Friday, October 8, 2010

William Easterly Is Shrill!

. Friday, October 8, 2010

What else is new, I know, but it's always important to take a longer-run perspective:

So another way of stating China’s rapid growth recipe would be something like the following:

Have a succession of crazy autocrats, political chaos, and war savagely repress one of history’s most inventive peoples, along with not allowing one of the most successful trading diasporas in history to operate in China proper. Then have things calm down a bit and have somewhat less crazy rulers allow more of the people’s energy and creativity to burst out. Presto, the change from EXTREME NEGATIVE to LESS NEGATIVE is called a “growth rate,” and it will be high. Now accept worship from around the world.

More at the link. I hope to have more to say about the "somewhat less crazy" part of this over the next few days. But Easterly's point is that we should not be emphasizing how well China is doing under an autocratic system, but how poorly they have done. Look at these charts, created from Angus Maddison's data and pilfered from here:

The point is that China's economic performance has been so unbelievably poor over the past few centuries, almost against all odds, that any government just to this side of sado-masochistic could expect to produce short-run economic growth. That doesn't mean they are worthy of praise.


Matt Richmond said...

Short run being defined as... 30 years? Because they've averaged a 10% growth rate for that long. Or is 10% just not that impressive?

Well obviously that's not the answer. America would sell Alaska back to the Soviets if we could get 10% growth for the next 30 years, guaranteed.

and 30 years is, under any sane economist's definition, certainly not short term.

So that leaves me thinking that your point is that the chinese people are just THAT productive and THAT amazing that getting out of the way was basically like letting a tiger out of its cage and let loose on a herd of defenseless, scattering mongoose. Not that that image makes any real sense, but the ridiculousness of criticizing such explosive growth over such a long period of time (unless squarely) attacking the human rights issues) leads me to imagine equal ridiculousness when crafting analogies.

Point is, the only way I see this criticism holding weight is if the stereotypes about asians being intellectually superior to the poor white folk actually holds true. Get out of the way and let 'em do their asian thing.

But why, then, has africa done so poorly when governments opened up and did their best to "get out of the way?"

O I see, because they're...

Uh oh.

Kindred Winecoff said...

Huh? Yes, "short run" being defined as 30 years or less, when compared to the previous, oh, 3 centuries.

China's last 30 years have only been remarkable if you forget that they started from an amazingly low base of capacity utilization. Why isn't that impressive? Consider this: What if the U.S. government mandated a one year work holiday, so no one in the U.S. could produce anything. The next year, lift the ban. Presto! 100% growth rate. But is that impressive? Of course not.

All of that growth has gotten China the ~ 100th highest GDP/capita in the world. (Doesn't matter whether you use nominal or PPP.) China's GDP/capita is roughly 10-15% of the U.S. So China's growth is only impressive if you don't consider the context.

Finally, your race-baiting is silly. I never said or implied anything of the sort.

Matt Richmond said...

Countries with per capita GDP below that of China's: 79 (world bank)

Number of those countries with higher growth rate (2009): At most, 1 (azerbaijan, which is not on my ranking list and I don't care nearly enough to keep looking)

After THIRTY years of consistent double digit growth.

So the fact that they're poor does not somehow make it less impressive.

Thirty years is not short term. Short term = time period where firms don't have enough time to adjust to market changes.

The market has changed. The firms have adjusted. And growth has still held steady. Saying short term and then saying "30 compared to 300" is like trying to plan an expedition to Mars and then saying, "it should be a piece of cake you NASA worry warts, it's practically a hop skip and a jump compared to ALPHA CENTAURI!"

It means nothing. The government, despite having some similar characteristics, has changed drastically in the last 300 years. Several times over. The policies enacted by Deng Xiaoping after Mao died were DRASTICALLY different and no, they did not just step out of the way. It was a market based socialism, and they still pushed the economy in the direction they wanted it to go. Markets were certainly a driving force for their ascension and were a primary piece of reform, but it wasn't like over the course of 10 years they went from Maoist policies to western style capitalism. So then you talk as if the economy surged DESPITE the government ("any government just to this side of sado-masochistic"), as if the government played no part in this growth and the market could have done/did a better job.


Consider Haiti. The World Bank came in, told them that they needed some good ol' fashion free markets. It'd be good for 'em. "Get out of the way" so that your best friend capitalism can fix everything.

.... that turned out pretty well.

Did China just start better off?

US GDP per capita 1970: ~$5000
China: $111
Haiti: $87

So "in context," no, not really.

O, but China's human capital reserves were higher. So lets compare to India, another success:

1970 GDP: $110 (perfect match!)

2008 GDP: $3100
vs China: $6800

ooooo... ouch. Not even close. That's because India has been seeing something like 5-6% growth annually (which is, of course, very respectable) vs. China's 10%.

Both have ports, both have tons of people, both started off poor. The main difference is India is a democracy and China is communist. China influenced and pushed what it wanted to see while India did the democratic thing. The democratic thing, while more stable when you look at analysis of developing nations, is also less likely to produce incredible levels of growth (like seen in China). Smart, charismatic dictators are better than any democracy because the vision and movements are unified (though dumb/evil dictators are nearly always worse for obvious reasons).

Which is more humane? Well, it's debatable. Most would say India, but as China pulls away and 100s of millions are pulled out of poverty...

Which one was more effective? China wins in a landslide. Will state intervention work as the economy keeps growing? No, and that's why they have backed farther and farther away. Yet as a poor country, their levels of growth have been incredible, because what is best for a poor country is not what is best for a rich country's economy.

This is just another example of white guys in rich countries letting their biases toward democratic ideals influence their opinions on a nation's ascension. If a democratic DRC had sky rocketed at 10% growth rates for 30 years it wouldn't matter exactly how it happened, people would call it a miracle. Yet because people are uncomfortable with China's tactic, they're critical of their feat altogether. Not at all helpful.

Kindred Winecoff said...

Matt, you're arguing in bad faith. First it was the bizarre accusation of racism. Now... it's another bizarre accusation of racism ("white guys in rich countries"). I take it this is your first visit to the blog, but for the record I am not one of those who thinks that democracy is a panacea for everything, I never said such a thing, and I don't believe it.

Nor did I say that China's growth isn't a good thing. My point follows a very simple logic: when you start from a small base with a lot of natural endowments, rapid growth is not some miracle. China's strong central government may have provided some added benefit by simply maintaining order, but there is NO evidence that their growth is a result of wise planning or political repression. There is a lot of evidence that China's growth began when it started incorporating price signals from global markets.

(For more on that, see DeLong:'s+Semi-Daily+Journal))

And, given the high and rising inequality in a country with half a billion living in extreme poverty, I'd say the plan is actually fairly poor. Factor in low domestic demand and exceptionally high savings rates, and standards of living in China are well below what their growth rate would imply, especially outside of the elite. ("slightly less sado-masochistic" but still quite sado-masochistic.)

As for comparisons with India or other countries... India did not liberalize its economy until 1991 and no other country is really comparable. I would point out that plenty of other E. Asian countries did similarly well in the 2nd half of the 20th century under different forms of democracy.

Anyway, I'm done responding to you until you start dealing with the arguments I've made rather than the ones you've imagined I've made.

Matt Richmond said...

It's not just democracy, it's democratic ideals, and all of the ensuing human rights, opinions on necessary equality, etc. etc. that are attached to it. Democracy is in a package of ideals that are pushed, rarely just for the sake of itself, and the human rights issue is very much a large part of this argument (as that was the reason easterly went off in the first place, as he said).

Do I disagree human rights are important? Of course not, but when trying to evaluate economic and political advancements as a focus we should not be hung up on those issues. It's not helpful.

For the record, the first post was tongue in cheek, chill out. I was inspired by the, "history’s most inventive peoples," and "Then have things calm down a bit and have somewhat less crazy rulers allow more of the people’s energy and creativity to burst out" as if other nations don't have inventive or creative people trying to burst out. As if not developing when rulers get out of the way means your people are just dumb. If I thought you were being racist I would have said something less snarky and more:

"Wow. You're a racist POS."

Other side note: white guys in rich countries is a common criticism that has nothing to do with racism. Has to do with thinking that we know better just "because." Easterly himself makes the criticism of academics frequently. It's one of my larger irritations with everyone in the community.

China's population living below the poverty line -

1981: 65%
2007: 4%

I worry much less about inequality and much more about people starving to death. While important for a variety of reasons, inequality is still secondary. The issue of savings rates and low domestic demand is an issue of personal decision making, not standards of living (just because every american decides to live on Ramen doesn't mean we're worse off).

"No other country is really comparable."

Well. This is pointless then.

But really? 10% growth for 30 years?

I guess that's easily explained when you look at 30 years as the short term, or when you just assume that the country is so well endowed it was inevitable. Doesn't sound overly simplistic to me at all.

William Easterly Is Shrill!
There was an error in this gadget




Add to Technorati Favorites