Why I Try Not to Blather About China: My Visualization of the Cosmic All Is Incomplete
During the discussion of: Grasp the Large, Let Go of the Small: The Transformation of the State Sector in China:
Bradford DeLong admitted that the more good papers on China he has read the more uneasy he has become–and the less he feels he understands.
One of the few historical patterns to repeat itself with regularity over the past three centuries has been that, wherever governments are unable to make the allocation of property and contract rights stick, industrialization never reaches North Atlantic levels of productivity. Sometimes the benefits of entrepreneurship are skimmed off by roving thieves. Sometimes economic growth stalls. Or sometimes profits are skimmed by local notables who abuse what ought to be the state’s powers for their own ends. China has failed to make its allocation of property rights stick in any meaningful sense through the rule of law. Instead, it seems to have adopted a form of industrial neofeudalism.
Such a system should not work: The party bosses with special rights to enterprises should find themselves unable to referee disputes among one another. The same shortsighted rent-extraction logic should apply in China as has played out in Eastern Europe, sub-Saharan Africa, Southeast Asia, South Asia, and Latin America. And yet, somehow, it seems to be working in China.