17 febrero 2017

Siglo XXI, el siglo de Asia

Es incuestionable. Te he insistido tanto desde estas líneas, que aunque no me hayas creído, lo acabarás haciendo…
España se desploma desde el puesto 16 hasta el 26…
Las economías emergentes E7 lideran a las desarrolladas G7
EEUU y Europa los grandes perdedores…, se desploman.
Es el siglo de los emergentes, ni lo dudes…
Y poco se podrá hacer para que esto no sea así…

Yes, this is the Asian Century. But there’s still cause for Western optimism

The big question of our time is a simple one: should we feel optimistic or pessimistic for the future of humanity, all 7 billion of us?
The world’s response is divided. Many Western societies are drowning in pessimism. By contrast, the rest have never been more optimistic. This represents a reversal of previous centuries’ pattern, where the West was always more optimistic. What happened? And what do the facts tell us?
The facts are clear. The human condition has never been better. Global poverty is declining steadily. In 2015, we far exceeded the UN’s Millennium Development Goal of halving global poverty. According to the NIC, extreme poverty could halve again by 2030.
The global middle classes are exploding, from 1.8 billion in 2010 to 3.2 billion in 2020 and 4.9 billion in 2030. The world’s infant mortality rate has decreased from an estimated 60 deaths per thousand live births in 1990 to 32 in 2015. This translates to more than 4 million fewer infant deaths per year. If we were rational and objective, we would be celebrating the current human condition.

Western naval-gazing

Why are we not? One simple answer is that Western intellectuals who dominate the global intellectual discourse are only aware of their societies’ short-term challenges, not the long-term global promises. Francis Fukuyama illustrates this well. In an essay written after the election of Donald Trump, he says, “Donald Trump’s stunning electoral defeat of Hillary Clinton marks a watershed, not just for American politics, but for the entire world order. We appear to be entering a new age of populist nationalism, in which the dominant liberal order that has been constructed since the 1950s has come under attack from angry and energized democratic majorities. The risk of sliding into a world of competitive and equally angry nationalisms is huge, and if this happens it would mark as momentous a juncture as the fall of the Berlin Wall in 1989.” [Note: emphasis added.]
Please study his words carefully. He is conflating the condition of the West with the condition of the world. It’s true that populism has risen in the West. That explains Trump and Brexit (and possibly Le Pen). But it hasn’t emerged in the more populous regions of Asia and Africa.
More importantly, the West only represents 12% of the world’s population. 88% live outside the West. And their living conditions (with the exception of a few Arab countries and North Korea) have never been better.
Take three of the most populous countries in Asia: China, India and Indonesia. The lives of the almost 3 billion people in these countries have never been better. And they will get much better in the coming decades, as this figure shows.
The decade of 2010 to 2020 is probably the best decade Asia has ever experienced. The Asian middle class population is going to jump from 500 million in 2010 to 1.75 billion in 2020. In short, Asia is going to add 1.5 times the total population of the West to the global middle class population in one decade.
Why is this happening? One simple answer is the triumph of reason. The spread of Western science and technology demonstrates this most clearly. At the most basic level, humans around the world can see the benefits of modern Western medicine. As a result, reason is replacing superstition. In all spheres of human life, from economic policies to environmental management, from education to urban planning, Western best practices are being almost universally adopted by all societies.

So what’s with all the pessimism?

If the world is getting better, why is the West becoming more pessimistic? The simple answer is that the West has pursued a deeply flawed strategy since the collapse of the Soviet Union in 1991. Like the British defenders of Singapore in World War II, they had their guns pointed out to the sea in the South when the Japanese came by land from the North.
To put this point even more starkly, the West thought it had won a colossal and epic struggle with its dramatic victory in the Cold War. As a result, it didn’t notice that an even bigger struggle had begun with the “return” of Asia at the same time. China decided to re-join the world economy in the 1980s. India did so in the 1990s. The return of 3 billion Asians was obviously going to shake up the global economy. The West didn’t notice.
It didn’t notice because Western minds were intoxicated with an unhealthy opiate of triumphalism. Francis Fukuyama’s famous essay “The End of History” captured this well. As a result, the West developed a flawed interventionist strategy towards the rest. Many of the interventions led to disaster. Michael Mandelbaum notes that “the Clinton administration’s track record was not encouraging: it has promised order in Somalia and left chaos. It had gone to Haiti to restore democracy and had left anarchy. It had bombed in Bosnia for the sake of national unity but presided over a de facto partition.”
And 9/11 made things worse. It seduced the Neo-Con advisers of George W Bush to invade Iraq, after invading Afghanistan. A decade later, Europeans saw two-thirds of their refugees coming from three countries: Iraq, Afghanistan and Syria.
But that was not where the real disaster was. As Western strategic thinkers were distracted, they didn’t see that the most important event in 2001 was not 9/11. It was China’s entry into the World Trade Organization. The entry of almost a billion workers into the global trading system would obviously result in massive “creative destruction” and the loss of many jobs.
Trump and Brexit are therefore the natural and logical results of a flawed Western strategy of not dealing with the real economic challenges to the West. While the West was distracted, China emerged. According to IMF statistics, in 1980, in PPP terms, America’s share of global GDP was 25% while that of China was 2.2%. In 2016, America’s share has shrunk to 15.5% while that of China has risen to 17.9%.

The relative decline of the West

There are therefore sound strategic reasons for Western pessimism: From 1820 to roughly 1980, Western economic power either grew steadily or maintained a huge globally dominant position. In the past three decades, the combined GDP of North America and Western Europe has shrunk from 51.5% in 1990 to 33.45% in 2014.
An even more destructive strategic change happened at the same time. While the workers in the West suffered job losses and deteriorating incomes, the Western elite became super rich from accelerated globalization and the return of Asia.
RW Johnson describes well how American workers suffered: “Between 1948 and 1973, productivity rose by 96.7% and real wages by 91.3%, almost exactly in step. Those were the days of plentiful hard-hat jobs in steel and the auto industry when workers could afford to send their children to college and see them rise into the middle class. But from 1973 to 2015 – the era of globalization, when many of those jobs vanished abroad – productivity rose 73.4% while wages rose by only 11.1%. Since 2000 the wages paid to college graduates have fallen.”

A reason to be optimistic

The existential questions that the West faces today are quite simple. Is everything lost? Will Western power and influence steadily decline? Or is there hope for the West? Can the West also benefit from the resurgence of the rest?
The simple answer is that the West can benefit from the surge of the rest. 12% of the world’s population can be pulled along by the remaining 88%. To achieve this, Western leaders and pundits need to make many significant psychological adjustments.
Instead of constantly trying to retain control of the world, the West should learn to share power. Asians should be allowed to run the IMF and World Bank. Equally importantly, Western pundits must drop their traditional condescension when speaking about the rest. Emerging Asian entities, like China, India and ASEAN, should be treated with more respect. India should be immediately given a seat on the UN Security Council, with the UK and France stepping aside.
All this sounds inconceivable to many Western minds. But until recently, it was also inconceivable that the rest could be more optimistic than the West. The West must now do the inconceivable to prepare for the inevitable inconceivable world.
PD1: Y esto tendrá consecuencias para Occidente…

How China will impact the world economy in 2017

"The Chinese economy is undergoing unprecedented and profound changes."
To open up or to close? To advance or go back? The global economy is currently at the crossroads and it is in desperate need of sufficient courage, wisdom and responsibility from around the world to chart a clear direction and path for sustainable economic growth. The upcoming World Economic Forum Annual Meeting 2017 has drawn extensive attention for putting the focus on responsive and responsible leadership for effective global economic governance.
President Xi Jinping will attend the meeting and deliver a speech, offering Chinese remedies for the world’s economic ailments. It will be the first time the top Chinese leader has attended the event.
The Chinese economy is undergoing unprecedented and profound changes. The “innovative, coordinated, green, open and shared” development concepts put forward by President Xi not only offer solutions for China’s current outstanding economic problems, they also point out a clear direction for its long-term development. Supply-side structural reform has sparked a new development dynamic and raised the quality and effects of the country’s economic development. The strengthened efforts to promote deepened overall reforms, the simplifying of administrative procedures and the delegating of central government power to lower levels of government, along with innovation-driven development, the rule of law, and the fight against corruption, are all contributing to the establishing of a governance system that can ensure China’s sustainable and healthy economic development.
The Chinese word for “economy” means “for society to prosper and benefit the people”, an aim of governance advocated by Chinese sages in ancient times. It is also an important governance concept cherished by the Communist Party of China. In the first three quarters of 2016, China’s economy grew by 6.7 percent year-on-year, and its per capita disposable income registered a growth of 6.3 percent. In the first 11 months of the year, China created 12.49 million new jobs in cities and townships and lifted more than 10 million people out of poverty, further raising Chinese people’s sense of well-being and happiness. Against the backdrop of the global economic slowdown, it has really not been easy for China to make these achievements.
And, in recent times, remarkable progress has also been made in China’s infrastructure, such as the railway extension to the Qinghai-Tibet Plateau, the building of a comprehensive highway network throughout the country, the construction of the Three Gorges Dam and multiple ports that better connect the country with the ocean. A set of complete industrial sectors have been established and China has realized a bumper agricultural harvest for many years in succession. At the same time, China has achieved new breakthroughs in its aerospace development and further built up its national defense capabilities.
PD2: Vuelve a las andadas… Buen tirón y muy buenas perspectivas…

La economía china se acelera; las tendencias de la base monetaria siguen siendo positivas

A tenor de las tendencias de la base monetaria y los indicadores adelantados, parece que el crecimiento económico de China excederá las expectativas del consenso en el primer semestre de 2017, lo que respalda nuestra tesis de que la política monetaria se endurecerá, aliviando así la presión bajista sobre el renminbi.
Ayer la OCDE publicó sus datos de noviembre correspondientes a indicadores adelantados de países. El indicador de crecimiento a seis meses de China* siguió aumentando y ahora se ha distanciado considerablemente del momentum de la producción industrial, lo que augura que probablemente dará alcance a esta última (véase el primer gráfico).
Entre tanto, las cifras monetarias de diciembre publicadas hoy resultaron boyantes. Todavía no se dispone de información adicional para calcular los agregados preferidos restringidos y ampliados aquí (M1 más depósitos de demanda de las familias (“verdadero M1”) y M2 excluyendo depósitos del sector financiero (al ser este último volátil y estar en gran medida desvinculado con las decisiones de gasto a corto plazo). Las tasas de crecimiento a seis meses de los agregados M1 y M2 subyacentes, ajustados al índice de precios al consumo, disminuyeron ligeramente respecto a noviembre (segundo gráfico). El crecimiento de la base monetaria restringida real puede haber tocado techo en agosto de 2016, lo que indicaría que la expansión de la producción industrial a seis meses habría alcanzado un máximo en mayo, teniendo en cuenta el liderazgo medio a nueve meses. Sin embargo, en el punto mínimo anterior el desfase temporal de la producción fue superior a nueve meses, lo que apunta a un máximo posterior en el momentum económico**. Por su parte, los niveles de crecimiento de la base monetaria real siguen siendo sólidos y no hay indicios de que vayan a ralentizarse apreciablemente en el transcurso de 2017.
Al contrario que las tendencias de la base monetaria, las tasas de crecimiento a seis meses de los préstamos bancarios reales y de financiación total para fines sociales aumentaron en diciembre, ésta última al ritmo más rápido desde enero de 2016, lo que aporta otra razón, junto con la mejoría de noticias económicas y las crecientes presiones de inflación, para augurar un endurecimiento de la política monetaria.
*El indicador engloba seis componentes: producción de acero, vehículos motorizados, fertilizantes y edificios; el índice de pedidos extranjeros de la encuesta trimestral a empresas PBoC 5000; y la facturación del mercado bursátil.
**La variación a seis meses de la base monetaria restringida real tocó fondo al cierre de 2014, más de un año de anticipación a los repuntes experimentados por el indicador adelantado y el crecimiento de la producción industrial.
PD3: Te saco regularmente este interesante gráfico. Es lo que piensan los de GMO sobre cuál va a ser la rentabilidad real (descontada la inflación) de los próximos 7 años:
Y lo tienen muy claro, las acciones emergentes… Yo también.
PD4: Paciencia con los mercados, paciencia con tu mujer, paciencia con tus hijos, mucha paciencia. Paciencia criando a los pequeños, paciencia con los políticos, paciencia en el apostolado. Como aquí dice, la paciencia no es quedarse quieto, es una forma de acción, de actuar…, y requiere mucha paz y tranquilidad, y algo de alegría.

16 febrero 2017

No conseguimos meterle mano a los gastos

Seguimos sin solucionar el desequilibrio de ingresos menos gastos…

Bruselas eleva el déficit español al 3,5% del PIB en 2017 y apunta a más recortes

La Comisión aprecia signos de desaceleración y duda de que España recaude tanto como espera con las últimas subidas fiscales

En un contexto de excepcionales incertidumbres globales, la economía española sigue fuerte. La Comisión Europea prevé crecimientos ligeramente por encima del 2% en 2017 y 2018 y apunta que España “sorprende al alza”, aunque detecta ya “signos de desaceleración”, según el informe que se presenta hoy. Bruselas es menos optimista por el lado fiscal: prevé un déficit del 3,5% del PIB este año, cuatro décimas por encima del objetivo (y dos décimas más que hace tres meses). Europa, en fin, no se fía: detecta “incertidumbre respecto al impacto de las recientes medidas fiscales”, por la posibilidad de que Hacienda recaude menos de lo esperado con la última subida de impuestos. Si ese análisis es certero, obligaría a acometer un ajuste extra de 4.300 millones.
“El crecimiento económico supera las expectativas en los últimos trimestres”, arranca el capítulo español de las previsiones de invierno de la Comisión. Ese jugoso informe está marcado por la palabra “incertidumbre”, que aparece más de 80 veces en casi 200 páginas, asociada al Brexit o a Trump y compañía. España, sin embargo, ya no es el principal riesgo de Europa: el rescate se llevó a partir de 2012 ese sambenito tras un ajuste morrocotudo, y la economía crece ahora con fuerza, crea empleo con fuerza, exporta con fuerza y bate con claridad las medias de crecimiento europeas. España, en fin, ya no es el problema. Pero ojo: la economía española sigue lastrada por un endeudamiento formidable, y por una frágil situación fiscal que puede provocar enormes quebraderos de cabeza si los riesgos globales acaban generando inestabilidad y un nuevo arreón en las primas de riesgo.
Bruselas aplaude: 2016 fue “el tercer año de expansión” de la economía española, que creció casi el doble que la media europea con unos fundamentos “más equilibrados”, una demanda interna fuerte y un sector exterior que el año pasado aportó al crecimiento —en términos netos— por primera vez desde el inicio de la recuperación. El PIB “seguirá siendo fuerte, pero tiende a desacelerar”, apuntan las previsiones. El petróleo, los recortes de impuestos y la mejora de las condiciones financieras gracias al BCE eran vientos de cola que han empezado a amainar. La Comisión augura que la creación de empleo seguirá dando alegrías, pero menos que hasta ahora. El paro bajará al 17,7% este año, y cerrará 2018 en el 16%. “El crecimiento salarial y las bajas ganancias de productividad provocarán que los costes laborales sean similares a la media europea”, tras varios años de fuertes ganancias de competitividad, sostiene el estudio.
Los análisis de Bruselas son interesantes por el lado de la evolución económica, pero se convierten en fundamentales por el lado fiscal: la estrecha vigilancia del déficit español estuvo a punto de costarle una multa multimillonaria al Gobierno el pasado verano, y la Comisión sigue marcando en corto al Gobierno. Por ese flanco sigue el rifirrafe Bruselas-Madrid. Los pronósticos de crecimiento del Ejecutivo son sistemáticamente más optimistas, al igual que las previsiones de déficit. La Comisión, sin embargo, empeora esta vez las cifras del agujero fiscal: Bruselas prevé un déficit del 3,5% del PIB este año (dos décimas más que en noviembre), y del 2,9% en 2018. Y esos datos pueden tener consecuencias.
El déficit de 2017 es especialmente preocupante: si Bruselas tiene razón, el agujero fiscal acabará cuatro décimas por encima del objetivo (3,1% del PIB). En el examen del proyecto de presupuestos de enero, Bruselas preveía un 3,3%. Y ya entonces avisó al Gobierno de que debe “estar listo para tomar medidas adicionales” si incumple las metas. Esas cuatro décimas de incumplimiento se traducirían en un ajuste extra de casi 4.300 millones, a través de recortes del gasto público o de subidas de impuestos.
¿A qué obedece la diferencia? Bruselas es algo menos optimista con respecto a la evolución del PIB. Y, sobre todo, respecto a los ingresos. A pesar de sus promesas electorales, Mariano Rajoy ha aprobado un endurecimiento del Impuesto de Sociedades y subidas en alcohol, tabaco y cotizaciones sociales. Pero Bruselas cree que Hacienda va a ingresar menos de lo que espera. Por eso, en el marco de un análisis muy favorable en líneas generales, en el informe destaca un párrafo demoledor: “Los riesgos de las perspectivas fiscales están relacionados con los compromisos de deuda y con la incertidumbre respecto al impacto de las recientes medidas fiscales”. Esos “compromisos de deuda” son, básicamente, las pérdidas potenciales que aún pueden llegar del rescate a la banca, por los rescates de Bankia y BMN o los esquemas de protección de activos. Y “la incertidumbre sobre el impacto de las recientes medidas fiscales” obedece a la citada posibilidad de recaudar menos.
La Comisión no dice una palabra de las dificultades que tiene por delante un Gobierno en minoría para sacar adelante los presupuestos, pero las cifras cuentan historias. Ahí van dos. Una: el déficit estructural (sin contar los vaivenes del ciclo) empeoró claramente en 2016; solo mejorará suavemente este año, y se estabilizará en 2018. En plata: España no es capaz de poner en orden sus cuentas públicas ni creciendo al 3%. Y dos: la deuda pública subirá ligeramente este año y se estabilizará en torno al 100% del PIB. La deuda externa —pública y privada— es muy elevada. Si es cierto que vienen curvas y los mercados vuelven a dar guerra, los problemas vendrán por ahí.
PD1: El paro en España ha mejorado, pero con matices:

Cinco años después, la reforma laboral en cifras

Desde el cambio profundo en la legislación laboral que se aprobó en 2012, hay más empleo y la tasa de paro se ha reducido. La excesiva temporalidad y los afectados por ERE son la cara amarga del balance

La reforma laboral se aprobó el 10 de febrero de 2012. España tenía entonces una tasa de paro del 24,8% y 18,2 millones de españoles tenían trabajo. Muchos de ellos perdieron su empleo en los años posteriores. En la parte más cruda de la crisis del mercado laboral, España llegó a tener más de seis millones de parados y una tasa de desempleo del 27,1%, la más alta de la historia del país. La ocupación se redujo hasta 16,9 millones de puesto de trabajo. ¿Funcionó la reforma laboral para crear empleo? Cuando llegó la recuperación económica en 2014, con apenas un crecimiento anual del PIB del 1%, empezó a crearse en empleo. Cinco años después de la reforma laboral que impulsó la ministra de Empleo Fátima Báñez, la tasa de paro es del 18,5%. Hay 18,5 millones de españoles con trabajo.

Contratos temporales y a tiempo parcial

Cinco años después de la aprobación de la reforma laboral, hay menos paro y más empleo. Sin embargo, su calidad es menor. La temporalidad sigue enquistada en el mercado de trabajo español. El 26,5% de los asalariados españoles no tiene un contrato fijo. Es el segundo país de la Unión Europea, solo por detrás de Polonia, con mayor tasa de temporalidad. Tampoco todos los españoles que desean trabajar a tiempo completo lo consiguen. Este tipo de acuerdos laborales, que solo cubren parte de la jornada, suponen el 15,3% del total, frente al 13,5% del momento previo a la reforma laboral. Esto explica que haya más gente ocupada pese a que las horas trabajadas todavía están ligeramente por debajo de 2011. En cuanto a los sueldos, la reforma laboral impulsó la devaluación salarial. Antes de su aprobación, el salario medio era de 25.999 euros brutos al año. En 2015, el último dato disponible según la Encuesta Anual de Coste Salarial, era de 25.211 euros.

Expedientes de regulación

La reforma laboral aprobada hace cinco años facilitó los despidos colectivos, al eliminar la autorización administrativa de los expedientes de regulación de empleo (ERE). Es decir, tras el cambio de norma, las empresas no precisan el visto bueno de la administración antes de llevar a cabo una regulación de empleo. Con la segunda recesión económica, a partir de 2011, el número de personas en despidos colectivos se disparó. Llegó a superar los 82.000 afectados en un año en 2012. Más que en 2009, pese a aquel año la economía registró una caída más profunda. Con el crecimiento económico los ERE han bajado con fuerza.
PD2: Y en Europa, el desempleo se atasca en Francis e Italia…
PD3: Con más inflación:
PD4: Fines del matrimonio cristiano:

15 febrero 2017

¿China o India?

Cada una tiene sus particularidades…

Popular Narrative

India has been the world’s favorite country for the last three years. It is believed to have superseded China as the world’s fastest growing large economy. India is expected to grow at 7.5%. Compare that to the mere 6.3% growth that China has “fallen” to.
India’s quarterly annualized GDP growth rate since 2008, according to MOSPI (statistics ministry).
The IMF, the World Bank, and the international media have celebrated this event. Declining commodity prices and other problems in Russia, Brazil and South Africa have damaged the prospects of the BRICs (ex-India) and other emerging markets.
Commodity and currency markets have been very turbulent, and the Arab Spring has not only failed to keep up its pace, it has half-destroyed the Middle East, with fires raging in Syria, Turkey, Libya, etc. Migrant problems in Europe and the uncertain future of the US — as per the current narrative — leave India as the prime candidate to prop up global economic growth.
It seems to be deeply emotionally satisfying to finally see the world’s largest democracy supersede the “communist dictatorship” of China. India’s GDP has also just surpassed that of the UK, its former colonial master. The world is looking toward India as a beacon for the future of humanity. Again, that seems to be the narrative.

Is India the World’s Next Superpower?

Everything cited above is plain wrong and falsifiable by using primary school mathematics. It is little but rationalization for what seems to be emotionally gratifying.
China’s GDP is USD 11.4 trillion (2016; IMF). India’s GDP is USD 2.25 trillion (2016; IMF). These economies are in no way comparable. The Chinese economy is more than 5 times larger. China’s GDP per capita stands at USD 8,260 and that of India at USD 1,718. China’s population (1.37 billion) and the population of India (1.34 billion) are comparable — but China is five times richer on a per capita basis.
China’s GDP growth rate has declined from its previous torrid pace – but what does this really mean by comparison?.
Based on these figures, India will add USD 129 in economic output on a per capita basis if it grows at a pace of 7.5%. Similarly, if China grows by 6.3%, its output will increase by USD 520 per capita.
Those who say that India is home to the world’s largest economic growth have not even done primary school math on the situation. India actually needs to grow at more than 30% to outpace China in absolute terms per capita.
It helps to play around with the numbers cited above to understand how erroneous expectations have been. If one assumes that India continues to grow at a rate of 7.5%, and China at a rate of 6.3% from here on out, it will take 127 years before India’s per capita growth will actually begin to exceed China’s.
The problem is that many people confuse “rate of growth” with actual “growth.” They blithely assume that a higher growth rate means greater growth. They assume that a decline in the growth rate is a decline in growth. Perhaps people simply see what they want to see as a result of their ideological preferences.
China and India, history of real GDP expansion since 1980
In the early 1980s, India was richer on a per capita basis than China — India’s population was much smaller than China’s, but its GDP was of similar size.
If one pores over statements released by international institutions and media reports published over the past 36 years, it was consistently claimed that while India would be slow in getting to this point, it would eventually outpace China.
Not only did this not happen, but as demonstrated above, by now it looks as though it will be virtually impossible for India to outpace China. One should pause to reflect on why so many have been so consistently wrong about India.

The Sacred Cow of Democracy

One of the major reasons why the West, its institutions and the upper and middle classes prefer India over China is that India follows the western religion of democracy. They refuse to see that democracy tends not to work in poor countries (it is debatable whether it worked in the West).
One could well say that by the time democracy was introduced in the West, particularly in its present form in which everyone has the right to vote, the West had already reached its intellectual peak.
A painting purporting to show the assembly of ancient Athens. The city-state became democratic around 500 BC – it was the first known experiment in democracy. However, only adult male Athenian citizens who had completed their military training had the right to vote. Slaves, freed slaves, children, women and foreigners residents were excluded.
The history of democracy’s achievements in the non-western world is particularly bad. Africa, the Middle East, South East Asia and most of South America are riddled with countries that embraced democracy and almost immediately took a turn for the worse. In fact, I cannot think of a single country in these regions that improved after adopting democracy. Nepal, East Timor, and PNG are vivid recent examples.
Non-western countries which have performed better in terms of economic growth and social indexes improved during time periods in which they were for all practical purposes not democratic. To name a few: Lee Kuan Yew’s Singapore, British and now Chinese Hong Kong, Park Chung-hee’s South Korea, Pinochet’s Chile, and Chiang’s Taiwan.
In India democracy never worked, but who need facts when emotions need to be satisfied? If Africa were a country, India would be worse off in terms of virtually every economic and social index on per capita basis. As a proportion of India’s population, the country’s people are among the world’s poorest, most diseased, wretched and malnourished.
48% of Indians don’t even have access to toilets. Similar percentages of India’s population live without electricity, water and other basic amenities. To put this number into perspective again: at a per capita GDP of USD 1,718, India is poorer than Sudan, the Republic of Congo, Laos, Papua New Guinea and many other countries not exactly known for their great wealth.
It is often claimed that India has the largest English speaking population outside the western world. This was true in the past, but it is likely no longer true. China has brought in a large number of native speakers from Canada, the UK and the US to teach English to its students. It seems very likely that there are now more English speakers in China than there are in India – and they speak better English.
Population growth and demographics of India incl. projection
India certainly appears to be in an advantageous position in terms of demographics. While China’s society is aging and the number of young people is declining, more than 50% of Indians are below the age of 29. Alas, this is likely to turn into a liability, as the vast majority of them are unskilled and incapable of participating in the modern economy.
There is a net increase of 12 million Indians joining the workforce every year, but India continues to exhibit job-less growth. While their expectations are increasing — for they all watch American TV — they lack wealth-generating capabilities. As a result, crime is on the rise.
India’s institutions are often highlighted as the reason for the country’s superiority over China or other non-democratic systems. The reality is that in the last 70 years, Indians have systematically destroyed the institutions left by the British. Today’s judiciary, legislature and executive are not comparable.
Today none of these institutions are run for the benefit of the country’s citizens. They operate for the glorification of the State, in which citizens are mere cogs. These institutions have mutated on account of India’s underlying tribalism totalitarian tendencies.
Unless one is a criminal, one doesn’t visit a police station in India. The tyranny of the police, up to and including killing innocent people in fake encounters, has a long history. Court cases can drag on for decades. Regulations and laws are mere pieces of paper, with decisions sold to the largest bidder.
It is virtually impossible to get anything done in India without a bribe. Worse, people must grovel and humiliate themselves in front of public servants to get what is rightfully theirs.
Readers will do themselves a service by challenging themselves to find out whether democracy really has any connection with improved governance, stronger institutions of liberty, or faster economic growth.

India’s Problems Have Deep Roots

India is an extremely irrational, superstitious, and tribal country. The concept of reason is mainly conspicuous by its absence in much of India. India was long associated with Britain and has imported western institutions, ways of living, technology, etc., over the last 200-300 years, but has failed to import the concept of reason.
The same could be said for Africa, the Middle East, rest of South Asia and most of South America. But we will stick with India here. Without the concept of reason, people can have no understanding of the rule of law, of fairness, or simply of what is right or wrong.
They can only think in terms of might is right, street-smartness and political connections. Such a society cannot have any understanding of the principles of the ten commandments, or have respect for the individual and liberty.
Assimilating the concept of reason hasn’t happened in the last 200-300 years. In Europe it took about 2,000 years after it was discovered by Greco-Roman philosophers. Could it take another millennium or more before India’s society will be able to assimilate the concept of reason?
In the last three decades, India’s economy has grown, but most of this growth can be attributed to significantly improved access to the western world and its technology through the new medium of internet and cheap telephony. The low-hanging fruit from this have been plucked and India is starting to show signs of stagnation.
While India grew economically, government grew at an even faster rate. People and corporations took on debt faster than they could repay it. They imported the lifestyle and a generous helping of consumerism from the West, mostly its entertainment aspects. Reason fell by the wayside.
All evidence indicates that Indians were actually disincentivized from developing critical thinking, creativity and reasoning skills. Why bother when one could become rich without them?
Indian manufacturing plants or offices, including those in the private sector are chaotic, wasteful and incapable of planning and following a system as a result. Labor costs appear cheap, but India’s chaos ensures low productivity.
Given a chance, Indian companies prefer to move their factories to China. Indian cities and villages are packed with Chinese good, even very basic ones. The way Indians drive mirrors how Indian manufacturing and service industries operate:

What Will India’s Future be Like?

It shouldn’t be too difficult to abandon the idea that India will be the next China. India’s much-celebrated growth of 7.5% is too low to make any real impact on the world economy. But even this is under massive threat, once considers the country’s institutional and cultural problems.
As mentioned earlier, the low-hanging fruit from importing western technology have been plucked by now. India has failed to cultivate critical thinking and hence the ability to develop its own technology.
India has been a massive beneficiary of the fall in oil price, as oil is by far its biggest import. This was a one-off gain, a benefit for growth that will trail off again. Indian exports are already showing signs of strain and are falling, partly losing out to other countries which continue to improve their competitiveness, such as China and the Philippines.
Growth in Indian exports has turned negative in early 2015 – click to enlarge.
Members of India’s middle class have become remarkably arrogant, thinking that there must be something special about them that made them so much richer, but they were merely lucky beneficiaries of western technology. This arrogance has boosted nationalism, which is spreading like wildfire.
In a society lacking in rationality, nationalism is not perceived to be about human values but is a mere geographical, tribal concept. Hindutava (Hindu-nationalism) has been on the rise. The BJP, the party representing this ideology, has come to power two and half years ago, with Narendra Modi as the prime minister.
Under Modi’s reign, as the institutions which the British left continue to get destroyed, liberties are falling, taxes are going up without any improvements in public service, and the regulatory burden has increased significantly. The country is getting increasingly centralized as well, and brought under Modi’s command. He believes he has to do more of all these things to ensure India remains on a path to growth. This is a recipe for disaster.
On 8th November 2016, Modi announced a ban on banknotes affecting 86% of the monetary value of currency in circulation. This has been another example of his dictatorial policies, as the decision was not even discussed by his own cabinet. Even the central bank did not know about the ban until the very last moment.
Readers should reflect on the fact that Modi took a decision crippling the economy by robbing it of its life-blood, depriving people of the medium of exchange they needed for performing transactions, without worrying in the least about checks and balances.


It should be easy to see that India is not the next China. There is no point in holding out much hope for India. Rather, it is ever easier to conclude that it is on the way to becoming the next banana republic, similar to neighboring countries such as Pakistan, Bangladesh, Sri Lanka, Myanmar or Nepal.
Intellectuals should engage in some self-reflection on why they have been consistently wrong about India. It is China that exhibits continued economic and social growth. China keeps coming out with innovative products. In China’s book shops one can find Chinese translations of many of the best foreign books. I’m worried that India could rapidly become a backwater by comparison.
PD1: Comparación de la Bolsa de INDIA(BSESN) con la Bolsa CHINA (HSCE)
Y si miras a India con más rango de tiempo, la subida ha sido muy fuerte. Bolsa de INDIA:
¿Le seguirá China en este carrera hasta las alturas? Eso espero…
Y recuerda que por valoración, los precios relativos de las bolsas occidentales están caros, mientras que las emergentes siguen muy baratas…
Cyclically Adjusted P/E Ratio (IIF)
PD2: El Papa Francisco recordaba que «el Bautismo es el sacramento en el cual se funda nuestra fe misma, que nos injerta como miembros vivos en Cristo y en su Iglesia»; y agregaba: «No es una formalidad. Es un acto que toca en profundidad nuestra existencia. Un niño bautizado o un niño no bautizado no es lo mismo. No es lo mismo una persona bautizada o una persona no bautizada. Nosotros, con el Bautismo, somos inmersos en esa fuente inagotable de vida que es la muerte de Jesús, el más grande acto de amor de toda la historia; y gracias a este amor podemos vivir una vida nueva, no ya en poder del mal, del pecado y de la muerte, sino en la comunión con Dios y con los hermanos».
Hemos escuchado los dos efectos principales del Bautismo enseñados en el Catecismo de la Iglesia Católica (n. 1262-1266):
1º «He ahí el Cordero de Dios, que quita el pecado del mundo» (Jn 11,29). Un efecto del Bautismo es la purificación de los pecados, es decir, todos los pecados son perdonados, el pecado original y todos los pecados personales así como todas las penas del pecado.
2º «Baja el Espíritu», «bautiza con Espíritu Santo» (Jn 1,34): el bautismo nos hace "una nueva creación", hijos adoptivos de Dios y partícipes de la naturaleza divina, miembros de Cristo, coherederos con Él y templos del Espíritu Santo.
La Santísima Trinidad —Padre, Hijo y Espíritu Santo— nos da la gracia santificante, que nos hace capaces de creer en Dios, de esperar en Él y de amarlo; de vivir y obrar bajo la moción del Espíritu Santo mediante sus dones; de crecer en el bien por medio de las virtudes morales.
Pidamos, como nos exhorta el Papa Francisco, «despertar la memoria de nuestro Bautismo», «vivir cada día nuestro Bautismo, como realidad actual en nuestra existencia.