between 1978 and 2004. Both countries experienced an acceleration of growth
in output per worker after 1993. In both China and India the growth in output
per worker is equally split between increases in physical and human capital per
worker and gains in TFP (although absolute values for China are twice those
for India). The contribution of physical capital to India’s growth remained
below those evident during the investment-led rapid growth experiences of
East Asia. By contrast China achieved an investment rate comparable to that of
East Asia between 1978 and 1993 and in more recent years has achieved an
even higher rate.
Comparisons are not often made between the former Soviet Union and
super-successful Singapore. Paul Krugman (1994), however, notes some
striking similarities in their patterns of growth. Rapid Soviet growth was
based on an immense state-led effort to mobilize factors of production: shift-
ing labour and resources from agriculture to higher-productivity industry and
women from the household to the factory; increasing hours of male employ-
ment; a massive expansion of education; and suppressing levels of consump-
tion to raise the rate of saving. ‘Communist growth rates were certainly
impressive but not magical. The rapid growth in output could be fully
explained by rapid growth in inputs’ (1994:63). Krugman argued that
‘Popular enthusiasm about Asia’s boom deserves to have some cold water
thrown on it’ (1994:64). Growth rates of 8.5 per cent (6.6 per cent per capita)
in Singapore between 1966 and 1990 were ‘based on perspiration rather than
inspiration’ (1994:70). The perspiration consisted of raising the employed
share of the population from 27 to 51 per cent,raising educational standards
(in 1966 more than half had no formal education at all and by the 1990s two-
thirds completed secondary education) and raising investment as a share of
output from 11 to more than 40 per cent. The Singaporean economy, accord-
ing to Krugman,had always been relatively efficient, but was previously
starved of capital and educated workers: ‘If there is a secret to Asian growth,
it is simply deferred gratification, the willingness to sacrifice current satisfac-
tion for future gain’ (1994:78). Young (1995) accepts the thesis of negligible
TFP growth in Singapore. He argues that the state-directed Singaporean econ-
omy had forced its citizens to save too much and pushed itself too fast up the
technological ladder without fully realizing the benefits of learning and
consequent productivity gains at each stage, but this is a pessimistic view. It is
more likely that the rapid rate of TFP growth has been underestimated by such
studies. Without TFP growth the very high rates of investment would have
quickly run into diminishing returns. The rapid diversification of exports
could not have happened without East Asian countries successfully mastering
new technology and producing those new exports to a decent and competitive
standard. In 1960, for example, Taiwan produced virtually no electronic
goods and by 1990 these accounted for more than 20 per cent of all manufac-
turing exports.
Growth in the Modern World Economy since 1950 59