In dependence or Inter-dependence ?

I recently had a conversation with a friend (the only one who reads this blog) about the US –India nuclear deal. He mentioned the “i” word. I have been thinking hard about its relevance in today’s world and hence this response.

Independence cannot be defined without explaining the context in which it arose. Now we are moving on to the “c” word, colonialism. As Adam Smith argued, the only way to accumulate wealth is to produce more than you consume ***in value***. For e.g. Denmark and Holland with feeble populations had to open and monopolize markets outside Europe. I mean, how wealthy can you get by selling cheese to your hamlet? Market creation basically meant physical and political domination of territory by expeditionary military forces followed by systematic creation of monopolies. When European naval powers formed colonies to expand and grow their economies by creating markets, it caused a response motion: growth of nationalism and identity coagulation in the colonies. In the clash, colonialism turned out to be costly, required more resources and began to pay diminishing returns. For the colonies, independence became the predominant requisite to compete fairly in the global system. I do not contend that nations are not into creating profitable markets anymore: that will be an ongoing process. But the tools chosen would no longer be political domination of territories.[1]

So what does independence mean in a post-colonial sense? It means the ability of sovereign nations to make decisions and act in their own interest in spite of pressure from others on the contrary. If we observe closely such a water-tight definition cannot contain fully the actuality of the global system. Because post-colonialism has increased the entropy of many agents that permeate the global system, resulting in certain cases transformative change.[2] Key among them is the rapidly growing technology and revolutionary global connectivity, both hard and soft. Both these agents have also played the role of leveler in favor of developing nations. But they also cause complex, unprecedented problems to the global system: pandemics, environmental degradation and terrorism.

Given a situation, even for powerful nations, to interpret independence in this manner and acting on this basis would be a fuzzy math. Take the case of US and China, arguably the two most powerful countries in the global system. Let us not even get into the political differences in the past and its implications for the future. That is a side show compared to what happens in the economies of the two countries. China invests its savings on buying US Treasury bonds and holds about 12% of it. Together with Japan, it basically finances the US budget deficit. It pumps manufacturing goods into US, keeps prices of consumables low enabling US citizens to have a decent standard of life. It is able to do so, because it heavily subsidizes its own industries in the form of low interest loans. It needs a prosperous and vigorous US economy for its own economy to grow. US want the Chinese economy to grow at a faster clip for its own businesses to thrive in the Chinese market. On the other hand it also wants the Chinese currency to be valued higher resulting in lesser imports and to reduce its trade deficit with China. Doing that will also result in reduced Chinese investment in US bonds raising interest rates and affecting the mortgages for US citizens. China cannot let US currency deteriorate because its holdings value will be shaved off. May be Paul Krugman can make your head spin giving even more exciting stats, but you get the idea (or I hope).

Welcome to the world of interdependence. Now both China and the US cannot act “independently” of each other because their economies thrive on this inter-dependence. In 20th century system, economies thrived by being resilient, even national and commanded. It also meant being shielded from external crises enveloping and sweeping away whole nations. In the future, the growth of economies will be directly proportional to the degree of interdependence with other large growing economies. Interdependence will involve extra-ordinary agility in adjusting, restructuring and thriving on change.

Let us see how interdependence with global system affects India. We have a huge population to be lifted up from poverty. It is plain obvious that our national economy is not sufficient for this task. We face a twin task of empowering our human resources, equipping them with marketable skills and to create, locate and gain entry into newer markets. This requires agile maneuvering and networking with the global system. This won’t come free without its pitfalls. East Asian currency crisis, anybody? However is Malaysia today dead in the water? Apparently not.

Philosophically too, I would like our society to possess an outward looking global outlook to carry forward the process of re-inventing ourselves and positioning India in modernity. Historically our nation had been unafraid of the “other” with its sea-faring traders in far corners of the world. But Turko-Arab invasions and colonialism has created a foreign(er)-anxiety in our mindset. This I perceive as unnatural and unfit to our traditions and globalization provides an excellent setting to carry out this revolution and shed our baggage of colonialism (as Naipaul would chide). I perceive two related strains in India that is working in cross purposes. One is this craving for the creation of our own indigenous modernity and then trying to link up to the outside. This is both caused by a fear of the outside and the fear of the unforeseen[3]. And the other is moral absolutism of trying to do all or nothing preventing us from taking specific discrete measures in the hope of solving a problem all at once[4].

Realistically speaking, we have no real choice but to embrace interdependence, because the speed at which the change agents permeate the global system creates its own determinism. Lost opportunities will impose prohibitively high costs to “catching up” efforts and in certain cases may even permanently deny its advantages. India should not shun and shy away from involving “others” in solving “its” problems. Pragmatically this involvement will burn away a lot of atavistic forces and tendencies at work in India. Creating such stakes for others in us improves our security physical and material. In fact many of our problems are already global challenges.

[1] I do concede that in exceptional circumstances a short term atavism cannot be ruled out. For instance a coup d'état in Saudi Arabia by bin Ladenists would receive a response that will involve territory control.

[2] This is fundamentally due to the contact established between the colonies and the developed world that is inconceivable without colonialism.

[3] Unforeseen can also work in the favor of underdogs. Charles de Gaulle on a tour of US in late 50s, after visiting San Francisco observed the western sea-board of US will undergo a transformative change after China’s markets are opened to US. Indeed the real transformative change occurred across the Pacific in the eastern sea-board of China.

[4] The position Indian leadership took in WW II is an apt example. It did not want to fight predatory Nazism on the side of colonialism because both were “equally” bad.