On a recent visit to India, Lawrence Summers, the outgoing Director of the US White House’s National Economic Council, played music to the hosts’ ears by proclaiming that a Mumbai Consensus would become the pre-eminent economic model by 2040. Explicitly comparing it to the neo-liberal Washington Consensus and the statist Beijing Consensus, Summers hailed India’s domestic consumption-driven development as people-centric and hence more attractive for emulation.
That India is a less threatening emerging economy compared to China was reinforced by the heartburn caused by the latter’s undeclared export quota restrictions on rare earth minerals to Japan, the European Union and the US. Without resorting to a formal ban or slowdown of rare earth exports, which are critical components in high-technology, defence and energy industries, China tried to explain its provocation as a spontaneous reaction of Chinese entrepreneurs whose ‘feelings’ had been hurt by a tiff with Japan. Beijing also claims that mining, processing and refining of rare earths have harmful consequences for the environment and that they have to be limited for ecological reasons.
However, this green alibi does not wash. China actually treats its virtual monopoly over rare earths as a weapon to wage economic warfare. Former Chinese patriarch Deng Xiaoping’s maxim from the early 1990s that “the Middle East has oil, while China has rare earths” is a giveaway of Chinese strategic planning to attract maximum foreign investment into its own high-value-added industrial sectors by rendering rare earths scarce in the rest of the world.
China’s beggar-thy-partners policies have an underlying narrow self-interest that is zero-sum in tenor. According to NYT, China’s industry and information technology ministry has emerged as a bastion of economic nationalism and is formulating blueprints for Chinese manufacturers to grab ‘global leadership’ positions. Summers took a swipe at this very troubling aspect of Chinese behaviour while addressing the Indian business community in Mumbai earlier this month. He praised India for not being motivated by mercantilist capitalism or exports, traits that are trademarks of Chinese trade, currency and investment policies.
Since the global downturn of 2008, China’s image-managers have consistently projected it as a saviour of the world economy by virtue of its unrelenting growth that provides best value for money to multinational corporations and shores up demand for raw materials and fossil fuels. The notion that China is an important engine of world economic recovery has been trumpeted ad nauseam by Premier Wen Jiabao