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Nigel Harris

Economic growth in India and China

(July 1973)

From International Socialism (1st series), No. 60, July 1973, pp. 12–16.
Transcribed by Marven James Scott, with thanks to Paul Blackledge.
Marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

In Asia today, the case for state capitalism depends upon China putting up an economic performance that is dramatically superior to that of other countries. Very often it seems that the gap is so great, the case is hardly worth arguing. Anything that questions China’s excellent economic record must be CIA propaganda.

Economic growth does not, of course, necessarily mean economic development. Output can grow at the same time as most people remain unaffected – remain, for example, employed in agriculture. Again, output can grow while conditions for the majority even get worse.

For anyone familiar with Calcutta who visits Canton or Shanghai, the contrast is very sharp – on the one hand, the appalling conditions of a very large proportion of people and the ostentatious luxury of a minority; on the other, austerity but apparently an adequate diet and considerable equality.

For many people that is enough. For many liberals sympathetic to China, it is enough that China appears a fairer society than India (although they would not accept that, on similar criteria, British capitalism is ‘fairer’ than either). But for a poor man in India this consideration is – in the absence of any other alternative – decisive.

Unfortunately, it is not enough. We need to know how secure is China’s achievement – can it continue to raise the condition of its people, industrialise and defend its borders?

In the 1960s, the backward countries increased defence spending by 114 per cent; Asia by 84 per cent; China by 161 per cent. The appalling burden of defence on an economy as poor as China’s is the requirement of survival in an imperialist dominated world. If defence is crippling the industrialisation of other backward countries, why will it not do so in China? It is not enough just to stand still.

The original claim of Stalinist state capitalism was not merely to a fairer distribution system, but to world power – the ‘proletarian base’ would grow to engulf capitalism itself, not just create a more decent regime at home.

This means that, among other things, the gap between China and the industrialised countries must be closing to the point where the People’s Republic can unequivocally show that its system is the only way forward for the peoples of the world.

If we leave aside all other aspects of present-day China, however, what has been the record in terms of economic growth? How does it measure against the performance of the only country that comes anywhere near it in size, India? Unfortunately, the statistics are far from reliable. India’s economy is known in some detail and with some accuracy. China’s cannot be.

No continuous series of statistics on the national economy or particular sectors have been published by Peking since 1959. The population figures date from the census of 1953 (since when there have been two complete censuses in India, 1961 and 1971), which was itself not very reliable. This means that nobody really knows the size of China’s population (the possible range is enormous), and therefore, how far – say – grain output is capable of feeding it.

The Chinese government itself uses different estimates – the Ministry of Commerce seems to use the figure of 830 million people; the Ministry of Food 800 million; the planning department ‘less than 750 million’ – a range of 80 million! In 1972 Chou En-lai spoke vaguely of the present rate of growth of population as ‘around two per cent’, which could represent a change from 1953 to under two per cent or something virtually the same as India’s 2.47 per cent (1971 census).

The position is not everywhere as bad however. The figures published up to 1959, plus some of the recent issued statistics, plus what is known about the rough proportions of the Chinese economy, some hints, isolated facts and so on, provide a rough guide.

Some of the sources for particular years are American, for US imperialism has the most powerful interest in identifying what is happening in China. We are not dealing here with the wild prejudices of the popular press, but with careful estimates, some of them exceedingly favourable to China (since there are many pro-China American sinologists). They are no more lies than Chinese government claims are lies.

The Peking government refuses to publish its own account, we have to rely on what sources there are – while always checking the Chinese basis for those sources.

India and China began from very different base points. China is much larger – its population may be 40 to 50 per cent above that of India – and its agriculture has always been much richer. Agriculture is overwhelmingly the most important activity in both countries, and within agriculture, the production of food grains.

Given the higher Chinese productivity – some say it has been consistently higher since the tenth century [1] – the overall output per head in the Chinese economy as a whole would be significantly higher. [2] On the other hand, the military needs of British imperialism in India resulted in a much more extensive network of roads and railways, covering a much smaller land area, and that factor is important in the speed of growth.

Taking the main areas of the economy, what is the picture?
 

1. Agriculture

Food grains production dominates agriculture in both countries. So the annual grain harvest is the most significant single index of the performance of the economy. The graph shows the respective output of China and India. The Indian figures are official. The Chinese contain, for particular periods, different estimates.

The figures are difficult to compare. Normally Chinese grain statistics are for unhusked rice and include for example – unlike the Indian – potatoes. Nevertheless the direction of the graphs is not affected by this factor (the Chinese figures are adjusted to allow for dehusking).

If we compare the first and last years for both countries, we get a rate of increase per year of 1.8 per cent for India and 2.6 for China, but this is distorted by the peculiarity of the two years – had we taken, for example, 1970-71 for India and 1971 for China, the annual rate of growth would be 3.9 per cent for India and 3.3 for China. To flatten out the accidents of particular years, we can compare the first five and the last five years:

We can alter the assumptions and estimates, and get slight variations in these figures [3], but the overall conclusion remains – the rate of growth of food grains output of both countries has been much the same averaging, over a quarter of a century’s sustained development effort, something around two per cent per year – perhaps just about keeping level with the rate of growth of population. The gap between Indian and Chinese total output remains roughly constant – with perhaps a very small tendency for it to decrease.

Of course, from the graph we can see that the performance in detail has striking contrasts. The fluctuations in Chinese output are much greater than in India. When Chinese grain output expands, it does so much more rapidly, but it also falls much more drastically. Indeed, paradoxically, the economic fluctuations of ‘socialism’ are much greater than those of capitalism on this evidence.

In non-food grain items of agricultural output, India’s performance seems to have been better (presumably, the price incentive of private capitalism for commercial crops has affected this). Since 1957, it seems, India’s total agricultural output has grown by about three per cent per year and China’s by just over two per cent. [4]

Again, it has to be stressed that the importance of these figures is not that they can be relied upon (or rather the Chinese figures cannot be relied upon) but that the evidence does not suggest China’s performance is much better than India’s. This is particularly odd given what is known about China’s massive efforts to develop agriculture.

For example, the output of China’s chemical fertiliser industry is said to have been 17 million metric tons in 1971; in India, consumption of chemical fertiliser barely reached 5½ million tons (the figures are not strictly comparable, since the Chinese figures include eight million tons from the ‘traditional sector’, whereas the Indian figures cover only the ‘modern sector’).

The number of tractors in use in China was said to have reached 135,000 in 1956, but only 31,000 in India by 1961. The failure of the land reform of India, the continuation of small fragmented holdings, must have impeded the expansion of output and further exaggerated India’s relative disadvantage.

Chinese land has always been more intensively cultivated, the irrigated area proportionately larger, and the per hectare yield consistently higher. The explanation for China’s relatively poor performance lies in the interruptions suffered by production rather than its potential for growth. Indeed, given the interruptions, the sheer superiority of Chinese agriculture is shown in its ability to achieve nevertheless the same performance as India. If expansion had been sustained, China surely would have drawn much further ahead of India.

Agriculture usually provides the main source of surplus for capital accumulation in an industrialising backward country. The possibility of industrial growth is closely related to agriculture’s growth and fluctuations in the fortunes of agriculture can have a powerful effect on the industrial sector.

Both the Indian and Chinese governments have in practice been forced to subordinate their respective economies to the short-run performance of agriculture, to the power of dominant rural groups. [5]

This was made necessary by the relative stagnation of agriculture, the very low level of livelihood of the rural population (a higher rate of exploitation would have led to mass refusal to work or to starvation), and the lack of any alternative source of capital. Defence is also a major drain on what surplus there is. The industrial sector has to be seen against this backcloth.
 

2. Industry

China’s industrial growth has an even more extreme pattern of fluctuation than its agriculture. The official index of industrial production (including handicrafts) rose from 100 in 1956 to a claimed 258 in 1959 (and, from one official source, 332 in 1960) only to fall back to 184 in 1963 and 212 in 1964. [6] A revision of this index [7] moderates the size of changes so that 1959 becomes 189 and 1962 110 (1963: 121). In the machine building sector, Cheng has constructed an index (1957: 100) which registered a dizzy 305 in 1960 and 122 in 1962.

By contrast, India’s progress has been much slower but has suffered less drastic drops. The 1956:100 index fell only once prior to 1970 (in 1966, by 0.7 per cent) although output has been extremely sluggish in some years. India’s overall rate of growth, 1957 to 1970, is put at some six per cent per year (6.6 per cent for the modern sector; 4 per cent if the small-scale sector is included). The real growth phase – through the second and third plans – disintegrated in the later sixties and has still not recovered.

China also experienced its highest rates of growth in the fifties – some 19 per cent per year during the first five year plan. This very high figure was partly the result of much unused capacity available after the war – whereas India’s industrial capacity had been over-utilised without proper replacement – the boom that came with the Korean war and the attempt to meet China’s needs from its home resources rather than imports. Since then China’s growth rate has declined to something around six per cent. [8]

This is no ‘new model’, but merely an accommodation to a particularly forbidding material reality. The propaganda of the Chinese regime suggests that, once imperialism is expelled, internal organisation and morale are the keys to development.

No amount of morale, however, can make up for the gross shortage of resources. Decentralisation is the result of a relatively poor long-term economic performance (relative, that is, to what is required to shift the structure of employment), a response to stagnant employment, rather than the reason for what growth takes place.

In fact, decentralisation positively restricts the full potential of the economy by dispersing scarce resources – although it may make for a quieter political life at the local level. [And] it also makes it almost impossible to have a serious national plan, and state planning has been one of the casualties of economic stagnation in both India and China.

The immediate prospects for each economy are different. Industrial output in India is only very sluggishly climbing out of a long drawn out recession, and agriculture in Western India is in severe crisis (although because the area is in any case poor, this will not have such great effects on the overall figures).

China’s industrial output is expanding rapidly, but agriculture has been checked quite sharply in some areas (China’s purchase of grain abroad is one factor in pushing the world price up). If the agricultural performance remains poor in both countries, sooner or later it will lead to a cutback in industry.

But the picture could be changed very quickly. Both countries try to use the world market as a means of compensating for difficulties at home – China has now expanded its foreign trade to the same sort of size as India’s (China’s foreign trade is valued at about 4,200 million US dollars; India’s – on the latest figures (1970–71) – at 4,164 million US dollars).

Of course, India’s past external borrowing has reached the stage where it is a crippling burden on its foreign trade now, whereas China does not bear such a burden. Almost certainly, however, the Chinese government will move towards trying to use the resources of foreign capitalism for China’s development – by accepting credits and loans to make up for domestic shortages with foreign imports.

Imperialism dominates the world market. Its forces compel the defence expenditure which is a major burden upon China’s economy and to a lesser extent upon India’s. Backwardness and the price of development today reduce the massive efforts made in both countries to little more than standing still in development terms.

Everyone knows that Indian capitalism is rotten to the core and has no serious perspective of development. The lack of any perspective, however, also afflicts China. Stalin’s aim of ‘socialism in one country’ became in the 1950s ‘development in one country’; but even that is now impossible.

Development can only take place on a world scale – unlocking the accumulated resources of world imperialism for the development of the whole world. The reformist-nationalist alternative – gradual economic development in one country – has become Utopian. It can no longer be a substitute for world revolution.

Both countries have made important advances. Both have programmes, for example, in the fields of aerospace and nuclear energy, in electronics and computers. In both, the engineering and petrochemical industries have had strikingly high rates of growth.

China still depends on imports for much of its needs in heavy vehicles, special steels, ocean shipping, modern aircraft, chemical, metallurgical and oil refining equipment (although it meets 80 per cent of its needs for machinery at home, in comparison to 15 per cent in the fifties).

India’s dependence on imports of complete units is less than China’s, but is much greater on imported components for a much wider field of manufacturing. Technically, India’s productive capacity is almost certainly more advanced than China’s, and the modern units on a much larger scale; as a result, the diversity of output is greater and more sophisticated.

But in absolute terms, China’s output is, in many fields, much larger than India’s. In steel the contrast is most dramatic – China’s output in the modern sector is some 14 million tons, with another seven from the ‘traditional’ sector; India’s total output is about seven million tons.

This says nothing about the quality or diversity of steels produced, nor about the base point: China’s peak steel output during the Second World War was 13 million tons, whereas India’s probably never went much over one million. [9]

At its most optimistic, China’s performance is considerably better than India’s, and on the less optimistic, slightly better. But in both cases, there is nothing which distinguishes China’s growth today over some 25 years as the Soviet Union was distinguished between 1928 and 1953.

China started from a far lower base point than did Russia (China’s grain output per head in 1952 was less than half that in the Soviet Union in 1928 [10], and the price of development is now incomparably higher. The Russian rulers pillaged agriculture and robbed the industrial workers to maintain a breakneck pace of industrialization. In neither China nor India is this possible.
 

3. Development

In any case, the growth of output today does not show changes in employment (and that is what constitutes development). It is here that the ruling classes of India and China have grounds for real pessimism. Neither economy has shown any sustained ability to employ its available labour force.

Peking’s emphasis on labour productivity in Chinese factories – despite other efforts to increase employment in the countryside – have the same effect as in India. The Chinese leadership has been much more ruthless than the Indian in using the rural areas as places of exile for surplus urban labour – in order to minimise urban labour costs and preserve low prices of industrial output. The maintenance of strictest police controls round China’s cities to prevent people getting in to them shows how far the mass of the rural population willingly accept this state of affairs. [11]

There are no useful estimates of unemployment in either country since ‘unemployment’ only makes sense where everyone goes through labour exchanges for jobs and a job means something clear and measurable.

Yet the growth of the population entails a certain growth in the labour force; and the growth in industrial and agricultural output entails a certain increase in the number of jobs. And on any evidence, the first is wildly larger than the second.

Both countries are large enough to mobilise resources on a scale sufficient to change the overall output of their respective economies. But not by any new methods. China’s leadership is committed to building heavy industry – as its leaders readily admit [12] – but cannot do so except by first trying slowly to improve agriculture. [13]

Notes

1. J.L. Buck, Land Utilisation in China, New York 1937.

2. ‘per capita income (in China) in the 1930s and 1950s was well above that in India in the 1950s ... In particular, grain output per capita in China in the twentieth century was roughly comparable to that in the grain-surplus countries of South-East Asia’ – D.H. Perkins, in China in Crisis (edited by Ping-ti Ho and Tang Tsou), Chicago, 1968, 1, 1, p. 200.

3. Sinha (The Times, 4 December, 1972) argues for compound rates of growth of ‘food production’, 1957 to 1970, of 1.3 per cent for China and 2.7 per cent for India. Bardhan (Pranap, Recent Developments in Chinese and Indian Agriculture, in Comparative Development of India and China, edited by Kuan-I Chen and J.S. Uppal, Londo, 1971, p. 46), 1952 to 1967, proposes an annual rate for China of 1.9 per cent, and India 1.7 per cent. Because in both countries the trend is heavily influenced by two bad years, he calculates the trend excluding those years – and gets 2.5 per cent per year for both countries. See also Rawski, cited later.

4. Bardhan (see last note) estimates the annual compound growth rate for agricultural output, 1953 to 1965, at 3 per cent for both countries. Rawski (Thomas, Recent Trends in the Chinese Economy, China Quarterly 53, January–March 1973, p. 3), using the figures for grain and cotton, estimates China’s average annual rate of growth of agricultural production, 1957 to 1971, at 2.1 per cent (or 1.2 per cent, 1957 to 1965, and 3.4 per cent, 1965 to 1971). Ashbrook (A.G., China: Economic Policy and Economic Results, 1949–71, in People’s Republic of China, Economic Assessment, US Congress, May 18, 1972) offers for 1957 to 1965, 0.1 per cent, and for 1965 to 1971, 2.2 per cent.

5. See my forthcoming book, India-China: Underdevelopment and Revolution, Delhi, and articles International Socialism 35, 52, 53 and 55.

6. See Ten Great Years, State Statistical Bureau, Peking, 1960, pp. 84 and 87; for 1956–8 and thereafter, from various official sources, compiled by Robert Michael Field, Chinese Communist Industrial Production, in Economic Profile of Mainland China, Studies prepared for the Joint Economic Committee of Congress, Washington 1967, Vol. 1, p. 273.

7. Field’s index, ibid.

8. Richman (Barry M., Industrial Society in Communist China, New York 1969, p. 596) estimates Chinese industrial growth, 1957 to 1966, at between 5.5 and 6.5 per cent per year. Field (see note 6), 1957 to 1965, at 5–6 per cent, and 1957 to 1970, 5.4 to 6.6 per cent. Rawski (see note 4), 1957 to 1965, 9 to 10.8 per cent, and 1965 to 1971, 9.9 per cent.

9. Cited by Kuan-I Chen, The Outlook for China’s Economy, Current History, Sept. 1972, p. 103.

10. Bardhan, op. cit. See also Alexander Eckstein, Economic Development Prospects and Problems in China, The Annals, July 1972, p. 107.

11. See the Chinese Minister of Agriculture’s comment (7 September 1966): ‘Everyone wants to go to the towns. There a man can earn 30 to 40 yuan a month just by sweeping the streets, whereas in the country he can earn no more than 200 to 300 yuan a year, or 20 yuan a month. Among those present here, who are there who would voluntarily become peasants?’ (reported. Red Flag of Science and Technology, 6 March 1967, and cited by Jan Deleyne, The Chinese Economy, London 1973, p. 58). Policies of urban control are discussed in my review article, China’s Cities, Economy and Society, 1/1, February 1972.

12. See, for example, China’s Path to Socialist Industrialisation, Red Flag journal, October 1969.

13. See Tony Cliff’s article in IS 29, and mine in IS 55.

 
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