Assessing the Economic Rise of China and India: Notes from Pranab Bardhan’s lecture at The New School

Awakening Giants China India

Thanks to a recommendation from @maggierauch, I made it across a very rainy lower Manhattan Thursday night to catch the excellent Assessing the Economic Rise of China and India lecture put on by The New School’s India China Institute. Economist Pranab Bardhan talked about some of the research and conclusions from his new book, Awakening Giants, Feet of Clay: Assessing the Economic Rise of China and India (Princeton University).William Milberg and  Sanjay Ruparelia offered their responses, and Carl Riskin made an appearance and weighed in on Bardhan’s talk as well.

I took a lot of notes during the talk and Q&A period. Tapped out on my phone, they’re not exact, and they’re certainly not a summary — just a brief recording of things that stood out to me. If you’re at all interested in this kind of thing you should buy Bardhan’s book. There’s some pretty surprising stuff in here, and I’m looking forward to reading Fee of Clay to learn more. If there are mistakes here, they are mine, not the speakers’.

*****

- According to numbers from Angus Maddison (and there are data problems for both countries), in 1820 China contributed 33% of the world’s income, India was responsible for 16%. By 1950 India and China contributed 9% combined.

- Chinas growth has been in manufacturing, Indian’s in service. However, in terms of value added, not output, China is not number one in manufacturing — in value added terms they were about equal with Japan in 2008, and behind the US and others.

- In terms of the secondary sector (manufacturing), China’s growth rate is not unprecedented, even for the region. 

- Software — including call centers and all sorts of related services — is actually a very small part of Indias economy; less than half of 1%.

One of Bardhan’s more controversial arguments:

- Stats show reduction of poverty has little to do with globalization, most of China’s growth was before global integration — half the growth had occurred by 1987. Land reform and usage rights had a huge effect. Indian rural households are still mostly landless.

- Success in Indian exports is not in labor intensive goods and so doesn’t provide jobs to many poor people.

- Indian life expectancy in India is the same as China in the early 70s. The percentage of underweight children in India is worse than in Sub-Saharan Africa.

-China rural health services have also declined, from de-collectivization onwards. Most poor Chinese cannot afford public hospitals.

- Chinese income inequality may have flattened in recent years.

- Income inequality is less important than inequality of opportunity. Indias education inequality is among highest in the world. China’s is similar to Brazil, India is much worse.

- Class inequality rampant in india. China has worse gender equality, although female literacy and workforce participation are higher.

- Demographic dividend (working age population) is better in India. Younger population=more workers and also a higher savings rate. Though there are mitigating factors, the saving portion of the population is 35-65 years of age. This demographic will peak in china in 2030, not the same time as the workforce will.

- Environmental problems: lot of air pollution in both countries is indoors, from cooking. Mostly affects women (based on WHO numbers. Yale University Center for Environmental Law and Columbia also have numbers on this). India’s environmental movement is stronger.

- India and China both have very high savings rates, partially due to lack of benefits. Both will decline, especially in China.

- China’s fiscal deficit ratio is lower than most think it should be, largely due to bad loans from federal to local govt.

- India’s infrastructure is bad, electricity is 2x as expensive as in China. The state is complicit in 30% of electricity thefts in India. Around election times, Indian pols promise to make utilities free, and often do so — bankrupting local govts and discourages private buy ins.

- India’s formal sector economy is 40 pct SOEs.

- China is capitalist, but defining ownership is very tough. A Chinese author that wrote a book on Chinese capitalism couldn’t determine ownership details of Huawei or Lenovo.

- A 2007 study found 3000 of 3500’s China’s wealthy with over 100 million RMB are closely tied/related to CCP leadership.

- The richest members of Chinese parliament are worth a combined 75 billion USD.

- India’s capitalism is  more controlled, regulated.

- In China, the internal logic of capitalism is missing. They’re riding “a tiger the political leadership may find it difficult to dismount.”

- CCP is only 29% workers and peasants.

- China’s socialism was a good launching pad for capitalism. This includes a high percentage of R&D funding, even before major growth

- “Many young people [in China] think the 20th century started in 1980.” 

- Only half-joking when he says, “Chinese may be better capitalists now because they were better socialists then.”

- Rebuttal of Beijing consensus: ”Authoritarianism is neither necessary nor sufficient for development.”

- China’s “strong” govt is more brittle than India’s — the leadership in India doesn’t depend on continually high GDP numbers for legitimacy.

A few counterpoints/comments/cautions/questions from Carl Riskin (who hasn’t yet read the book). Bardhan responded to a few of these during the Q&A:

- Comparative historical trends need to “be taken with very large chunks of salt.” Backward projected data sets are useless.

- Chinas high (50%) savings rate is partially because a very small part of GDP makes itself into household income.

- Infrastructure development is really only for upper middle class, same thing with high speed rail.

- Why are life indicators (expectancy etc.) going up while health systems are being dismantled?

- Development of eastern areas for foreign development and trade led to changes, meaning that globalization does matter.

- Distribution of land was incredible, however that’s disappearing now. Poor farmers are getting land grabbed because of high prices of commercial real estate. 100 million may have lost their land — a class of landless laborers is being created

*****

Awakening Giants, Feet of Clay: Assessing the Economic Rise of China and India 

The New School’s India China Institute / Events Schedule / On Twitter

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