CAT 1997 Question Paper Question 157

Instructions

When Deng Xiaoping died a few months ago, the Chinese leadership barely paused for a moment before getting on with the business of governing the country. Contrast that with the chaotic contortions on India's political stage during the past month, and it is easy to conclude that democracy and democratic freedoms are serious obstacles to economic progress.

When the Chinese leadership wants a power plant to be set up, it just goes ahead. No fears of protracted litigation, of environmental protests, or of lobbying by interested parties. It โ€” or the economy โ€” is not held to ransom by striking truckers or air traffic controllers. Certainly, there is much that is alluring about an enlightened dictatorship.

But there the trouble begins. First, there is no guarantee that a dictatorship will be an enlightened one. Myanmar has been ruled by a dictator for decades, and no one would claim that it is better off than even Bangladesh which has itself suffered long stretches of dictatorship. Nor can Mobuto Sese Seko, much in the news these days, be described as enlightened by any reckoning. The people of Israel, almost the only democracy in a region where dictatorships (unenlightened ones) are the norm, are much better off than their neighbours.

Second, dictatorships can easily reverse policies. China was socialist as long as Mao Zedong was around. When Deng Xiaoping took over in what was essentially a palace coup, he took the country in the opposite direction. There is little to ensure that the process will not be repeated. In India such drastic reversals are unlikely.

Six years ago Indian politicians agreed that industries should be de-licensed, that imports should be freed or that investment decisions should be based on economic considerations. Now few think otherwise. Almost all politicians are convinced of the merits of liberalisation though they may occasionally lose sight of the big picture in pandering to their constituencies. India has moved slower than China on liberalisation, but whatever moves it has made are more permanent.

Democracies are also less likely to get embroiled in destructive wars. Had Saddam Hussain been under the obligation of facing free elections every five years, he would have thought ten times before entangling his people in a long confrontation with the West. Germany, Italy and Japan were all dictatorships when they launched the World War II. The price was paid by the economies. Democracies make many small mistakes. But dictatorships are more susceptible to making huge ones and risking everything on one decision โ€” like going to war. Democracies are the political equivalent of free markets, Companies know they can't fool the consumer too often; he will simply switch to the competition. The same goes for political parties. When they fail to live up to their promises in government, the political consumer opts for the competition.

Democratic freedoms too are important for the economy, especially now that information is supreme. Few doubt that the Internet will play an important part in the global economy in the decades to come. But China, by preventing free access to it, is already probably destroying its capabilities in this area. As service industries grow in importance, China may well be at a disadvantage though that may not be apparent today when its manufacturing juggernaut is rolling ahead.

India has stifled its entrepreneurs through its licensing policies. That was an example of how the absence of economic freedom can harm a country. But right-wing dictatorships like South Korea erred in the opposite direction. They forced their businesses to invest in industries, which they (the dictators) felt had a golden future. Now many of those firms are trying to retreat from those investments. Statism is bad, no matter what the direction in which it applies pressure. At this moment, China and other dictatorships may be making foolish investment decisions. But as industries are subsidized and contrary voices not heard, the errors will not be realised until the investments assume gargantuan proportions.

India's hesitant ways may seem inferior to China's confident moves. But at least we know what the costs are. That is not the case with China. It was only years after the Great Leap Forward and only such experiments that the cost in human lives (millions of them) became evident to the world. What the cost of China's present experiments is we may not know for several years more. A nine per cent rate of growth repeated year after year may seem compelling. But a seven per cent rate of growth that will not falter is more desirable. India seems to be on such a growth curve, whatever the shenanigans of our politicians.

Question 157

The passage says that

Solution

Refer to the following lines:"But there the trouble begins. First, there is no guarantee that a dictatorship will be an enlightened one." This is highlighted in option B.



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