Tuesday, September 20, 2011

Democracy and Economic Growth



This is an inspiring TED presentation on democracy and economic growth.  The presenter is professor Huang Yasheng 黃亞生.  He is now the professor of political economy and international management at Sloan School of Management, Massachusetts Institute of Technology.  The topic as it looks appears to be controversial.  He is staging the political structure of China and the resultant economic growth.  We all know the success in economic growth in China.  But is it a result of her political system or otherwise?

The strong government scenario in the Shanghai model has been cited as an example.  The government-led expansion of infrastructures was very efficient, at the expense of livelihood of many citizens.  It could be thought that balancing the importance of infrastructures with economic growth facilitated by a strong government would be an advantage.  Nevertheless, statistics on many countries show otherwise.

Another more direct question is whether democracy is bad for economic growth.  There are many examples that democracy led to prolonged arguments thus hindered the efficiency of decision making, and led to compromised watered-down policies.  However, there are also statistics showing the long term growth of democratic countries having an advantage over authoritarian governments.

The success of China, over India in particular, is her human capital.  You may refer to the video for more figures and arguments.  The basic concept, against the general impression that the literacy level in China is low, which is not correct, is that the quality of human capital in China is better.  You may argue that there are a lot of India scholars all over the world with good achievements.  The truth with India is that she focused on tertiary education but the basic education is severely insufficient.  You may have heard from the news that Hong Kong people are keen on helping the education of poor children in rural China.  However, as a whole, the literacy rate in China in 1990 is already 78%.

With regard to the effect of the political system, professor Huang proposed that we have to focus on the dynamic of political systems rather than a static ideology.  Economic growth is about change, and it has to be compared with changes ongoing.  Coupled with the fast economic growth in the last several decades, China was undergoing changes in her political system from an authoritarian government to a relatively less authoritarian government.   Reforms were carried out to provide some economic autonomy to provinces as well as rural areas.  However, the challenge ahead for China is whether the direction of reform can be maintained.  For the pace of economic growth to sustain, the people must continue to be able to share the benefits of growth permitted by a more open political system.

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