Impressions Matter: How US Wrote The Foreword To China’s Growth Story

The US, based on their declassification policy, released sometime back certain secret papers of the early 1960s and 1970s, containing interactions between the US and China, that revealed how the former helped China grow its gross domestic product (GDP). The rationale behind this policy, explained in these and other papers, was to use China to counterbalance the Soviet power during the Cold War period.

However, the US continued to patronise China even after the Soviet Union collapsed. There could only be two reasons behind this generosity. One, the Americans were so impressed with the 20-year interactions with China that they continued to back them regardless of the rationale, and this despite China refusing to go by the rules of international human rights or financing institutions. USA, as a matter of fact, helped China circumvent these rules, and thus created an illiberal country. The second reason could be that the US found the rapidly growing Chinese market lucrative for its own companies which were struggling to expand.

It were perhaps these reasons that forced the US to keep its papers secret for about 35 years, and some continue to be under wraps even today. In these papers, US president Richard Nixon, diplomat Henry Kissinger and Chinese premier Zhou Enlai speak of their impressions about many countries. After a long sanitised portion of a conversation contained in these papers, Nixon states: “It is interesting to note that both the defeated countries of the World War II, Germany and Japan, received US aid. Also many other countries did, and I think if we analyze why Germany and Japan have done so well. It is because they have qualities of drive and are willing to work hard, whereas some other countries we have helped do not have this quality.”

According to these papers, during the discussions between Nixon, Zhou, and Kissinger, Nixon, in his analytical mode, goes on to say, “This brings me to the point. It is not help that is provided to a country that counts, it is whether the people of that country have the will to use that help. If they don’t have that, the money goes down a rat hole. A pretty good example is India, (Zhou laughs). We don’t regret having given it, apart from the fact that the more aid we have given, the less importance we have. The point is that India is not able to do much with aid because as compared to Japan, it does not have the drive, or the spirit of determination that Japanese have.”

USA and the West’s confidence in Japan is a matter of history. After all, this was the first country–during the Meiji period in the 18th and 19th century–that copied the Western model of reforms and gained hugely in GDP growth. It was also the first country which started a privatisation policy, much ahead of Margaret Thatcher’s in the 20th century. Later, Japan proved itself again when it won the impossible Japan-Russia naval war in 1905 with USA/UK help, when these countries were looking for a country which could balance Russia in the East, and Japan proved a perfect recipient of huge naval aid. Japan converted the aid to a successful completion of assigned tasks, and with this clear impression, Japan has been a favourite recipient of US aid since then. Another reason, of course, was the American guilt of having destroyed Japan by dropping bombs. Aid to Germany was perhaps to help a country totally devastated by the war.

Nixon and Zhou were not India lovers. They further show it in the latter part of the conversations in the ‘secret’ papers. They said that the creation of Bangladesh was unfair to Pakistan. Unfortunately, both Nixon and Zhou, and also Kissinger, who was present, did not say anything about the huge persecution of the minorities in Bangladesh by the military rulers of Pakistan, and then pushing them into India, causing huge problems to India and the minorities. The stand then is hugely in contrast to the US policy now when the Rohingyas, a Muslim minority in Myanmar, were driven into Bangladesh and India.

Or maybe I can add that India is less willing to be guided by aid-provider USA. On the other hand, China’s Deng Xiaoping openly stated that he went to learn from the West and even Japan, with which it had huge animosity, because Japan had shown its capacity to develop and become rich, that learning from these countries could help China, to develop and help its poor.

Lee Kuan Yew was originally a Chinese, who converted Singapore from a third world status to the first in a short span of time after its independence in 1965 through his political and administrative acumen. When the Chinese started interacting with the USA to find a model for its growth, Deng advised in consultation with Lee Kuan Yew that he would not go for the Western democratic/human rights oriented model, as without the support of its communist party cadres, China would not be able to control the country and it would break up like the Soviet Union, and some East European countries. ‘And what would he reform then’. Deng abhorred confusion in government systems. Since Gorbachev had created such confusion, “My father”, Deng’s younger son told an American acquaintance, “thinks Gorbachev is an idiot”. While Deng was looking around for a model for China’s growth, he interacted with his Asian counterpart most, who designed the USA/China/international institutions aid-giving model for China.

Lee Kuan Yew was a very fair man, and a leader par-excellence, who had a fascination for Nehru’s India, and offered similar advice to the Indian government under Narasimha Rao and Manmohan Singh, but did not receive response. Later he wrote his impression on India, in his characteristically blunt fashion, that India was not even a real country, merely, “32 separate nations that happen to be arrayed along a British rail line” - a memorable line looking at the fissiparous tendencies, which continue even today, trying tirelessly to break the nation. Vivek Wadhwa, a famous American investor and professor also had the same impression, that we are brilliant people, but too egoistic to learn. And the world is today changing so fast that anyone not wanting to learn will surely be left behind. About India’s positive achievements he wrote: "India may have leapfrogged the US technology industry with simple and practical innovations and massive grunt work. It has built a digital infrastructure that will soon process billions more transactions than bitcoin ever has." But about Indian executives, “If they were my students, I would call them "duffers", not because of their intelligence and skill — they are amongst the smartest in the world — but because of their overconfidence and insularity”.

Perhaps, state policies every where are run by impressions. It were these impressions which led to huge investments into China, and huge growth, and far lesser investments in India, and five times lesser growth between 1990s and 2010s. Many policies in India, like retrospective taxation, have not improved impressions about India later.

There is another recent happening which will impact investment and growth. The Supreme Court and the trial court have reached different conclusions on the same set of facts, leading to confusion about India’s laws/rules/regulations and their interpretations. Unless firm and final conclusions emerge in a judicial process early, investment in India will suffer. No country or investor enjoys uncertainty in laws, rules and regulations, and their differing interpretation, both prospective and retrospective, and are likely to dump such countries for investment. We need to collaborate and learn from those countries who have walked the difficult path of growing their GDP successfully even in difficult circumstances like Japan, Germany, Singapore and China. Walking on the razor’s edge very humbly and taking continuous help from the Americans, Japanese, Taiwanese and Lee Kuan Yew also helped Deng enormously.

A word about China today. They have turned very aggressive and egoistic now. Whether they will have problems in a Brexit/Trump dominated world is yet to be seen.

And about India, If we do not grow quickly, we will get destroyed in the present bi-polar and fast changing digital world. But we have all the wherewithal for growth.