How China Escaped the Poverty Trap tackles a long-standing problem in development: Is it strong institutions of good governance that leads to economic growth, or growth itself that enables strong institutions?Ang reveals that this chicken-and-egg debate is false. Drawing on deep historical evidence of China’s great transformation since 1978, she shows that development is in fact a coevolutionary (mutually causal) process that occurs in three reciprocal steps:
harness existing weak institutions to build markets > emerging markets stimulate strong institutions > strong institutions preserve markets.
In China, underlying this adaptive process of development is a system within the party-state that she calls “directed improvisation.” This system consists of three elements: a flexible strategy of political communication, relatively clear criteria of bureaucratic success coupled with high-powered incentives, and efforts to foster mutual exchanges between economically advanced and backward regions.
In a final comparative chapter, Ang extends her analysis to three contrasting cases–late medieval Europe, antebellum United States, and contemporary Nigeria–and arrives at a striking conclusion: in all these cases, actors on the ground creatively leveraged institutions that appear weak, wrong, or corrupt to meet the challenges of building new markets. In short, the belief that we must first “get institutions right” in order to achieve growth is not only wrong about China and other developing countries, but also wrong about the history of the West.
How China Escaped the Poverty Trap upends the conventional wisdom on development. It rejects linear causal accounts and the assumption that best practices in wealthy democracies are a universal benchmark of good governance. Further, rather than invoke adaptation as a buzzword, it also specifies the conditions that must be created in order for effective adaptation to occur.
“Development economists have struggled to explain the extraordinary growth of the state-led Chinese economy—despite apparent violations of the usual ‘micro rules.’ Yuen Yuen Ang unpacks the process with convincing detail, explaining the underlying logic of a story so apparently different from the textbook models. Are there lessons here for today’s low-income economies? How China Escaped the Poverty Trap is worth reading with that in mind.”
—Nancy Birdsall, President, Center for Global Development
“Sometimes the best way to answer a difficult question is to ask a different question. In this book, instead of asking the usual question—How has China developed despite having low-quality institutions?—Yuen Yuen Ang asks how China has used those institutions to kick-start economic development, which then set off a mutually reinforcing cycle between institutional development and economic development. This innovative and sophisticated book is an outstanding contribution not only to the study of Chinese economic development but also to the long-running debate on the role of institutions in economic development.”
—Ha-Joon Chang, University of Cambridge, author of Kicking Away the Ladder and Economics
“In this major new contribution, Yuen Yuen Ang offers a fresh synthetic explanation for the stunning economic transformation of China in recent decades. She shows how China experienced sustained rapid economic development by transforming weak institutions in ways that strengthened states and markets simultaneously. This book points toward a potential model of growth for other countries and is a must-read for all scholars interested in explaining development trajectories in the Global South.”
—James Mahoney, Northwestern University, coauthor of Advances in Comparative-Historical Analysis
“How China Escaped the Poverty Trap addresses an enduring question in political economy: Why are some nations rich and others poor? This core question is explored through a secondary question about the sequential relationship between effective governance and economic growth: Did growth follow or result from state capacity? Yuen Yuen Ang states that the government and economy coevolved, meaning they adapted to each other. She identifies a three-step sequence to this coevolutionary process and shows, surprisingly, that the first step of development is actually to build markets with ‘weak’ institutions, that is, features inconsistent with norms of good governance. Ang crafts this original and compelling argument using a rich base of fieldwork, including more than three hundred interviews that introduce readers to real voices on the ground.”
—Kellee S. Tsai, Hong Kong University of Science & Technology and Johns Hopkins University, author of Capitalism without Democracy