Friday, September 25, 2009

Challeges for China at 60

Professor Pranab Bardhan, a renowned economist at University of California at Berkley, has an an article in YaleGlobal on "Challenges for China at 60". He looks at the relationship between the political authorities in the Communist Party, and the leaders of enterprises in China. The online journal which studies globalisation, summarises the article as follows.
China is in many ways a land of contradictions, confounding outside observers. And such contradictions are nowhere more obvious than in China’s economy: a market-driven allocation of resources overseen by the Communist Party. But as Berkeley Economics Professor Pranab Bardhan notes, the contradictions lie at an even deeper level. Simply establishing private ownership of some of China’s largest companies is decidedly serpentine and many of the owners have familial ties with, or are themselves members of the Party. Moreover, many state-owned enterprises are controlled by political families. Such fuzzy lines between political connections and business have led to particularly egregious abuses of power that are precisely the predatory tendencies of capitalism that the Chinese Communist Party originally sought to defeat. Indeed, as Bardhan points out, many government officials now find it difficult to control their own colleagues’ venality, collusion, or depredations. But as some assert, as long as control of the economy remains with the state, such ills will continue to plague China. Though Chairman Mao believed that contradictions were the nature of society, it is doubtful he would have imagined all the contradictions that obtain in China’s society today. – YaleGlobal
A few key points.
  • While party retains monopoly over political power, resource allocation in the Chinese economic is mostly market driven.
  • About one third of the private entrepreneurs are members of the Party, and members get help in the form of finance, protection, and gain legitimacy.
  • The nexus between political and economic agents is best evident in land seizures in cities and countryside.
Prof Bardhan's new book, "Awakening Giants, Feet of Clay: Assessing the Economic Rise of China and India”, is to be published shortly by the Princeton University Press.

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