Waylaid Dialectic

July 20, 2013

Krugman, Acemoglu and China

Filed under: Development Theory,Economic Development,Governance — terence @ 11:32 am

To look on the bright side, if Paul Krugman is right, at least Daron Acemoglu and James Robinson won’t have to deal with ‘what about China?‘ type objections so much in coming years.

Setting aside the suffering, and the potential impact on a depressed global economy, the interesting development related question is how will China’s political and social institutions fare through the political stresses caused by a slow down?

Indeed, Rodrik et al’s growth accelerations paper suggested (to me at least) that growth spurts can happen in poorly governed countries but sustained development, which means dealing with the wobbles on the road, is much harder to maintain. What’s more, Rodrik provided pretty convincing evidence in One Economics that democracies weather economic shocks considerably better  than autocracies, which doesn’t bode well for slow down in China.

An optimist might hope (I certainly do) that the Chinese government responds to the pressures generated by economic downturn through democratic opening and redistributive transfers to the poor.

But a pessimist will remind you that there are many, many other potential outcomes.

We’ll see.


May 17, 2010

China and the World Bank

Filed under: China,Institutions — terence @ 5:44 pm
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I’ve always held the belief that giving developing countries more power on the boards of the World Bank and IMF would be beneficial. And, along these lines, had you asked me, I would have instinctively answered that recent moves to give more power to China on the boards of the Bank and Fund would be a good thing. However, over at AidWatch, erstwhile World Bank staffer William Easterly, provides one very good argument as to why this might not be the case: censorship.

The globalisation of censorship isn’t new (remember the Salman Rushdie affair, or Margaret Thatcher’s attempts to get a book about the British secret service banned elsewhere in the English speaking world). And in New Zealand there was recent controversy regarding the Chinese government reportedly pressuring local council’s in New Zealand not to let Falun Gong marchers enter in their Christmas parades.

But while it isn’t new – the rising economic might of China and density of economic inter-linkages between China and the rest of the World give pretty good reason to believe that it’s probably intensifying. Which isn’t good.

Or, to put it another way: censorship bad; globalisation really freakin complicated.

April 20, 2010

Back to the Future!…no wait, um…Forward to the Past!

Filed under: Aid,China — terence @ 8:47 am
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Over at AidWatch Laura Freschi interviews Deborah Brautigam. The subject: what western aid donors can learn from China’s aid to Africa.

[Freschi]: It’s my reading of your book that you think Western donors could learn something from the way China behaves in Africa. What are the strengths of the Chinese way? Are there specific strategies or programs that the West should pay attention to?

[Brautigam]: As a donor, China’s way has several advantages. Take the way they operate. They rarely “poach” skilled staff from African ministries to work in their own offices. The focus on turnkey infrastructure projects is far simpler and doesn’t overstretch the weak capacity of many African governments faced with multiple meetings, quarterly reports, workshops, and so on. Their experts don’t cost much. In addition, their emphasis on local ownership is genuine, even if it leads to projects like a new government office building, a sports stadium, or a conference center. They understand something very fundamental about state-building — something that Pierre L’Enfant understood in 1791 when he teamed up with George Washington in newly independent America: new states need to build buildings and dignity, not simply strive to end poverty.

But the Chinese also funded university scholarships, roads, bridges, mini-hydropower, and irrigation, for decades — when other donors had moved away from most of these sectors. And like Japan, they see nothing wrong with using subsidies to help foster investment by their own companies; this is seen as beneficial to both sides. From the 1970s to the early 1990s, Southeast Asia’s “miracle” was underwritten not only by good policies, but by Japanese investment, and Japanese aid was a partner in this. These investments boosted manufacturing prowess, attracting Japanese firms to go offshore. China’s engagement in Africa could have similar results in at least a handful of countries with receptive leadership. The Chinese avoid local embezzlement and corruption by very rarely transferring any cash to African governments. There is almost no budget support, no adjustment or policy loans. Aid is disbursed directly to Chinese companies who do the projects.

In short: employ expats, build infrastructure, provide project aid, and give tied aid.

Brautigam’s work seems interesting and, for what it’s worth, I’ve a sneaking, guilty sympathy for project aid, am not anti-infrastructure, and accept that there are meaningful trade-offs between employing expats and employing locals (future posts on all these topics, I hope) but can I just point out the bleeding obvious for a second:  Western donors did all this, for about three decades, with very mixed results. Lots of white elephants, ‘boomerang aid’ (so-called because the lion’s share of it returns to the countries of origin), and grotesque corruption.

Also worth noting is that Chinese experts don’t cost much for the same reason that Chinese garments are cheap – wages are low in China. And there’s not much that Western donors can do to replicate this with their own expats (although they could, I guess, employ Chinese). Also, Australia and New Zealand, at least, never moved away from scholarships. And I can tell you from experience that such scholarships are no less problematic than any other form of aid.

Like I said, Brautigam’s work is interesting and the whole interview is well worth reading (thanks to AidWatch for posting it!) but having read it I remain a sceptic as to whether the west has much to learn from China’s aid practices.

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