Tuesday, February 26, 2008

What Makes a Miracle: Some myths about the rise of China and India

What Makes a Miracle: Some myths about the rise of China and India

Pranab Bardhan's Boston Review article debunks claims that China and India's economic development is solely due to capitalism: communism, democracy and socialism have also played major parts.

Added to the Government And Economics index.


Glen said...

A big piece of the Chinese miracle missing from that article was the ideological revolution/debate over "the criterion of truth". China's rough equivalent of Milton Friedman (or, if you prefer, Gorbachev) was a professor of philosophy named Hu Fuming who wrote an article in 1978 called "Practice is the Sole Criterion of Truth". His article was a "the emperor has no clothes" moment that ultimately helped turn policymakers away from an official policy of following the alleged will of Mao in all matters - "the two whatevers" - in favor of doing and believing what actually works in practice. Capitalist land reform - allowing farmers to profit from their labor - was just one of many fantastic changes that came out of that.

The key point is that China at that point - in the late 1970s - embraced *science* for essentially the first time. They started using the scientific method to evaluate policies, including bringing in experts from other countries and deliberately trying to learn from and copy - albeit "in a Chinese way" the positive policies and experiences of other nations. That's when things really started to take off.

Here's a recent retrospective on Hu:


Mike Huben said...

Thanks for that one, Glen.

Only one thing I'd criticize about your comment: land reform (in China and elsewhere) is seldom capitalist. Usually it is Jeffersonian populist: aimed at creating ownership by farmers (individually or community wide), rather than a capitalist class. Perhaps you may argue that this is a step along the way towards capitalism, but it is not quite the same because there is little or no mobility of this capital.

Glen said...

Yes, this particular reform was about allowing farmers to directly profit from their labor, not about whether they could sell the farm itself. In the old system there was essentially no incentive for farmers to be especially productive. In the new system farmers still had a small production quota to meet but anything they produced beyond that they were free to sell on the market to anyone who wanted to buy at any mutually-agreeable price. Only a few farms were allowed to do this at first but their productivity beat the old system by orders of magnitude and the system expanded until these (still relatively small) farms accounted for most of China's agricultural production.

From farming, the same concept spread to other areas of the economy over time. Eventually it was possible in some areas to similarly profit by building a factory, whereupon the groundwork had been laid for WalMart.

Wikipedia says this was called the responsibility system.