Why do we study economics? Because of the suffering of people left behind in poverty.

Many countries around the world have seen their economies grow and enjoy the improved nutrition, health care, comfort, and consumer goods that go along with growth. Other countries, locations, and people groups have been left behind.

Why should we care about growth?

Consider a billion people struggling in India while a billion people in China have a per capita GDP today that is equal to what we had in the U.S. back in 1972.

(Cross-post from my other blog, Nonprofit Update. The question I’ll ask here: Is it moral that the policies that let a billion people move out of grinding poverty in one place were not applied to lift up a billion of their next-door neighbors?)

The Economist explained the issue this way on 5/24:

The increase in (China’s) average annual GDP per head from around $300 to $6,750 over the period (of the last 30 years) has not just brought previously unimagined prosperity to hundreds of millions of people, but has also remade the world economy and geopolitics.

That’s great. I am sincerely happy for the people of China. The next sentence asks us to consider a billion people who got left behind:

India’s GDP per head was the same as China’s three decades ago. It is now less than a quarter of the size. … India’s economy has never achieved the momentum that has dragged much of East Asia out of poverty.

So what, I hear some say.

Consider the human cost:

The human cost, in terms of frustrated, underemployed, ill-educated, unhealthy, hungry people, has been immense.

That makes me sad.

Something happened in China over the last 30 years that didn’t happen in India. The human suffering from that lack of economic progress is too high.

And unnecessary.

Why did India get left behind? Some pieces of the answer are covered in the article:

Government is at the heart of India’s failure. …

That is partly because India is an extraordinarily hard place to govern. Much power is devolved to the states; the fissiparous nature of its polity means that deals have constantly to be done with a vast array of regional and caste-based parties; and a colonial and socialist past has bequeathed India a bureaucracy whose direction is hard to change.

Government. Polices. Internal structure. Historical patterns.

That last part jumped out and knocked me out of my chair. Look again:

… and a colonial and socialist past has bequeathed India a bureaucracy whose direction is hard to change.

Government. Historical patterns. Going back to the British colonial era.

That in a nutshell is one of the main points in all the economics books I’ve been reading lately.

Why should we look at economics and development?

To reduce human suffering.

If we can figure out how some places produce lots of growth and improve the health, wealth, comfort, and overall well-being of the population, maybe we could facilitate the political, economic, social, and legal environment to do the same in places where growth hasn’t happened.

The relative poverty of one group of a billion people compared to relative prosperity of a billion of their neighbors ought to focus our thinking. What is it that made things so much better in one of the countries?

Some stats to make my point

Here are some stats I pulled with a variety of Google searches.

GDP per capita in dollars for China and India, with the India amount then calculated as a percent of China’s. Notice India started ahead and is now at under one-fourth the GDP of China.

1980 1995 2012
china 193 604 6,091
India 271 479 1,489
India/China 140% 79% 24%

 

Growth from ’80 to ’95, from ’95 to ’12, and for the 32 years from ’80 to ‘12:

growth to ’95 to ’12 32 yr
china 213% 908% 3056%
india 77% 211%   449%

 

Population in millions:

1980 1995 2012
China        981      1,205      1,351
India        699         956      1,237

A billion people left behind. Why?

How is that considered moral?

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