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Why is India poor? What can be done to change this?

I am looking to go beyond the obvious reason which is quality of institutions (including corruption) and infrastructure. For a nation of 1.2 billion, even if the institutions aren't that good, it should be possible to fix things, right?

I think we can learn a lot from history and evolution of distribution of wealth in the world. Look at this chart: http://2.bp.blogspot.com/-V_zsRrVZd4w/T_B-rIF6v7I/AAAAAAAAGhE/JdlSo4iwtGU/s1600/Economic+history+of+world.png

This shows a shocking shift of wealth off India in only as much as past 300 years. Caste system and all have been here since ever, so there has to be a deeper reason. Also, as much as I agree with Technology being the reason, I don't really see it as the reason, unless we want to be developed EXACTLY in the way as the west is - there CAN be multiple other ways of being wealthy - and the tech way of using minimal human capital and mechanization while may be the best for the west where humans resources are scarce, it may not be the best way for our human-capital rich society - wonder how much we can do with sooo many hands! And still, we are just struggling to feed those mouths :(

So I guess the question is calling for a critical analysis of what has brought about the condition shown in this graph, where India houses the max poor in one country: http://3.bp.blogspot.com/-cXku0S7O-N0/UA1lK_DhtbI/AAAAAAAAAgE/0FduwIJQhZ4/s1600/regional-ineq.JPG

By the way, a disclaimer here is a must on my background so that you do not think this is coming from a very narrow mind - I am not casteist, am highly educated, and am IIT B.Tech. grad - so a big promoter of tech (tech I think is awesome for me and the likes who like it, but still don't see mechanization as the solution to human state).

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    Apr 8 2013: the chart is misleading, as it shows data in percentage of global wealth. if you look at absolute numbers, turns out that india never went back, the progress is continuous. the reason why india lost its lead in terms of world percentage is the fast progress of europe and USA in the centuries before 1900, and then in a decelerating pace up to now. this growth wasn't any faster than what india has today, in fact it was slower.

    economic growth requires time. it works through accumulation of capital. capital, in turn, accelerates the accumulation even further. there is no skipping of this. the path has to be walked. we can only control to some degree the speed of progress. if we hinder the economy with stupid regulations, war, instability, etc, we can slow down progress or even turn it into negative. but we can not artificially speed up the economy above its natural rate. if we can speed it up at all, maybe the best we can is to educate the people about the significance of economic freedom and property rights. if you look at the numbers, india performs very good at the moment. the growth is impressive. but it is questionable if the intention is good, or it is just happens out of luck. related talk is http://www.ted.com/talks/niall_ferguson_the_6_killer_apps_of_prosperity.html

    from the above, it is clear that wealth is mostly based on history. even if you adopt the best methods possible, you won't get rich next year. it just puts you on a trajectory that makes you rich in the future, 50 or 100 years later. on the contrary, if you do terribly, it is still possible that you are rich. 400 years of steady progress can be followed by a stupid neo-marxist neo-fasist neo-mercantilist neo-luddite neo-expansionist state control. it effectively shuts down progress, but will not eliminate all the wealth at once. people can enjoy the fruits of their ancestors' labor for a long time before the entire thing collapses. this is what is happening in the USA and the EU.
    • Apr 8 2013: I agree overall, it is probably just the capital game. I am not sure enough to deny the existence of another route, but this way, it makes sense.

      One small point -
      Regarding the graph, I don't think India didn't go back in absolute numbers. In fact I think, and that is the common belief in the country, that it did indeed go back in wealth even in absolute terms, during the colonial rule. Do you have data supporting your claim (made in the first line, where you say that the chart is misleading)?
    • Apr 8 2013: Oh interesting - maybe you are both right and wrong! Hear this: India did not go back in absolute terms, but the 'term' changed. Ofcourse, it was all trade, the colonialization. BUT, food got replaced with metallic arms, which were 'valued' more highly, and disparity/ concentration of wealth increased. That pushed the 'country' into poverty.

      Is that correct? What do you think, Krisztian? I think it is a nice conclusion.
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        Apr 8 2013: the data we have is quite weak. it is apparent that life expectancy for example went down in the colonial era, but not by much.

        hans rosling's famous gapminder shows this from 1800 to 1900: www.bit.ly/ZJlCNj

        the change seems very slow and not very significant. if you run the program forward, you can see that real progress started after 1950, which coincides the end of british oppression, but another milestone was around 1980, when india abandoned socialist views in favor of more economic liberalism.

        so my conclusion is that colonialism prevented progress, but did not cause negative growth. it is all economical though, the cultural changes can not be measured bu gdp.

        ps: keep in mind that preventing progress is the exact same crime as theft. do not interpret my words as i think colonialism did not hurt. it did. but the harm did not manifest itself in shrinking economy.
        • Apr 8 2013: well observed - 90's and 2k's have been good years

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