Chinese Economic Development: Historical

1
Chinese Economic DevelopmentHistorical
Comparative Perspectives

• Historical Perspectives
• c. 1000early commercialization
• c. 1500-1800agrarian commercial
• c. 1800-1900divergence
• 2. Comparative Perspectives
• economic history / development economics
• Where and why economic growth?
• Spatial units of comparison
• 3. The Challenges of this Course

2
Historical Perspectives1000 ADcommercialized
economy in Jiangnan

• Growth of market towns (brokers, shops, urban
  culture of story tellers, theatre, tea houses)
• Growth of long-distance trade (boats, docks)
• Specialized agricultural production, cash crops
• Handicraftstextiles, silk and cotton.

3
1500-1800 continued spread of
commercialized agrarian economy

• Rural handicrafts supplement agriculture
• 2 contrasts with Europe
• Rural crafts and agriculture separate
• More crafts go to cities
• Chinese features
• Long-distance trade, areal specialization
  increased marketing--urban-rural connections AND
  connections between regions of empire
• More isolated peripheral areas have some markets
  and exchange differ in resource endowments.

4
Economic ties beyond the empire

• Silver imports and commercial change
• Trade w/ Southeast and Northeast Asiasilks,
  teas, porcelains, foodstuffs, medicines
• Trade through Central Asiaprecious jewels
  stones, paper, silk,
• Trade with Europe-- silks, teas, porcelains

5
19th-c. Divergence

• Europe industrializes/China population pressures
  and environmental challenges grow
• Changed trade connectionsprimary products
  exports, Europeans do import substitution on
  porcelain and silk
• But variations within China Europe too
• Key differences technology institutions

6
20th-c. Changes in China

• Pockets of industrialization
• Agrarian crisis
• Growing divide between rural and urban
• Greater regional variations
• Questions of whether positive or negative changes
  to spread faster
• Key role of unstable political situation

7
Chinas economy in 1949

• Short-run
• recovery from war and occupation
• restore social and economic order
• Long-run
• industry in certain areas
• rural stability
• questions about urban-rural relations and
  development path

8
Chinas Past its Economic Future

• Re-establish strong centralized state, unified
  and integrated control
• Managing agrarian economic and social order a
  major political job
• See industrial economy largely for state
  strengthwealth and power of late 19th c forward

9
Comparative Perspectives

• economic history / development economics
• Where and why economic growth?
• Spatial units of comparison

10
Sources of Growth

• Division of labor, increased market size,
  economies of scale
• Savings/investment vs consumption
• Organizational change for increased efficiency
• Technological change

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Economic History

• Study of how economies have grown historically
  application of economic theory and principles to
  past practices
• Most developed literature for Western Europe and
  the United States
• How to fit in cases with less clear paths of
  growthe.g. Africa, Asia and Latin America?

12
Development Economics

• Assume we know how to create growth
• Growth based on the shift from traditional to
  modern sectorindustrialization.
• Industrial policies create conditions for
  private or nationalized industry, varying roles
  for government
• Macroeconomic policies to promote market
  development and stability.

13
Explaining vs creating growth

• Intentions and complexitygap between
  theory/policies and implementation
• Unintended consequences
• Consequences of European states needing
  loansdevelop banking
• Consequences of early modern European
  warmanufacturing into cities
• 1950s Chinese government control of resource and
  product flows to avoid monopoly markets, makes
  all movements difficult

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Where and why economic growth?

• Euro-America has a range of paths
• Capital-intensive industrialization
• Initially market led but late 19th c. increasing
  roles for state
• Asia has overlapping sequence of paths--
• Japan and China in early 20th c. are labor
  intensive methods
• Post WW II heavy industrialization with state set
  priorities.

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Who industrialized, how why?

• At end of WW II, outside of Euro-America and
  Japan, Argentina, Brazil, Chile, China, Korea,
  Malaysia, Mexico, India, Indonesia, Taiwan,
  Thailand and Turkey.
• Development economics fails to explain or create
  successes. Cannot model increasing returns to
  scale or oligopolistic behavior. Result lack of
  formal models to make clear causal mechanisms.
  Politics matter.

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National units of comparison

• Large and small countries cannot be compared just
  with arithemetic averages
• Variation within large national units and
  explanations of differenceswhich variables are
  the same within a large country and across
  several small ones?
• Politically defined spaces matter but how has to
  be carefully evaluated.

17
The role of institutions in defining economic
regions within and beyond national states

• Common institutions to create a region e.g.,
  contract law
• Institutions that link otherwise different sets
  of institutionsfinancial markets between
  institutionally different economies
• Alternative institutional mixes by
  regionrelative importance of formal and
  informal, e.g. litigation versus mediation

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Comparisons and connections

• States have policies that affect growth
• Connections in the international economic system
  shape growth
• Two questions
• The relative importance of economic connections
  within regions or across the globe
• The relative importance of paths of development
  vs systems within which development takes place

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Course challenges

• locate Chinas developments since 1978 in global
  context
• compare with other paths of development
• note spatial scales of variation
• Observe particular institutional complexes

20
Course goals

• Establish contexts China in 1950s isolated
  growth is largely a domestic issue China by 2000
  increasingly connected to international
  networksdo connections mean greater
  similarities?
• Observe bottom up and top down patterns of change
  and their social consequences
• Locate Chinas pattern of changes in world time
  and space