Can India, China rise if the brightest leave?

 

Bloomberg News

In the 1970s, long before the word “globalization” achieved common currency, the buzzword in India was “brain drain” — an apparent problem that almost everyone in my family and circle of friends wanted to be part of.

Many young men and women educated at highly subsidized public institutions started leaving the country in the 1960s to deepen or monetize their skills in First World countries. Unlike short-term contract workers servicing the construction boom in the Persian Gulf and Southeast Asia, these expensively educated seekers of greener grass, many of whom ended up as prominent bankers, entrepreneurs, innovators and scholars abroad, seemed unlikely to return to a slow-growth economy.

The loss of the best and brightest may have diminished the growth prospects of what was then a very poor postcolonial country. But in the 1990s, as news spread of a fresh economic bonanza in India, some of these long-departed brothers, sisters, cousins, nephews and nieces began to return. In many ways, the achievements as well as the illusions of “rising” India in the past two decades are largely because of this repatriating Indian diaspora, which brought fresh energy, capital, information, networks and ideas to the motherland.

Disillusionment with India’s political dysfunction and seemingly ineradicable corruption and inefficiency has made many of them — such as the former chief executive at a major software company I met recently in Singapore — want to go back to relatively low-growth but less challenging and more secure economic environments.

This is part of a broader flight. India’s biggest corporate beneficiaries of economic liberalization — names like Tata, Mahindra, Birla — are putting the bulk of their investments abroad. Escaping rapidly declining educational institutes at home, more Indian students than ever before — the number has risen 256 percent in the last decade to almost 200,000 — have gone abroad, to Spain and China as well as the United States, Britain and Australia. Young technology professionals and bright undergraduates are moving to Singapore, Australia and Silicon Valley. An influx of wealthy businessmen and financiers has made Indians the highest income ethnic group in Singapore.

A similar quest for more congenial climes is apparent among China’s privileged classes. The country’s rapid economic growth was actually triggered in the late 1970s and 1980s by its far-flung and patriotic diaspora. But the New China they enabled is now a place — environmentally challenged and politically and economically unstable — that many of its wealthy inhabitants hope to leave. A recent report by Bain & Co. revealed that an astonishing 60 percent of Chinese it surveyed with a net worth of $1.5 million or more wanted to emigrate, and a third of them already have investments abroad.

Chinese seeking second and third homes, and foreign residency and passports, have been pushing up real-estate prices from Hong Kong to London; many are even buying up apartments left empty or unfinished by Spain’s construction boom. Hong Kong, outshone by Shanghai in recent years, has become a fresh magnet for mainland Chinese. Travel agents in Hong Kong have made a fortune transporting pregnant Chinese women to their city-state. Tens of thousands of mainland births — almost half of all births in Hong Kong — have forced the city’s government to regulate hospital bookings and even restrict pregnant women from traveling there.

The Associated Chamber of Commerce and Industry of India estimates that Indian students studying abroad cost India as much as $17 billion a year in lost revenue. Only 37 percent of Chinese educated overseas have returned to China in the past 30 years. The Economic Times, India’s biggest business daily, reported this July that fewer Indian students at Wharton and other prestigious business schools in the United States are planning to come home this year; the recent depreciation of the rupee and signs of revival in the U.S. economy are making them more keen to stay on.

The Chinese government, at least, seems alert to this problem as it invests more in local education. The number and rankings of Chinese universities in the global top 50 continue to improve. In India, on the other hand, even the once-prestigious Indian Institutes of Technology have suffered rapid decline. (Higher education in most other Indian universities has long been inadequate.)

There are, of course, some obvious advantages to emigration, most prominently the more than $400 billion worth of remittances migrants send to the developing world — a sum that makes the most ambitious foreign aid programs look meager. The losses of brain drain can be mitigated. One could argue that influential Indians in Silicon Valley saved India’s homegrown venture-capital industry from the country’s usually stifling regulation. In his book Diaspora, Development and Democracy, an important overview of a little-reported phenomenon, the social scientist Devesh Kapur claims that the costs and benefits of migration depend largely on how countries configure their domestic policies.

This is certainly validated by Malaysia, where policies discriminating against ethnic Chinese and Indians have driven out some of the country’s most skilled and best educated people. But it is also true that citizens of nation-states are exposed today like never before to the seductive temptations of what the social anthropologist Aihwa Ong calls “flexible citizenship.” A Filipina maid in Singapore or Hong Kong is in no position to market her skills widely or lucratively. But an Ivy League-educated citizen of India or China can claim the rights and benefits of many societies, and invite ever-higher appraisals of her human worth.

What does this rush to the exit by their elites portend for India and China, two of Asia’s biggest nation-states, which not so long ago were widely expected to preside over a shift of power from the West to the East? This month in Hong Kong I met an old friend who had opened a business for rich consumers in China as early as the 1990s, and branched out into other realms, including culture. Having witnessed many ups and downs in previous decades, she imagined the currently diminished market for luxury goods in China was just another phase.

But she was worried about the long-term ramifications of the sociopolitical and economic uncertainty settling upon Chinese elites, and the consequent flight to the safety and security of other societies. Back in the 1990s, she had invested in the future of a class of educated, well-off Chinese — its expansion and the related growth of a sophisticated culture of consumption at home. Their departure from China, if not for good then with the intention of finding an additional base elsewhere, meant that she, too, had to find a haven elsewhere from the coming storms of Chinese life.

Theoretically, she could exercise her rights as a flexible citizen, and follow her clientele to flashy playgrounds of the rich such as Singapore, Hong Kong and Dubai. Indeed, these old hubs of transportation and commerce are reinventing themselves as high-class tax shelters and playgrounds for Asia’s plutocracy. But this is far from resolving the crisis of the nation-state, the original guarantor, in postcolonial India and China at least, of citizenship, rights, welfare and dignity — a gathering crisis that will affect everyone invested in Asia’s political and economic stability.

Pankaj Mishra is the author of “From the Ruins of Empire: The Revolt Against the West and the Remaking of Asia” and a Bloomberg View columnist.

© 2013, Bloomberg News

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