What Makes a Miracle:Some myths about the rise of China and India

After more than a century of relative stagnation, the economies of India and China have been growing at remarkably high rates over the past 25 years. In 1820 the two countries contributed nearly half of the world’s income; by 1950, with the industrialized West having pulled away, their share had fallen to less than one-tenth. Today it is just less than one-fifth, and projections suggest that by 2025 it will rise to one-third. (In 2008 the World Bank is expected to issue revised numbers about cost of living in China and India, which may somewhat reduce these estimated income shares, both current and future).The consequences of this expansion are extraordinary. The Chinese economy in particular has made the most headway against poverty in world history, with hundreds of millions of people moved out of the most extreme poverty within just a generation. (The environmental consequences are comparably remarkable, though perhaps proportionately disastrous). What explains this strikingly rapid growth? The answer that continues to dominate public discussion in the United States runs along the following lines: decades of socialist controls and regulations stifled enterprise in India and China and led them to a dead end. A mix of market reforms and global integration finally unleashed their entrepreneurial energies. As these giants shook off their “socialist slumber,” they entered the “flattened” playing field of global capitalism. The result has been high economic growth in both countries and correspondingly large declines in poverty. While India’s performance has been substantial, China’s has been truly dramatic. The particularly dramatic Chinese performance (like the earlier economic “miracles” in South Korea, Taiwan, and Singapore) suggests, in the dominant narrative, that authoritarianism may be better than democracy for development—at least in its early stages. Regional economic decentralization provided local autonomy and incentives, and, even without democracy, led to broad-based local development. But the narrative warns that global capitalism has brought rising inequality, more in China than in India. The idea is that this may portend serious trouble for Chinese political stability, as China does not have the capability of democratic India to let off the steam of inequality-induced discontent.This story contains a few elements of truth and provides many comforts to our preconceptions. But through sheer repetition it has acquired an authority that does not withstand scrutiny...

By Pranab Bardhan

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As in the days of Noah.....