Why Trump’s India-China Comparison is Senseless ?

The Republican presidential nominee, Donald Trump has mounted an aggressive attack on the economic policies of Barack Obama and Hillary Clinton. He says that the democrat’s economic policy has led to stagnation in the United States economy. The United States is growing at a nominal rate of 1.4% whereas, in real terms, the economic growth is negative!

Donald Trump contrasted the American economic growth with that of India which he claims has grown at 8% and China which has grown at 7%. First, the facts need to be corrected. India has grown at 7.6% and China at 6.8%. A small percentage difference is also huge when we are talking about trillions of dollars.

Donald’s Trumps statements require complicated answers which cannot be debunked easily. In this article, we will try and do what Hillary Clinton could not, i.e. debunk these myths and explain why Donald Trump’s rhetoric is nothing more than rabble rousing.

False Argument

The first and obvious point is that a higher GDP growth does not equal better economic development. Afghanistan had a GDP rate of 45% during the war. Does it mean that it was growing at 6 times the speed of the fastest growing nation in the world! Well, it does not. GDP growth is a highly deceptive number and mindless focus on increasing this number has brought countries and economies to its knees in the past. The Eurozone is a perfect example of what can go wrong. Hence, Donald Trump is misleading people by equating a higher GDP with a higher growth rate.

Developed vs. Developing

The United States of America is a developed nation; perhaps the most develop done. On the other hand, countries like India and China can best be described as developing. Like the growth rate of a child cannot be compared to that of an adult. Similarly the comparison between the two is false. At the early stage of an economy, growth happens rapidly. As economies get developed, the rate slows down. The United States is doing pretty well, as compared to its peers and comparing it with India and China only means putting numbers out of context to prove a point for political gains.

Lower Investment and Gestation Period

Countries like America have spent a lot of time and effort in developing the technology. On the other hand, developing countries can only buy the technology off the shelf! Consider the case of airplanes. The Wright brothers had to show an extremely high level of ingenuity and entrepreneurship to create an aircraft. India and China only had to contact an aircraft manufacturer to obtain this technology by buying their products. This leads to countries spending lesser time in research and gestation. The financial effect of this phenomenon is also huge. Countries like India and China are 10 years behind the developed countries. However, since they got the technologies effortlessly, their growth rate appears to be magnificent!

Low Hanging Fruits

The United States of America has already developed so much that there is less scope for future development. Any development is hard to come by and earned with blood, sweat, and tears. On the other hand, countries like India and China can be developed quite quickly. Consider the fact that the United States has an 82% urban population. More urbanization is simply not possible. On the other hand, India has a 33% urban population. The easiest way to increase GDP would be to introduce urbanization or other development projects simply. India and China can, therefore, continue on this high growth path since their growth was lower in the earlier period. Economists call it the law of “convergence”. Donald Trump’s comparison of the absolute growth rates is therefore absurd to say the least!

Corruption Ignored

The United States is still a meritocracy. The country is run by law. The law enforcement is efficient and warrants no comparison with the likes of India and China. The developing countries, on the other hand, face a lot of corruption! Countries like China and India have major law enforcement problems. Donald Trump has just ignored these facts while comparing economic growth. The politicians of India and China may be getting richer, but the average person is getting poorer by the day.

Pollution

The high economic growth rate in India and China is driven by excessive amounts of pollution too. The natural environment is being destroyed. No regard is being given to sustainability. China and India will have to pay a heavy price for this environmental disaster in the future. However, Trump simply mentioned the growth numbers without mentioning the economic catastrophe they were leading to.

Is High Growth Impossible for United States ?

Proponents of Trump believe that America can grow at rates cited by developing economies. They believe that America was indeed growing at 5% to 7% during the period before North American Free Trade Agreement (NAFTA). Data does support this fact. However, one cannot say for sure since correlation does not mean causation.

Only time will tell whether Donald Trump will get an opportunity to raise the rate of economic growth and make America great again.


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