Comparative Political Economy Development: India and China

An essay exploring various factors that have led to economic development in different historical contexts.

This essay will discuss and explore the various factors that have led to economic development in India and China discussing both historical and modern contexts for both economies.

Firstly, what is economic development? According to Michael Todaro (2006) economic development “is an increase in living standards, improvement in self-esteem needs and freedom from oppression as well as a greater choice”. Economic development is the development of economic wealth of countries, regions, communities for the prosperity and happiness of their society. From a policy perspective, economic development is very much multi-dimensional and broader than economic growth and can be defined as efforts that explore improvements in the economic well-being and quality of life for inhabitants of these communities by creating employment, retaining jobs and supporting or growing incomes and the tax base. So what is economic growth? Economic growth is a much narrower concept than economic development referring to the increase or growth of a specific measure, for example, national income, gross domestic product (GDP), or per capita income. National income or product is commonly expressed in terms of a measure of the aggregate value-added output of the domestic economy called gross domestic product (GDP). When the GDP of a country rises economists refer to it as economic growth. Notably, there are significant differences between economic development and economic growth and in the context of this essay, I will examine both concepts in relation to India and China’s economies.

India and China are two of the
oldest civilizations still extant today both of which collectively had amassed
expansive wealth reserves and for centuries were seats of immense wisdom, a feat which did not go unseen to the eyes of Europeans.
It was between the mid eighteen century and early nineteen century that
European perceptions shifted. For Europeans,
these countries became bywords for weak, passive, primitive countries. In
China’s case, this happened around the
time of Voltaire’s commendation for the country and Montesquieu rather cooler
judgement referring to the Chinese Empire as a “despotic regime, the principle
of which is fear” (Richter, M, p.237). On the other hand India’s contrasting
opinions differed as was that of Sir William Jones in which he desired to learn
about all-things India whilst James Mill, a Scottish historian, economist,
political theorist, and philosopher dismissed Indian history regarding it as
nothing but darkness stating “the darkness, the vagueness, and the confusion,
which reign in it, need not be remarked; for by these the Hindu mythology is
throughout distinguished” (1817, p.203).

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By the twentieth century, perceptions of Europeans toward India and China deepened, by words such as misery, wretchedness, deprivation was not far from
the actual conditions within these countries. Two countries that were and still
remain very populous countries, for example in 1820 combined population
estimated at half a billion which by the 1900‘s seen a population increase to
700 million. By the twentieth century,
the population trebled. This populous status combined with being two of the
poorest countries invoked thoughts of locations for disease, famine,
underdevelopment, superstition, “women with bound feet and men with long pony tails, untouchables beyond the pale and
myriads of gods with many heads and limbs”  (Tseng &
Cowen, 2005, p. 1).

In the mid-twentieth century, particularly in the 1960’s, both countries
reached their lowest point. Two countries, independent republics, launched on
their path of development, suffered catastrophic famines. China’s famine in
which the ruling class tried to hide from the outside world followed swiftly
upon the fiasco of the Great Leap Forward, an economic and social campaign
created by the Communist Party of China led by Chairman Mao, legislation aimed
at transforming the country from an agrarian economy into a socialist society.
India suffered a double harvest failure both in 1965 and 1966 which brought the
country to its proverbial knees, uncovering inadequate foreign policy which
later heavily relied on food aid from the United States. These two countries
were “basket cases“ (Tseng &
Cowen, 2005, p. 1) in
the then fashionable terms of international diplomacy.

The following forty years and we
are now discussing India and China, not in terms of their misfortunes or
previous failings or ancient wisdom but
as dynamic modern economies. Economies feared by other nations such as the
United States and the United Kingdom, for
example the Economist, a weekly English newspaper had to write editorials
telling the world not to be afraid of China’s economic power and legislators in
the United States had to pass laws preventing businesses outsourcing work to
India especially to India’s booming I.T sector notably in the areas of software
and telecommunication services. Prior to the financial crisis and in 2004
according to International Monetary Fund (IMF),
China ranked the second largest economy in terms of GDP in purchasing power parity
(PPP) dollars whilst India ranked fifth. Cumulatively both countries accounted
for 19.2 % of world GDP with China 11.5% and India 7.7%. This was still below
their share of the world population which
stood at 37.5%, with China 21% and India 16.5% (International Monetary Fund
[DOHC], 2004). Comparative causes had lead to contrasting economic performances
of both countries. There were also similarities toward modernization and future
prospects for both economies. Political similarities of both countries are
notable as to their twentieth-century
history and twenty-first-century
challenges.  

India and China have long histories
but their histories have been very different. China,
for the most part, has been a stable centrally run state with brief
periods of instability lacking single authority while India’s history has been
quite the opposite. India’s political authority in even any of the country’s
major territories had been greatly inadequate and non-existent. In China there
was a desire for unification toward nationalism in the twentieth century, later
called reunification and with the arrival of World War II, China was divided. Jonathan Spence, a British-born American
historian and intellectual specialising in Chinese history expresses China’s
desire for nationalism,

““The solidification of such a group of new states [i.e. war lords, KMT, communists and Japanese enclaves] would return China to the situation that had prevailed before the Qin conquests of 221 B.C., during the so-called Warring States period when ten major regimes controlled the country among them; or it might bring a recurrence of the shifting patterns of authority and alliances that typified China’s history from the third to sixth century A.D., and again from tenth to the thirteenth.”

(Spence, 1999, p.426).

India on the other hand never
really had any ruling political authority on the country as a whole. India has
always been an idea in world culture for millennia. The British could be said
to have ruled over two-thirds of India with the remaining territories under
paramountcy with no direct rule of which were
with native princes. It is also
notable that the British were perhaps the first rulers of India to try a more
absolute and hierarchical structure of power within Britain’s governing
territories. The governance of British
political authority gave India structure among
the country’s vast territories and laid the foundations to develop a central
government which enabled the current Indian government tools to implement
policy. It is also notable that the British gave India the English language
which has facilitated India’s economic success even today allowing access to
global markets, developed legal systems of property rights and introduction to
the western orientation of the super-rich
and elite. Furthermore, the hegemonic political ideology of the nationalist
movement, liberal democracy, was also borrowed from the foreign rulers, hence,
the India we talk of today is a nineteenth-century
product in more than one sense.

In contrast,
China never really suffered foreign rule over its territories. It wasn’t until
the 1930’s when Japan invaded Manchuria and occupied large territories in
Eastern and Central China that China really suffered imperial rule. In contrast
to India China’s attitude to foreigners was quite hostile, in fact this
hostility led to the removal of foreigners which became the driving force for
China, unlike India, soon after gaining independence quickly attempted to
obtain foreign capital from public sources, rather than private sources, and
also from a wide variety of countries rather than relying on its old colonial
masters. China’s reliant on one country, the USSR, soon became after a
regretful partnership. China, unlike India,
had no single hegemonic ruling ideology and the country also had to struggle
with confronting Confucianism against Western ideologies such as liberalism,
Fascism and Communism.

These historical accounts shaped
both countries politically and economically and it was these historical legacies that drove India and China to define
industrialisation rather than economic development. Both countries sought
independence from foreign capital and self-sufficiency. India and China
feared foreign domination and considered the State as the driving force for economic
growth, ideologies arose such as Marxism, Leninism,
Maoism in China, Gandhism in India, forged during the road to independence. It wasn’t until after the 1960’s that
both countries adopted fresh ideologies mainly due to failings in previous administration
with more emphasis on suiting the rhythm of the world economy and their
comparators, South Korea and Taiwan, both of which had very successful growth
strategies.

China
and India developed their own growth strategies focusing on the steel,
cement, machine making machinery industries. India
diverted resources from domestic consumption goods production whilst China
initially concentrated its efforts on the basic goods sector switched emphasis
on heavy as well as light industries. The
1990’s brought the new economic policy to
India with economic liberalization, including industrial deregulation,
privatization of state-owned enterprises, and reduced controls on foreign trade
and investment. This had a positive effect on the economy right up until the
financial crisis with strong economic growth mainly in the country’s
knowledge-based sectors such as I.T and pharmaceuticals while China, on the other hand, received a lot of
foreign capital. China’s open door policy and its attitude to policy reform
improved its human capital with rapid
growth in their manufacturing industry.

With strong economic growth and
improved human capital, another notable
aspect too buoyant economic success or an
alternative viewpoint on economies is to look at the Human Development Index
and according to the Human Development Report, released by the United
Nations Development Programme (UNDP) in 1995 China is ranked 106 while India is
ranked 139. Similar HDI report in 2013 places China 101st while India is ranked
136. Currently, as of 2016, China is currently ranked 90 while India
is ranked 131. China’s strong emphasis on education for all at an early age and
stronger incomes have seen China progress
positively while India’s poor education record, lower incomes and inequalities
especially toward women have India with a lot to do towards economic
development reforms.

References

• IMF Country Report. (2004, November). Retrieved December Tuesday, 2017, from International Monetary Fund: https://www.imf.org/external/pubs/ft/scr/2004/cr04351.pdf
• Mill, J. (1817). The History of British India Vol. 1. London: Baldwin, Craddock, and Joy.
• Programme, U. N. (1995;2013;2016). Human Development Reports. Retrieved December
• Wednesday, 2017, from United Nations Development Programme: http://hdr.undp.org/en
• Richter, M. (1977). The Political Theory of Montesquieu. Cambridge: Cambridge University Press.
• Spence, J. (1999). The Search for Modern China 2nd Edition . New York: W.W. Norton.
• Todaro, M. P., & Smith, S. C. (2006). Economic Development. Harlow: Pearson Education Limited.
• Tseng, W., & Cowen, D. (2005). India’s and China’s Recent Experience with Reform and Growth. Hampshire: Palgrave Macmillan.