Comments on: How does China do it? Hint: Not free-market economics

By: Walker

Walker — Fri, 02 Sep 2005 01:26:02 +0000

Yazad, this “economic freedom” ranking that CATO put together has Singapore ranked second so I am not sure how meaningful it could possibly be.

Still, granting the list for the sake of argument, I’ve noticed that India enjoys more “economic freedom” than China which would seem to support Amitabh’s point.

By: Yazad

Yazad — Wed, 31 Aug 2005 09:53:48 +0000

There's an element of straw man here. India is nowhere close to being a laissez faire economy. You can't compare two mixed economies and state that you're unsure about laissez faire guaranteeing quick economic growth. So what is India doing wrong? Too much regulation and too little economic freedom. We've seen dramatic changes whenever economic freedom has increased. There's a hell of a lot of data collected now for nearly 30 years, all around the world. Check out the Economic Freedom of the World: 2004 Annual Report This powerpoint presentation has a good intro. Especially look at the slides on Economic Freedom and Per Capita Income; Economic Freedom and Economic Growth; and Economic Freedom and the Income Level of the Poorest 10% of the Population. Freetheworld.com has the whole dataset for those wishing to delve deeper.

By: Blue Sky

Blue Sky — Mon, 29 Aug 2005 14:27:34 +0000

The first lesson for India from China’s experience is to privatize and let market forces work more. China has sold several hundred thousand companies, of all sizes, in the last decade in order to get the state out of the market, while keeping ownership of several hundred bigger ones (which it will eventually have to sell). China also allows more competition, both domestically and from abroad, into most of its markets than does India. The lesson for India is to raise competition and to get government out of the business of producing things that the private sector can produce.

The second lesson for India is to improve government spending, shifting from subsidies into investment. The private sector cannot provide public goods like rural roads or canals. The problem in India is that the government spends more on rural subsidies than on rural investment. The states spend more on electricity subsidies than on investment in the grid. China does not. That is the lesson for India, not to stop with liberalization but to complement more privatization with a redirection of public spending.

By: Michael H.

Michael H. — Sun, 28 Aug 2005 20:38:42 +0000

I am not an expert in the Chinese economy by any means but I could guess what the Chinese are doing right and the Indians are doing wrong. The Chinese, being socialist in nature, probably invest heavily in public goods. And they probably target the right public goods to invest in; i.e. the ones that give the best return on investment. They probably invest heavily in their cities and make them compatible with technological growth. That means having sufficient electical capacity for industry, enough sewage capacity for an expanding city population, etc.

It seems to me that India underinvests in its cities and in other public goods (like railroad, roads, etc) that could be good compliments to production. In other words, China Inc. is just better at business than India Inc.

But I would still bet that China will encounter some serious problems down the road.

By: New Economist

New Economist — Sun, 28 Aug 2005 17:18:09 +0000

More analysis on China’s economy

Here are several recent newspaper articles and blog posts on China that are worth a look: * Will Hutton writes in Saturday’s Guardian on how China’s poorest will suffer if the self-defeating trade war on textile imports is allowed to continue. * Robe…

By: DesiPundit » Therein lies the difference

DesiPundit » Therein lies the difference — Sun, 28 Aug 2005 03:13:56 +0000

[...] ies the difference Posted in Economics at 11:12 pm by Patrix Amitabh Arora has a solid reason to explain the difference i [...]