Opium Wars redux

Back in the 1840s and 50s, the East India Company, with Britain’s military backing, forced China into importing opium (grown and cultivated by Bengal’s bonded labourers), though the Emperor of China, concerned that Chinese society had become addicted to the drug, banned it. Social media, 21st century’s opiate of the masses, has supplanted the opium of the 19th century.

When the trade-related opium wars ended in 1862, China not only ceded some territory to Europe and the US but also lost control of its trade and economic policies by signing several unequal treaties. Over the years since, China has learned its lessons well and taken steps to protect itself.

Prior to 1992, around the time China and India liberalised their economic policies, both countries had around 45% of their peoples living in extreme poverty, and their GDP was $426 billion and $288 billion, respectively. Today, less than 2% of China is poor, compared to India’s 21%; China’s GDP of over $19 trillion is five times that of India’s, and snapping at the heels of the $25 trillion US economy.

Facing twin issues – the pandemic-related disruption in the China supply chain and a potential military confrontation between the US and China on the horizon -- western companies are anxious to move their outsourcing operations from China to other nations. While politicians and industrialists may drool over the prospect of India being the main beneficiary, the country is ill-prepared. Unlike China, India does not have the transportation/manufacturing infrastructure or manpower with the technical skills to gain from such a move.

More importantly, there are huge problems associated with encouraging large MNCs from the industrialised nations to operate in India, let alone any country in the Global South. These companies carry with them a lot of colonial baggage, one based on exploitation and a firm belief that their economic systems, their culture, and their race are infinitely superior.

India is yet to shed its colonial supplicant mindset. Embracing MNCs is sheer folly when there is no national-level policy formulating body that understands the seriousness of the MNC trap. ‘Atmanirbharta’ is a political slogan, not much else.

Take IT for example. Using a State-led capitalism model, China has been successful in creating the world’s largest video-gaming company (Tencent), the world’s second-largest search engine (Baidu), and the world’s second largest e-commerce and AI company (Alibaba). Of the 20 largest companies in China, 17 are State enterprises, several of which are dedicated to providing transport, energy and communications infrastructure.

All that the Indian IT sector has accomplished is supplying software coolies for the West and earning foreign exchange. Of the over 400 MNCs located in Bengaluru, most are American IT companies. Joining them soon will be US law firms and investment/insurance companies with extraterritorial privileges. Colonising the mind is less costly and far more effective than occupying territories, unless mineral resources are involved.

When China was refusing to let Microsoft offer “cheap” windows software for users, the Indian establishment was sleeping, as far as I can tell. Without a large indigenous effort to come up with suitable software for a variety of applications, India was in no position to call the shots. The problem has only worsened with time. Just look at how Amazon, Meta (aka Facebook) and Google have inextricably embedded themselves in the psyche of the Indian populace.

China is not reliant on FDI the way India is now or the way the so-called ‘Asian Tigers’ were in the 1990s. When the Asian Tigers’ rapidly growing economies suddenly collapsed due to a foreign exchange crisis, loans provided by the IMF enabled them to recover. But the loans came at a huge cost imposed by the IMF – a forced sell-off of State-owned enterprises (banks, real estate, automobile, telecom, and utilities), large reductions in the workforce resulting in massive unemployment, and allowing foreign companies and individuals 100% ownership of land and assorted private enterprises. Colonialisation has many detractors, but many more avatars.

India is sleepwalking into a US-China confrontation and will end up as collateral damage. The new opium wars have just started.