Tuesday, September 19, 2006

India and China's stagnation

The Belmont Club has a nice post showing that India and China, together, in 1820 produced 50% of the world's output. Now they produce just 2%. Wretchard goes on to say that
The truly amazing historical event is how one hundred years later both India and China would become synonymous with economic underdevelopment, a collapse that was probably caused and simultaneously the cause of European colonialism.
Wretchard is incorrect on calling this shift from 50% to 2% a "collapse" -- China and India did not start producing less, the rest of the world (particularly the West) produced more. Moreover, it is difficult to see how European colonialism in India or China could have caused this stagnation. China was never under European colonial rule, and the British invested in Indian infrastructure produced benefits just as their colonial rule produced costs.

The Indian and Chinese model of stagnation is normal, and has proved the rule for most of history. It is Western (and now Japanese, Chinese, Asian, Indian, etc.) growth that is the exception.

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