December 16, 2004

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The Chinese development puzzle

My musing yesterday on China's metamorphosis got me thinking about this line:

It (China) has done more to alleviate poverty and hunger than any other organisation in the history of mankind.
Why should that be? What did China have 25 years ago that countries that are poverty stricken and moribund do not have? Why has China succeeded when the best efforts and years of international aid, World Bank, NGO and other programs have barely helped many poor countries in Africa and South America? After all, China was and is ruled by a totalitarian Communist regime; it has limited rule of law; corruption; an inefficient financial system where loans are allocated based on cronyism and diktat rather than price. Going by the economic development rulebook, China shouldn't work. But it has and does. Why?

My best guess is China set reasonably stable macro-economic parameters and got out, to some extent, of people getting on with the business of making money. Once a measured dose of market capitalism was introduced, China's entreprising people went to work and the success of their efforts have borne fruit. But the question remains: have development organisations, foreign aid givers and NGOs actually learnt anything from China's example?

I'd gladly welcome any input on this one. I don't pretend to know the full answer. But I cannot help but feel the answer is well worth knowing.

posted by Simon on 12.16.04 at 11:18 AM in the


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"China's entreprising people" says it all.
Tito sat on the Balkans for 40 years and the moment he departed the scene all the old tribal hatreds resurfaced.
Same in China. Despite Mao and the Red Gards brain washing the people for 40 years, the old,intuitive capacity to trade and make money resurfaced naturaly.
Cultural differences surface again.

posted by: Andrew on 12.16.04 at 02:28 PM [permalink]

Andrew, I think that might be part of the answer. But I'm not sure I believe that Africans are any less enterprising than Chinese. It might be that Chinese culture has long emphasised education and learning...

posted by: Simon on 12.16.04 at 05:40 PM [permalink]

I'd vote for China having a "totalitarian regime" (although you seem to class it as a negative for economic growth). China under the CCP has consistently shown the ability to think up and execute projects on a huge scale ... I'm thinking of such successes as the great leap forward and the cultural revolution. Perhaps it's just 3rd time lucky.

Most countries just bumble along, either tweaking economic parameters which only have small effects, or having a bloody revolution/war (which obviously has a negative effect). China doesn't seem to be like that: big projects - big results.

posted by: David on 12.17.04 at 09:47 AM [permalink]

Ask and ye shall find!
Finance and Development is IMF's issues and best practices journal, which also includes work from World Bank economists.

Here's an article from this quarter's issue: "Learning from Success," by Martin Ravallion and Shaohua Chen. (pdf)
The blurb: "China has made huge strides in its battle against poverty over the past 25 years, providing a number of lessons for other developing countries trying to improve living standards. What has worked well in China and why has the problem of inequality become a looming problem?"

The biggest source of poverty reduction is, of course, not replicable, either by China or others -- Deng's liberalization of agriculture. But some interesting observations nonetheless, especially on the importance of rural and agricultural development (bulk of poverty reduction from growth in primary sector), and that growth and inequality aren't necessarily tradeoffs (at least to a certain point).

Your point about macrostability is also clearly critical. I've got to study their comments about the ambiguous contribution of increased trade more closely -- doesn't quite jibe in my brain with their comments about sectoral contributions to poverty reduction and relative to growth rates. There's a bit of a mix there between growth rates and impact on specific workers that seems a bit apples and oranges, but it's probably just my reading of the piece.

posted by: nadezhda on 12.18.04 at 02:23 AM [permalink]

Communist China is one of the last living proofs of the failure of communism. China improves when (and where) abandons communism (in economy). China is the same black hole as before when (and where) mantains communism (in politics).



posted by: 1972 on 12.18.04 at 08:30 PM [permalink]

of course the Chicoms did more to cause poverty, famine, death, etc first.

Maybe what they did to alleviate it was to stop doing the things that caused it.

That is, they got oput of the way

posted by: jack on 12.19.04 at 11:24 AM [permalink]

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