Thursday, June 20, 2013

India and China

The ancient civilizations of India and China dominated much of the world for a couple of thousand years. They continue to have about a third of the world's population between them. After a bad couple of centuries, they are once again asserting themselves on the world scene. In today's New York times, Nobellist Amartya Sen laments that India is lagging behind China economically, and offers a diagnosis. This lag is something of a rebuke to democracy, since India is democratic and China authoritarian, but Sen says that's not the problem.

The hope that India might overtake China one day in economic growth now seems a distant one. But that comparison is not what should worry Indians most. The far greater gap between India and China is in the provision of essential public services — a failing that depresses living standards and is a persistent drag on growth.

Inequality is high in both countries, but China has done far more than India to raise life expectancy, expand general education and secure health care for its people. India has elite schools of varying degrees of excellence for the privileged, but among all Indians 7 or older, nearly one in every five males and one in every three females are illiterate. And most schools are of low quality; less than half the children can divide 20 by 5, even after four years of schooling.

He also faults India for failure to provide health care for its citizens.

The underlying problem, he says, is India's failure to absorb the lessons of the Asian economics success stories.

India’s underperformance can be traced to a failure to learn from the examples of so-called Asian economic development, in which rapid expansion of human capability is both a goal in itself and an integral element in achieving rapid growth. Japan pioneered that approach, starting after the Meiji Restoration in 1868, when it resolved to achieve a fully literate society within a few decades. As Kido Takayoshi, a leader of that reform, explained: “Our people are no different from the Americans or Europeans of today; it is all a matter of education or lack of education.” Through investments in education and health care, Japan simultaneously enhanced living standards and labor productivity — the government collaborating with the market.

Despite the catastrophe of Japan’s war years, the lessons of its development experience remained and were followed, in the postwar period, by South Korea, Taiwan, Singapore and other economies in East Asia. China, which during the Mao era made advances in land reform and basic education and health care, embarked on market reforms in the early 1980s; its huge success changed the shape of the world economy. India has paid inadequate attention to these lessons.

Of course this is just one perspective. The fact that India is more fragmented in almost every possible way than the other examples is one. India's slightly less catastrophic initiation into the modern world may have left it with more cultural inertia, allowing entrenched rent seekers to gum up the works. In any case, it's a crucial issue for India, and the world.