Quora Question: Why Aren't India and Africa Wealthier?

Cow in India
A cow walks past a closed slaughterhouse in Allahabad, India March 28, 2017. REUTERS/Jitendra Prakash

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Answer from Balaji Viswanathan, CEO of Invento:

Why do India and Africa represent 30 percent of the world population but control only 2 percent of the world’s wealth? Three key factors: colonization, internal turmoil, delay in opening up the markets.

Wealth creation is primarily a function of human development. In India and most countries of Africa, there are severe structural problems that led to a slow development and even today, a majority of the population there don’t have the means to build wealth.

Colonization

A factor for this stagnant human development is colonization. Here is a fun fact: of the top 15 economies in the world, only one of them has been a colony in the last 150 years. That is by GDP alone. If you ignore the city states like Singapore and Hong Kong, there is not a single developed country that was a colony—unless you include countries where the native populations are mostly eliminated and ruled by European settlers.

The past 200 years were quite significant for scientific and industrial development. The countries that had the sovereignty during this time [including Japan and United States] were able to make use of the technology and grow significantly better than countries that didn’t have the independence to build policies that suited their economy. China is sort of in the middle—where it was under the influence of colonial powers, while not fully a colony. Thus, its human development and wealth creation is somewhat in the middle now.

Market opening up

Besides colonization, there is also the factor of opening up the markets. All developed countries in the world have open markets and are considered capitalist. For various reasons, India [and most of Africa] was very slow to join the world markets. India is behind China by almost 15 years when it comes to market liberalization. Given that the wealth accumulation is exponential, that delay is crucial.

In the crucial 1970s and 1980s when the rest of Asia [China, South Korea, Taiwan, Malaysia, Indonesia] was busy joining the capitalist world, India was in an internal chaos stemmed from bad leadership. This was the time when Japan and Singapore shed their tags as maker of cheap stuff and an Asian slum. In the case of India, the 1980s was especially lost as Indira Gandhi and her son, Rajiv Gandhi, mostly missed the fast growth that took over rest of Asia. Their inexperience with economic affairs was quite crucial to India missing the bus. India had to wait for 1991 to finally open up markets.

The same is true of most countries in Africa. The majority of them are not market economies and still play around with socialism and protectionism.

Internal turmoil

East Asian countries were able to settle to normalcy by the 1970s. There were no more wars, civil wars or other internal conflicts. China has not had a major internal strife in over 50 years [other than the 1989 Tiananmen square protests]. In case of India, there was terrorism and internal chaos up to the 1990s. Kashmir, Assam, Punjab and many other territories were unstable in the 1970s,80s and 90s. This distracted the government and slowed the growth. Many parts of Africa also experience persistent wars, civil wars and chaos.

Fortunately, many parts of Africa and India are fast growing and building up their wealth. It won’t be long before the parity with west happens.

Why do India and Africa represent 30% of the world population but control only 2% of the world’s wealth? originally appeared on Quora - the place to gain and share knowledge, empowering people to learn from others and better understand the world. You can follow Quora on Twitter, Facebook, and Google+. More questions: