History of Modern Economic Growth: China: Recent Episodes
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What is the household responsibility system (HRS) and what were the changes in the Chinese agricultural sector at the beginning of the 1978 reforms?
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How did the earlier pre-1978 reforms contribute to the rise in agricultural output growth post-1978 following the introduction of the HRS?
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Instead of privatization, how did reform of the industrial sector occur in China? What is a dual-track economy and until what time was China a dual-track economy?
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Why should stock listings, corporate structure reforms, and corporate governance reforms of state-owned enterprises (SOEs) not be interpreted as a simple privatization of Chinese SOEs?
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What are the main differences in the sets of economic reforms between the Deng Xiaoping (1978-84) and Zhao Ziyang (1984-89) period?
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What are the trends in the key SOE statistics (the relative and absolute share of total employment; SOE's profit as a percent of GDP) between 1978 and the mid 1990s?
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Why would it be inaccurate to reduce the changes in the Chinese economy in the post-1978 "Reform and Opening Up" (改革开放 Gǎigé kāifàng) period to the simplistic description of "Market Reform and Free Trade"?
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What are the main ways in which the Chinese developmental state has remained involved in the management and steering of the economy after 1978, specifically in the different 1978-2000 period?
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What is so special about China's exports?
We review the policy cycles between 1949-1978 in China from the framework of the developmental state.
We will address the following questions: 1. According to proponents of industrial policy, why does development focus on supporting manufacturing or capital-intensive industry, instead of the services sector or the agricultural sector? 2. What is meant by the two stages of developmental states? What is the disagreement in the academic literature about the optimal role and sequencing of international openness and exports? 3. To what extent is the developmental state’s industrial policy more than just the infant industry argument, ie. besides tariffs and subsidies, what role and policies does the developmental state adopt? 4. According the developmental state framework, why is a coordination mechanism such as the state needed for the development of certain industries? 5. What are the historical origins of the developmental state? 6. What are the intellectual origins of the idea of the developmental state? 7. Was the developmental state model only applied in developing countries? If no, how do the policies adopted by economies in Western Europe or North America in the early 19th century differ from the developmental state policies of developing countries in the 20th and 21st century?
The traditional pre-modern Chinese economy suffered from limited state and fiscal capacity. The symptoms as well as resultant effects of limited state capacity were resistance by entrenched elites, including the gentry, local magistrates, and merchants, to fundamental economic reform. This can be seen from Kangxi's failed cadastral survey, the response to the Taiping Rebellion, the Tongzhi Restoration, and the aftermath of the Boxer Uprising. In this episode, we trace the changes in the Chinese economy over the late Qing period (1840-1985), the Interwar Period (1912-37), and the War and Civil War (1931/7-49). The tumultuous developments left the Chinese economy devastated but also established some, albeit limited pockets of progress, and endowed the state with control over the economy which would enable it to adopt a developmental state approach following independence in 1949.
In this episode we look at these issues:
- What is the reason for the slow onset of rapid economic growth in China compared with Britain as the first mover, other Western European economies as immediately followers, and Japan and Korea as one of early catch up cases?
- Idealistic vs. materialistic explanations of economic history.
- Two institutionalists schools: institutions restricting the state or institutions restricting the market.
- Static vs. dynamic comparative advantage
- The essential features of the traditional Chinese economy
- The key stylised facts of the Chinese economy in terms of (i) absolute total GDP, (ii) absolute per capita GDP, (iii) relative total GDP, and (iv) relative per capita GDP with relative being measured against the World Economy and relative to Western Europe.
- The role of demand and supply of technology in the economics of technology argument: Was the traditional Chinese economy lacking in demand or supply of technology?
- The limited quantitative size and geographical reach of pre-modern China’s international trade.
- Fiscal capacity and the effects of limited fiscal capacity on the onset of Chinese modern economic growth.
A discussion of alternative hypotheses to the high-level equilibrium trap, the economics of technology argument, and how China escaped the trap.
Starting with the turning point in the 14th century, there was a slowing down and eventual reversal in the pattern of north to south migration in China, an adoption of isolationist trade policies, the decline of serfdom, as well as the rise of rural markets and rural industries. These transitions are the backdrop to the high-level equilibrium trap that China found itself in by the start of the Industrial Revolution.
A brief exposition of Mark Elvin’s book on “Patterns of the Chinese Past” and his hypothesis that the Chinese economy, following the 14th century, was stuck in a high-level negative equilibrium.
How did some countries manage to catch up with the West after its industrial revolution and become part of the pack of the most advanced countries in the world economy in the 20th century? We will look at Russia, Japan, and China.
What are the historical origins of the divergence between today’s developing and developed countries? This episodes provides a brief introduction to the three-part answer and the associated three eras of modern global economic history.
A take on Pommeranz’s book on why Britain was the first country to enter the industrial revolution.
Francis Bacon, the 16th century English philosopher, suggested in his major work Novum Organum, the four main human biases and thinking errors that prevent objective reasoning. Budding social scientists, but economists in particular, need to be aware of these self-limiting errors in thinking.