Why Burma will beat Bangaldesh: human capital matters

When I was a little kid I would check out countries whose vital economic and social statistics were not as good as Bangladesh’s. I basically was curious as to what could have happened, how can you be more miserable than Bangladesh??? How??? During the 1980s Vietnam was one of those nations. Torn by war for decade & saddled by a anti-productive Communist economic system this was a nation where I noted that indices like caloric intake and GDP PPP actually had Bangladesh on top!
No more. Vietnam’s economy has grown a great deal from its extremely low base over the last 20 years, and it has now surpassed Bangaldesh. South Asians often like to complain that the reason East Asian nations like South Korea and Japan did so well, while their nations languished, was that the United States injected capital inputs after World War II. That model doesn’t work for Vietnam for obvious reasons.


So what is going on? Vietnam’s literacy rate is 90%, while Bangladesh’s is 43%. I am well aware that terms such as “literacy rate” are subject to a great deal of fudging, and aren’t always comparable, but I think such a wide variance in this case reflects a real qualitative difference. And this gap in literacy is a good proxy for a an enormous difference in endogenous human capital, the natural implication is that Vietnam was always poised to enter the global economy and transition toward higher value sectors and surpass Bangaldesh.
Which brings me to Burma, whose GDP PPP is $1,691 vs. $2,270 for Bangladesh. Burma’s literacy rate though happens to be around 90%. Like Vietnam, when Burma opens up to the rest of the world I assume it will quickly leap-frog over Bangladesh and leverage its bank of human capital to shift into industries where South Asian workforces simply do not have the requisite skill levels (think about the handicaps which might result from having a substantially illiterate labor force on the factory floor!).
I use Bangladesh as a comparison because Burma is right next door, and I would not be surprised if two decades from now Bangladeshi workers stream into its eastern neighbor to take advantage of economic opportunies at the bottom of the skill ladder. But the human capital surfeit is endemic to all of South Asia.
Take a look at these two maps….
undernourished.gif
g-gpw-population-map.gif
I don’t want to minimize the suffering in Sub-Saharan African; but do note that this region has a population of 770 million vs. a population of nearly 1.4 billion in South Asia. Also, note that in very densely population nations such as Nigeria nutrition is better than in most of South Asia. In vast swaths of the continent such as the Congo Basin one can chalk up malnutrition to exogenous shocks such as war; in contrast, South Asia is characterized by a basal rate of poor nutrition.
When reading articles about the Indian economic revolution, keeps these data in mind.

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