Why Are China and India Growing So Fast? State Investment

[FairAndUnbiased]

That's because they already belong to the middle-income, not lower income.

And there are many other factors to economic growth, such as political system, culture, education, demography. I wouldn't say Malaysia already peaked; they are still growing at 4-6% annually which is not bad for a country with a GDP per capita of $26,000.

The state-led investment isn't a superior model just because India is growing faster than Germany. It's an established fact that it's easier to grow from a lower starting point. Are you really arguing against this?

India doesn't have state led investment and is growing faster than Germany anyways. The country that started state led infrastructure investment was the US with the interstate highway system. Malaysia does not have a GDP per capita of 26000. That is its PPP GDP per capita which is a meaningless number for countries without significant industrial bases, since they have to import products at nominal prices. Malaysia has peaked at 9000 dollars and has stayed in the 7000-9000 range for over a decade.

What about in the 60's and 70's when the accepted model was that non-European countries would be forever poorer? You say that "it is easier to grow from a lower starting point" but that hasn't been economic consensus forever. It has only been economic consensus after the Asian Tigers demonstrated it, but it wasn't always obvious why that would be.

Also, the point is, "putting farmers into offices" is meaningless. If it was so easy, everyone would've done it. The hard part is figuring out where those offices come from, who owns those offices and can the farmers actually do work in those offices. If it was so easy, Thailand would be Switzerland by now. Here's the funny part: in China, very few office workers or factory workers are previously farmers. They may be the children of farmers, but they never did a single day of farm work. The whole "farmers to workers" paradigm doesn't even exist within 1 generation.

 

[Mista]

India doesn't have state led investment and is growing faster than Germany anyways. The country that started state led infrastructure investment was the US with the interstate highway system. Malaysia does not have a GDP per capita of 26000. That is its PPP GDP per capita which is a meaningless number for countries without significant industrial bases, since they have to import products at nominal prices. Malaysia has peaked at 9000 dollars and has stayed in the 7000-9000 range for over a decade.

What about in the 60's and 70's when the accepted model was that non-European countries would be forever poorer? You say that "it is easier to grow from a lower starting point" but that hasn't been economic consensus forever. It has only been economic consensus after the Asian Tigers demonstrated it, but it wasn't always obvious why that would be.

Also, the point is, "putting farmers into offices" is meaningless. If it was so easy, everyone would've done it. The hard part is figuring out where those offices come from, who owns those offices and can the farmers actually do work in those offices. If it was so easy, Thailand would be Switzerland by now. Here's the funny part: in China, very few office workers or factory workers are previously farmers. They may be the children of farmers, but they never did a single day of farm work. The whole "farmers to workers" paradigm doesn't even exist within 1 generation.

Economists calculate GDP growth rate using PPP GDP, not nominal GDP which is subjected to currency fluctuations. Growing 4-6% annually isn't called stagnating.

Japan demonstrated it. Asian Tigers demonstrated it. Developing countries which encourage foreign investment demonstrated it. It's obvious why developing countries have higher growth rate than developed countries.

You assumed that I meant the same workers converted from farmers to factory workers to office workers. I didn't. Attracting foreign investment and importing existing technology to improve productivity is far easier than innovating to improve productivity. You're saying it's difficult to convert a farmer to worker. Yes it is, but it is still easier to achieve that productivity growth than developed countries for the same productivity gains which they had already achieved with existing technologies.