The Worst Question

At news aggregator Real Clear World, Frank Ching’s recent article comparing the economic performance of the earth’s two demographic giants was given the tantalizing headline Why India Keeps Falling Behind China. There’s no sign of the “Why?” at the original, published in Taiwan’s China Post. No surprise there.

As Ching notes:

While India and China are both being hailed as rapidly developing emerging markets, the gap between the two countries is widening with India being left behind as China continues to power ahead. China’s growth in 2013 was 7.7 percent while that of India hit a low for the decade of 4.5 percent in the 2012-13 fiscal year.

Despite being positioned for catch-up (i.e. being far poorer), India simply doesn’t grow as fast as China. “The average estimated productivity growth rate of China (5.9%) is more than double that of India (2.4%).” India hasn’t matched Chinese growth rates in any single year since the end of the Mao-era in the late 1970s, even after launching its own much-heralded market-oriented economic reform program in the early 1990s. Despite pulling itself from the dismal 3% “Hindu” growth rate, which was roughly doubled to a 5-6% range, China’s average 9.8% growth rate, sustained over three decades, has remained far out of reach.

The two most populous nations on earth — by a huge margin — accounting between them for over a third of the ‘developing world’ by headcount (and for a far larger proportion of the part that has been in any serious way developing), would seem, superficially, like obvious candidates for unrelenting comparison. How could this titanic development race not be the most important socio-economic story on the planet?

Adding drama to this competition is the ideological polarity it represents. Pitting the most substantial and obstreperous antagonist to liberal-democratic global manifest destiny against a regime that was forged in Fabian social-democracy, and which continues to exult in its status as “the world’s largest democracy®” — the narrative potential is … oh wait.

For the forces of darkness, it only gets better. If India’s relative development failure is not to be considered a conspicuous illustration of democratic incapability, other explanatory factors have to be invoked. Something like 5% GDP growth is going missing, chronically, every year (and if alternative development indicators are preferred, the grim story they tell is much the same). Either India’s Cathedral-approved political orientation is responsible for this social morass, or something else has to be.

While wondering about this awkward conundrum, you’re quite likely to stop being surprised about the paucity of China-India comparative news coverage. Clearly, the “Why?” isn’t wanted, because it only goes to bad places. In fact, it’s probably the worst question in the world.

March 27, 2014admin 31 Comments »
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31 Responses to this entry

  • AWC Says:

    I’ll go a little into the “why”:

    Average IQ of India: 82
    Average IQ of China: 103

    India is multiracial and very low trust.

    China is not high trust (like Japan) but at least it’s largely racially homogenous which gives it advantages.

    [Reply]

    admin Reply:

    That’s the biorealist Charybdis (I like the anti-democratic Scylla too).

    [Reply]

    Antisthenean Reply:

    I prefer a hammer/anvil analogy. There’s no sailing between HBD and democratic inefficiency to a serious PC explanation for India.

    [Reply]

    Posted on March 27th, 2014 at 3:52 pm Reply | Quote
  • Artxell Knaphni Says:

    Don’t know too much about this. But there are various factors involved.
    The Chinese government heavily subsidises manufacturing, the Indian government doesn’t.
    The Chinese government can requisition whatever they like, not so Indian democracy. The environment is not really an issue for China, it is for India.

    There are hundreds of millions in India, for whom government has no bearing on their lives.

    It should be borne in mind that the poorest state in India, Kerala, has free education, social welfare programmes, & the highest rate of literacy in India. It has a Socialist government.

    I guess IQ could be a factor, too. There, though, it’s interesting to note that Bangladesh has a problem with high levels of lead in their water, this causes a drop in IQ for that region.
    Unless there is parity in all factors, IQ can only index performance of unequal factors, as it were.

    [Reply]

    Posted on March 27th, 2014 at 4:26 pm Reply | Quote
  • RiverC Says:

    Also the Chinese could be lying

    [Reply]

    Posted on March 27th, 2014 at 5:53 pm Reply | Quote
  • Handle Says:

    Ratios of Fossil Fuel Reserves, CHINA:INDIA (Source: BP)

    OIL: 3.0
    GAS: 2.3
    COAL: 1.9

    Burning a ton of coal is cheaper in China than anywhere else in the world, and they consumer more than the rest of the world combined. This matters a great deal too for poor large countries that cannot feasibly import an energy supply and haven’t yet developed up the value-chain to more sophisticated markets.

    Even if China and India had identical populations and governments, China would have the distinct comparative advantage in any industry that relies upon the conversion of large amounts of fossil energy into outputs. That is to say ‘industrialization’.

    They have enough natural resources that their productive capacity can match the entire globe’s aggregate demand for certain products. That’s why China makes so much of the whole world’s supply of bulk-quality steel, aluminum, glass, cement, fertilizer, etc. and dominates many intense-electricity-consumption markets, such as chemical synthesis.

    Bangladesh is significantly less resource-endowed per capita than even India, and thus has nothing to offer the world except pure labor unaugmented by any capital, and as such must compete directly with all the other pure-unskilled-laborers of earth, the global population supply of which expands to undermine its own wages in the classic Malthusian fashion.

    [Reply]

    Dan Reply:

    Very good point. I have been to India three times (but never to China). One thing that stands out about India is that the ‘public sphere’, the ‘commons’ is utterly tragic, to use the metaphor. Roads are unsufficient, electricity goes out regularly even in the low-demand seasons, and there is trash and garbage everywhere. And yet, many private spaces can be very nice, luxurious even. All wealth is behind locked doors and gates. This leads to great inefficiences. When the power goes off, private generators kick in everywhere generating electricity at a far higher cost. Guards are required for every building, around the clock.

    The reason the commons is ruined is that, as in America, politicians promise stuff for votes. In India with its large proportion of poor, this consumes 100% of public resources instantly. In that regard, India does not make a good case for democracy.

    And yet, and this deserves great emphasis, the private sphere in India seems to be doing okay. I have seen a number of places which were beautiful, and deserving of a number of stars by first world standards. But 100% of such places are private, where you pay to get in.

    If India lags in IQ, nutrition no doubt has a role in that. Meat is hardly eaten by most people and the poor probably get hardly any protein at all.

    [Reply]

    admin Reply:

    Have you read Kenneth Pomeranz? He uses an almost identical argument in The Great Divergence to explain why industrial capitalism took-off in the West (rather than the East). It all has a kind of Jared Diamond quality to me, deliberately evading deep cultural factors, so I’m suspicious — but for sure it deserves a more serious response than that.

    [Reply]

    Handle Reply:

    The answer to the question of “Which of these factors matters for a nation’s wealth, development, and economic growth?” is, “All of the above.”

    Natural Resource Comparative Advantage matters. Human Capital Resources matters. Capital / Labor ratios matter (important capital-intensification incentives exist in low-density countries, or after plagues, or after restricting immigration). Institutions (cf. Acemoglu), politics, taxation, and governance matters.

    Culture and values (cf. McCloskey) and the motivation and means of achieving status matter. Stable temperate climates and relative security from invasion and predation matters, because it contributes to a perception of less risk in the future, and less need to hoard. Access to warm-water ports and being a maritime power with control over trade routes, or having plenty of arable land, matter.

    When you add it all up, you can make a better version of Pomeranz’s argument that helps to explain why certain countries in certain times had the ideal circumstances and were set to take off economically.

    But when addressing questions such as those posed above, “Why do growth rates differ so greatly between two largely similar entities?”, then one cannot exclude any of these possibilities, and one should not favor one particular explanation to the exclusion of others without a good argument that it’s the dominant explanatory variable.

    For China, huge amounts of cheap coal has mattered a lot. It essentially subsidizes everything else.

    [Reply]

    Posted on March 27th, 2014 at 6:45 pm Reply | Quote
  • Kgaard Says:

    I’m actually getting semi-optimistic on India. The stock market has been falling for several years but now seems poised for a turn due to a variety of fairly subtle macro forces that are all starting to turn the right way. It’s hard to argue with the thrust of the author’s argument (China has trounced India) but I still think India will do better in coming years.

    As an aside, I follow Pakistan pretty closely and it has had one of the world’s best stock markets over the past four years. Things are getting a bit better there, albeit from a low base. IQs are rising steadily due to rising rates of literacy, better nutrition and smaller family sizes. I suspect some of the same is occurring in India.

    Still … the argument that democracy is holding these countries back relative to China is pretty tantilizing. Hard to argue with it.

    [Reply]

    Posted on March 27th, 2014 at 9:23 pm Reply | Quote
  • John Hannon Says:

    The gap may be about to (catastrophically) close soon –

    https://www.youtube.com/watch?v=HUSjMnmS5lI

    [Reply]

    Hanfeizi Reply:

    No. The “debt explosion” in China has been one spent on massive hard capital accumulation and improvement. There’s been plenty of malinvestment, but most of it is pretty easily overcome by unleashing more market forces- i.e. letting many companies go bankrupt and allowing property prices to drop to levels people can afford. By contrast, the western world’s debt bubble was built on consumption. It’s the difference between a guy who runs up his credit cards on vacations vs. a guy who runs up debt building a business. The first is left with nothing but a massive debt to pay off- the second is left with productive capital that will eventually (after some restructuring) pay off. We saw this same story with South Korea in 1997- their economy took a hit, but promptly blasted off again after a few adjustments.

    The hard landing is wishful thinking for the Gordon Chang crowd. Ain’t happening.

    [Reply]

    Kgaard Reply:

    @Blogospheroid

    One challenge with holding up China as a neoreactionary ideal would be that, from a Hoppean perspective, it’s not really “owned” by anyone. Hoppe argues that monarchies do better than democracies because there is one guy at the top looking to maximize the value of his fiefdom over the long term. (Whereas in a democracy you have a never-ending chain of caretaker leaders who just want to skim off as much as they can while in power, and pander to the masses to STAY in power.)

    Looked at through this lens, what really is the driving motivation behind the leaders in China? At least in part it’s to enrich themselves, hence the corruption. It’s an open question just how bad the current cooling off/downturn period will be. If it’s corruption all the way down, then the bad-debt pancaking effect could be worse than generally anticipated. That said, I like the fact that they have devalued the yuan, as that takes some of the pressure off. It should allow exporters to expand margins, while boosting the nominal value of iffy real estate. So hopefully it should work out all right.

    [Reply]

    Posted on March 27th, 2014 at 11:39 pm Reply | Quote
  • spandrell Says:

    A Chinese take on India:

    http://www.chinasmack.com/2010/pictures/filthy-india-photos-chinese-netizen-reactions.html

    [Reply]

    Posted on March 28th, 2014 at 5:06 am Reply | Quote
  • VXXC Says:

    @RC

    Yes thank you, and lying about IQ as well as growth.

    They’ve apparently just now started telling the truth about their debt.

    now what if you’re not Indian or Chinese, why is this either applicable to your nation [or your problem]??

    based on Indian “democracy” we draw the following conclusions about American/Anglo-Saxon democracy: ______?????? What exactly?

    Desperation. NRxn already rather desperate because it locked itself into ideological rigidity before even a whiff of power – the only reason to be rigid is to defend.

    You could draw the conclusion that democracy is not for everyone, but not even Progs would really disagree with that – unless they had a rational if evil ulterior motive in mind for that country they suddenly decide needs democracy.

    Of course the desired conclusion is that democracy is for no one, even if the democracy at it’s most democratic merely extended the franchise of the Republic. In America’s case too far with the 17th Amendment [direct election of Senators instead of State legislatures electing them – this was the worst stroke before the New Deal] and probably way too far with the 19th Amendment, damning America to either chaos or the New Deal.

    Democracy is not for everyone =/= Democracy for none.

    Atavism however ends up being for everyone, and it doesn’t matter what form of government you’ve got when you have Bankers Transnational Communism being run basically from NYC and London, everyone goes bankrupt. China probably already is bankrupt, the books were just opened for the first time and surpluses have yet to appear.

    There isn’t any system, software for people, or anything that allows the First Duty escape.

    The First Duty is to remove the Evil and Insane from the levers of Power. Those levers are Finance, Government, Media, Academe.

    [Reply]

    Posted on March 28th, 2014 at 10:47 am Reply | Quote
  • VXXC Says:

    @VXXC

    IT BE EARLY

    so only the 1st part was for River C

    rest for the crowd.

    democracy not for everyone=/=democracy for none.

    in particular when the democracy is merely extended franchise, and it’s chief selling point was throw the corrupt bums out.

    which we can’t do now, because the bums are the bureaucracy and they’re appointed for life.

    Bureaucracy –that’s your actual real world aristocracy right now. whose corner offices are most coveted by many Casca’s here…and that’s true life aristocracy as well. We already have an actual aristocracy along with it’s jealous usurper wannabe’s. This is what they were and are actually like, once you read the history without glazed covetous eyes.

    Congrats, you’re already halfway there. The other half being the corner office.

    Of course when you get the corner office if that’s all..then..you have to play loot the country with the bankers and their mafia friends too.

    [Reply]

    RiverC Reply:

    Still not hot on Democracy

    Maybe try other angles?

    Our growth may not have been good all of the time, some low hanging fruit might account for most or all of it, leaving Democracy out in the cold.

    If people voted for policies that enhanced growth (wait, people don’t vote for policies in our system) that might make sense.

    As far as I know, voting tends towards plundering, i.e. farmers vote for politicians promising farm subsidies, etc. It’s kind of like the stupidity of crowds and of command economies combined.

    [Reply]

    VXXC Reply:

    Fine, go sell that. Not just to voters, but what’s already coming.

    For one thing they’ve just realized we’re not a bureaucracy, their reaction isn’t hopeful for the cause of conserved sovereignty.

    This isn’t a democracy, it’s a managerial bureaucracy that holds elections and does as it pleases. Looting? Of course. That’s now it’s point the last 20 years. Worse it loots by department or functional area of government, with the exception of the police and military [now that would be fun. Not civilized of course, but fun]. Treasury&The Fed for instance is both master and partner with Global Finance in looting the nation along with any poor sap who takes IMF loans. If they don’t they find themselves being overthrown. That’s our New Deal now.

    I think the actual angle NRxn is playing is the corner offices of the Cathedral, said it before. To call this Reactionary as others have pointed out is foolish. If for instance good King Mikey were to get his throne we’d simply have Right Wing Progressvism attempting to reprogram the software from another angle. And looting.

    Democracy died with the New Deal. How much looting prior to that? The people for the 100 years of the extended franchise did a better job than their putative betters. The poor common prole is much closer to Joe the Plumber, the guy who knows it’s him who’ll be screwed than the Obamaphone voter. And who pray tell is her partner and master? It’s not the Plumbers.

    Somehow Americans quite knew who would get screwed if they gave the government broad powers, and didn’t do it. They didn’t do this, the elites did out of righteous pursuit of of social engineering. 20 years ago that became with Clinton and Rubin pure looting.

    I find it hard to hate the people for submitting to the universal bidding of their Tribunes, all of whom betrayed them.

    And again they’re not gonna go for it. We’re seeing the end of the managerial state now and it’s not pretty. Any other scheme other than the obvious atavistic one of the Republic restored only would have a chance if it meddled even less.

    Again I think reaction should be teaching and leading the commons, something they lack. Certainly they have no political party. A vacuum that nature abhors. Something will fill it.

    [Reply]

    Posted on March 28th, 2014 at 11:00 am Reply | Quote
  • Blogospheroid Says:

    Being an Indian, one of the biggest wonders that we think about is how China dramatically overtook us. It is a talking point in upper middle class conversations. However, this class that talks a lot doesn’t vote nearly as much. Who wants to waste a perfectly good holiday ? Not sure when this cynicism against democracy crept in, but it is there now. So, the political parties don’t do anything special for the upper middle class and there is no one to speak up for development. Incentives, right? There are a couple of parties in this coming general election that are talking a different talk. Who knows what they will actually end up doing?

    A lot of middle class people favour a military dictatorship for some time to clear out the junk, but India’s fortunes have not been good here either. The army is kept comfortable with a full parallel infrastructure of schooling and medical care. If they were forced to use the public facilities, you’d have a coup the next day. The army is also not forced to adopt the reservation policy (affirmative action).

    The closest that India came to a dictatorship was when Indira gandhi imposed an emergency. However, that was also accompanied by a rash of socialist policy.

    The political class here almost completely supports socialist policies. I think its in the constitution somewhere, that every party has to swear to be socialist.

    Weirdly enough, I think most upper class Indians would be ok with a corporate form of governance. After all, there was a huge diaspora of people who’ve gone to countries where they cannot vote, revealed preference and all.

    [Reply]

    admin Reply:

    Any thoughts about Modi? (I try to avoid enthusiasm about politicians, but his authoritarian capitalist credentials look good.)

    [Reply]

    Blogospheroid Reply:

    One-eyed king in a world of blind people.

    Gujarat was pretty well off even earlier, and many have noted it.

    Modi has made a lot of good noises in the campaign about a lot of stuff. He strikes me more of a competent managerial type, rather than a “let loose the dogs of competition” type. It’s definitely going to be better than the previous government which has almost become the textbook definition of killing the golden eggs laying goose, redistributing before a growth spiral really got setup. Modi would work better, but India’s problems seem to huge to make any one office a bottleneck to solve them.

    But more interestingly for India, he would be the first state chief minster to become a prime minister in a long time, which is pretty much a seminal event. Not only a person with actual governance experience occupying the top post, but also he’s talked about more delegating more powers to the states. This is a really big deal for India, if you think about it. It means that Indians might finally be getting the confidence that the country is not going to break into 30 pieces if you empower the states a little more.

    Overall cautiously optimistic.

    [Reply]

    Zimriel Reply:

    Also also, it didn’t end well for the rajah Gandhi.

    [Reply]

    Posted on March 28th, 2014 at 12:23 pm Reply | Quote
  • Dan Says:

    That is an interesting video. I’ve never seen a corpse laying around on my three trips to India, nor heard of anyone who had. But in India, it’s not totally surprising.

    It is comical that a Chinese person should look down on Indians because of the ENVIRONMENT! (Snort)

    If what I have heard and read about China’s unbreathable air is true, then it is better to visit a third world country than China. People in most third world countries kinda, sorta have cause to look down on China, for that reason.

    If in your pursuit of wealth, you’ve made it so that you can’t breathe the air in any of your cities, then you’ve missed the entire point.

    [Reply]

    fotrkd Reply:

    Paris was having similar problems recently, and the UK are being fined by the EU for London’s air quality. I think it’s a devious plot by tobacco companies to make the harm done by cigarettes inconsequential. Then us smokers can live more peacefully [hack… hack… stifled guttural guffaw…].

    [Reply]

    Handle Reply:

    There are existing ways Chinese industry could clean its air pollution. It doesn’t have to wait for technical innovation, and it’s not even that much more expensive. There are ash bag traps, particulate filters, and calcium slurry sulfur scrubbers (which make gypsum for drywall, if your coal deposits don’t have too much naturally radioactive materials mixed in, and even those can be separated out at not too much additional cost.) Affordable, clean coal is already a reality in the developed world’s youngest plants.

    But there are two problems. The first is that, so long as there is global free trade, there is no incentive to continue to develop better, cheaper pollution-mitigating technology, because operations can be outsourced to the winner of the race-to-the-bottom of health and safety regulations. This is the irony of progressive attempts to impose additional restrictions without simultaneously controlling for free-trade – they don’t get the innovation, and the pollution just moves elsewhere, unless it’s global in nature, like carbon emissions, in which case it’s a purely insane policy mix.

    The second problem is that even a 10% additional cost will lose China it’s comparative advantage at its current stage of development. For what it’s worth, the Chinese claim they can’t afford to clean up their act just now because their industries are so cheap-coal-intensive, and they need to build wealth, capital, expertise, and sophistication, and rely on dominating the global market for these particular products, for the ‘temporary’ period they require to move up the value chain, at which point, they will copy the development trajectory of the West and other countries, and implement EPA-style regulations, and clean up the toxified sites, all of which they would now be able to afford.

    “So, yes, the people suffer, but this is a noble and temporary sacrifice to build the future for the whole nation where ones descendants can enjoy clean air and water and live in wealth.”

    Well, I’ll believe it when I see it. Maybe massive amounts of environmental retrofitting and cleanup will be China’s grand economic stimulus and make-work program circa 2025.

    [Reply]

    Peter A. Taylor Reply:

    My _Industrial Ecology_ textbook (Graedel & Allenby, 1995, p. 20) has some charts that seem to support the Chinese claim as being typical for developing countries. They were taken from _World Development Report 1992_. For example, the number of micrograms of sulfur dioxide per cubic meter of air goes from 10 at per capita income of $100, to 50 micrograms at just over $1000, then back down to 10 at about $30000.

    [Reply]

    Posted on March 29th, 2014 at 4:57 pm Reply | Quote
  • Dan Says:

    ‘Video’ was a typo.. I meant photo journal (referring to admin’s link)

    [Reply]

    Posted on March 29th, 2014 at 4:59 pm Reply | Quote
  • Hanfeizi Says:

    This is always an interesting question. Here’s my go at it.

    Ayn Rand once said that in America, the Democrats view human beings as “free spirits in bodies that should be chained to the ground”, and the Republicans view human beings as “productive robots to be programmed from Washington, DC”. Whether or not this is a fair characterization of either party is irrelevant to this discussion; but it’s interesting to see that “free spirits chained to the ground” is an apt take on where India is at in terms of political economy, while “productive robots to be programmed from Beijing” is an apt description of the world according to the CCP.

    This naturally stems from the makeup of the human capital of both countries. The average IQs don’t tell us much; what tells us a lot more is the width of each country’s bell curve. India’s is broad and interesting; China’s is narrow and boring. The former is a product of thousands of years of caste breeding that has generated exceptional talents alongside masses that verge on the subhuman; the latter is the product of thousands of years of meritocracy and upheaval- a country where a man could be born a peasant and die an emperor, and born an emperor and die a bandit, gradually bred a population of competent mediocrity. If you spend much time among people who have come out of the top universities of both countries, you’ll spot the difference immediately. In Shanghai, I generally worked with graduates of China’s top educational institutions- and I’m married to a graduate of such an institution, Shanghai Jiaotong University. In general, these guys are driven, productive, competent… but show few marks of genius or originality. IQs in about the 120 range, in general. They can do their jobs well, but that’s it. (And when genius does emerge in China, it often finds itself subverted or smashed out.)

    Indians, on the other hand… yow! In business school, I found that Indians were often the smartest guys in the room, or at least among them. India’s international business, academic and professional class is on par with that of America or Western Europe. There’s a tremendous reserve of talent there, genius- and the success of the IITs and IIMs shows it.

    Thus, in India, we have a country with a fabulous, visionary elite- and no infrastructure with which to realize their visions.

    OTOH, in China, we have a hive of productive worker bees; a massive population of literate and numerate people who have built a near-first-world infrastructure on a massive scale in record time… but lack much in the way of a real vision of where to go next, or much talent to get them there.

    India is a golden crown with no body; China is a massive pyramid with no top.

    Sadly, the likelihood of the two effectively working together is slim to none. Geography, culture, and mutual distrust stand between them. It’s more likely that China’s “progress” will instead be crowned/driven by some new trans pacific elites via the mediation of Sino-Anglo hubs like Hong Kong, Singapore, Vancouver and San Francisco; what influence India has on that will be via their diasporic elite. I don’t hold out much optimism for India as a polity or empire, whereas China’s impressive structure leaves much to build upon.

    I remember once standing on the 35th floor balcony of my apartment in Dapuqiao, looking out over Shanghai, with a group of Indian classmates. One of them looked at the other and asked, “Why can’t we do this?”

    I was too polite to tell him why, even though I knew the answer. I have a feeling he did as well.

    [Reply]

    Kgaard Reply:

    @Hanfeizi

    Great point on India and China IQ distributions. I knew there was something gnawing at me about the argument that China has a higher average IQ than India. This is it …

    [Reply]

    spandrell Reply:

    Lots of Indians in Singapore, most of them doing quite well, some in the higher stages of government.

    But they surely aren’t revolutionizing the place with their genius.

    The US and UK already have a sizable Indian population. Where are the great mathematicians, the writers, the philosophers, the thinkers? All I see is Anil Dash.

    [Reply]

    admin Reply:

    “India’s [IQ distribution] is broad and interesting; China’s is narrow and boring.” — Allowing for a certain poetic license viz ‘boring’, this is a crucial point. India’s IQ average tells us much less than China’s does.

    [Reply]

    Posted on March 30th, 2014 at 3:55 am Reply | Quote

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