Comments on: Russia and China

By: Gabriel

Gabriel — Fri, 29 Aug 2003 21:33:22 +0000

For a positive view of the aftermath of shock therapy, Anders Aslund’s Building Capitalism is a very good number crunchy exposition which concludes that “The frequent statement that Russia suffered from too radical reform is a misrepresentation of facts. Russia undertook a brave attempt at an initial radical reform, but, unfortunately it did not reach far enough.”

By: Matt Weiner

Matt Weiner — Fri, 29 Aug 2003 21:04:46 +0000

I’ll third the demand for D-squared’s presence. In the meantime, here’s a suggestion—it’s just a suggestion, since I don’t know anything about it but what I read in the papers at the time—Yeltsin’s armed attack on the Duma was conducive neither to the rule of law nor to a healthy democracy. Discuss.

By: cmdicely

cmdicely — Fri, 29 Aug 2003 19:39:55 +0000

he compares a rural area in Ukraine to Guangdong province, and extrapolates the comparison to “Russia” and “China”. Actually, he extrapolates to “the former Soviet Union” and “China”, which is a little less bad, since at the very least, the Ukraine is actually part of the former Soviet Union, but not Russia. Russia is not the same thing as the former Soviet Union, though its part of it.

By: Roberta Taussig

Roberta Taussig — Fri, 29 Aug 2003 19:10:27 +0000

It’s easier to institute dramatic change if you’re in despotic control than if you’re not. China’s doing better because it is still tightly controlled. Russia is doing worse because it’s uncontrolled. For an analogy, look at population control in China and India. China brutally instituted its one-child-per-couple policy, and it has its growth under control. Democratic India couldn’t, and it hasn’t. Democracy has a lot to be said for it, and it sure gets my vote, but it’s not efficient.

By: pathos

pathos — Fri, 29 Aug 2003 19:07:31 +0000

Also, don’t forget the “self-fulfilling prophecy” part of the story. China has ONE BILLION people and will be the NEXT BIG MARKET and you don’t want to be LEFT BEHIND. Every major company is currently investing in—and losing money in—China to be sure that they get a foothold. Now Citibank—unlike say, pets.com—can pump money millions into China’s economoy for years and years without a major long-term impact on their business. But eventually (in however many years), companies will either have to start making money in China, or the foreign investment will stop. Now, it might happen, but it might not. And if foreign investment stops, the whole China things turns out—in retrospect—to be a huge bubble.

By: James Hamilton

James Hamilton — Fri, 29 Aug 2003 18:01:44 +0000

Back in the days when I was a historian, I remember that the trouble with both Russia and China was that ALL the economic data had been largely made up to please the institution demanding it. It bore NO relation to anything that might actually have happened. The miracle was that things had managed to carry on (more or less) regardless. (It’s fair to say that a lot of modern, Western writers on Soviet history can’t quite take that on board – Robert Conquest has interesting things to say about this).The most extreme case concerned the Soviet census before WW2, where statisticians made an honest attempt to come up with the correct figure, and were executed for their trouble. (Their figures revealed the full extent of the purges and the 1920s famine, and were consequently buried). I understand that this procedure is still common among esp. Chinese banks, and that there is some doubt as to their long-term viability as a result. People commenting here on the consequences of the lack of reliable rule of law in Russia will find, no doubt to their surprise, (it was certainly to mine) that Margaret Thatcher argues exactly that in “Statecraft” (she emphasises the absence of properly enforced property laws in particular).

By: dipnut

dipnut — Fri, 29 Aug 2003 17:50:59 +0000

It’s believable that Kristof took non-representative samples, and that both the Soviet and Chinese Communists have inflated their success in the telling, which makes present-day Russia look comparatively worse. But man, those godless ChiComs crank out the goods. I’ve been trying not to buy Chinese, and it’s a bitch. Try to buy a pair of shoes, or sunglasses, or a computer chassis, not made in China. It’s doable (my shoes were made in Vietnam), but unreasonably difficult. Spot-check random items at GI Joe’s, or Target, etc. When you tune in, you realize America’s standard of living is heavily dependent on Chinese, hence Communist, labor. Whether that’s something to freak out about (and whether buying Vietnamese is any better) is worthy of debate; I personally find the Chinese preeminence in this area very disturbing. No Way will Russia export on that scale, in the current climate. It’s simply impossible. Even if the production capacity miraculously appeared, money doesn’t want to go into a place with such shaky financial institutions. You can’t do international trade in cash.

By: Tina

Tina — Fri, 29 Aug 2003 17:46:16 +0000

I recommend Doug Guthrie’s book, Dragon in a Three-Piece Suit, to everyone interested in this issue. He argues that China built new institutions to support the transition to capitalism, whereas Russia simply dropped a free market down and watched it go.

By: PG

PG — Fri, 29 Aug 2003 17:08:26 +0000

Good point by Robin. One could argue that people in the most rural parts of China are doing worse as economic Communism recedes.

By: edward hugh

edward hugh — Fri, 29 Aug 2003 17:07:05 +0000

Just try looking at underlying demographic reality in both cases, you won’t need to ge much further.

By: JRoth

JRoth — Fri, 29 Aug 2003 17:06:57 +0000

I second the demand for D-Squared’s presence. In his absence, I’ll paraphrase a bit from one of his best/funniest posts, in which he addressed the issue of how Russia went quite as badly as it did: No matter what the incentives are, people don’t just go tools-up and go home to starve to death.

By: robin

robin — Fri, 29 Aug 2003 15:54:23 +0000

Kristof doesn’t compare “China” and “Russia” in his article; he compares a rural area in Ukraine to Guangdong province, and extrapolates the comparison to “Russia” and “China”. Guangdong province borders the rabidly free-market and very crowded entity of Hong Kong, and is also quite close to Taiwan. Guangdong takes the overflow from HK and TW for any enterprise requiring land (HK and TW simply have no land to spare) or heavy industrial activity or open spaces for resorts and private homes. Guangdong’s secret of success is neither the postponement of democracy nor the irrepressible business acumen supposedly inborn in ethnic Chinese. Its secret is that it has a nice, steady job working for its richer super-capitalist neighbors. If Kristof really wants a useful Chinese case to compare to his Ukrainian ancestral home, he could choose any area in Sichuan, or a coal-mining region in the north, or practically any place in China other than Guangdong, Canton, Shanghai, or Beijing.

By: Matthew

Matthew — Fri, 29 Aug 2003 15:47:34 +0000

Chris, I think the general understanding is the GDP figures overstated the ‘true’ picture by about 2% a year (taken from comparing with energy usage and achievable ‘typical’ energy efficiency). However even if true this means China grew at 7% from 1978 to 2002, not 9%, so doesn’t negate the achievement. Furthermore, at least in my own field, what can’t be denied is that China is now the world’s largest producer or importer of many commodities, the latter immune to statistical falsification. Of course it all began from a very low base, and there are 1.3m people, so the record is undoubtedly going to be patchy. But even on PPP figures it doesn’t seem to me that China’s GDP per head is out of line with other Asian countries at simlar stages of development. Now, where’s D-Squared when we need him? Matthew

By: dipnut

dipnut — Fri, 29 Aug 2003 15:43:56 +0000

Re-reading the Tayler piece I linked above, here’s what seems to have happened: Soviet Russia was every bit as lawless in its own way, as Russia in the present day. And there was plenty of corruption. But the system was spared from immediate collapse by Communist ideology. The state had a Project, a goal. Its operations might be brutal and inefficient, but total failure (or total corruption) was punishable. Then Russia switched to democracy. But the Soviet apparatus remained in place. After all, it was the only government they had. The apparatus proved fertile soil for organized crime. The criminals simply beat the capitalists to the punch. Given the nature of the bureaucracy, this was inevitable. As Tayler makes clear, there never was any way to lawfully run a business in Russia. And unlike the Soviets, the mafiozy have no ideology beyond their own immediate-term enrichment. They have no dreams of world conquest, no overriding Project which they even pretend to serve. If the whole system collapsed, they could just cut and run. Where before, total corruption would get you purged, now it’s the ticket to the high life. Everybody wishes to be a criminal now. Add to that, the looting of the Soviet system by the “oligarchs” in the early stages of the transition, and you have a plausible explanation for the bankrupt, unstable current situation.

By: Red HgS

Red HgS — Fri, 29 Aug 2003 15:39:20 +0000

We’re making an awful lot of assumptions about the quality of the information we’re using to compare pre- and post- market reforms. In the Soviet Union, I believe, the numbers were frequently exaggerated (or at least quantities were accurate to appease Gosplan, but quality was often terrible or non-existent), so the slide in output could partially be accounted for by a more realistic accounting (or one differently motivated). In China, the communist state allows them to have almost as much control over information now as before the introduction of market reforms. I for one would question some of the statistics, like life expectancy, both now and before. But, more generally, (though I don’t like the sound of it :) I agree with “dipnut”. Markets thrive within a strong rule of law, they require enforcement of contracts, property rights, etc. In this light, it’s not terribly surprising that a strong-enforcement communist state would outperform a lawless klepto-democracy.