What Explains China’s Rise? — Part 3

Samuel Johnson (1704 – 1789), the great lexicographer, noted that “knowledge is of two kinds. We know a subject ourselves, or we know where we can find information upon it.”[1] Although I know fancy little about China, I do know where that knowledge can be had. There are very credible experts on the subject of modern China’s growth. It is best to learn from their scholarship. Fortunately for us, all we need is an internet connection and time. Here I will list some of the resources I found interesting.

Fear of China

Seen from the broad perspective of human history in the context of material prosperity, the astonishing story of China post the Mao era (starting around 1978) is heartening. From a narrower perspective though — that of an American or an Indian or Japanese or European — the China story is likely to be a cause for alarm. The prospect of China replacing the US as the global hegemon is chilling: it threatens the liberal world order. Continue reading

What Explains China’s Rise?

In any discussion on economic development, China invariably shows up. How did China manage an economic transformation that it now rivals even the greatest developed economy? Isn’t it amazing that China did that without being a democracy? Or maybe precisely because it is an autocracy that it could do what India, the largest democracy in the world, cannot do?

Those are not easy questions to answer because a story as large as China cannot be easily or quickly told. Big books have been written by reputed scholars on the subject. They are useful, instructive and fascinating. My personal favorite is the book How China Became Capitalist (2012) by Ronald Coase and Ning Wang.

Anyone seriously interested in understanding the economic rise of China should read Coase’s book. (Just by the way, Coase wrote that book at the age 101.) The publisher, Palgrave, gives this as the description of the book: Continue reading

Isn’t China Socialist? What about Motivations?

My apologies for not keeping in touch. I am afraid that this dry spell on my blog is going to continue for a couple of weeks more. I am on a road trip and the whole of the coming week I will be on the road to Yellowstone National Park. So I thought I would reply to a few recent comments on this blog.
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The Unbearably Sad Reality of India

Yesterday’s Wall Street Journal reported how the US is pressuring India to (what effectively is) surrender its interests to Pakistan’s whims. “U.S. Aims to Ease India-Pakistan Tension“. Why? Because Pakistan presented to the US administration “a litany of accusations against the Indian government,” and suggested “the U.S. intercede on Pakistan’s behalf.” Which the US is in essence doing. Continue reading

Debunking Myths about China and India

Pranab Bardhan, a professor of mine at UC Berkeley, whom we have met before here (see Crouching Tiger, Lumbering Elephant, and Pranab Bardhan on the Indian Economy, for instance) has an excellent article in the Boston Review titled “What Makes a Miracle: Some myths about the Rise of China and India.” (Hat tip: Yuvaraj Galada.)

He states the standard view explaining the rapid growth of the two countries:

What explains this strikingly rapid growth? The answer that continues to dominate public discussion in the United States runs along the following lines: decades of socialist controls and regulations stifled enterprise in India and China and led them to a dead end. A mix of market reforms and global integration finally unleashed their entrepreneurial energies. As these giants shook off their “socialist slumber,” they entered the “flattened” playing field of global capitalism. The result has been high economic growth in both countries and correspondingly large declines in poverty.

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Moving Mountains

Golf, not Chess

Economic growth in a sense, and to a much larger extent economic development, is more akin to a game of golf than a game of chess. In golf, the opponent’s moves matter very little; you may as well play by yourself and later compare scores if needed. In chess, your move depends on how your opponent has moved and how he is likely to respond to your move. In other words, chess is a strategic game while golf is not. All this is very broadly speaking, naturally. I don’t mean to imply that there are no dependencies among economies as they grow; what I mean is that, especially for a large economy like India, how much it produces and how determines how materially prosperous it is and is independent of how other economies are growing. For strictly benchmarking purposes, one can glance over at the neighbors. And if one is smart, one can learn from the experiences of those neighbors. Still, when it comes to economic growth, it is largely the case that you are playing against yourself.

Here I want to glance at India’s large northern neighbor and recently a strategic competitor in the fiercely competitive game for control of scarce resources. China has been moving mountains — quite literally as you will soon note — for quite a few years for growing its economy. From an Indian perspective, it is a chilling reminder that there are no shortcuts to economic growth and that it takes something special in terms of will and perseverance to overcome the ill-effects of flawed economic policies and failed leadership. It is also a story of hope and the indomitable human spirit, a story of almost superhuman striving by mere mortals.
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Overtaking China

Here is another bit from Anand’s comments.

The collective leadership that is fueling china’s growth today will have to go away in the future. Communism is not going to last long enough for china to become a developed nation. Once communism collapses and democracy begins to form in china, there will be a prolonged period of little or zero growth in the country’s economy.

That is when India will overtake china.

It is very likely wishful thinking combined with admirable patriotism that motivates Anand above. The engine of communism has been decoupled from the Chinese train long ago and it is the engine of capitalism that is driving that one. As Pranab Bardhan had observed, the Chinese were better socialists than Indians, and now the Chinese are proving to be better capitalists than Indians.
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