Within the advanced countries, growth rates tend to be very stable over long periods of time, provided one averages over periods long enough to eliminate business-cycle effects (or corrects for short-term fluctuations in some other way). For poorer countries, however, there are many examples of sudden, large changes in growth rates, both up and down. Some of these changes are no doubt due to political or military disruption: Angola’s total GDP growth fell from 4.8 in the 60s to – 9.2 in the 70s; Iran’s fell from 11.3 to 2.5, comparing the same two periods. I do not think we need to look to economic theory for an account of either of these declines. There are also some striking examples of sharp increases in growth rates. The four East Asian ‘miracles’ of South Korea, Taiwan, Hong Kong and Singapore are the most familiar: for the 1960-80 period, per capita income in these economies grew at rates of 7.0, 6.5, 6.8 and 7.5, respectively, compared to much lower rates in the 1950’s and earlier. Between the 60s and the 70s, Indonesia’s GDP growth increased from 3.9 to 7.5; Syria’s from 4.6 to 10.0.
I do not see how one can look at figures like these without seeing them as representing possibilities. Is there some action a government of India could take that would lead the Indian economy to grow like Indonesia’s or Egypt’s? If so, what, exactly? If not, what is it about the ‘nature of India’ that makes it so? The consequences for human welfare involved in questions like these are simply staggering: Once one starts to think about them, it is hard to think about anything else.
Robert Lucas, ‘On the Mechanics of Economic Development’, Journal of Monetary Economics, vol. 22, no. 1 (July, 1988), pp. 4-5