How China Escaped The Poverty Trap (Part 6)
Category: Economic Development
By: Emmanuel Wa-Kyendo,
What Are Six Policy Lessons that Prof. Yuen Yuen Ang Thinks China’s Experience has Offered the World?
Yuen Yuen Ang identifies six policy lessons that China has offered the world.
The six lessons are
- Experiment, within boundaries,
- Induce incremental changes broadly and in an interconnected way
- In the first case, define success narrowly.
- Give all a personal stake in the development process
- Allow for inequalities, and then pair up the poor and the rich
- Weak institutions can be harnessed to build markets.
I summarize them briefly below.
Darwinian Co-Evolution
A pervasive theme throughout this series is that China’s growth can be explained on Darwinian terms. Yuen Yuen Ang assesses the coevolution of the public and private sector much in the same way that an anthropologist might assess the co-evolution of the ancestors of human beings and serpents. Firstly, China’s experience supports policies that promote experimentation, variation in those experiments and constraints in the form of specific policy objectives that facilitate the selection and adaptation of successful experiments.
Experiments with Constraints
These experiments are coupled with an approach that is incremental yet broad. Speaking roughly, the Chinese government moved slowly but those movements widespread in both geographically and by economic sector. The objectives set were themselves narrowly defined. The CCP would mandate a specific output target, for example. By tying public wages to performance relative to these objectives, the CCP obtained buy in from the public sector. As the measures were determined in terms of the benefits they would accrue to private sector growth, the private sector was also incentivized to participate.
Inevitable Inequality and the Comfort of Imperfect Yet Effective Institutions
Those individual inequalities in resource and skill endowments are unequal is often unobserved facts. These inequalities also divide city suburbs, urban and rural regions, and whole provinces. In China’s case, coastal regions were poised to ‘run’ the development race faster than their ‘inner region’ counterparts. China allowed for inequalities to grow and then instituted policies that paired up the poor and the rich. The final important observation about development a la Chinoise was that weak institutions can be harnessed to build markets. There is a certain preoccupation with perfect institutions. The debate seems to suggest that development would occur if only there was a means by which to drop these perfect state institutions on the less than perfect nations around the world. This is a view supported somewhat implicitly by Daron Acemoglu in his opus ‘Why Nations Fail’’. Yuen Yuen Angs counterpoint to this argument is that public and private institutions co-evolve. That is, the state and the nation can find comfort in the idea that under the right conditions – conditions such as those highlighted by the six policy lessons discussed -, they can spur each other to advance in productivity and effectiveness
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How China Escaped The Poverty Trap (Part 6)
| Post date: Thu, Nov 24, 2022 |
| Category: Economic Development |
| By: Emmanuel Wa-Kyendo, |
What Are Six Policy Lessons that Prof. Yuen Yuen Ang Thinks China’s Experience has Offered the World?
Yuen Yuen Ang identifies six policy lessons that China has offered the world.
The six lessons are
- Experiment, within boundaries,
- Induce incremental changes broadly and in an interconnected way
- In the first case, define success narrowly.
- Give all a personal stake in the development process
- Allow for inequalities, and then pair up the poor and the rich
- Weak institutions can be harnessed to build markets.
I summarize them briefly below.
Darwinian Co-Evolution
A pervasive theme throughout this series is that China’s growth can be explained on Darwinian terms. Yuen Yuen Ang assesses the coevolution of the public and private sector much in the same way that an anthropologist might assess the co-evolution of the ancestors of human beings and serpents. Firstly, China’s experience supports policies that promote experimentation, variation in those experiments and constraints in the form of specific policy objectives that facilitate the selection and adaptation of successful experiments.
Experiments with Constraints
These experiments are coupled with an approach that is incremental yet broad. Speaking roughly, the Chinese government moved slowly but those movements widespread in both geographically and by economic sector. The objectives set were themselves narrowly defined. The CCP would mandate a specific output target, for example. By tying public wages to performance relative to these objectives, the CCP obtained buy in from the public sector. As the measures were determined in terms of the benefits they would accrue to private sector growth, the private sector was also incentivized to participate.
Inevitable Inequality and the Comfort of Imperfect Yet Effective Institutions
Those individual inequalities in resource and skill endowments are unequal is often unobserved facts. These inequalities also divide city suburbs, urban and rural regions, and whole provinces. In China’s case, coastal regions were poised to ‘run’ the development race faster than their ‘inner region’ counterparts. China allowed for inequalities to grow and then instituted policies that paired up the poor and the rich. The final important observation about development a la Chinoise was that weak institutions can be harnessed to build markets. There is a certain preoccupation with perfect institutions. The debate seems to suggest that development would occur if only there was a means by which to drop these perfect state institutions on the less than perfect nations around the world. This is a view supported somewhat implicitly by Daron Acemoglu in his opus ‘Why Nations Fail’’. Yuen Yuen Angs counterpoint to this argument is that public and private institutions co-evolve. That is, the state and the nation can find comfort in the idea that under the right conditions – conditions such as those highlighted by the six policy lessons discussed -, they can spur each other to advance in productivity and effectiveness
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In principle, Excise taxes are levied on goods and services whose consequences are considered socially undesirable. Most developing countries, including Kenya, rely on excise taxes for revenue. Furthermore, it can be used to achieve public health goals by discouraging the consumption of harmful products such as alcohol and tobacco, thereby addressing negative externalities of that […]
An Alternative Medium-Term Strategy for Kenya’s Central Bank
The Central Bank of Kenya Act, (Cap 491) created the Central Bank as one of its autonomous agencies. The Central Bank’s mandate is to develop Kenya’s monetary policy, foster price stability, print money, and carry out other tasks assigned by a parliamentary act. The Constitution stipulates that the Central Bank of Kenya shall not be […]
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The 12th Parliament has had its share of successes and setbacks. The sheer volume and diversity of legislation passed by the 12th Parliament demonstrate the effort made by legislators and committees in enacting both consequential and inconsequential government policies. The problem with increased volume is that it adds legal obligations to the already existing legal […]
A Regulated Kenyan
A look at the total income taxes collected by the government of Kenya in the Financial Year 2020/21 shows that collectively, working Kenyans paid a total of Ksh 694.1 billion for personal income taxes. While this is easy to compute, many Kenyan citizens are aware of how much of their income goes into taxes on […]
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