Thursday, February 18, 2010

277) China's Rise in Historical Perspective

China’s Rise in the Medium Term Perspective: an Interpretation of Differences in Economic Performance of China and Russia since 1949
Vladimir Popov - New Economic School, Moscow / Carleton University, Ottawa
Revista Interdisciplinar História e Economia
Vol. 3 - 2º semestre de 2007

article in pdf

This paper is an attempt to interpret recent rapid Chinese growth in a longer term perspective and in comparison with Russian economic performance. First, it is argued that recent economic liberalization produced spectacular results (1979-onwards) because the reform strategy was very different from the Washington consensus package (gradual rather than instant deregulation of prices, no mass privatization, strong industrial policy, undervaluation of the exchange rate via accumulation of reserves). Second, recent Chinese success (1979-onwards) is based on the achievements of the Mao period (1949-76) – strong state institutions, efficient government and an increased pool of human capital. Unlike in the former Soviet Union, these achievements were not squandered in China due to gradual rather than shock-therapy type liberalization.

Comment PRA: The author is incredibly naif: he does not see that the whole process of China's reform and adaptaption to a modern economy is due entirely to its acceptance of the main tenets of Washington Consensus, that are: market liberalization, property rights, competition, private investment, regulation mostly by the market than by the State, privatization (extensive and intensive), and some measure of liberalization of capital flows.
It is correct that China still keeps a tight control of the currency, interest rates (like many other Central Banks) and exchange operations, but that is due to the fact that the financial sector in China, and most of its national banks are not yet prepared to confront a totally open market economy. But the trend is there.
Contrary to what the author say, the whole package of Chinese reform is capitalist, or at least, market-led, not State-led, and the comprehensive process in entirely in line with mainstream economics, that is, Washington Consensus, not an anti-Western model, that he conceives erroneously.
Paulo Roberto de Almeida (18.02.2010)

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