Towards a Worldwide Index of Human Freedom

Liberty in Comparative Perspective: China, India, and the West • 229
at risk: limited government and individual liberty, private property rights
and capitalism, and in the long-run, even prosperity and peace.
Conclusion: Geopolitics, evolution and the expansion of liberty
Three hundred years ago, most of mankind was poor. Chinese, Indian,
and European shares of world product were about equal. Then the West
overtook Asian societies. Three decades ago, China and India were about
equally poor in purchase power parity terms. Since then, China has left
India behind. Chinese per capita income in purchase power parity terms
is about twice as high as Indian per capita income. This history of economic
performance raises two explanatory challenges. Why did China
and India fall behind Europe or the West? Why did China do better than
India recently? Here, an explanatory sketch has been suggested for answering
both questions. While stagnation is blamed on restrictions of economic
freedom, conversely, growth and prosperity have been explained
by the expansion of economic freedom. Asia’s giants grew much more
slowly than the West because of weaker property rights, lack of scarcity
prices, and insufficient mobilization of dispersed knowledge or deficiencies
in economic freedom. Europe and the West benefited from better
institutions than Asia because of interstate rivalry resulting in limited
government and comparatively free markets. China could outperform
India and start its attempt to catch up with the West only after climbing
out of the socialist trap by a de facto improvement of personal freedom
and property rights and implementing some economic freedom, by “market-preserving
federalism” and joining the capitalist global economy. The
extraordinary growth of both Asian giants would have been inconceivable
without the advantages of backwardness. These advantages result from
the earlier Western establishment of economic freedom or capitalism and
the prosperity coming out of it. China did better than India because it
moved away from socialism earlier and more forcefully than India did.
This account of Western, Chinese, and Indian economic performance
is driven by geopolitics. Rivalry between European kingdoms and principalities,
between territorial rulers and autonomous cities produced the
checks and balances, as well as the exit opportunities for ordinary people,
which contributed to the establishment of safe property rights and
the European miracle. European states had to concede limited instead of
absolutist government and therefore initiated the commercial and industrial
revolutions in the West. During the twentieth century, the United
States overtook Western Europe and established a transient hegemony
at the end of the century.50 Nevertheless, international rivalries still
50 The libertarian element in American political culture (Lipset, 1996) made American hegemony
less burdensome than other types of hegemony would have been (Mandelbaum, 2005).
www.freetheworld.com • www.fraserinstitute.org • Fraser Institute ©2012