Must-Read: : The Making of an Economic Superpower–Unlocking China’s Secret of Rapid Industrialization: “Poverty or backwardness or the lack of industrialization is always and everywhere a social coordination-failure problem…
…The problem arises because creating markets and the corresponding economic organizations (based on the principle of the division of labor) are extremely costly and require gigantic coordination efforts and trust from all market participants. In a most fundamental sense, the “free” market is a public good, and the most fundamental one, whereas its pillar is social trust…. Development is first and foremost a problem rooted in both missing markets and missing market-creators, in both market-coordination failures and government failures…. The benefits of the market are largely social while its costs (of creation and participation) are largely private. Hence, historically, a natural process of mass-market formation/fermentation has been a lengthy evolutionary process… initially accomplished mainly by a powerful and colossal merchant class that acted collectively under a nationalistic mercantilist spirit and backed fiercely by their government….
What China’s development experience showed to the world is that the centuries-long Western-style “natural” and lengthy market-fermentation process can be dramatically accelerated and re-engineered by the government, by its acting as the market creators in place of the missing merchant class, yet without repeating the Western powers’ old development path of barbaric primitive accumulations based on colonialism and imperialism and slave trade. China’s development experience thus suggests a new model (theory) of economic development, which can be labeled as the New Stage Theory (NST), or “Embryonic” Development Theory (EDT)…