It was a delightful opportunity to introduce my book, How China Escaped the Poverty Trap, at the World Bank last Friday. This talk introduced one of the core themes of my book: Rethinking the Sequence of Development, which resonates with the forthcoming World Development Report 2017.
Here’s a quick summary: My book tackles an intractable chicken-and-egg problem of development: Is it strong institutions of governance that leads to economic growth or vice versa? This debate, I show, turns out to be false. In fact, development unfolds in a three-step coevolutionary sequence: harness weak institutions to build markets > emerging markets stimulate strong institutions > strong institutions preserve markets. Contrary to popular belief that we must transform weak institutions into strong ones (such as rule of law, formal property rights, technocratic agencies) in order to achieve growth, leveraging existing weak institutions to build new markets is the first step of development.
Many thanks to Yongmei Zhou, Nancy Birdsall, and Asli Demirguc-Kunt for sharing their insightful remarks on the book, as well as to an engaging audience at the World Bank.
The audience raised many excellent questions, which regrettably I couldn’t all address at the talk. I’ll like to respond to a few commonly raised questions here.
Question: China is ruled by an authoritarian, centralized party, whereas most developing countries are not. So how could its experience travel elsewhere?
It’s true that China’s status as a single-party authoritarian regime makes it special, but this doesn’t mean that China’s development experience should be entirely dismissed.
When comparing China to other developing countries, here’s the key distinction. In China, policy and economic changes sweep across the entire country, under the aegis of an authoritarian state. Even then, this is not a purely command system, but rather a combination of direction from the central leadership and bottom-up improvisation by local authorities (which I term “directed improvisation” in my book). Development occurs at different speeds across parts of China but share a similar three-step process:
Now consider other developing countries where governments are weak and fragmented, such as Nigeria and India. There, bottom-up development occurs only in pockets of the economy, not on a national scale as we see in China. Also, it tends to be initiated by social actors, not state actors, as the government is either weak or lacks incentives to act. Yet despite having a weak state, as I discuss in the case of Nollywood in Nigeria (see the Conclusion of book), development follows the three-step sequence I outline above.
The policy implication is clear: Development experts must learn to use existing structures, traditions, and norms—even if seemingly weak and wrong—to build markets.
Question: It wasn’t hard for China to escape poverty, right? The act of opening markets alone would have been sufficient to spur growth and lead to today’s outcome.
With messages about China’s rise and spectacular growth repeated ad nauseam today, yes, it’s easy to think that either China was never that poor or that it was easy to get rich.
Quick fact: According to World Bank numbers, China was poorer than “bottom-billion” countries like Chad, Malawi, and Bangladesh in 1980, when markets first opened. The picture you see on my book cover is that of Guangdong province (the heartland of Chinese capitalism) in 1982. Only a generation ago, China was a very poor country.
Open markets and trade are essential ingredients of China’s development. But it would be too simplistic to assume that these alone are sufficient to do the magic. Otherwise, other poor countries could simply open their markets, and they too should escape poverty. China’s story was one of continuous adaptation to evolving challenges of development, at both the central and local levels, in addition to freeing markets.
Question: What’s the role of culture in China’s development?
I’m generally skeptical about cultural arguments, whether they’re made in the context of China or elsewhere. Culture, by definition, means a stable and long-lasting set of beliefs and values. Hence, if culture is an unchanging variable, how could it explain the radical and rapid changes that have occurred in China in the past decades? If the same culture accounts for both failure and success, then it doesn’t explain anything.
Moreover, it is a misconception—even stereotype—to think that all of China has the same culture. Regional histories and cultures of leadership vary tremendously across regions of China, as you’ll read in my book’s comparison of Zhejiang (coast) and Hubei (inland).
Next, I’ll be speaking at another World Bank conference, this time in Malaysia, in January 2017. The conference is on building capability to implement solutions to complex problems. This, in addition to rethinking the sequence of development, is the second theme of my book. I look forward to an exciting discussion in Malaysia.
This blog was originally posted on LinkedIn at this link.