

A Brief History of the Chinese Growth Model - gruseom
http://www.mpettis.com/2013/02/21/a-brief-history-of-the-chinese-growth-model/

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tokenadult
Any discussion of economic growth policy in China immediately reminds me of my
first visit to China, in 1982, when very little economic growth had happened
for about three decades. Going from the United States to Taiwan earlier in
that same year gave me a whole new appreciation of what "poor" means. But then
going from Taiwan as it was in 1982 to Guangzhou (via Hong Kong) the same year
even more more starkly showed me what real poverty looks like. China's
economic growth model of the most recent thirty years has been very
consciously patterned on the growth model of Taiwan that began in the 1950s.
Three books that I read during my first stay in east Asia helped me understand
what I was observing all around me in 1980s Hong Kong, Taiwan, and China. The
first book was an abridged edition of Adam Smith's _The Wealth of Nations,_

[http://www.amazon.com/Wealth-Nations-Adam-
Smith/dp/161382081...](http://www.amazon.com/Wealth-Nations-Adam-
Smith/dp/161382081X/)

which was very illuminating about why Hong Kong, Taiwan, and Guangdong
Province, areas with similar cultures but very different governance, could
have such different economic levels. The second book was _How the Other Half
Dies,_ now available as a free download of the original book,

<http://www.tni.org/tnibook/how-other-half-dies-0>

which I saw on the bookshelf of a student from France who lived in the same
international dormitory I lived in in Taipei. That book has some interesting
details about the successful land reform in (South) Korea and Taiwan, details
expanded in the book _Island China,_

[http://www.amazon.com/Island-China-Ralph-N-
Clough/dp/1583483...](http://www.amazon.com/Island-China-Ralph-N-
Clough/dp/1583483152/)

a more detailed study of Taiwan's development. Successful economic development
doesn't have to be rocket science, especially when there are examples to
imitate with varying mixes of natural resources and natural disasters and
demographic challenges, of varied cultural backgrounds, all over the world.

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qschneier
The economists never get it right.

Being in China for more than 30 years I can tell the Chinese growth model is
really simple: #1 An international economy and market so that we have a common
currency to measure. The government also controls foreign exchange so that the
"valuation" can be bumped to a high level. #2 A billion slaves so that you can
get things done really quick and nobody would ever challenge. #3 No cost. In
China pretty much everything is owned by "the public", so that those "country
owned" companies can get the land and other resources with a very low price or
even free. Labor is cheap. And you don't need to clean up the waste you
produce: you can just throw them anywhere. The companies have no incentive for
efficiency improvements so that the resources consumption is fast.

Before the "economic reform" in 1990s #1 didn't exist so you only see the
growth in recent years.

This is a damn simple business and even a dog can make a lot money out of it
easily. It is not replicatable (#2/#3) so it only happened in China. This is
of course unsustainable. The minerals are exhausted, the environment is
polluted and most of the people are still poor and the population getting old
due to the one child policy. I would say we may see a collapse in the future 5
years or even less.

~~~
seanmcdirmid
Where are you based in China?

I'm not bullish on China, but I'm not that negative either. Some of this is
true, but not in the extreme presented.

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Symmetry
The author cherry picks countries to suit his he mentions 19th century Chile
failing while embracing free trade, but Argentina in the 19th century also
embraced free trade and reached 1900 nearly as wealthy as America despite
starting with a less well educated populace.

I'm not sure why he lists Japan as a protectionist success here either, since
Japan was famously importing as much as possible in this period. They also
were far more keen on importing laissez faire British advisors.

Not to say that protectionism can't work. As a backdoor way of transferring
money from farmers to industrialists it can work, but if your country has the
beaurocratic sophistication to engage in direct subsidies those will work
better, as they did in Japan or the USSR.

Another benefit of tariffs in practice was that they allowed the government to
raise money relatively efficiently, compared to other means of taxation then
available. This allowed a larger government, which allowed more advanced
commercial institutions. Good luck getting someone to enforce a commercial
contract in China in the 19th century! But again, most modern states can pull
off having an income tax, so this isn't as much of a concern these days.

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deadbea7
Looks like a crashed server. Short url of the google cache link
<http://bit.ly/WcTSWk>

EDIT: site seems to be back again

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yekko
Print money to fund productive activities, it's as simple as that.

