In the year 1700, India and China had living standards at least equal to Western Europe. The Indian collapse began with the advent of colonialism in 1757. In 1947, India’s per capita income was around a sixth of what it was in 1757. China’s collapse began with the Opium War of 1840 in which the British forced the Chinese government to accept the import of opium for Chinese addicts. Meanwhile, Europe and America enjoyed per capita income growth of 1-2 percent per annum. By 1850, Western and Asian living standards had diverged by margins that established the qualitative stratification of the world economy we have seen since. Japan, which had not been the target of imperialism, was able to catch up. Its colonies in Korea and Taiwan saw economic development in the first half of the 20th century, and got a second wind after their independence.
The first decades of the new Asian states saw little change in the world economic order. This stagnation is often attributed to foolish economic policies of Asian governments, but that’s only half true. The British had exploited India by taking land out of food production and using it for cash crops for their own industries, turning India into a land of famines. The government of newly free India reversed that process. The new state experienced a decline in exports but a rise of life expectancy. A series of such adjustments were needed. It is unlikely that most Indians would have benefited from economic liberalization before 1975.
Both India and China have built comparative advantages in the world economy that can take them far. The Chinese manufacturing and Indian information services sectors have won enough access to the core of the world economy that they will receive early notice of changes in demand and be able to adjust their production accordingly. They have rejoined the process of technological innovation. In both countries, the political system has channeled growth in certain directions and not others.
In India, a small information services sector has inherited a capitalist regulatory order and has made the most of it. The good news is that its boom is now calling forth a boom in construction, which is the second largest source of employment in India after agriculture. More effective taxation is also fueling the construction boom through public investment in infrastructure. The bad news is that employment in manufacturing remains moribund because the tiny trade union movement and its political allies have conspired effectively to block labor law reform. The Indian masses have not served themselves well overall, despite democracy.
The new Indian political order has strengths also. The broadening of the political class has deepened the democratic order, despite the inevitable corruption of new political forces. The new political order is similar in social composition to that which prevailed before the spread of Muslim dynasties. Buddhist and other non-Brahminical forces were more powerful then. Now, the traditional ethics of tolerance and renunciation in India undergird the democratic mechanisms derived from the West.
In China, a strong overseas Chinese investor class and multinational corporations from developed countries have been the leading forces. The domestic capitalist class has developed comparatively slowly. Oddly, this suits the political monopoly of the Communist Party. Nonetheless, the Chinese masses have been served well overall.
After the capitalist reforms of Deng Xiaoping, Chinese people cutting across a variety of social divisions have embraced a national identity rooted in the Confucian past and expecting a restoration of China’s traditional glory. For the time being, the communists are widely seen as essential catalysts for this transformation despite mass awareness of their flaws. According to Western liberal theory, the combination of market-oriented development and dictatorship is not sustainable. In South Korea and Taiwan, the theory predicted accurately, and the transition to democracy was benign. China is too big to recapitulate their transition. Neither its entrenched Leninist order nor global relations would permit such a smooth ride. A Confucian theory and ideology of stable social hierarchy based on merit and not birth is more supportive of the present order. Time will tell which theory is better.
The continued rise of the two civilizational states and their neighbors would sweep away the distributions of power and wealth of the last quarter millennium. The Western response will shape the character of global politics. Raising political integration and risk-sharing among Western countries would be the most constructive. It would provide the greatest economic and military security for the West itself, while minimizing the need for external interventions. Western unity declined under Bush, but the contradictions of national social solidarity and continental integration in the European Union are creating an opening for a radical restructuring of the Western world. In 1700, India, China, and Europe were the three largest centers of wealth and civilization. They had been that way for two thousand years. There is a growing likelihood that after a brief aberration, the world is returning to that condition.
Sanjoy Banerjee teaches international relations at San Francisco State University. He writes about India, America, and the world.