Spence on China and India

February 26, 2012

My colleague Mike Spence’s recent book  touches on a number of big-picture issues.  One is  the growth of emerging market economies:   they’re now more than half the world economy.  Another is the impact on developed economies, including the shift of low-skilled manufacturing activities to emerging markets.  It’s a good read.   Or you could watch Mike on Charlie Rose and at NYU Stern talking about related issues.

But what got my attention was this mention of China and India from a review by Daniel Gross in the Wash Post:

Spence argues that China faces significant hurdles in powering through its awkward adolescence. Countries that have thrived as low-cost labor hubs lose out to poorer countries as they grow richer. In time, China (and India) will inevitably see their impressive growth rates slow. “Advanced countries do not grow at 6-10 percent a year.” From here on out, Spence writes, China’s growth will depend on major political and social decisions. And he’s skeptical as to whether Beijing can engineer a smooth transition from manufacturing to services. He is more optimistic about India’s prospects, despite that nation’s deficiencies in infrastructure, education and planning.

It’s a topic that comes up all the time in class.  China looks the better bet right now to me, but could India’s institutions give it  a long-term advantage?  Hard to say, really, but it’s an interesting thought.  Anyone placing odds?

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