Sunday, August 12, 2012



Why did India perform well in 1 CE? -- Bibek Debroy

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1. India was prevented by colonial regime from gaining access to the industrial revolution of 1700.
2. India's wealth was looted by colonial regime and earlier by mediaeval barbaric regimes
3. India has the potential to get back its top position because it is endowed with rich alluvial soil, water resources of Himalayan glaciers and regular monsoons and a young workforce.

Source: The Economist, Nov. 19, 2009, Aug. 16, 2010 Data compiled by Angus Maddison, an economist who died earlier this year, suggest that China and India were the biggest economies in the world for almost all of the past 2000 years. Why they fell so far behind may be more of a mystery than why they are currently flourishing.

We had more economic freedom then
Bibek Debroy
Saturday August 11, 2012, 01:00 PM

Angus Maddison (1926-2010) accomplished the impossible. He dragged estimates for population, GDP, GDP and per capita GDP back to 1 CE.

Through him and his co-workers at University of Groningen, we have a historical series. For India, we have population fi gures of 75 million in 1 CE*, 75 million in 1000 CE, 110 million in 1500 CE, 135 million in 1600 CE, 165 million in 1700 CE and 209 million in 1820 CE.

Until the 19th century, India’s population was more than China’s. In 1990 US dollars, India had a GDP of 33.75 billion in 1 and 1000 CE, 60.5 billion in 1500 CE, 74.25 billion in 1600 CE, 90.75 billion in 1700 CE and 111.417 billion in 1820 CE. Again, this was more than China’s.

Cross-country comparisons become easier with per capita GDP. Instead of a long time-line, let’s take 1 CE and 1700 CE. In 1 CE, the fi gures were 576 US dollars for Western Europe, 400 for Australia-Canada-New Zealand-USA, 450 for China-India, 400 for Japan and 467 for the world.

In relative terms, India was not as poor, but was still a little below world average. In 1700 CE, those numbers changed to 993 for Western Europe, 476 as average for Australia-Canada-New Zealand-USA, 550 for India, 600 for China, 570 for Japan and 615 for the world.

India was still below world average and was falling behind Western Europe. When one sees a fantastic historical number for India, there are two questions to ask. What year? 1 CE will look better than 1700 ACE. What indicator?

Because of high population, India’s share in world GDP is more respectable than per capita GDP. For instance, in 1 CE, India’s share in world GDP was 33%, China’s 26% and Roman Empire’s 21%.

Why did India perform well in 1 CE? The answer requires a treatise, but the ingredients are simple -- urbanisation, agricultural productivity increases, export and imports (especially with Roman Empire), monetisation and single currency, capital accumulation and investments (in today’s jargon), literacy and spread of education, development of crafts and guilds (guilds set product standards, prices, wages, provided skills to craftsmen), decentralised governance, reduced State-intervention (with State providing political unity and security), decline in taxes and effi cient public works (roads, waterways, canals, rest-houses, hospitals).

This was true of Maurya and early Gupta periods.

If Fraser Institute or Heritage Foundation were to construct a historical economic freedom time-line, they would fi nd that in 1 CE India was economically freer than in, say, 1820 CE. Arthashastra’s State-intervention was limited.

In today’s jargon, it is possible to interpret the investment rate (public investments) then as 17%. An incremental capital-output ratio (ICOR#) of 4 meant GDP growth of 4.25%, close to the so-called Hindu rate of growth.

After the external shock of collapse of Roman Empire and foreign trade, subsequent declines were because of increased State intervention, clamping down on diffusion of education, knowledge and innovation, increased centralisation and switch in public expenditure from investment to consumption. Core templates of development don’t change.

There is a lot of excitement (somewhat muted since 2009) about India’s economic future potential and references to its glorious past, 1 CE or 1700 CE.

In the Asian century, China and India will indeed be the engines of growth and their shares in world GDP will increase. It has often been said that India’s economy has a glorious past and a glorious future. It is the present alone that is bleak.

To remove the bleakness and ensure that past-present-future seamlessly become glorious, one should not remove that 1 CE template. There are lessons there and one doesn’t need the much-maligned Washington Consensus@ to fi gure them out.

An awesome decade of growth - and fallacy

By John Ross
August 3, 2012

China is rapidly approaching its once-in-a-decade change in president and government, which seems an appropriate time to survey the country's economic performance over the last decade. As the economic data for 2012 is not yet in, the decade will be taken as 2001-2011. Strictly speaking, this period includes a year of China's previous administration; but this is merely a statistical quibble as nine-tenths of the period was overseen by the present government.

A cargo ship is loaded at a container berth in Huanghua Port of Cangzhou, Hebei Province [Yang Shiyao]

Some statistics over that ten year period are well known: China became the world's second largest economy and the world's largest goods exporter. But such statistics greatly underestimate the scale of China's economic achievement. The last 10 years in China's economy may be summed up in two overwhelming facts which place all other economic data in context.

• In the last decade China experienced the fastest growth in GDP per capita of any major economy in human history.

• Translated into living standards, this means that in the last 10 years, China has experienced by far the fastest consumption growth rate of any major economy.

As these are astonishing achievements it is worth giving the exact data.

China's annual average GDP per capita growth in the last ten year period was 9.9 percent. The total increase in GDP per capita over the decade was 158 percent. Historically, as shown in World Bank data, and for earlier periods in Angus Maddison's standard work World Population, GDP and GDP Per Capita 1-2006AD, this makes China's the fastest rate of increase ever recorded by a major economy. This figure is all the more extraordinary when one considers that it includes the period since 2008, which has seen the most serious international economic crisis for 80 years.

In terms of contemporary economic comparisons, no other major economy remotely approaches China's scale of economic growth during this 10 year period. The data for the largest G7 economies, the BRICS countries and South Korea, are set out in Table 1. China's 158 percent increase in GDP per capita over the period is almost twice that of the next best performing major economy - India. In addition, China's growth was two-and-a-half times Russia's, more than three times South Korea's, seven times Germany's and twenty times U.S.'s.

As a foundationless myth is peddled in some sections of the media that China's economic growth has not been translated into an increase in its population's consumption, it is also worth giving data for this. As all countries' statistics for 2011 are not yet available, the period 2000-2010 will be taken. The total increase in China's consumption per capita in that period was 103 percent - again the highest recorded by any major economy. The data is set out in Table 2. Only Russia's increase in consumption compares to China's - and Russia's was, in significant part, due to its recovery from a long period of depression. China's total rate of increase in consumption was 57% higher than India's, three times South Korea's, almost 10 times that of the U.S., and almost sixteen times that of Germany. In short, far from being slow, China's consumption growth rate was far more rapid than that of any other major economy.

This achievement also casts light on another issue -denial of elementary economic facts by those who regularly predicted that China's economy would fail during this period. It would take too much space to make a comprehensive list, so here are some highlights.

• Fallacy: The Economist magazine's special supplement, 'Out of puff', published in June 2002, claimed: "in the coming decade, therefore, China seems set to become more unstable. It will face growing unrest as unemployment mounts."' It argued: '"the [Chinese] economy still relies primarily on domestic engines of growth, which are sputtering. Growth over the last five years has relied heavily on massive government spending. As a result, the government's debt is rising fast. Coupled with the banks bad loans and the state's huge pension liabilities, this is a financial crisis in the making."

• Reality: Instead of 'crisis,' China experienced the most rapid growth ever in GDP per capita of any major economy.

• Fallacy: Gordon Chang predicted in The Coming Collapse of China in 2002 that: "A half-decade ago the leaders of the People's Republic of China had real choices. Today they do not. They have no exit. They have run out of time."

• Reality: Instead of 'collapse' China experienced unprecedentedly rapid economic growth.

• Fallacy: When the international financial crisis erupted, Michael Pettis of Beijing University in 2009 reiterated: "I continue to stand by my comment [made] last year... that the US would be the first major economy out of the crisis and China one of the last."

• Reality: In fact, in the four years since the international financial crisis began, China's economy has grown by 40 percent and the U.S. economy by 1 percent.

Such statements, and many more could be given, are not errors of predictions on details, which are inevitable; they are examples of analyses which simply got it wrong in predicting the entire trajectory of China's economy. To predict 'sputtering', 'crisis' or 'collapse' when China experienced the most rapid per capita economic growth of any major country in human history would, if rational standards of debate were used, lead to the discounting of future prognostications based on these analyses. It is a measure of unscientific bias that Gordon Chang continues to be retained as a 'China expert' by Forbes and that Michael Pettis is still printed in the Financial Times predicting three percent growth in China. Given their prolonged failure to withstand the test of facts, such views may be discounted.

Do China's quite extraordinary economic achievements mean that it is free from any problems? Evidently not, but it simply means that they must be placed in context. No other major country in human history has ever experienced such rapid per capita economic growth as China in the last ten years, and no other major economy has witnessed such a rapid growth in the population's consumption in the last decade. These are truly awesome economic facts. Anyone who believes in rational fact based economic discussion has to register not only the scale of such an extraordinary achievement but also how completely it refuted the analyses of those predicting any deep crisis in China's economy.

The author is a columnist with For more information please visit:

Will Durant, The Case for India(1931)

The Case for India – Will Durant

The Case for India – A Primer

An excerpt from the Book “The Case for India”. Reading the book one would think it was written by an Hardcore Hindu Fundamentalist. The rage that is swelling in the heart of the Author is so apparent, one could almost touch it. The Author had seen it all; after all he was the man who wrote the monumental ten volume tome “The Story of Civilization”. Will Durant in his own words,

“I went to India to help myself visualize a people whose cultural History I had been studying for The Story of Civilization. I did not expect to be attracted by the Hindus, or that I would be swept into a passionate interest in Indian politics. I merely hoped to add a little to my material, to look with my own eyes upon certain works of art, and then to return to my historical studies, forgetting this contemporary world.

But I saw such things in India as made me feel that study and writing were frivolous things in the presence of a people – one-fifth of the human race – suffering poverty and oppression bitterer than any to be found elsewhere on the earth. I was horrified. I had not thought it possible that any government could allow its subjects to sink to such misery.

I came away resolved to study living India as well as the India with the brilliant past; to learn more of this unique Revolution that fought with suffering accepted but never returned; to read the Gandhi of today as well as the Buddha of long ago. And the more I read the more I was filled with astonishment and indignation at the apparently conscious and deliberate bleeding of India by England throughout a hundred and fifty years. I began to feel that I had come upon the greatest crime in all history.”

If he had written those words today, he would have been branded a Hindutvavadi. And today not even many Indians feel the way that this Great Author felt about India. Some excerpts from his book:

“….They taxed the provinces under the Company so exorbitantly that two-thirds of the population fled; defaulters were confined in cages, and exposed to the burning sun; fathers sold their children to meet the rising rates. It was usual to demand 50% of the net produce of the land. “Every effort, lawful and unlawful,” says a Bombay Administration report, written by Englishmen, “was made to get the utmost out of the wretched peasantry, who were subjected to torture, in some instances cruel and revolting beyond all description, if they would not or could not yield what was demanded.” ……. “Everybody and everything” says the Oxford History of India, “was on sale.” And Macaulay writes:

During the five years which followed the departure of Clive from Bengal, the misgovernment of the English was carried to such a point as seemed incompatible with the existence of society…… The servants of the Company……forced the natives to buy dear and sell cheap…..Enormous fortunes were thus rapidly accumulated at Calcutta, while thirty millions of human beings reduced to the extremity of wretchedness. They had been accustomed to live under tyranny, but never under tyranny like this. ….. Under their old masters they had at least one resource: when the evil became insupportable, the people rose and pulled down the government. But the English Government was not to be shaken off. That Government, oppressive as the most oppressive form of barbarian despotism, was strong with all the strength of civilization.”

He goes on to say:

“….When at last in 1857 the exhausted Hindus resisted, they were suppressed with “medieval ferocity”; a favorite way of dealing with captured rebels was to blow them to bits from the mouths of canon. “We took”, said the London Spectator “at least 100,000 Indians lives in the mutiny. This is what the English call the Sepoy Mutiny, and what the Hindus call the War of Independence. There is much in a name.”

He must know. After all he dealt only with words.

“Let Englishmen describe the result. A report to the House of Commons by one of its investigating committees in 1804 stated: “It must give pain to an Englishman to think that since the accession of the Company the condition of the people of India has been worse than before.” In 1826 the English Bishop Heber wrote: “The peasantry in the Company’s provinces are, on the whole, worse off, poorer, and more dispirited, than the subjects of the Native Princes…… I met with very few men who will not, in confidence, own their belief that the people are overtaxed, and that the country is in a gradual state of impoverishment”. James Mill, historian of India wrote, “Under their dependence upon the British Government …… the people of Oudh and Karnatic, two of the noblest provinces of India, were by misgovernment, plunged into a state of wretchedness with which …….hardly any part of the earth has anything to compare with.” “I conscientiously believe,” said Lt. Col Briggs in 1830, “that under no Government whatever, Hindu or Mohammedan, professing to be actuated by law, was any system so suppressive of the prosperity of the people at large as that which has marked our administration.”

The Case for India – Social Destruction

The Case for India – II

Social Destruction

An excerpt from the Rebuttal by Eminent Historians of Hindu Fundamentalist, Shri Murli Manohar Joshi’s “Preamble to the Manifesto” of BJP. While one is skeptical of claims by Political Parties, the Hindu culture ingrained in us takes the “Guru” at face value. But we are taught new lessons every day. The lesson that this episode teaches us is take nothing at face value. When you read your News paper be armed with as much tools that you can lay your hands on – encyclopedias, reference books and what not. For every one has his turf to protect. The politician his vote bank and the eminent historians ?

Shri Muli Manohar Joshi

It has been established beyond doubt by the several reports on education at the end of the 18th Century and the writings of Indian scholars that not only did India have a functioning indigenous educational system but that it actually compared more than favourably with the system obtaining in England at the time in respect of the number of schools and colleges proportionate to the population, the number of students in schools and colleges, the diligence as well as the intelligence of the students, the quality of the teachers and the financial support provided from private and public sources.

Contrary to the then prevailing opinion, those attending school and college included an impressive percentage of lower caste students, Muslims and girls.

Eminent Historians

There were no schools or colleges as we know them today in ancient India. Upper caste children were educated in mathas, agraharas and sometimes monasteries. Children following a profession were apprentices in that profession. Lower castes and women were not educated generally. In Sanskrit plays they are the ones who speak the vernacular language Prakrit whilst the upper caste, educated persons speak Sanskrit.

I would have looked into Shri Dharampal’s “The Beautiful Tree-Indigenous Indian Education” to find the truth on the above controversy. But we have demeaned our quality of discussion so much that Scholars are first categorized into Hindu Fundamentalist or Marxist Secular even before the lay public like us get to read what they write. The only choice is to look at what an independent source untouched, unlabelled Scholar Will Durant says.

“When the British came there was, throughout India, a system of communal (My note: Communal here means “common” and not “Religious” as we seem to have corrupted the word) schools managed by the village communities. The agents of the East India Company destroyed these village communities, and took no step to replace the schools; even to-day, after a century of effort to restore them, they stand at only 66% of their number a hundred years ago. There are now in India 730,000 villages, and only 162,015 primary schools. Only 7% of the boys and 1 ½ % of the girls receive schooling; i.e., 4% of the whole. Such schools as the Government has established are not free, but exact a tuition fee which, though small to a western purse, looms large to a family always hovering on the edge of starvation……

In 1911 a Hindu representative, Gokhale, introduced a bill for universal compulsory primary education in India; it was defeated by the British and Government-appointed members. In 1916 Patel introduced a similar bill, which was defeated by the British and Government-appointed members; the Government could not afford to give the people schools. Instead, it spent most of its eight cents for education on secondary schools and universities…..

Hence the 93% illiteracy of India. In several provinces literacy was more widespread before the British took possession than it is now after a century and a half of British control; in several of the states ruled by native princes it is higher than in British India. “The responsibility of the British for India’s illiteracy seems to be beyond question”

An Aside:- Going by Will Durant’s words the British not only destroyed the Education system but also encouraged drink. “When the British came, India was a sober nation. “The temperance of the people,” said Warren Hastings, “is demonstrated in the simplicity of their food and their total abstinence from spirituous liquors and other substances of intoxication……Miss Mayo tells us that Hindu mothers feed opium to their children; and she concludes that India is not fit for Home rule…….She does not tell us that the opium is grown only by the Government, and is sold exclusively by the Government…..that the Central Legislature in 1921 passed a bill prohibiting the growth or sale of opium in India, and that the Government refused to act upon it;……..She does not tell us that Burma excluded opium by law until the British came, and is now overrun with it; that the British distributed it free in Burma to create a demand for it; that whereas the traffic has been stopped in the Philippines, England has refused, at one World Opium Conference after another, to abandon it in India;…. She does not tell us that the health, courage and character of the Hindu people have been undermined through this ruthless drugging of a nation by men pretending to be Christians.”

The eminent historians obviously have an agenda and so does Murli Manohar Joshi. But the Eminent Historians cannot fight an inconvenient truth with well-intentioned lies.

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