A&R
argue that economic growth under extractive institutions is unlikely
to be permanent. This is also what North, Wallis and Weingast think,
and it leads all these authors to be skeptical of China’s present
growth spurt. A&R use the analogy of the Soviet Union, which also
grew fast up until the 1970s before crashing. There may well be a
slowdown, or even a political crisis, in China, but I don’t believe in
the USSR analogy, for the following not-very-scientific reason.
Visitors to Soviet bloc countries in the 1960s found them drab and
depressing places: think shortages, rationing and queues, bad
service, no consumer choice, crappy cars, unhelpful and corrupt
officials.... Visitors to China in 2011 come back with very different
impressions – not uniformly positive, but far from stagnation –
fast trains, massive growth, a booming middle class. Even the
problems, like the arrogance of the newly wealthy, arise from rapid
change.
My instincts are that the statistics are not the whole story;
and that if politics fights economics in China, economics will win
and the new bourgeoisie will replace the Communists with a more
pliant executive committee, or even perhaps a system of teams which
compete for office. In short, economic growth can throw up new
assertive classes and generate its own political pressure.
There are
certainly places which do fit the idea of unsustainable growth
(Pakistan, Venezuela) and here growth tends to be based on commodity
prices or foreign aid rather than innovation. (By
the way, innovation does not have to mean “being the next Apple”.
There is also what Dani Rodrik calls “within-the-frontier
innovation”, ie within the technological frontier, ie being the
first firm in your province to sell bottled lemonade or littlepackets of shampoo.) China just looks different to these
cases.
[That's enough of my incoherent thoughts on this very interesting book. Go and read it!]
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