We've talked about what causes countries to develop and what development means. In general, although there are lots of different factors, we'll look at some of them in a moment, a lot of different factors that contribute to development, they all correlate very highly with GDP per capita. All right. So, how do you get your GDP per capita to a high enough level to become a developed country. Well, obviously GDP has to grow, and it has to grow faster than population. So, countries that are developing are usually characterized by faster GDP growth rates than the developed countries. In these charts right here we can see what the growth paths of GDP, real GDP have been for India and China in the period since the late 1960s. The line that always appears at the top, very seldom dipping below the other line, belongs to China. China is a country that has had fabulously high growth rates for a very long period. It reminds us a bit of Japan that we looked at in an earlier session that sustained 20 years of growth around 10 percent. China has done the same thing, and you can see actually that China never dips in this chart after the late 60s. It never dips into recession. It's always growing more or less. The interesting thing is to see that that figure starts to slow down near the end of the chart. So, China is in what we might call a secular slowdown. It's a country that has grown very fast and it looks like that very fast growth period is coming to an end for reasons that we'll see. The other line that's usually below China is India, its real GDP growth rate and their high growth rates. But you can observe that there is a period when the average growth rate is much lower, which is the period going up to about 1991. This is when India had their balance of payments crisis, and they had to change their growth model. What happened was that they liberalized the economy, they removed a lot of the bureaucracy, they allowed more foreign investment, they opened themselves to trade and gradually, of course, this doesn't happen overnight, but gradually they became a different kind of country growing slightly in a different way and growth rates accelerated. Again, notice the end of this chart, we see that India has now moved above China in its rate of growth, and it stayed there for a couple of years. So, if this is going to be a trend, it's a very interesting and historic one. This chart just zooms in a little bit on the later part of that same picture. Again you can see after India's balance of payments crisis, you can see the modern Indian rates of growth. But still, even though India's growth accelerates in this period, it's consistently with very few exceptions lower than China's until the last couple of years. So, what about GDP per capita growth which is the bottom line for development? What about GDP per person? Now, this chart shows GDP divided by population, of course, if the population is growing faster than GDP, GDP per capita will decline. We observed that in both countries GDP per capita actually rises every year, but the growth is much faster in China. Now, we'll be talking about their demography a little bit later, but part of the reason that China has had much higher GDP per capita growth, part of it is they're higher overall GDP growth, but the other part is that they limited population growth with the one child policy whereas India has continued to have strong population growth which means GDP per capita is growing at a slower rate than China's. Again, notice that at the end of the period, these two rates converge. Now, as we've said, of course, development is not just GDP per capita, it's not just in income money. It should translate itself into other things. Some of the things that we should start to see in a developed country are better educational outcomes, better health outcomes, better infrastructure etc. So, this graph attempts to show the difference between India and China at one moment in time. What it's showing is on the different indicators; life expectancy at birth, child mortality rate, dependency ratio which is the old and the young divided by the working age population, literacy of adults and going on down, cars, the car ownership rate. We see on the left hand side where India is now. Then the distance between the two shows how many years have gone by since China was where India is now. So, what we're finding is that actually on many development indicators, China is way ahead of India. There's a big gap between where they stand on these different indicators, and it kind of gives us a sense of how many years India would have to grow in a similar way to China in order to catch it on development metrics. Of course, the bottom line for deciding the level of development for a country is usually GDP per capita. So, here on this chart you can see the difference in GDP per capita between China and India, and also the difference between them and the other countries that we've looked at in this course. Still their GDP per capita is much lower than the developed countries we've looked at, because their populations are so big that the denominator in our equation which is population, brings down the total number. It's also very clear that as the previous slide showed, India is behind China in the process of development with a much lower GDP per capita. Then finally as we think about well-being and prosperity, and it's something that we reviewed in every country we've looked at so far, we might want to think about equality. How equally are incomes distributed. Now, you know that we use the Gini Coefficient to measure this, which is a metric that goes from zero to one, actually on this slide 0-100, 100 means one person has everything, zero would mean everybody has exactly the same amount. So, higher numbers indicate greater inequality. You may find it surprising to see that China is the most unequal country in the group of countries that we've looked at so far. Now, this seems a bit contradictory in light of the fact that China is still nominally a communist country, which we would tend to associate with more equality in resources and income. But anyway, China is the most unequal country in the group. The United States is the next most unequal and then we go through, we go to Spain and India which are about the same. So, actually the equality of incomes is similar in India to what it is in the United States and some other European countries. Where China is an outlier in inequality. And these figures have gotten worse in recent years.
