The ten-trillion-dollar question in international development

Disclaimer: I am not an expert, so if get anything facts wrong feel free to correct me. Please read me generously, and know that I say nothing maliciously. Feedback is welcome!

So a while back I attended an interview with Arvind Subramanian, Chief Economic Adviser to the Government of India.

And I was NOT impressed. Because whenever people asked him questions adjacent to (nobody asked him directly) the ten-trillion dollar question, he punted, shrugged, or gave non-answers.

Excuses like the "democracy tax" (if anything, functioning democracy should encourage economic growth) and "China is a special case" came up. But what is special about China? S. Korea, Taiwan, Singapore & Hong Kong traveled along similar development paths. And if there's a country similar to China in terms of economic fundamentals, its India.

And so the ten-trillion dollar question is this: Why China, and not India?

Because if I had to bet on which country would be richer today in 1960, I'd bet on India.

First the similarities: Both are large, populous, ancient countries, with long traditions of state authority and shared culture & identity. Both were incredibly poor in 1960. And both were economically exploited by Europeans for a century or so.

In 1960 India had been independent for about 20 years. Prior to that, India had been a British colony. This meant that there was legacy colonial infrastructure, a national government, and economic, educational and other connections to the developed world. An export-oriented development path like the one China is taking now. During the During the Second World War the worst India experienced was the Bengal Famine - which while horrible really doesn't come close to the devastation China experienced before and after WWII. And overall, India's colonial history while terrible, seems much less traumatic and destructive to me than China's "Century of Shame".

Between 1831 and 1950 China was the battlefield where not one, but two of the deadliest conflicts in human history played out. First, the Taiping Rebellion, which lasted 14 years and killed an estimated 20-30 million people. Compare that to the contemporary Indian Rebellion of 1857 which lasted less than 2 years and killed around 1 million people.

And then there's the period between 1927 and 1950. This includes the Chinese Civil War, which killed 8 million people, and was interrupted by the Second World War, (in China, the Second Sino-Japanese War) which killed between 17 and 22 million civilians and millions more military personnel. I'm not going to exhaustively document all the damage and destruction the Second Sino-Japanese War caused China, but I'll just note that the Japanese pursued the so-called Three Alls Policy: "kill all, loot all, burn all".

And then, China was under the control of the Communists, whose economic policy between 1960 and 1980 performed about as well as India's license raj. Which is frankly pretty impressive - in a bad way. India got all the poor economic performance associated with a Communist centrally planned economy


and none of the upsides of Communism in public health:





or education. In 1949 China and India had similar literacy rates, between 15 and 25%. By 1982 the gap between China and India was 20% points, with Chinese literacy at 65% to India's ~41%.



So the ten-trillion-dollar question stands. And while I have thoughts as to the answers, I'll ask the question first.