What really perplexes the Chinese, he said, is that scores of nations have engaged in the same sorts of economic reforms as India, so why is it that it’s the Indian economy that has become the developing world’s second best? The speed with which India is creating world-class companies is also a shock to the Chinese, whose corporate structure is based on state-owned and foreign companies.
I have no satisfactory explanation for all this, but I think it may have something to do with India’s much-reviled caste system. Vaishyas, members of the merchant caste, who have learned over generations how to accumulate capital, give the nation a competitive advantage. Classical liberals may be right in thinking that commerce is a natural trait, but it helps if there is a devoted group of risk-taking entrepreneurs around to take advantage of the opportunity. Not surprisingly, Vaishyas still dominate the Forbes list of Indian billionaires.
In a much-discussed magazine article last year, Lee Kwan Yew, the former prime minister of Singapore, raised an important question: Why does the rest of the world view China’s rise as a threat but India’s as a wonderful success story? The answer is that India is a vast, unwieldy, open democracy ruled by a coalition of 20 parties. It is evolving through a daily flow of ideas among the conservative forces of caste and religion, the liberals who dominate intellectual life, and the new forces of global capitalism.
So why isn't India perceived as a threat in the way that China is? That's a fascinating question, one that deserves a lot of thought. And it is one that China should take the time to really think about. What China and a lot of countries don't understand is that America wants other countries to be successful. But our view is shaped by our experience of the 20th century, and that experience was shaped by the rise of Germany, Japan, and Russia and we are always on the lookout for any country whose rise has the potential to follow their path. India is doing the right thing, they realize what Germany and Japan now know and the Russians have yet to figure out: you can achieve national greatness through economic and cultural achievement within a generally liberal framework rather than through dictatorship, war, and conquest. If China can realize that basic truth and pursue appropriate policies it will achieve great things for its people. And if it can't then it will face American power committed to defending a liberal international order.