China and India: Night and Day

Quick, what is India's Independence Day? China's?

If you didn't know, you need to read "Billions of Entrepreneurs: How China and India Are Reshaping Their Futures, and Yours," Tarun Khanna's guidebook to the future. The world isn't flat; it's tilting towards the world's two most populous nations. This book will show you just how different they are from everything we know.

The first part of the book, "Foundations," looks at the emergence of modern India from August 15th, 1947, the year Britain handed the country back to its own people, with Nehru's 'tryst of destiny' speech ringing out. China, meanwhile starts its modern era October 1, 1949, when Mao officially declared that "the Chinese people have stood up."

Khanna shows us the legal, political, financial underpinnings of both China and India. We see how they approach property rights, development, infrastructure. In India, street protests stall developers for decades; in China, they are little more than street theatre. The two could not be more different â€" really, yin and yang. India is impossibly pluralist, China agonizingly rigid. Indian banks 'underlend,' refusing to give loans to credit-worthy customers. China's banks 'overlend,' giving money to help prop up businesses at the party's whim.

We in the U.S. like to think we have corrupt officials, courts that don't work and skewed financial systems. In India, a quarter of the elected officials have criminal records, the courts operate like the one in Alice in Wonderland, and the banks, well, they make mattresses look like a sound place to invest.

But India has succeeded in establishing solid stock markets, and in reforming its financial systems. In China, meanwhile, the party may be corrupt, but in a hierarchical fashion that aims at group harmony. "Any country hoping to engage in meaningful dialogue with China must recognize that the flip side of order, harmony and hierarchy are rigidity, censorship and state control," Khanna writes. That's one way that entire cities can appear in China seemingly overnight.

Unfortunately, that means there is little financial transparency, since the banks exist to prop up the local party's factories, "American audiences despite their rather long historical romance with China, do not fully understand the bias in Chinese data..." It's a bias that makes Chinese stock markets suspect and even their economic growth perhaps not so impressive (we fret about our debt here, but in China isn't so hot either: domestic bank debt in 2005 was 135 percent of GDP).

As Khanna notes, perhaps with a bit of bias towards his native India,

It is ironic that the West pays less attention to, and thus has less understanding of, the more informationâ€"rich country. This is even more surprising because, as Jay Taylor points out, the similarities between India and the United States, -- the only two large countries where democracy has preceded economic development â€" are quite striking.

UPDATE: See the Big Think Breakdown here: China and India Don't Need Us.