This newsletter is really a public policy thought-letter. While excellent newsletters on specific themes within public policy already exist, this thought-letter is about frameworks, mental models, and key ideas that will hopefully help you think about any public policy problem in imaginative ways. It seeks to answer just one question: how do I think about a particular public policy problem/solution?
Welcome to the mid-week edition in which we write essays on a public policy theme. The usual public policy review comes out on weekends.
We’ve Started. So Will We Finish?
— Raghu Sanjaylal Jaitley
We wrote about the range of options India has to send a message to China in our previous edition. In this edition, we write about the likely consequences of sending a message and standing up to China and our long-term course of action to mitigate those consequences.
Update: Last evening the union government banned 59 Chinese apps under Section 69A of the IT Act citing data security concerns and threat to national sovereignty. This is a kind of message that was low down in our list of options. It was part of the economic response of banning Chinese goods and apps which doesn’t hurt China badly while hurting domestic constituents. But it has symbolic ramifications beyond its real impact. We will use this as a starting point to lead to the larger consequences we want to talk about.
Impact of The Ban
Right now, all things considered, this ban is economically inconsequential to both sides. However, taking a long-term view, there are some arguments in favour of this:
India is the largest ‘open’ digital market that is available to be monetised over the next many decades. CPC wants its companies to compete and win in this market. We use CPC here deliberately. There should be no doubt these companies thrive because of its patronage. To have these companies control strategic elements of the digital value chain like browsing, payments, news and storage is a national security risk in the long run.
China should be the last country to complain about banning of apps or websites. It doesn’t allow most global technology platforms to operate within its boundaries. It has created local knockoffs of these platforms which have become large and they compete globally. Now doing a tit-for-tat in international trade is a bad idea and Prof. AISH will upbraid me for this. But this is exactly the kind of Chinese action that has been left unchallenged by the global community. China has benefitted from the global trade while showing a fine disregard to its norms whenever it has suited it.
Lastly, if platforms like FB and Twitter which are independent of the state can be abused by groups to influence elections, build narratives and peddle false news, what should you make of platforms that are controlled by an illiberal entity like CPC? Even if these apps pass the data security tests, there are risks of them controlling data about choices, preferences of their users and shaping their opinions surreptitiously.
There are arguments against the ban too:
People downloaded these apps because they found value in it. It doesn’t matter however dubious the value appears to you. Banning them hurts our people
If we knew these apps were playing fast and loose with our data and sovereignty, why did we wait for so long to ban them? Had we not had the skirmishes at LAC would we have continued with the status quo? Or is this just doing something to keep people who want a strong response happy? (clearly, this man was happy)
The revenues from these apps in India are small. It doesn’t hurt them now
There are ways to circumvent a ban through proxy servers or VPN. There are always options in the digital world
How will this play out?
This isn’t a big deal for either party at this moment. We have done this to show some kind of response. And to be sure, China won’t reel under this ban. But China has one advantage. This ban clubbed with the bizarre 100% inspection of all import consignments that we are doing will help it to play the offended party. It can act to paint India as the aggressor that’s contravening global trade and investment norms. The first reaction that has come from the Chinese foreign ministry is in line with this approach. Expect more of this posturing. This positioning of being the offended party gives it more room to pursue actual aggression across LAC. This can’t be discounted. As for India, it is a low-risk trial balloon to gauge China’s response to its message. What will China do? Ban our apps or our businesses in China? We hardly have anything in China to ban. In that sense, it is not a bad manoeuvre. So long as we back it up with real messages and plans to mitigate their consequences.
Which brings us to the discussion with which we started this edition.
How should we prepare for the long-term consequences of sending China a message?
China has always been viewed with suspicion in India for good reasons. Over the years China has taken positions against Indian interests in multilateral fora despite improving bilateral ties. The list is long. The events in the last two months on LAC has obliterated any chance for this to change. There is a real possibility of both sides getting entangled in a spiral of countermeasures in the short term. The tu tu main main in India on which party has been closer to China will mean it will be a while before a leader will risk political capital to befriend China. A reading of twentieth-century history suggests in such situations a real détente needs a new generation of leaders on both sides. That’s about a quarter of century away. To put it bluntly, we are adversaries now.
The die is cast
This won’t be easy for India. China is already the second most important global power which is on the ascendance. It will be the pre-eminent power in the next two decades. India followed a muddled non-aligned doctrine during the Cold War that followed WW2. India could get away with it despite the US suspicion of non-alignment because of two reasons. First, USSR was a special friend and second, India wasn’t a frontline state pitted against the US. With China things will be different. We seem reluctant to make a special partnership with the US whose position China wants to usurp, and we are in a direct confrontation with China. To have a single party, authoritarian global power with almost no shared values as an adversary will test India. Those civilisational connection that surface during summits are bunkum. China and India have very little in common.
So, what do we do? We mentioned in the last edition that India has no choice but to send a message that it won’t back down. Every single option must be exercised to show we can hurt you. Apart from the US, India is the only country that has resources, demography and an alternative world view that can stand up to China over the next two decades. This is true even if we bumble along at a GDP growth of 5 per cent.
We think India should focus on three areas as it starts taking on China.
China’s Rise Won’t Be Peaceful
Anyone who has studied the Xi Jinping doctrine and then seen China’s moves in the last three years would be naïve to believe China’s rise will be peaceful. Its irresponsible conduct during the pandemic only strengthens this. Yet, there are those who view China as some kind of grand civilisational power whose rise will be a net positive for the world. India will have to catalyse and consolidate the view that this is the worst geopolitical mistake the liberal world order had made and continues to make. China’s rise has to be contained and it has to adhere to the standards of a responsible global power. The world should get over the idea that economic prosperity will usher in political freedom and liberty in the Chinese society. The Chinese state and the party won’t let that happen.
It is surprising the western world that saw USSR as a mortal enemy doesn’t yet take that view of China. It has an authoritarian regime that has disdain for liberal values. It mocks democratic processes and encourages dictators and rogue regimes around the world. It has violated NPT regime to help North Korea, Pakistan and Iran with nuclear capabilities. It is capturing regimes and territory across Africa and Asia through debt diplomacy in the cover of BRI (Belt and Road Initiative). How different is this threat from the spectre of USSR style communism?
In fact, it is worse. China is stronger than USSR ever was economically. It is embedded in global value chains and it is the biggest trade partner for most developed countries. Global corporates benefit from being in China and have helped co-opt it at the high table ignoring its illiberal regime. Unlike USSR, China is the world’s biggest market which provides it great leverage. Its military strength and its technology capabilities are real. It copies (or steals) freely from the west with little respect for IPR. Unlike USSR, the mortal threat to a liberal world order this time is sitting within and benefitting from the order it wants to upend. All of it in plain sight. That apart, the civilisational mumbo-jumbo of middle kingdom, tianxia and other such terms that have been used craftily by Xi Jinping have deeper and longer cultural resonance with the majority Han people than Marx, communist manifesto or May Day parade could ever create among the people of USSR.
To be clear, this is USSR on steroids with none of its inherent weakness and many original strengths. This isn’t news to anyone. But no one has thought of acting on it. China’s role in the pandemic and its blatant power grab provides India with the window to play a central role in building the narrative to contain China. India shouldn’t shy away from creating a ‘new Cold War’ framing. What does it have to lose?
A coalition of frontline states against China
China’s economic might and its control of global supply chains will make it difficult for many western democracies to intervene on behalf of India if things escalate. It will take a pandemic or two for them to have a clear-eyed view of the threat of China. Meanwhile, India should formalise an Indo Pacific co-operation group involving Japan, Vietnam, Australia, Indonesia and South Korea that have a shared interest in containing China’s rise. Broader regional cooperation on economy, trade and defence will serve as a strong counterweight to China’s revisionist view of its borders and provide a liberal alternative to countries in South Asia and Africa for economic partnership. Over time, others will recognise the danger of the unchecked rise of China for the liberal world and join forces with this coalition. India has to take the initiative in creating this.
India as an alternative to China
China used its demography, state-led reform of land, labour and capital and its integration with global economy to become the world’s factory. It did this in quick time and the result was three decades of supernormal growth. Socialism with Chinese characteristics is just a fig leaf for embracing capitalism and global trade. It also served an important purpose for the developed world. It kept the price of goods low there which contributed to a sustained period of low inflation. As it gets richer and older (its demography is hurting because of its one-child norm), China will move up the manufacturing value chain while discarding the tag of world’s factory. India is a natural successor to becoming the world’s factory after China if it plays its cards right. It has the market, the demography and the resources to do so. For India, the best antidote to the risk of standing up to China is to do factor market reforms, avoid its penchant for policy unpredictability and follow China’s economic playbook from the last two decades. India should not look inward or retreat into a morass of trade barriers and protectionism. The world needs an open, liberal and a fast-growing India that offers a philosophical counterpoint to China.
India needs it even more.
A Less Than Proportionate Response
— Pranay Kotasthane
I think Raghu has been too charitable in assessing the consequences of the #AppBan. To me, it is a counterproductive move and not just because it infringes on the individual choice of Indians.
India’s move should be seen in the context of what the PRC has already done in Ladakh. There is sufficient evidence to say that the PLA has now occupied a few areas that were previously at least patrolled by the Indian Army. Second, even behind the front-line, China is changing the status quo by building newer structures so that the tactical advantages it has today can be converted to operational advantages in the future. Third, the PLA attacked the Indian army soldiers physically in the midst of an agreed disengagement process. PLA’s conduct went against the border defence cooperation agreement between the two countries.
Given this military context, it’s certainly not the time for India to be floating ‘low-risk trial balloons’. The time for that is long gone.
Coming to the response itself. What India has done is to address a problem in the military domain through the application of power in the economic domain, using the economic option that causes the least pain to the PRC. Such a response is likely to have zero deterrence effect on the CPC’s decision-making calculus. We just have a trial balloon in place of a proportional response.
One way to model India’s response is to see it as a product of two factors: ( the speed of the response) x (the relative pain inflicted on the adversary).
Raghu argues that the #AppBan option was optimised for speed. I disagree. I’m pretty sure that the government would have in mind a range of possible escalatory options against China even before the current standoff. It’s not as if China hasn’t done variations of this before. Second, the current standoff started on 5th May. To wait for a full 58 days for banning a few apps hardly indicates agility.
Now, the relative pain factor. By using a weak instrument in the economic domain, India has ceded the advantage to the PRC. PRC is relatively stronger in this domain and use of economic instruments will come at a relatively higher cost to India.
Instead of the economic route, India has two other options. One is to replicate China’s land grab in another border area where the Indian forces enjoy tactical superiority. We had a framework batting for this approach in edition #44. The other option is to poke the PRC at least at the level of rhetoric in a host of political issues. The PRC is way too touchy about way too many issues. The time to issue statements on Taiwan, Hong Kong, Tibet, and Xinjiang is now.
So, expressed differently, if one were to draw a production possibility curve for India’s response with speed and relative pain as the two axes, #AppBan would be placed way below the curve.
By using #AppBan as a response to a much higher escalatory option deployed by China, India is signalling — incorrectly in my opinion — that we have very few options to inflict relative pain to the PRC. We should explore the political and military options instead.
After all, the proportionality of response counts for a lot in a matsyanyaaya world.
Reading and listening recommendations on public policy matters
[Article] Indrani Bagchi in the Times of India on June 30, 2020 making points on the lines of our edition #46
[Article] Zorawer Daulet Singh bats for a mutually beneficial relationship with China instead of leaning against it
[Article] Zhiqun Zhu in the Al Jazeera believes China will be foolish to push India into the US camp in this new cold war