Cornell Studies in Political Economy. Ithaca; London: Cornell University Press, 2016. xvi, 326 pp. (Illustrations.) US$27.95, cloth. ISBN 978-1-5017-0020-0.
The story of China’s economic transformation is still baffling to many. How did a once poor country transform itself into a middle-income, capitalist dynamo in such a short period of time, while other countries have failed in that quest? When countless poverty alleviation programs and billions of dollars of aid have only produced mixed results in addressing global poverty, the Chinese success story presses us to question what we have done wrong and how we can learn from the Chinese experience. But developing a clear and coherent understanding of its messy, decades-long process of economic development can be a daunting task. Ang’s book How China Escaped the Poverty Trap takes on that challenge and makes an admirable effort to present a big, common-sense picture. The strength of the book is that it rejects any particular narrow model of explanation and instead provides a powerful dynamic narrative.
Ang pursues an alternative paradigm based on complexity to present an evolutionary process of China’s economic development, which she calls directed improvisation given the Party-state’s high degree of influence (note, not control as she points out) (17, 49). She analyzes mutual feedback processes among various factors of development over time. As the focus of her analysis, she picks two institutions or domains of activities where the market intersects between bureaucracy and national development strategy. Then she identifies three key mechanisms of adaptation in China’s economic development, namely variation, selection, and niche creation. As argued, in China variation is manifested in local innovation based on local conditions. The township and village enterprises in rural areas emerged under such an innovation process and acted as the initial engine of growth. The selection process, by contrast, allowed the Party-state to strike the right balance between variety and uniformity. It relied on institutionalizing a bureaucratic incentive structure, in other words franchising the bureaucracy (104), where incentives were not always vague but included varying degrees of directions based on “red, grey, and black” lines representing a binding constraint, an ambiguous area of policy for bottom-up innovation, and a bold policy, respectively (90). Finally, niche creation allowed China, as immense and heterogeneous as it is, to exploit comparative advantages from its uneven regional development. The outcome, as Ang claims: China’s stellar story of economic success that was incremental as well as nation-wide.
In the bigger picture, the book’s contribution to the political economy of development is manifold. First, Ang’s two most important theoretical claims are: market-building and market-preserving processes are two separate endeavours, and they are an evolutionary process specific to localities rather than a static framework that functions as a magic-bullet fit for all. Couched in the fitting analogy of the chicken-egg puzzle, Ang argues that the approach based on best practices and good governances, often preached by the West as the indispensable ingredients for economic development, is ill equipped for market building. Instead, weak institutions—with all the “grease” smoothing out different layers of socio-economic exchanges, accompanied by bottom-up policy innovations—can naturally set a vibrant market for growth. Does it mean that the state has no role to play? Ang claims that the state has an immensely important but equally difficult role to play. A central leadership has to address a delicate balance: sketching a comprehensive economic policy which provides local government flexibility for innovation and variation, while setting a boundary so that diverse local experiences feed to a uniform national strategy of development. It is important to get the “meta-institutions” (67), i.e., the local conditions for growth, right. But what if local conditions are confined to geographic barriers and become a disadvantage for some regions? Ang contends that geographic factors are not deterministic if we deem economic development as an evolutionary process. The undeveloped regions can exploit their comparative advantage and attract domestic investment when the already developed regions are challenged by rising labour costs, scarce land resources, and the discontent of an increasingly affluent population who start to voice concerns over the environmental and health-related costs of dirty industries. This is when the developed region takes the front seat of the flying-geese formation to pull up the left-behinds (215)—surely, a message of hope for the nations still stuck at the bottom rung of development. Second, Ang’s endeavour to narrate the process of economic development based on complexity adds a bold punch of clarity that could be useful beyond China’s case. Ang is deft at presenting a complex process with a dynamic but well-organized framework that is readable to all. She methodically demonstrates that the academic fetish for sketching a static narrative of causal mechanism should and can be supplemented by a complex but intelligible macro perspective.
Nonetheless, the book falls short of adequately addressing some important problems. First, China’s impressive growth model masks an equally impressive excess of debt. The true enormity of its debt problem remains under-explored in the book. Second, the crucial bureaucratic innovation carried out in the particular mix of the Chinese political context may have worked but it remains a question whether such necessary innovation can be triggered in other weak institutional contexts. Finally, Ang admirably plunges into the complex issue of economic development, but she underappreciates the myriad human connections entangled in the socio-economic processes of development. The improvement of collective welfare surely came with many individual and social costs in China, as it did in the West during the centuries of slow, zigzag, and often brutal market-building. However, higher individual socio-political awareness since the late twentieth century, combined with easier connectivity to near and distant worlds, can create undue political pressures, which perhaps in an authoritarian regime can only be tackled with brute force. How can we overlook and tolerate weak institutions that promote economic development but at the expense of popular demands for political rights and equity in everyday socio-economic transactions? Admittedly, one book cannot address every possible relevant question. In sum, Ang has done an excellent job despite the constraints. This book is an invaluable addition to the scholarship on the political economy of development.
Asif B. Farooq
University of Toronto, Toronto, Canada