Why 1978 and 1991 will likely be the most important years of the 20th century

If you had to pick just one year from the 21st century and say that this was the year that mattered the most, which year would you pick? Some might pick 1939 and the start of WWII. Others, for the same reason, might pick 1945, as the year it finally ended. Others more in tune with the long run forces of history might pick 1914 because that’s when the whole thing really started.

 

But that’s answering the question from a European perspective. Closer to home, you might want to pick 1947, and our neighbours to the east might pick 1949 for broadly similar reasons. But as an economist from these parts, my choice would by 1978 from a broader perspective, or 1991 from a purely Indian one.

 

Because 1978 was the year in which Deng Xiaoping famously said “Let some people get rich first” and kickstarted the process of market reform in China. Xiaogang is a village that almost nobody outside of China has heard of, but if you’re interested in the question of how nations get richer over time, you should take the time out and click on that link. There’s a lot else that Chinese economic history has to teach us, but we’ll get to it over time.

 

Let’s move on to the other date that we think is important from the 20th century: 1991.

 

“A moment comes,which comes but rarely in history,when we step out from the old to new,when an age ends,and when the soul of a nation,long suppressed,finds utterance.” Famous words, uttered by a famous politician, and possibly the most famous speech by an Indian politician. We’d argue that these apply in almost equal measure to the year 1991, because that is when the entrepreneurial spirit of India, long suppressed, finally found utterance.

 

It is when business stopped being a bad word in Indian parlance, and getting (and staying!) rich was seen not as a dubious achievement but an everyday event. Indians going to movie houses post 1991 admired the Mercedes that Amir Khan drove to Goa in Dil Chahta Hai, and not the smoudering angst that Amitabh Bachchan harboured against the system in Deewar. Aspirations were a good thing, and it was ok to say that publicly after 1991.

 

The Liberalized Exchange Rate Management System (LERMS), the New Economic Policy (NEP) of 1991  and the other economic policies of that era were remarkable, and are rightly being celebrated today as the cornerstones of the remarkable change that has been wrought in India since. And we’ll talk about the impact that these policies had in the posts to follow.

 

But they are, in a sense, merely the tools that allowed P Chidambaram, Montek Singh Ahluwalia, PV Narasimha Rao and above all, Manmohan Singh to say what Deng Xiaoping had said all those many years ago in China.

 

1991 was about letting Indians get rich.

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2 comments

  1. Neatly written. The year 1991 may be considered watershed year for indian economy but most important for the world is a stretch. Even today, twenty five years since P.V.Narasimha Rao and Manmohan Singh ushered in the free economy, we are yet to make an impact on the world. China became the manufacturer for everything on this planet. The unsung Bangladesh now has more garment exports than India and we send confusing signals to the world by our retro taxation etc.
    Yes, great milestone for India but the world remains unmoved by India story.
    As authors, you have every right to your views and I fully respect that while expressing my opinion.

    Like

    • Thanks for writing in, Uncle! Completely agree with you, 1991 is not particularly relevant for the world just yet. I’d say it’s an important date from an Indian perspective though, particularly with an eye to the future. That’s what I was trying to say

      Like

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