Tyler Cowen Blogging at WSJ: The Economic Fortunes of Europe and Asia

The last couple of days Tyler Cowen (Prof. of Economics at George Mason University) and John Irons (Associate Director for Tax and Budget Policy at the Center for American Progress) have been discussing outsourcing here in the online edition of Wall Street Journal. Today's discussion was on The Economic Fortunes of Europe and Asia. Tyler also blogs at Marginal Revolution regularly.

John: The rapid growth of some Asian economies and the more tepid pace of European growth raises an interesting contrast in styles of growth, and illustrates that gross domestic product is not the only measure of well-being. Europe has stronger controls on pollution than does, say, China. China on the other hand has seen higher growth rates. While the two economies are not really comparable (per capita output is significantly greater in Europe), and it's not necessarily true that pollution control necessitates lower growth, it raises an interesting point about how to measure and compare growth. How much economic growth is it worth to give up some quality of life? Is a slightly higher growth rate of GDP worth polluted skies and
rivers?

We require a broader measure of well-being than just GDP when evaluating economic performance -- one that takes into account things like environmental conditions, leisure time and other measures of life quality than total consumption. One could add in measures of human rights, health outcomes, public safety and the like. Progress on the GDP side cannot blind countries to other measures of well-being.

Tyler: Turning to Asia, China is not the economic juggernaut we often think. Chinese per capita income just recently passed $1,000 a year. To put this in perspective, Chinese per capita income remains below Morocco; Guatemala is richer still. Yes, size matters, but size also constrains China, makes it harder to manage, and limits its national unity. Most publicly listed Chinese companies have majority state ownership, with an average of about 60% in government hands. Public officials are rampantly corrupt and the provinces often ignore the central authority. China will have a harder time moving to democracy than did either South Korea or Taiwan; size, the need to keep numerous provinces in line, the presence of nuclear weapons, and military designs on Taiwan are all critical factors that will limit Chinese freedom. Yes, China will rise in importance, but we shouldn't start by extrapolating the current 9% rate of growth.

John's observation is interesting and very valid I think. The manner in which technology has penetrated different nations has been interesting. For example, here is an article on some common technologies one can see put to good use in China. I guess a few of those are present in India too now - for example, high cell phone penetration and deployment of high speed GPRS networks to cover large city areas (Reliance recently announced this for deployment in Indian cities), informative city traffic lights, etc. Here is another article on broadband penetration in South Korea. S. Korea has about 75% penetration for broadband, as compared to less than 20% in the US.

Tyler's analysis is in line with the relationship between democracy, liberalism and GDP of a nation that I read in Zakaria's book (here is a summary I had posted earlier).