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The Real Reason Politicians Look to India and China

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India and China have become the stock case studies for politicians trying to envision a new economy for the UK. They have been referenced in the past by figures like Boris Johnson, and were most recently raised by the MP Kwasi Kwarteng, co-author of Brittania Unchained - a book which could become a touchstone for the ambitious new right of the Tory party.

On the face of it, the tale of India and China is a good one to use when arguing for a shift in the UK economic system. The main cities of both countries are brimming with new skyscrapers, Mercedes Benzes, penthouses, businessmen, and middle-classes. Everything is shiny and new. There is entrepreneurship and optimism. They withstood the financial crisis and, despite a general drop in global output, continue to have impressively high and consistent growth figures. According to the IMF's current projection for 2012, the GDP growth for China will be 8% while India will be 6.1%. In comparison, the UK will be at only 0.2%.

But as ever, there is another side to this story. In both India and China there is still widespread poverty and inequality, shown by both countries' extremely low levels of GDP (nominal) per capita. While the UK's GDP growth is extremely poor, we still have a higher GDP (nominal) per capita - in other words, a larger share of wealth per person - than either India or China. It is in fact this wealth in the UK which is contributing to the two countries' rapid growth; because we are among the main consumers of their exports.

Despite this, it seems that India and China have provided an easy parable for economically right wing thinkers to use when they want to promote their own ideological agendas as policy. Using the huge growth of India and China as a selling point for increasing our own prosperity, they preach that we should follow their example of fostering hard work, which itself must be incentivised by cutting the welfare state and the laziness and dependency it creates.

The evidence, though, suggests that much of the praised work ethic of India and China is due to severe constraints on collective bargaining and freedom of association rights rather than any deeper willingness to labour harder than anyone else. Consider that in China the only legal trade union - the All-China Federation of Trade Unions - is administered by the state, and in India independent trade unions are regularly undermined by the corruption of the Government. As a result, workers in both countries find it difficult to effectively demand higher wages, which has the happy by-product of making their economies extremely competitive globally. This stifling of freedom of association rights also means that workers cannot adequately campaign for shorter working hours, more holidays, or any other benefit we in the UK take for granted, with the result being that they can be presented as much more industrious than supposedly feckless Brits.

The focus on India and China's GDP figures but not the underlying factors - such as low GDP (nominal) per capita or severely hampered freedom of association rights - allows people like Kwasi Kwarteng to claim that this success is all the product of hard work and a small welfare state. By appealing to honourable notions of hard work and financial independence which India and China are portrayed to evince, they can promise similar economic prosperity in the UK, but only if we too can build a system more like theirs. Undoubtedly such a project would involve dismantling the welfare state along with laws surrounding freedom of association. This is sold as being economically 'competitive' or 'free'.

But economic freedom is not correlated with GDP growth. The Fraser Institute found that China is 107th, while India is 111th in rankings of the most economically free nations in the world, despite their high levels of GDP growth. Rather, according to a 1991 study by Zane Spindler and Laurie Still, it is freedom of association which shows the strongest correlation. And contrary to Milton Friedman's belief, there is a difference between economic freedom and civil freedoms.

The purpose of the India and China example is to blur this distinction. By equating hard work with economic freedom and growth, the right can destroy freedom of association rights with little argument. But regardless of GDP growth, there are still large differences in how the subsequent wealth is distributed, depending on how strong or weak a country's freedom of association rights are.

When they are weak, a good proportion of the GDP growth undoubtedly comes from - as it has in India and China - a reduction in GDP (nominal) per capita rather than an increase in labour efficiency, as Kwasi Kwarteng and Boris Johnson want us to believe. That is to say that profits rise greatly for the few, funded by lower wages and higher working hours for the many - all thanks to the dismantling of freedom of association rights. It is the ultimate race to the bottom, and our politicians are encouraging it with enthusiasm.

It is time we saw the India and China examples for what they are - a cynical and ruthless attempt to cheat us of our fundamental rights in the name of economic growth.

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