I want to do three things today: To try to put this moment in a very broad historical perspective, to try to think about this generation in India, and to try to reflect on what it means for the relationship between our two countries. Let me begin by asking, what will historians say about our era when they write its history 300 years from now?
I will suggest to you that, in the long sweep of history, the biggest story from our era will be what has happened in the developing world and in the world’s emerging markets. Consider this: Economic historians have calculated that if you compare living standards in Athens at the time of Pericles and in London in 1800, over those 2,200 years, growth was far less than one-tenth of 1 per cent per year.
They called it the Industrial Revolution because, for the first time in all of human history, economic growth started at a rate where you could see the difference in living standards at the end of a human lifespan, relative to the beginning of a human lifespan. And, that difference might have been, during the Industrial Revolution, as much as 50 per cent.
If you look today at what is happening in India, what is happening in China – nations that between them have 40 per cent of the population of this planet – living standards are rising at a rate where they double within 10 or 15 years. In the economic history of the last millennium, this is an event that ranks only with the Renaissance and the Industrial Revolution, and that I would suggest to you is far more important and represents far more change for far more people, taking place far more rapidly.
Here’s how that story may look from an Indian perspective just one generation from now: India will look at a nation that has the world’s largest labour force, that has by a wide margin one of its three largest economies, that has over a billion people in middle-class living standards, that can look back at a period in which tremendous economic energy was unleashed — first with the reforms of the 1990s and the first decade of the twentieth century that saw a profound opening-up of trade and investment to the rest of the world, that saw the beginning of movement from a presumption of prohibition to a presumption of permission.
And, believe me, much has changed.
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I remember my first trip to India 20 years ago. I met an entrepreneur with a fantastic software idea who was unable to rent a car in the United States to market his software idea because he couldn’t get a credit card or enough cash because of the then-present capital controls in India.
Looking back from 2040, the second thing people will see is that India was the first developing country to embrace on a major scale the knowledge economy: Whether it was world leadership in software that made Bangalore the hub of the world’s software industry; whether it were efforts to internationalise exchange in services, symbolised by a burgeoning export of medical services; whether it was the overdue recognition; whether it was the remarkable progress that India was able to make by harnessing an expatriate community.
By 2040, all of this will be discussed, and people will remember the Washington Consensus and the Beijing Consensus as interesting historical ideas. But a majority of the world’s people will be following a Mumbai Consensus. I’m not here to tell you that all of this is going to happen, that all of this will necessarily happen. But I am here to tell you that it or events like it are a very real possibility.
(Excerpts from an address to the US-India Business Council by former US Treasury Secretary Lawrence H Summers on ‘Reflections on the US-India Economic Relationship’ on June 2)