this is owed to the pluralist social structure. A lack of confidence in the system is a further problem that is underlined by the importance of the informal sector. In China, the emergence of social capital is hindered by authoritarian politics and a lack of formal institutions. The state interferes in social processes instead of promoting trust and cooperation through greater passivity. The emergence of social capital can only partly be supported by the state through the creation of formal institutions. Yet, he can exert negative influence by means of its actions.
India's democracy and formal institutions mean a huge competitive advantage, but heterogenous social structures manifest a nearly unsolvable problem with regard to the creation of social capital. China, in contrast, has the opportunity to support the emergence of additional positive forms of social capital—but the state must yield control and increase the civil freedoms of its people.
A common economic concept is important for a country's long-term competitiveness since it is the only way to create a successful interplay of all spheres of life. It alleviates continuous implementation of collective policies with regard to time and contents as well as enforcement of long-term interests and the creation of stable expectations. In particular, globalization and competition have to be generally accepted.
In the following paragraphs, we will analyze the respective key features in India and China.
In 2006, the Chicago Council of International Affairs in cooperation with Asia Society, the East Asia Institute and the Lowy Institute conducted a survey in five countries among which were China and India that asked how ongoing globalization is judged by society. Whereas 87% of the Chinese evaluate globalization as predominantly positive, only 54% of the Indian respondents are of the same opinion [
Concerning competition, the poll of the World Values Survey yielded the following picture: 90.4% of the Chinese and 85.7% of the Indians evaluate competition as predominantly advantageous. In India, the picture is yet more mixed. The survey allows for answers on a scale from 1 to 10, with 1 illustrating an absolutely positive attitude towards competition and 10 an absolutely negative evaluation. 55% of the Indian interviewees judge competition with a 1, but another 10% with a 10. In China, absolute agreement was only at 38.3%, but also only 2.6% judged competition as completely negative.
The World Values Survey 2001 documents a greater interest in politics in China. More than 70% of the interviewed Chinese show political interest, in contrast to 45% of the Indians.
The majority of Indians (54.1%) think high economic growth rates should be the central political goal. Only 40% of the Chinese share this opinion, further 40% see the primary goal in boosting national armed forces. In both countries, the focus on economics is the more likely the higher the degree of education.
Cultural scientist Geert Hofstede has developed an index of five cultural dimensions that tries to map the dependence between national culture and corporate culture. The index is based on a survey of more than 100.000 IBM employees from 50 countries. One dimension is the long-term societal orientation. China reaches 118 of 125 potential points, India scores only 61. (Other dimensions are the indicators: distance to power (How big is the respect towards authorities?), individualism, masculinity and risk affinity. The study is mainly criticized for the fact that the sample is not representative. A detailled description of the concept and the single dimensions can be found at G. Hofstede and G. J. Hofstede [
The studies point towards a higher acceptance of competition and globalization and towards higher interest in politics in China. On the other side, Indians are more likely to agree on primary political goals and put a larger focus on economic development. However, the Chinese tend to develop long-term perspectives which favor the creation of common future visions.
For the development of a common national vision, both the political and social structure of a society are crucial. In contrast to China, India has at no point in history been a unified country under unified leadership. Desai [
Whereas social structure has been analyzed in the preceding paragraph, we now will have a look at the political structure and its influence on the development of a common economic concept. In China, political structure is hierarchical, the Communist Party standing at the top of the pyramid. India is a parliamentary democracy with strong federalist structures. Thus, it is obvious that it is easier for China to pursue long-term political goals than for India where 12 parties form the governing coalition and next elections could bring about a government with completely different economic and political targets. Yet, the question remains in how far a policy that is imposed by one party can be considered as concerted.
It can be stated that it will always be easier for China to articulate long-term goals. However, when the discrepancies between the goals proclaimed by the Communist Party and the opinion of economic actors become too huge, economic slowdown may follow. In addition, economic development challenges the stability of the authoritarian political system. Even Schumpeter [
Modernization forces China into a balancing act between economic self-determination and political heteronomy; we can only wait whether the impressive growth rates may foster democratization or stabilize communist power. Concentration of resources of power on a very small share of the population dilutes the hope for rapid democratization [
India profits from the fact that economic aims are decided upon within democratic processes. Yet, pluralistic structures, federal orientation, and often marginal political majorities endanger a collective and continuous long-term economic orientation.
China and India are two rapidly growing economies, similarly fascinating economists, politicians, and the general public. The dynamic development of the two giants not only forces established economies to adapt their economic framework to the newly emerging competitive environment but also encourages other emerging nations to study and imitate the underlying patterns of success.
This paper argues that in addition to the successful economic reforms since 1978 or 1980, respectively, socioeconomic factors such as cultural values, the accumulation of social capital and the existence of social networks are an important impetus of long-term international competitiveness and economic development. Therefore, conditions and formation of socioeconomic factors in China and India were compared.
Both countries profit from cultural values conducive to economic development as, for example, appreciation of work and education. However, both nations lack social capital. In India, this is due to a pluralist society and the archaic caste thinking. This problem is not easily accessible for policy measures. Although the government tries to promote contracts between all social groups and access to jobs and institutions for the so-called scheduled castes, success remains low. In contrast, violent conflicts between different religious and social groups appear again and again. This aggravates the development of a common economic orientation.
In China, a more homogenous society and the hierarchical political system help introducing common national targets. This does, however, not necessarily represent the public opinion. Continuing governmental interference in social concerns as well as lacking autonomy of economic actors deplete the accumulation of social capital and the formation of social networks.
In contrast to pluralistic structures of society in India this is, however, a problem the Communist Party can deal with and may solve in granting greater freedom to its people. Therefore, socioeconomic structures in China have the potential to develop more positively than in India, constituting a competitive advantage in the long run.
Closing, one fact is especially apparent. Positive values and norms in the sense that they are conducive to economic progress are more likely the higher the educational level. Thus, access to education and knowledge will be the most crucial issue in economic politics in the future.