Debunking Myths about China and India

Pranab Bardhan, a professor of mine at UC Berkeley, whom we have met before here (see Crouching Tiger, Lumbering Elephant, and Pranab Bardhan on the Indian Economy, for instance) has an excellent article in the Boston Review titled “What Makes a Miracle: Some myths about the Rise of China and India.” (Hat tip: Yuvaraj Galada.)

He states the standard view explaining the rapid growth of the two countries:

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.

Then he proceeds to demonstrate why that explanation is incomplete at best and provides a more nuanced and comprehensive explanation which touches on matters that are often neglected in the narrative explaining the growth miracles. For instance:

Start with the claim that global integration and associated market reforms resulted in high growth, which in turn produced dramatic declines in extreme poverty. Applied to China, the timing simply does not fit. China has indeed made large strides in foreign trade and investment since the 1990s, but well before then, say between 1978 and 1993, the country had already achieved an average annual growth rate of about nine percent—even higher than the impressive seven percent growth rate in East Asia between 1960 and 1980.

It is a very well-reasoned article and must be read in full. Let me close with the concluding paragraph of the piece.

Chinese and Indian economic performance has been far better in the last quarter-century than in the previous two hundred years—and this is one of the striking events in the recent history of the international economy. Other countries must adjust to this reality, and learn to treat the partial restoration of the earlier global importance of these two countries as an opportunity for trade, investment, and exchange of ideas, not as a threat. (We also need to work in tandem with them on the environment.) But we must remember that the story of their rise is more complicated and nuanced than standard accounts make out. That more complex story includes the positive legacy of China and India’s earlier statist periods, which offers general lessons for the process of development much too often ignored.