In the economic contest between communist China. and democratic India what matters is people.

Listener: 9 August, 2014

Keywords: Growth & Innovation; Political Economy & History;

The debate in the 1950s was whether the Chinese economy would do better than the Indian one. Both countries had become independent in the late 1940s, China after a vicious civil war, India after having shed the shackles of British imperialism. The issue was whether communist-dominated China would – or would not – outperform democratic India.

Sixty years later it is no contest. China has grown faster than India in per capita terms by about 2% a year. India’s material standard of living was about a third higher than China’s in 1950; now it’s only two-fifths of it

This does not prove that communism is better at economic growth than capitalism. It was in the 1950s that Nikita Khrushchev, leader of the Soviet Union, told the West that “we will bury you” economically. They haven’t – the Russian economy remains a basket case supported only by its mineral wealth.

The Indian economy hasn’t done too badly, for that matter. Its per capita growth rate has been about double New Zealand’s, which is not that dissimilar to the rest of the rich world’s, apart from blips from external events such as the 1966 wool price collapse and the Rogernomics era.

We should not be too surprised: economists rec­ognise this as the catch-up effect. As the rich struggle to develop new technologies, poor economies can grow from adopting the old ones. A poor, well-run economy should in principle grow faster than the richest.

Curiously, too, there is little evidence in the data that the Chinese economy grew especially faster than the Indian one in any particular period, not even following Deng Xiaoping’s market liberalisation from 1979. India’s growth has lagged over the entire six decades.

There is no simple explanation for the difference in economic performance. Possibly there is a problem with Chinese statistics, but few would dispute that its mate­rial conditions were substantially worse than India’s in the 1950s and are substantially better today.

Although Indian economists Amartya Sen, a Nobel laureate, and Jean Drèze are extremely committed to their country, the title of their book, An Uncertain Glory: India and its Contradictions, captures their gloom. They draw attention to failures, such as the fact that twice as many Indian children as African ones go hungry and that many adults, espe­cially women, are undernourished. Obesity and diabetes, meanwhile, spread among wealthier Indians.

Despite gains, extreme poverty is rife and death in childbirth is not uncommon. Immunisation rates for most diseases are lower than in sub­Saharan Africa. Prejudice kills on an immense scale: as many as 600,000 fetuses are aborted each year because they are female. The adult literacy rate is 63%, well below the 90%-plus of East Asia, including China, one of the explanations of that country’s better economic performance.

Indian infrastructure is often inadequate, especially in the north. Half the population still defecate in the open, resulting in many deaths from diarrhoea and encephalitis and leaving women especially vulner­able. In contrast 90% of Bangladeshis have toilets despite living in a poorer country; so do 99% of Chinese.

The focus on such indicators rather than GDP leads the authors to the conclusion that Indian rulers have never been properly accountable to the needy majority. India is only a democracy of sorts. May’s general election under first past the post rules gave 52% of parliamentary seats to the BJP party, under Prime Minister Narendra Modi, but it won only 31% of the vote. Given a voter turnout of 67%, the BJP’s parliamentary majority represents only 21% of eligible voters.

Regardless, China and India will remain two of the largest five econo­mies in the world. Given its younger population, India’s economic growth will perhaps begin to grow faster China’s.

But Sen and Drèze argue that success is better meas­ured in terms of health, hygiene, literacy and security among the poor. It seems likely, too, that paying more attention to the condi­tions of its people will accelerate the economic growth rate.