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The Indian rope trick – you see it but refuse to believe it

I have no idea whether the journalists at the Daily Telegraph make it their business to read this blog (although they most certainly should do so, naturally) but this article nicely backed up my point the other day about the economic upsurge of India.

In my posting here, a number of commenters scoffed with disbelief that some jumped up rating agency should be so daft as to proclaim that India’s debt rating has improved, and that the country’[s economy is improving. “My dear boy, this is India!” you can hear them cry. And one commenter, bless him, even suggested that India is still far behind most of Latin America, a comment sure to provoke hollow laughs from any entrepreneural type hoping to prosper in Chavez’s Venezuela. Of course, as I said at the time, India is still moving up from a relatively low base. During the immediate post-war years, the East Asian economies in places like South Korea, Hong Kong and Taiwan powered ahead while India, influenced by those dreadful Fabians and London School of Economics types who stuffed the old colonial service, embraced socialism, planning and progressive taxes. But the fact, that cannot be denied, is that this country, with its vast, English-speaking population, relatively stable system of property rights and its admirable enthusiasm for the world’s greatest sport, is shooting the economic lights out.

There is just no pleasing some people, it seems.

18 comments to The Indian rope trick – you see it but refuse to believe it

  • while India, influenced by those dreadful Fabians and London School of Economics types who stuffed the old colonial service, embraced socialism, planning and progressive taxes.

    Now you embrace the old canard that colonialism is to blame for all third world woes. This is nonsense. Before WW2 Britain wasn’t very socialist. Hong Kong, also ruled by Britain (for much longer) didn’t practice socialism.
    Nehru and Indira Ghandi adopted solcialism for the same reasons Britaind did after WW2 – it was fashionable, everyone did it, it was the accepted wisdom of the day. The extreme model of socialism adopted in India after independence proves the breaking away from British influence – because the British adopted a much more moderate form of socialism.

  • Here is a comment from the Telegraph story:

    Mad to bet that India’s conomic miracle is a mirage? Equally mad to bet on a country which has corruption techniques far in advance of the West, with a double accounting system for almost everything, corrupt police (as admitted by chiefs as not uncommon after the Delhi cover-up of horrific scores of pedophile and organ theft murders) and even Supreme Court judges that can be bought (as a recent high profile murder case showed yet again), over 40% under the poverty line, no social support for the masses of any kind, gigantic AIDS problems, estimated 246 million children engaged in child labour, UNICEF claiming that 171 million of them work in hazardous situations or conditions, and – indicative of the whole ‘mirage’ mentality, worship of the charlatan guru Sai Baba by its leading politicians.

    Posted by Robert Priddy on February 1, 2007 10:48 PM

    And he forgot to mention the 29 ongoing armed insurgencies and the ethnic and religious strifes.

    Also this:

    …India’s continued use of investment caps that keep foreign businesses out of key sectors such as retail and banking.

    which shows that many bureaucratic impediments to free enterprise still exist.

    Of course, I too welcome India’s fast economic growth.

  • Chris Harper

    a number of commenters scoffed with disbelief

    History repeats and people of little historical knowledge don’t see this.

    About 25 years ago at a nice leftish middle class London dinner party I remarked that South Korea was becoming a major industrial force. I received polite but incredulous response. South Korea? I must be kidding.

    I then mentioned some company names which it turned out none of them had heard of. Samsung, Hyundai and Lucky Goldstar (now LG)

    Another example of unknown unknowns.

  • Jacob

    Korea GDP/capita = $20,590 (34th)
    India = 3,700 (117th)

    I hope and wish that one day India reaches SKorean level of developement.

    I’m not “scoffing”. I’m just trying to point at the facts. Your powers of prophecy about the rosy distant future are admirable, I won’t try to compete.
    As I said, I’m just mentioning some current facts.

  • The disbelief shows a complete misunderstanding of how economics works.

    Yes lots of things are wrong in India, but there was more wrong yesterday. Hence the economy is growing.

  • Chris Harper

    Jacob,

    Fifty years ago South Korea’s per capita GDP was less than the sub Saharan African average and about half that of North Korea, the North being where the industry was.

    India is growing by 9% per annum. Has been for over ten years and shows no sign of slowing. Current per capita GDP = 3700US? Ok, for the next ten years – (3700 * (1.09)^10). You do the maths. Exactly the same maths worked on the UK (18th C), US, Japan, Hong Kong, Singapore, Taiwan, Sth Korea, China, and now India.

  • Nick M

    Well obviously, India is doing well. They’re dismantling the Nehru / Gandhi socio-economic control system and have a low-cost relatively highly educated workforce. It doesn’t take an economic genius to put 2 and 2 together on that one.

    The really big question is… Will other third world nations follow India’s lead?

    Or will they follow the pied piper of Venezuela down the road to African basket-case oblivion. I note that the president of Gambia has recently cured AIDS. It’s a three day course of herbs apparently. Amazing that one eluded the finest medical minds of five continents for a quarter of a century.

  • Sandy P

    I read a few weeks ago that meat eating is on the rise in India.

    People can afford it.

    Welcome to the Indian version of “keeping up w/the Jones.”

    They’ve taken their rightful place in the Anglosphere, any wonder they’re becoming more prosperous????

  • Ah, the glories of Samizdata.

    Four posts in a row: the US and Libya, Cuba, Canada and India.

    Sometimes the breadth of the collective knowledge of Samizdatistas amazes me. This is one of those times.

    Dr. Syn

  • Jacob

    Chris,

    Ok, for the next ten years – (3700 * (1.09)^10). You do the maths.

    Ok, for the next 50 years – (3700 * (1.09)^50). You do the maths…

    It does not work this way. When you start at a low level you grow fast, the more you grow, the more difficult is to keep up the same rate…
    And there might be some bumps on the road – like another Nehru, some global slowdown, or some bruising inner conflicts….

    You are entitled to your rosy view of the future, but for the present India is a poor and problematic country, although it seems on the right road.

    …have a low-cost relatively highly educated workforce.

    It is a thin layer among it’s huge populace.

  • Johnathan Pearce

    Now you embrace the old canard that colonialism is to blame for all third world woes.

    Where did I say it was to blame for “all” third world woes, Jacob? Be careful about putting words in my mouth. Debate straw men if you want but it is a waste of my time and this blog’s bandwidth.

    The people that ran post-imperial India were heavily influenced by socialist, Fabian thinking. The late, great, free marketeer and economist, Peter Bauer, wrote a great deal about how Nehru implemented ideas derived from the Fabians. For years, India had a chronically heavy licensing regime, a heavy bureacracy, etc. Go read some economic history.

  • The people that ran post-imperial India were heavily influenced by socialist, Fabian thinking.

    True, the Fabians were one of the earliest promoters of socialism , but Nehru was inspired by the USSR, not the old fabians, neither the new ones in the British foreign service. Nehru had close ties to the USSR.

    For years, India had a chronically heavy licensing regime, a heavy bureacracy, etc.

    I didn’t cast a doubt on this fact, just on your claim that it was inspired by the influence of British colonial rule.

  • Johnathan Pearce

    Nehru was inspired by the USSR, not the old fabians, neither the new ones in the British foreign service. Nehru had close ties to the USSR.

    Wrong. Nehru may indeed have inspired by the nonsense of Stalin’s five-year plans, but take a look at this article(
    )
    for instance, which points to the Fabian link.

    No. The impact of British socialist thinking on India was a significant one. Not the only influence, but a big one. many of the future leading bureaucrats of India were educated at the London School of Economics, read people like GDH Cole, Tawney, Wells, Shaw, yadda-yadda.

  • Ham

    I was dismayed to realise ‘third world’ India has a more useful character heading the treasury than does the UK.

  • nic

    They even have a free market think tank that looks as slick as the US’s Cato Institute http://www.ccsindia.org/

  • Chris Harper

    Jacob,

    For as long as Indian productivity per head is significantly less than that of the more developed countries there is no reason that this level of growth can’t continue. Once their level of productivity reaches the limits available under then current technology growth will fall to the same long term trend as displayed by other developed countries pursuing sensible policies. This won’t happen within the ten years I gave, but it will happen within the fifty you give.

    I find the extrapolations believable because these growths from poverty into development have happened in the past, and within my lifetime. I have watched South Korea, Hong Kong, Ireland and Taiwan get rich. I am watching it happen in Malaysia, Thailand and China now. I am also watching it in India and Indonesia.

    What is the basis for what seems to be your belief that India won’t achieve what so much of the rest of the world has demonstrated is possible? What makes India so unique?

  • What is the basis for what seems to be your belief that India won’t achieve what so much of the rest of the world has demonstrated is possible? What makes India so unique?

    Size. Sheer size makes India unique. Also the diversity of it population – many sects, cults, religions…. many inner conflicts…
    It will grow, it might become prosperous to some degree, but this is in the distant future, and many troubles can intervene. You have to be cautious in your predictions.

  • tranio

    The success of India means that you should all be investing in base metals, copper, zinc, nickel, lead. Developing middle classes will mean great demand for plumbing, electricity, all the infrastructure. Fortunes have been made because of China’s growth now I ndia will be a big driver.