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Yuen Yuen Ang - How China Escaped the Poverty Trap

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Yuen Yuen Ang How China Escaped the Poverty Trap
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Before markets opened in 1978, China was an impoverished planned economy governed by a Maoist bureaucracy. In just three decades it evolved into the worlds second-largest economy and is today guided by highly entrepreneurial bureaucrats. In How China Escaped the Poverty Trap, Yuen Yuen Ang explains this astonishing metamorphosis. Rather than insist that either strong institutions of good governance foster markets or that growth enables good governance, Ang lays out a new, dynamic framework for understanding development broadly. Successful development, she contends, is a coevolutionary process in which markets and governments mutually adapt.

By mapping this coevolution, Ang reveals a startling conclusion: poor and weak countries can escape the poverty trap by first harnessing weak institutionsfeatures that defy norms of good governanceto build markets. Further, she stresses that adaptive processes, though essential for development, do not automatically occur. Highlighting three universal roadblocks to adaptation, Ang identifies how Chinese reformers crafted enabling conditions for effective improvisation.

How China Escaped the Poverty Trap offers the most complete synthesis to date of the numerous interacting forces that have shaped Chinas dramatic makeover and the problems it faces today. Looking beyond China, Ang also traces the coevolutionary sequence of development in late medieval Europe, antebellum United States, and contemporary Nigeria, and finds surprising parallels among these otherwise disparate cases. Indispensable to all who care about development, this groundbreaking book challenges the convention of linear thinking and points to an alternative path out of poverty traps.

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A VOLUME IN THE SERIES Cornell Studies in Political Economy Edited by Peter - photo 1

A VOLUME IN THE SERIES

Cornell Studies in Political Economy

Edited by Peter J. Katzenstein

A list of titles in this series is available at www.cornellpress.cornell.edu.

Cornell University Press gratefully acknowledges receipt of a subvention from the University of Michigan Office of Research and the Department of Political Science, University of Michigan, which aided in the publication of this book.

Copyright 2016 by Cornell University

All rights reserved. Except for brief quotations in a review, this book, or parts thereof, must not be reproduced in any form without permission in writing from the publisher. For information, address Cornell University Press, Sage House, 512 East State Street, Ithaca, New York 14850.

E-book edition 2016 by Cornell University Press

ISBN 978-1-5017-0640-0

Visit our website at www.cornellpress.cornell.edu.

Cover photograph: Children investigate a new highway in Liannan County, Guangdong Province, 1982.

Photograph by An Ge, image copyright FOTOE.

Cover design: David Rotstein.

For Chia

Every act of creation is first an act of destruction.

Pablo Picasso

Contents
Figures and Tables

Figures

Tables

Preface

This book grew out of an earlier book I had abandoned.

Originally, I set out to write a book to explain why China could be a developmental (growth-promoting) state if it did not possess the Weberian (professional) bureaucracies necessary for effective growth promotion. On the surface, this was a good question, or so I thought.

But soon I realized the question was wrong.

First of all, are Weberian bureaucracies really a precondition for economic development? If good institutions like Weberian bureaucracies are necessary for market success, then where do these preconditions come from? Arent they themselves dependent on the level of economic growth?

Second, is China indeed a developmental state and does it lack Weberian bureaucracies? Many observers credit Chinas local governments for strongly and proactively promoting growth. Yet others lambaste the same actors for the opposite problems: ineptitude and corruption. So whos right and whos wrong? In fact, depending on where and when you look within China, you can find every variety of political economy, from developmental to predatory, Weberian to patrimonial, modern to backward. In a country that changes so rapidly and varies so widely across regions, no single description is completely right.

Acknowledging that every part of the story was moving, I felt momentarily paralyzed.

Traditional concepts and tools of analysis work well when something can be held constant. In a simple example, when comparing a wealthy and a poor country, we look for variation in the two cases. If they are nearly identical in all respects except one, say, the quality of governance, we may infer that this factor is a likely cause of their economic variance.

Yet what if the cause is a consequence of the outcome? Clearly, institutions and governance are deeply influenced by the level of economic development. One may apply statistical techniques to isolate the causal effects of institutions on the economy (also known in technical parlance as treat endogeneity). But such techniques do not resolve the fact that the two variables are intrinsically interdependent.

Furthermore, what if both the cause and the consequence are moving targets that change over time? For instance, Shanghai was poor, messy, and corrupt in the 1980s, but by the 2010s it approximated the modern, developmental states of East Asia. Was it institutions that changed the economy or vice versa?

Analysts may try to get around these problems by tracing causation back to some deep causes that are presumably constant, such as geography or shocks that occurred in the past. But if factors like geography or history are primarily what determine present-day outcomes, then it suggests that successes and failures are predestined. If a country lacks the right geography or historical legacy, is it doomed? How can we explain the reversal of fortunes among some places that inherited poor geography or a traumatic past?

The more I thought about these questions, the more I wondered if we shouldand couldstudy the world in a different way. The reality of political-economic development is that almost everything moves. Can we understand this reality without trying to hold things constant?

Thus I cast aside my original inquiry and restarted with a basic question: How did development actually happen? If we embrace reality as it is and simply follow the moving parts from point to point, what will we learn?

This book reports what I discovered from my detour into unfamiliar but ultimately more fruitful territory.

Acknowledgments

The creation of this book was an excruciating adventure, filled with surprises and rewards but also anxiety and toil. It would not have been possible to start and finish this long and winding journey without the generous assistance, encouragement, and opportunities provided by many individuals. First and foremost, my acknowledgment goes to mentors at Stanford University. My greatest debts are owed to Jean Oi, as it was Jean who prodded me back onto the path of a scholarly career when I had given up. It was also Jean who instilled in me an unconditional passion for studying politics on the ground; her tireless enthusiasm for fieldwork and interviewing was testimony to the intrinsic joy and scholarly duty of discovering what people really do. David Laitins intellectual breadth and teaching sparked a lasting curiosity for big questions, and his sharp advice kept me on track at critical junctures. Alberto Diaz-Cayeros and Beatriz Magaloni showered generous concern both for my work as a scholar and for my happiness as a person; they were my role models of fine scholarship and kindness. Jonathan Roddens comparative perspective pushed me to think about problems I would otherwise have taken for granted. Andrew Walder patiently listened to my ideas long before they made any sense. He deserves my utmost thanks for continuing to have faith in me and lending encouragement and support whenever it was most needed. More recently, a clarifying conversation with Jonathan Bendor, from whom I had learned about bureaucracies and principles of reasoning, helped me rethink some arguments.

Many other colleagues have influenced the evolution of this book. I wish to thank Atul Kohli, Deborah Yashar, and Miguel Centeno for including me in the Princeton Workshops on State Capacity in the Developing World. This series of workshops, which spanned years and took place in three different continents broadened my horizons and allowed me to test new ideas and receive feedback from esteemed colleagues as my questions and answers evolved. In particular, I thank Atul for inspiring me to take my work in a historical direction. At the workshop in New Delhi, he urged me to develop a genetic account, that is, to trace the origins of the institutions I studied. His suggestion sparked a new path and then subsequent ones, culminating in this book.

I was privileged to join the faculty at Columbia Universitys School of International and Public Affairs (SIPA). I am especially thankful for the warm welcome and collegiality of Jos Antonio Ocampo, Alfred Stepan, Victoria Murillo, Jenny McGill, John Coatsworth, Andrew Nathan, and Isabela Mares. Colleagues and students at Columbia piqued my interest in international development and expanded the scope of this study in ways I could not otherwise have envisioned.

During my years at the University of Michigan, I have benefited from a supportive environment and exposure to new ideas. Mary Gallagher was an extraordinary comrade who once hosted guests at her place till midnight for a conference that I organized (and for this and more, Ken Duck, thanks to you too). She carefully read and commented on this book from its early to final incarnation. Pam Brandwein cheered me during good and bad times and was always there to remind me of what was important; without her unfailing support and abundant kindness, I would have given up many times. Learning about Robert Axelrods pioneering work on complex adaptive systems was essential for reconstructing this book; otherwise I would have dismantled a previous project but would not have known what to do next. And it was also Bob who reminded me to write simply. Jim Morrows incisive feedback pushed me both to clarify the substance of my arguments and to improve their framing; conversations with him motivated a substantial revision of the conclusion. Mariah Zeisberg and I shared mutual words of encouragement and many stimulating conversations despite our different fields of study.

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