WASHINGTON, DC, May 19, 1998 --  

As thousands of outraged diplomats scurried about the world in response to India's nuclear blast, the real casualty of the atomic tests eluded public discussion. The risk to world peace created by the explosion may be real, but it is far less acute than the risk to the emerging world economy.

Since the Soviet empire began to unravel in 1989, the world has been moving in fits and starts toward an integrated, free-market economy. Perhaps the most remarkable aspect of this transition has been its universality. Although different countries have progressed at different rates, and a few countries have failed to move forward at all, there has been an astounding absence of major setbacks.

Until now.

The election of the nationalist Bharatiya Janata Party in India is the first serious reversal in the modern globalization of markets. The party's decision to demonstrate India's nuclear capability is not nearly as disturbing as its dismissal of the consequences of doing so. In announcing his country's ascension to nuclear armed status, Prime Minister Atal Bihari Vajpayee said he was fully prepared to weather economic sanctions when he decided to execute the tests. He added that India is a self-sufficient country that can live without world trade.

Had these statements come from another irrational nationalist -- like Serbia's Slobodan Milosevic -- it would hardly merit further comment. But India is a far larger and more important country than Serbia. With nearly a billion people living within its borders, India is one of the greatest population centers in the world. If the future lies with international markets, a large part of the future lies with India.

The economic sanctions announced by the Clinton Administration will do little to influence an inward-looking nationalist government. Since a previous government reluctantly began opening the Indian economy to foreign investment in 1991, the country has only half-heartedly adopted free-market reforms. While many U.S. and European companies have established presences in India, the bulk of the economy remains in regressively inefficient state-owned industries. To a conservative party like the BJP, any excuse to retreat from even modest free-market reforms is welcome.

India's turn to within has grave consequences for the future of the world -- much greater consequences than its deployment of nuclear weapons. While it is possible that India and Pakistan could bomb themselves back to the stone age with their nuclear arsenals, it is far more likely that these countries will stagnate in a pre-industrial age by their failure to engage in free international trade. With the world on the threshold of fantastic cultural and economic advancements, India's actions raise the prospect of nearly 20 percent of all people being left behind.