An economic development parable

People walk through a shopping mall complex in Beijing on January 21, 2019. – ’s economy grew at its slowest pace in almost three decades in 2018, losing more steam in the last quarter as it battles a massive debt pile and a US trade war, official data showed on January 21. (Photo by NICOLAS ASFOURI / AFP)

If you were to plot ’s GDP per capita on its map, you will find a startling ‘imbalance’. The country’s west is vast in terms of landmass and provinces like Xinjiang, Tibet and Qinghai make up close to a third of the country.

Yet, the GDP per capita in those 3 regions is $8,000 or less. But go to the eastern part of the country and you will find GDP per capita of over $14,000 in Shanghai and around $12,000 in Guangdong and Fujian. 

The mistake will be to think there is something abnormal about this. Every country you look at has a variance of regional imbalance with one part richer than the other. It is possible to drive from one coast in America to the other without passing through a single county that Hillary Clinton won in the 2016 election. Yet Mrs Clinton won states with 64% of America’s GDP in them.

The UK may be Europe’s 2nd largest economy today but take out London and the South East of the country and it will simply become a small European economy. In Brazil, Sao Paulo – the richest state – is 4 times richer than Piaui – the poorest state. 

What do do when they are faced with such imbalances? There are 2 obvious solutions at each extreme. First, you can try to slow down the fast growing and richer parts to allow the poorer parts to catch up. This might involve being hostile to the kind of economic activity prevalent in the richer parts in favour of what is considered a solution to the problems in the poorer parts of the country. You might call this ‘socialism’ – the idea that each part of the country should grow in lockstep with each other by doing everything possible to equalise everyone.

Secondly, you might simply ignore the poorer parts of the country and just allow the rich parts of the country to do their own thing. It is up to the poor parts to find ways to catch up with the richer parts. You might call this ‘capitalism’ – the idea that everyone is endowed with variants of the same resources and should use them appropriately. 

Still on China, things were not even always this way. Under Chairman Mao, the coastal regions which are rich today were poorer than the mainland regions because Mao did not want investment or economic growth in those areas as he feared that they were vulnerable to foreign attack. It was under his successor, Deng Xiaoping that things began to change and by the 1990s, there was a complete reversal to what you see today. That is to say, history is not destiny.

These days China is building a 1,600 kilometre high speed train – at a cost of $37bn – to connect poorer Tibet to the rest of the country. Half of the line will simply be running through 14 mountains (rising to 14,000 metres), valleys and practically ‘nowhere’. The railway line is clearly an expensive and technologically challenging project. Yet China considers it worthwhile to do. Why?

This brings us to the third and perhaps not so obvious option. China can pay for such a railway to ‘nowhere’ using the fruits of growth in richer parts like Guangdong and Shanghai.

If the Chinese government comes up with policies that are hostile to financial services (Shanghai) or (Guangdong), it might reduce the growth in those places or even make the people there poorer, but it is Tibet that will remain disconnected from the rest of the country by not having a train line at all. And that’s just infrastructure. Especially in western , there are so many ways in which governments work to redistribute the fruits of growth from richer parts to poorer ones that are not so visible to the eye with things like welfare benefits and payments.

A couple of years ago in China, President Xi Jinping gave voice to this view when he said ‘the first to prosper should help the latecomers’. 

President has just won a mandate that, given the performance of the economy over the last 4 years as well as various other missteps, is even more resounding than that of 2015. He will be well within his rights to take it as an endorsement by Nigerians of everything he did in his first term and thus continue along the same path. That will be a shame but he is not at liberty to listen to advice from people he has so roundly defeated. 

Still, one can try. It is ok for a country to have different types of economies. It is also fine for different parts of the country to move at a different pace insofar as there is a genuine and well thought out effort to help the left behind parts to catch up as quickly as possible.

What leadership does is find the best out of an often complex country and getting as many parts as possible to work together for the greater good. Growth first and all other things will be added unto you. 

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