Friday, August 20, 2010

The Rise Of India

Excerpts from Asian Journal of Political Science, 20th August 2010 Edition:

"Compared to China Indian public policy still has a lot of room for improvements.
‘Maoists’ or Naxalites threaten political stability and economic freedom.
Geopolitics may explain India’s late, slow and incomplete reforms. The
rise of Asia, in particular of China and India, generates geopolitical challenges of its own.
Conceivably, the global expansion of economic freedom permits not only the rise of Asia,
but the peaceful management of the coming power transition between Asia and the West."

"China and India together account for almost 40 per cent of mankind. Once they joined the
capitalist market economies, capitalism became truly global.Mainland Asia is catching
up. According to Maddison (2007: 378, 381), in 1950 the Asian share of world
population was 54.7 per cent, but the Asian share of world gross domestic product
(GDP) was only 18.6 per cent. By 2003 the Asian share of global population had
increased to 59.4 per cent, but the Asian share of world GDP had more than doubled
and increased to 40.5 per cent. In 2003 the West still commanded 43 per cent of world
GDP, but contained only 12 per cent of global population (Maddison, 2007: 71)."

"From the 1950s to 1980 per capita incomes in India and China were fairly similar to
each other. Per capita incomes in both countries grew more slowly than globally
(Maddison, 1998: 40 41). Both of them pursued ‘leap-forward strategies’ which
focused on heavy industries in spite of capital scarcity and labour abundance.
Comparative advantage was neglected (Lin et al., 2003: chapter 2). It could not be
exploited until the focus on heavy industry and import-substitution was mitigated
or given up. Like China, India was afflicted with socialism and an emphasis on
planning.8 Of course, a comparative advantage defying development strategy would
have been impossible in a free and competitive market economy. A large involvement
of government makes big and persistent mistakes possible. Whereas China suffered
from the repressive and radical variety of socialism, India tried the democratic
variety. Both countries, even democratic India, more or less disengaged from the
global economy. In the late 1940s when India became independent, its share in
global exports was 2.4 per cent. In the early 1990s, it was only 0.4 per cent (Bhagwati,
1993: 58). "

"The poor performance of the world’s most populous countries was not inevitable.
In principle, both of them should have enjoyed the ‘advantages of backwardness’ and
should have benefited from ‘conditional convergence’ (Barro and Sala-i-Martin, 1995;
Helpman, 2004; Levine and Renelt, 1992; Levine and Zervos, 1993; Olson, 1996).
Although not all backward economies do converge, although not all of them exploit
the potential ‘advantages of backwardness’, in principle the followers of the global
development process enjoy some advantages over the pioneers. If they choose to do
so, they can benefit from the greater degree of economic freedom and development of
the more advanced countries (Weede, 2006). They may borrow technologies.9 They
easily find opportunities for productive investment and are less likely to run into the
problem of decreasing returns. They can reallocate labour from less productive
employment in agriculture to more productive employment in industry and, later, in

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