Democracies are peaceful, representative – and terrible at boosting an economy. Or at least that’s the conventional wisdom in Asia, where for years growth in India’s sprawling democracy has been humbled by China’s efficient, state-led boom.
Consider the experiences of the following two Asian countries. In 1990, Country A had a per capita GDP of $317; Country B’s stood at $461. By 2006, Country A, though 31% poorer than Country B only 16 years earlier, had caught up: It enjoyed a per capita GDP of $634, compared with Country B’s $635. So, if you had to guess, which of these two Asian countries would you assume is a democracy? You might conclude that the better-performing country is authoritarian China and the laggard is democratic India. In reality, the faster-growing country is India, and the laggard – Pakistan. This certainly belies the notion that authoritarian states have an advantage in growing an economy compared with their democratic counterparts.
But surely, the familiar China-India comparison would support an authoritarian edge, right? The conclusion seems so obvious: China is authoritarian, and it has grown faster; India is democratic, and it has grown more slowly. For years, Indians have defended their democracy with a sheepish apology – “Yes, our growth rate is terrible, but low growth rates are an acceptable price to pay to govern a democracy as large and as diverse as India.” There is no need to apologise now. India has ended the infamous 2-3% annual “Hindu rate” of growth and begun its own economic takeoff. The Indian success is not only impressive in terms of its speed – growing at the “East Asian rate” of 8-9% a year – but also in terms of its depth & breadth. The Indian miracle is no longer confined to the much vaunted IT sector; its manufacturing is taking off. Even the historically lackluster agricultural sector is beginning to grow.
So where does this leave the “authoritarian edge” that China’s economy has supposedly enjoyed for years? The emerging Indian miracle should debunk the notion that democracy is bad for growth. And the emerging Indian miracle holds substantial implications for China’s political future. As Chinese political elites mark the 30th anniversary of economic reforms this year, they should reflect on the Indian experience deeply and absorb the real reason behind their own miracle.
Consider the experiences of the following two Asian countries. In 1990, Country A had a per capita GDP of $317; Country B’s stood at $461. By 2006, Country A, though 31% poorer than Country B only 16 years earlier, had caught up: It enjoyed a per capita GDP of $634, compared with Country B’s $635. So, if you had to guess, which of these two Asian countries would you assume is a democracy? You might conclude that the better-performing country is authoritarian China and the laggard is democratic India. In reality, the faster-growing country is India, and the laggard – Pakistan. This certainly belies the notion that authoritarian states have an advantage in growing an economy compared with their democratic counterparts.
But surely, the familiar China-India comparison would support an authoritarian edge, right? The conclusion seems so obvious: China is authoritarian, and it has grown faster; India is democratic, and it has grown more slowly. For years, Indians have defended their democracy with a sheepish apology – “Yes, our growth rate is terrible, but low growth rates are an acceptable price to pay to govern a democracy as large and as diverse as India.” There is no need to apologise now. India has ended the infamous 2-3% annual “Hindu rate” of growth and begun its own economic takeoff. The Indian success is not only impressive in terms of its speed – growing at the “East Asian rate” of 8-9% a year – but also in terms of its depth & breadth. The Indian miracle is no longer confined to the much vaunted IT sector; its manufacturing is taking off. Even the historically lackluster agricultural sector is beginning to grow.
So where does this leave the “authoritarian edge” that China’s economy has supposedly enjoyed for years? The emerging Indian miracle should debunk the notion that democracy is bad for growth. And the emerging Indian miracle holds substantial implications for China’s political future. As Chinese political elites mark the 30th anniversary of economic reforms this year, they should reflect on the Indian experience deeply and absorb the real reason behind their own miracle.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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