Ruthless Markets vs. State-led Miracles?

People like categorization, people like simple labeling. So we got introvert vs. extrovert, scientific vs. artistic, and in economy, government vs. market. Seemingly the time has come for government advocates, but before you go along with the mainstream-media-headline trend, no harm to take a look at what Mr. Yasheng Huang, associate Prof. at MIT, has to say in his article Private Ownership: The Real Source of China’s Economic Miracle.

Highlights:
- rural entrepreneurism, instead of state-led urban infrastructure investments, is the true driver of Chinese economic miracles.
- grand infrastructure projects and FDI-backed investments (e.g. factories), often regarded as the main engines of Chinese economy, “assumed huge proportions in China until the late 1990s-long after the relaxed financial controls and rural entrepreneurship prompted the initial growth surge, during the 1980s”
- “From 1978 to 1988, the number of rural people living below China’s poverty line fell by more than 150 million. In the 1990s, their number fell by only 60 million, despite almost double-digit increases in GDP growth and massive infrastructural construction”
[John here, statistics of people living below poverty line from 1978 through 2000 may give us a clearer picture before we agree or dispute the above (sorry I haven’t got it yet either)]
- GDP per capita of Shanghai (where state-led projects play the main role in economic growth) is twice that of Zhejiang province (in which Wenzhou City is located; Wenzhou developed and thrives mainly based on private entrepreneurship); but “…if the measure is household income-the actual spending power of average residents-the two regions are equally prosperous”

“township and village enterprise” ?
- “Western economists erred because they assumed the term referred to ownership. But Chinese officials understood it in geographic sense-businesses located in townships and villages…from 1985 to 2002, the number of collectively owned ones peaked in 1986 at 1.73 million entities, while the number of private ones soared to more than 20 million, from about 10.5million…the increase in number of these enterprises during the reform era was due entirely to the private sector”