Sources of Chinese Economic Growth 1978-1996/china's Last Steps across the River: Enterprise and Banking Reforms

By Nickum, James E. | The China Journal, January 2005 | Go to article overview

Sources of Chinese Economic Growth 1978-1996/china's Last Steps across the River: Enterprise and Banking Reforms


Nickum, James E., The China Journal


Sources of Chinese Economic Growth 1978-1996, by Chris Bramall. Oxford: Oxford University Press, 2000. xi + 558 pp. US$135.00/£82.50 (hardcover).

China's Last Steps Across the River: Enterprise and Banking Reforms, by Yiping Huang. Canberra: Asia Pacific Press, 2001. xiv + 246 pp. Aus$35.00/US$32.00 (paperback).

The great length of Sources of Chinese Economic Growth-500-plus pages-does not bother me. Nor does Chris Bramall's gladiatorial style, engaging in rhetorical battle against the lions of a "master discourse" that promotes economic liberalization and denies the possibility of a developmental state. Although I personally find the bashing of liberals such as Paul Krugman, or of Jeffrey Sachs and the World Bank, increasingly uncomfortable because of the wider global political context, I agree that authority must be questioned, and Bramall certainly does us all a service in laying out in detail the premises and biases that inhere in what has become common wisdom about China's amazing economic growth ever since it embarked on economic reforms over a quarter of a century ago.

My problem is elsewhere. Bramall is an excessively careful gladiator who excels in defining where others stand, including their positive features. He is obviously well-read in both economic theory and the state of the literature on China's economy. Yet he runs around the ring too much to provide us with a clear view of a well-defended position of his own. Let me illustrate with a précis of his introductory chapter, which reflects the structure and style of argumentation of the book as a whole.

Bramall argues here that the dominant tradition in economic theory (master discourse) holds that capitalism is the "end of history" and hence denies the success of the East Asian model, based on industrial policy. Propagators of this discourse attempted to destabilize the East Asian economies in the financial crisis of 1997-98, although it must be admitted that Japan's property bubble of the late 1980s, Kirn Daejong's hostility towards the chaebols, and currency depreciations in Southeast Asia were important factors too. Transition-era China's rapid economic growth provides a similarly serious threat to the hegemony of the master discourse, which has responded with an increasing number of attempts at denial. Of course, some writers schooled in the discourse oppose shock therapy and argue that there has been significant growth in China in total factor productivity (TFP), even in the state sector, but they see growth as unsustainable because of the deficits generated by the state-owned enterprises (SOEs) and because of rent-seeking behavior caused by contradictions between the market and state sectors. Nonetheless, these are mere cracks in the façade of the master discourse, not fundamental disagreements. Heterodox scholars are concerned about sustainability from other angles, such as the environment, political legitimacy, income inequality or human rights, but they too see the Dengist period as a restoration, not a durable regime, with a final crisis lurking around the next corner.

Bramall himself does not focus on long-run sustainability, however, but instead looks at the causes of growth in the period between the deaths of Mao and Deng, as this is where the orthodox school is the most deficient in its analysis, use of data, conclusions and identification of causal factors. The book discusses the "proximate" sources of growth-initial conditions, factor accumulation and productivity growth. Initial conditions are particularly important in conventional growth theory, which hypothesizes that there was a lot of developmental slack in China in 1978, due to low output per capita, technological isolation, a high proportion of rural population, a suppressed personal incentive structure, a disrupted educational system, and an obsession with local grain self-sufficiency. Even heterodox scholars share this negative view. Orthodoxy emphasizes factor accumulation over technical progress, especially in SOEs. …

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