Search

Liberalism has brought sharp reductions in both poverty and international inequality. The past half-century can be seen as a long exploration of the power of liberal trade to raise living standards, not only in the rich world but among the poor too. The story begins with the growth that took place in western Europe, North America, Australasia and Japan once the two great scourges of economic activity--war and trade restrictions--were removed after 1945. The rest of the world--communist, socialist, or just plain poor--also grew, but more slowly: at 2.2% a year on average, or a threefold rise in income per head. Thus the gap between "the West and the rest", as Angus Maddison, an economic historian, described it in an OECD report in 2002 from which these figures are taken, has been widening. Though it does little to promote democracy, China is proving a spur to economic liberalization in other developing countries: fear that its growth will steal their markets or investment is prompting others to copy its reforms and to adopt international trade rules by joining the World Trade Organization.

The article questions why poor democracies are not better at ending poverty. India, unlike China, is a vibrant democracy with a proudly robust habit of turfing lousy governments out of office. Yet, in poverty reduction, at least, China's unelected leaders have done better. A book by Bimal Jalan, a leading Indian economist and former governor of the central bank, lists some of the woes afflicting Indian politics, such as the rise of small parties, the dwindling of inner-party democracy and the shrinking role of Parliament in ensuring accountability. In poverty-reduction, as in growth, India is typical of other developing-country democracies, having achieved steady but not spectacular success. The relationship between caste and class helps explain the wide regional discrepancies in India.