02 February 2011

The China Problem


"Alright then smart-arse, if democracy is so good for development, then what about China eh?"

Well, I see your canny Rodrik-rebuttal and raise you......more Rodrik.....who I will quote at length.
For every Lee Kuan Yew of Singapore, there are many like Mobutu Sese Seko of the Congo.
Democracies not only out-perform dictatorships when it comes to long-term economic growth, but also outdo them in several other important respects. They provide much greater economic stability, measured by the ups and downs of the business cycle. They are better at adjusting to external economic shocks (such as terms-of-trade declines or sudden stops in capital inflows). They generate more investment in human capital – health and education. And they produce more equitable societies.
Authoritarian regimes, by contrast, ultimately produce economies that are as fragile as their political systems. Their economic potency, when it exists, rests on the strength of individual leaders, or on favorable but temporary circumstances. They cannot aspire to continued economic innovation or to global economic leadership.
At first sight, China seems to be an exception. Since the late 1970’s, following the end of Mao’s disastrous experiments, China has done extremely well, experiencing unparalleled rates of economic growth. Even though it has democratized some of its local decision-making, the Chinese Communist Party maintains a tight grip on national politics and the human-rights picture is marred by frequent abuses.
But China also remains a comparatively poor country. Its future economic progress depends in no small part on whether it manages to open its political system to competition, in much the same way that it has opened up its economy. Without this transformation, the lack of institutionalized mechanisms for voicing and organizing dissent will eventually produce conflicts that will overwhelm the capacity of the regime to suppress. Political stability and economic growth will both suffer.
Absolutely worth reading in full; The Myth of Authoritarian Growth.

All of which is completely besides my original point, which I will paraphrase as such; we know very little about how to take developed societies to where the poor people are, but we know a great deal about how to bring the poor people to where the developed societies are*, and yet we spend the majority of our time thinking about the former. 

*It's really pretty easy. A boat. Or a plane.

**If you noticed my use of TWO semicolons within the space of TWO sentences there, well this is absolutely to blame.

13 comments:

Ranil Dissanayake said...

Another really good post, Lee.

My biggest problem with this democracy/not democracy debate is how static the terms on which we judge them are. Countries become democratic gradually (as my examples of the US and UK show, and this process isn't even complete yet); countries that are authoritarian aren't authoritarian always and everywhere in their sphere. It's far more accurate to say there are Governments that are good for growth and ones that are bad for growth, and it's difficult to easily divide them on their openness.

The bottom line is that the relationship between democracy and growth is extremely murky at best, and I'm very wary of attempts to link them.

On the other hand, I will support a movement to generate democracy because it's a good thing and it's what people want (it isn't always, cf. Iran in the 1970s) every time.

Your final point is again correct, but we've had the immigration argument before. I'm all for it, but not as a development tool: the people who can afford to migrate are never the poorest. They just become the poorest (though still better off than before) wherever they migrate to.

Ranil Dissanayake said...

oh, btw, I love semi-colons, too. though I don't always use them; correctly.

Ranil Dissanayake said...

Gah. Lost comment.

I just typed that I only just saw your response on your other post. The history thing I'm actually writing a post about now (not just on this issue, more generally) but just wanted to say, yes - I agree. Democracy is development in the broad sense.

But in very poor places I tend to think that material aspects are the most important, something that changes over time.

Anonymous said...

> we know a great deal about how to bring the poor people to where the developed societies are.

How scalable is it? Can we take the poorest 500 million people in Africa and put them on a boat to the OECD?

Roving Bandit said...

Yes.

If the US had the same population density as the UK, it would be home to 2.5 billion people.

You can check my maths here: http://en.wikipedia.org/wiki/List_of_sovereign_states_and_dependent_territories_by_population_density

c-sez said...

Not arguing with your maths on that score.

Just whether you can get there from here in any useful timeframe. For instance, can you put 300 million people on a boat to the USA and double its population overnight aka the next 10 years? If you can't, is it really an intervention at scale? If you can, will the US society and economy (already with its 10% unemployment...) even resemble what they do today?

In terms of global environment and resources, can we put the billion people at the 'bottom of pyramid' into a place where they will overnight adopt the consumption patterns of the top 1 billion?

Anonymous said...

tilting; windmills

Roving Bandit said...

Is Southern Sudan or Chad or CAR going to become developed in the next 10 years? Are millions of children going to stop dying of easily preventable diseases in the next 10 years? I worry more about that than the look of US society.

ALVARO said...

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Saludos desde Santa Marta, Colombia

Roving Bandit said...

Robin Hanson links to a paper here http://www.overcomingbias.com/2011/02/open-border-wage-cost.html in which "Their survey of the earlier literature found that a 10% increase in the immigrant share of the labor force reduced native wages by about 1%."

c-sez said...

Obviously I left a phrase out of my last comment, and its meaning was unclear. Otherwise you wouldn't have mistaken my primary concern and taken a swipe at it. Sorry, let me try again.

If we double the population of the USA, will its society and economy resemble what they do today, ** so that the incoming immigrants from poor countries obtain the benefits we want them to? **

Thanks for the link. I can't access the NBER article referred to in it, but I seriously doubt the paper purports that the effects would be linear between a 10% increase in immigrant share in labour and a 50% or 90% increase.

Roving Bandit said...

Yeah sorry that sounded a bit bitchy. And I completely agree with you that Hanson is making a wild extrapolation there and somehow forgetting about general equilibrium.

But lets say there are nearly a billion people in the OECD and so we could probably happily take an extra 100 million with only a 1% cut in native wages. Bargain.

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