China and India: Economic Growth – Lessons from Asian Tigers and Singapore
As discussed in a prior blog post, choices nations make have unmistakably long-term consequences. There is no simple or single explanation as to why some nations thrive, consistently, over a long period; and others falter, unforgivably.
It was gratifying to discover abundant, quality research material from incredibly talented thought leaders on this complex subject. Their research points that among the determinants of growth rate include state of current economic development, quality of human capital, savings and investments, infrastructure, institutions, democratic rule, open trade, transparency, innovation.
I do not disagree with any of this, but wonder: are we missing the big picture? Aren’t all these determinants an offshoot of one predominant factor: leadership – quality of a nation’s leaders, quality of advisors they listened to, and quality of decisions they made? Granted leadership is contextual, reflective of the values of a nation’s population, which are inextricably rooted in its culture and civilization, which were built and shaped by previous generations of its leaders, so we circle back to leadership and the quality of decisions made.
Let’s look through quantitative facts in Table 1 at the trajectory of developmental path, the choices made by the leaders of Asian Tigers (Hong Kong, Korea, Singapore, and Taiwan). Singapore, sandwiched in the same region, which excels in every measure of excellence and quality, is also presented as a standalone case. In 1960, Singapore’s per capita GDP was 5.8 times that of India; after 50 years, in 2010, it is 14.9 times. Apparently, Indian leadership regrettably squandered away 50 years! Suppose going forward we give India benefit of doubt that its per capita GDP can grow at an annual average rate of 6.25%; and that of Singapore at only 3.5% rate. Unfortunately the tyranny of mathematics conspires against India. As shown in Table 2, even under these optimistic assumptions, it will take 103 years for India to achieve parity with the per capita GDP of Singapore.
China, once it got it, resolutely, unwaveringly, aggressively, and consistently pursued a pragmatic, gradualist, high growth economic model, with relatively much better outcomes. In 1960 Singapore’s per capita GDP was 5.4 times that of China’s; in 2010 it was 6.8 times. But as shown in Table 2, with stated assumptions, it will still take China 80 more years to catch up with Singapore, and 55years to achieve parity with Asian Tigers combined, Singapore included. Despite earnest efforts on the part of China and India’s leadership today, the math of compounding is stacked up against these and other late bloomers. So again, historical decision errors have long-term consequences. It is all about quality of leadership.
Source of data in Tables 1 and 2: Calculated from information in Penn World Table Version 7.1