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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).
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.
- 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.
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