China ver­sus South Asia

The Pak Banker - - EDITORIAL - Shahid Javed Burki

THE his­to­rian Stan­ley Wolpert ti­tled his book on the last days of the Bri­tish Raj in In­dia, Shame­ful Flight. Had the colo­nial masters not made a hur­ried exit, they may have man­aged to re­tain the political unity of the South Asian sub-con­ti­nent. Aye­sha Jalal, an­other his­to­rian, in her book on Jin­nah's strat­egy to safe­guard the Mus­lims' mi­nor­ity rights in what would have been a pre­dom­i­nantly Hindu political en­tity, has taken a con­trar­ian view to what is gen­er­ally viewed by Pak­istani his­to­ri­ans. She main­tains that the de­mand for the es­tab­lish­ment of an in­de­pen­dent Mus­lim state was a bar­gain­ing po­si­tion used by Mo­ham­mad Ali Jin­nah, the Pak­istani found­ing father, who wanted to se­cure bet­ter political rights for the Mus­lim com­mu­nity in in­de­pen­dent In­dia. How­ever, the Hindu lead­er­ship came to the con­clu­sion that ac­cept­ing the de­mand for Pak­istan would be ad­van­ta­geous for it, as it would make it pos­si­ble to de­velop political in­sti­tu­tions un­en­cum­bered with Mus­lim rights.

Pak­istan be­came in­de­pen­dent but its divi­sion into two parts sep­a­rated by thou­sands of miles of In­dian ter­ri­tory, was found to be im­prac­ti­cal for build­ing one na­tion. Af­ter less than a quar­ter cen­tury, East Pak­istan sep­a­rated and be­came the in­de­pen­dent state of Bangladesh. Had South Asia re­mained a uni­fied political en­tity, would it have per­formed eco­nom­i­cally bet­ter than it did? This is one of those ' what-if ques­tions' that are eas­ier to ask but dif­fi­cult to an­swer. One way of look­ing at South Asia's eco­nomic per­for­mance is to com­pare it with China, an­other large Asian coun­try with a land­mass roughly com­pa­ra­ble to that of South Asia. China has an area of 9.5 mil­lion square kilo­me­ters and a pop­u­la­tion in 2015 of 1.38 bil­lion. China is much less densely pop­u­lated than South Asia. It has 144 per­sons per square kilome­ter com­pared to South Asia's 262 per­sons. As econ­o­mists spe­cial­is­ing in the study of ur­ban con­glom­er­a­tions sug­gest, higher den­si­ties con­trib­ute to eco­nomic growth. That should have helped South Asia in grow­ing its econ­omy.

South Asia also had a bet­ter agri­cul­tural en­dow­ment. It had more cul­tivable and ir­ri­gated land per capita of the pop­u­la­tion than China. Much of the Chi­nese larger land mass was made up of moun­tains and deserts. South Asia had more wa­ter avail­able for ir­ri­ga­tion than China. Not­with­stand­ing th­ese ad­van­tages, China's per­for­mance com­pared to that of South Asia was spec­tac­u­lar. In the pe­riod be­gin­ning with the open­ing of the econ­omy in 1980 to 2010, the Chi­nese na­tional in­come ex­panded 32fold while that of South Asia in­creased only eight-fold. In to­day's prices, China's GDP was es­ti­mated at $325 bil­lion in 1980 com­pared with South Asia's $205 bil­lion. China's per capita in­come was then $356. It in­creased 20fold in the 35-year pe­riod since then. South Asia's in­come per capita in­crease was much more mod­est. China, in other words, has gone a great deal fur­ther than the South Asian sub-con­ti­nent. Why is that the case?

I have a num­ber of an­swers to the ques­tions posed above. I will pro­vide them briefly. China and South Asia fol­lowed very dif­fer­ent eco­nomic mod­els. Al­though China was a Com­mu­nist state, it al­lowed a fair amount of space to the pri­vate sec­tor. Pri­vate en­trepreneurs were ex­pected to work within the frame­work pre­scribed by the state. Bei­jing fo­cused on the ex­port sec­tor iden­ti­fy­ing for the en­trepreneurs, the ar­eas of pro­duc­tion and the mar­kets they should fo­cus on. South Asia, in its en­deav­our to put the state on the com­mand­ing heights of the econ­omy, made mas­sive amounts of in­vest­ments in pro­duc­ing cap­i­tal goods for the do­mes­tic econ­omy. This may not be ob­vi­ous but in many ways, the South Asian state was more in­tru­sive than the state in China.

An­other dif­fer­ence be­tween China and South Asia was the for­mer's em­pha­sis on de­vel­op­ing its hu­man re­source. Mao Ze­dong, the founder of the Chi­nese Com­mu­nist state, pro­vided uni­ver­sal pri­mary education and health care to all cit­i­zens. He also lib­er­ated women from years of servi­tude. One other ma­jor dif­fer­ence be­tween China and South Asia was the for­mer's will­ing­ness to work with its neigh­bours. This did not hap­pen in South Asia in part be­cause of the in­tense ri­valry be­tween In­dia and Pak­istan. In 1947, when the Bri­tish left the sub­con­ti­nent, most of Pak­istani ex­ports and most of its im­ports went to or came from In­dia. Now in 2015, In­dia is a very mi­nor trad­ing part­ner for Pak­istan. For In­dia, Pak­istan is an even smaller player. Also, China and South Asia have very dif­fer­ent political sys­tems. In China, de­ci­sions by a one-party dom­i­nated state can be taken quickly. By now the three ma­jor coun­tries of South Asia have rea­son­ably well es­tab­lished demo­cratic sys­tems where pol­i­cy­mak­ing is slow and cum­ber­some.

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