Tuesday, August 12, 2008

China's Success: Anything But Collectivism

David Brooks wrote on NY Times that China's economic success story was a result of collectivism and it provided an alternative to Western individualism in development model. He can't be more wrong about his judgement.

...What happens if collectivist societies, especially those in Asia, rise economically and come to rival the West? A new sort of global conversation develops. The opening ceremony in Beijing was a statement in that conversation. It was part of China's assertion that development doesn't come only through Western, liberal means, but also through Eastern and collective ones.

Since the reform 30 years ago, China's economic takeoff has been anything but collectivism. The most famed and much researched agricultural reform, the so-called Individual Contract and Responsibility System, like many more reforms followed, has a distinct feature of letting people take more individual responsibilities and providing them with more incentives, which was a great breakaway from former collective farming and state-planned economy.

As Wu Jinlian, a prominent economist in China, famously said, "Wherever you see more private businesses, you see more prosperity". Several Nobel winners in economics also called China probably "the most capitalist" country in the world. Astonishing comments to many observers, initially.

Make no mistake that China still remains not free, and the government also plays a relatively big role in the economy. But if you look back at China's development in the past 30 years: it's less and less government control and more and more free-market. Most people simply compares China's level of government control with theirs, and reached the conclusion that it's China's government who made the real difference. This can't be more wrong.

I suggest they look at China's development dynamics, and do not compare statics. This is an easy mistake by confusing superficial correlations with fundamental causes.

Indeed, during the Olympic opening ceremony, 2008 drummers playing like one easily left people with easy impression that Chinese society values collectivism over individualism. But don't be fooled.