The visible hand: the role of government in China’s long-awaited industrial revolution

China is undergoing its long-awaited industrial revolution. There is no shortage of commentary and opinion on this dramatic period, but few have attempted to provide a coherent, in-depth, political-economic framework that explains the fundamental mechanisms behind China’s rapid industrialization. This article reviews the Embryonic Economic Development theory put forth by Wen (2016a). This article reviews the Embryonic Economic Development theory put forth by Wen . It illuminates the critical sequence of developmental stages since the reforms enacted by Deng Xiaoping in 1978: namely, small-scale commercialized agricultural production, proto-industrialization in the countryside, a formal industrial revolution based on mass production of labor-intensive light consumer goods, a sustainable ‘industrial trinity’ boom in energy/motive power/infrastructure, and a second industrial revolution involving the mass production of heavy industrial goods. This developmental sequence follows essentially the same pattern as Great Britain’s Industrial Revolution, despite sharp differences in political and institutional conditions. One of the key conclusions exemplified by China’s economic rise is that the extent of industrialization is limited by the extent of the market. One of the key strategies behind the creation and nurturing of a continually growing market in China is based on this premise: The free market is a public good that is very costly for nations to create and support. Market creation requires a powerful ‘mercantilist’ state and the correct sequence of developmental stages; China has been successfully accomplishing its industrialization through these stages, backed by measured, targeted reforms and direct participation from its central and local governments.     

The ‘price revolution’ of the sixteenth century: Some Swedish evidence

Abstract

Since the publication in 1895 of George Wiebe's work, Zur Geschichte der Preisreuolution des XVI. und XVII. Jahrhunderts, ¹ the ‘price revolution’ has been a generally accepted concept found in most historical textbooks. By the ‘price revolution’, Wiebe meant the general rise in commodity prices which occurred in western Europe during the 16th century, the primary cause of which according to him was the influx of silver from the new Spanish possessions in America. His explanation also came to be generally accepted, but perhaps an even more significant contribution to the influence which this book has wielded is the fact that he synthesized in readily usable form the price analyses in existence when he wrote, i.e. at the end of the 19th century. In the 1930s his tables still formed the basis of sweeping conclusions and generalizations.     

The separation of information and lending and the rise of rating agencies in the USA (1841–1907)

This paper provides a new interpretation of the early rise of rating agencies in the USA (initially known as ‘mercantile agencies’). We explain this American exceptionality through an inductive approach that revisits the conventional parallel with the UK. In contrast with earlier narratives that have emphasised the role of Common Law and the greater understanding of American judges that would have supported the rise of an ethos of ‘transparency’, we argue that Mercantile Agencies prospered as a remedy to deficient bankruptcy law and weak protection of creditor rights in the USA. The result was to raise the value of the nationwide registry of defaulters which the mercantile agencies managed. This ensured the Agencies' profitability and endowed them with resources to buy their survival in a legal environment that remained stubbornly hostile.     

The rise of coffee in the Brazilian south-east: tariffs and foreign market potential, 1827–40†

During the period spanning independence in 1822 to mid-century, Brazil's south-east shifted from specializing in the export of cane sugar to coffee. This article explores the mechanism underlying this shift by exploiting a wealth of new monthly data on the Brazilian and international coffee and cane sugar markets during the period 1827–40. It argues that the timing of the coffee boom was driven by a rapid increase in foreign market potential associated with the abolition of the tariff on coffee in the US. It estimates that American tariff reform served to increase coffee exports and African slave imports by around one-fifth. American firms, with indirect links to the slave trade, rapidly became major players in the export market in Rio de Janeiro, while non-American firms, traditionally specialized in continental European destinations, turned their sights on the American market.     

The making of a liberal education: Political economy of the Austrian school reform, 1865 – 1880

The rise of mass schooling is an important contributor to modern economic growth. But its form, content, scale and manner of provision are all matters of public policy. The rise of modern schooling is frequently cast as a product of broadened suffrage and stronger political voice of the masses, which overcame the political opposition from old ruling elites. We investigate this hypothesis, using the case of a school reform undertaken in Imperial Austria in 1869. We show that large landowners were mildly in favor of school modernization, albeit less than urban and business interests. The strongest opposition came from the rural areas where the suffrage was in fact most numerous. The reform passed in spite of their opposition but, interestingly, post-reform developments suggest that passive resistance to it continued in the countryside in spite of the alleged benefits that education was billed to bring the masses.     

China’s rule of law in New Era: the rise of regulation and formalism

ABSTRACT

China’s financial development and economic growth is achieved under weak legal institutions. The literature attributes this counterexample of law–finance–growth nexus to (a) alternative mechanisms in China such as incentives, reputation and relationships and (b) a well-functioning xinfang system with common law features. In recent years, China has made increasing efforts to strengthen its rule of law. The Communist Party of China (CPC) has taken the lead by launching a far-reaching campaign against corruption, establishing a system of inspection tours, and promulgating a large number of regulations. We argue that using regulations to complement laws is effective: CPC has enough bureaucratic prowess to crack down on corruption whereas the courts are subject to subversion by powerful interests. We also discuss the drawbacks of this approach: regulations aiming at ex ante control of corruption substantially increase procedural formalism and limit the discretion of local governments and state-owned enterprises.     

Why did the communist party reform in China,but not in the Soviet Union? The political economy of agricultural transition

The dramatic transition from Communism to market economies across Asia and Europe started in the Chinese countryside in the 1970s. Since then more than a billion of people, many of them very poor, have been affected by radical reforms in agriculture. However, there are enormous differences in the reform strategies that countries have chosen. This paper presents a set of arguments to explain why countries have chosen different reform policies.     

The rise of the middle class: the income gap between salaried employees and workers in Sweden,ca. 1830–1940

ABSTRACT

We present the first comprehensive, long run salary information on Swedish middle-class employees before the twentieth century. Our data include, for instance, school teachers, professors, clerks, policemen and janitors in Stockholm and Sweden, ca. 1830–1940. We use the new data to compare the annual earnings of these middle-class employees with the annual earnings of farm workers, unskilled construction workers and manufacturing workers. The results show that the income gap between the middle class and the working class widen drastically from the mid-nineteenth century to a historically high level during the 1880s and 1890s. The differentials then decreased during the first four decades of the twentieth century. The bulging earnings advantage of middle-class employees vis-à-vis unskilled workers chimes with Kocka’s depiction of the latter half of the nineteenth century as the era of the bourgeoisie.     

The growth of the non‐government sector in Korea and its relations with the state

This paper hopes to show that the states have come to play an increasingly important role in the growth of NGOs by strategically utilizing their policy tools, including the use of funding, which has an important implications on the relationship between the state and NGOs. Coupled with the dominant state power in the society and NGOs’ relative lack of bargaining power, the imbalance in the relationship between the state and the NGOs has become a serious problem. This is largely due to the tradition of the state‐led industrialization in Korea that places a heavy emphasis on the government's role in the society.     

The relative importance of liquidity and other constraints inhibiting the growth of small‐scale farming in KwaZulu‐Natal

A logit model is used to examine the extent of liquidity constraints relative to other constraints inhibiting small‐scale farming in KwaZulu‐Natal. These other constraints include poor access to land, labour and information, and high transaction costs. Data for the analysis were sourced from two rural districts in the former KwaZulu. The results suggest that liquidity is important, while imperfect land markets, information costs and high transaction costs are also significant inhibiting factors. Investments in literacy and language skills, vocational training, and business and financial management skills may improve income opportunities for rural people and hence enhance their ability to invest, save and borrow. Better roads, telecommunications and legal institutions are also required to realise the full benefit of investment in extension and credit services.     

Development of the township‐village enterprises and the re‐instttutionalization of the family in China*

Small farms, which have maintained flexibility throughout history, have long existed in China and the so‐called “family household system as a cooperative organization” comprehensively playing a diverse socio‐economic function has developed. In addition, trust derived from a unique environment based on a village structure where a few families dwell not to mention “everyone knows each other well” has also become institutionalized. In this setting, a complex and multi‐dimensional property rights could have developed. Moreover, the Confucian order, historically institutionalized in China, has differentiated the respective roles of the public from the private and the center from the local through a network intertwined by relationships (guanxi‐based network), allowing them to be relatively autonomous from each other (embedded autonomy). This institutional tradition of the Chinese society has re‐emerged with the coming of the reform age. The reform reintroduced the revival of the traditional family household, as a cooperative unit for the insiders and, at the same time, as a competitive unit against the outsiders; and its renewed close relationship with the local governments have given birth to the township‐village enterprises. Based on reforms of this nature, which have occurred from the bottom and approved by the center state ex post, China was able to experience the implementation a new form of transition to capitalism, i.e., rural industrialization. In this process, China's guana‐based township‐village enterprises were able to secure the fitness to react to market competition despite their collective ownership nature.     

The impact of the rise and collapse of Japan's housing price bubble on households’ lifetime utility

This study estimates the impact of the dramatic changes in housing prices during Japan's bubble from the late 1980s to the 1990s on households’ asset accumulation and utility over their life cycle. We construct a life-cycle model explaining households’ consumption/saving and housing decisions under collateral and borrowing constraints. We estimate this model using data from the Family Income and Expenditure Survey (FIES), which includes data on households’ housing wealth estimated from objective information. Using the estimated model, we then conduct a counterfactual simulation in which we assume that housing prices remained constant during the bubble period. Doing so allows us to quantify the gains/losses of lifetime utility due to the housing price boom and bust. We find that 72.2% of the households experienced an average decrease in lifetime utility equivalent to 5.7% of lifetime income. On average, Japan's housing price boom and bust caused a loss in lifetime utility equivalent to 4.7% of lifetime income. Moreover, we compare the impact of the housing price bubble across cohorts and find that the impact was greatest for those who experienced the bubble at ages 35–45.     

Silver fetters? The rise and fall of the Chinese price level 1928–34

We show how the silver standard transmitted world silver price fluctuations into China and made the Chinese price level closely linked to the world silver price. Inflation was transmitted between 1929 and 1931 when the world silver price was falling; while deflation was transmitted during 1932 and 1934 when the world silver price was rising. Using micro-level evidence and counterfactual simulations, we show that the exchange rate was the main shock transmission channel, and silver stocks played an insignificant role.     

Education and development: The role of non‐formal education,especially in developing countries

Education plays an important role in development, especially in a developing country. To develop the skills and knowledge of the large percentage of the people outside the reach of formal education, and to offer education programmes which can easily adapt and respond to the specific and immediate needs of a developing community, out‐of‐school programmes should be considered.

This article explains how non‐formal education, that is organized and systematic education offered outside the framework of the formal education system, could complement formal education, and should be organized to support integrated, community‐based development Briefly discussed guidelines for the planning of non‐formal education are the horizontal and vertical integration of all activities, extensive community involvement, a self‐help approach, the use of front line workers and the maximum utilization of existing facilities.     

The effect of HIV on health care in sub‐Saharan Africa

This article is concerned with the hitherto neglected area of the effect of HIV on the delivery of health care in sub‐Saharan Africa. The task is hampered by a lack of usable data. In most countries there have been no sentinel HIV surveys, so we have no clear idea of the magnitude of the epidemic. However, it is certain that HIV will alter the demand for health care, and the supply and quality of services.

Demand will grow as infected adults and children seek care. Most HIV‐related illness is found in people who would not normally require care, and therefore creates additional demand. Demand for care will also be determined by the availability and accessibility of services. Ironically, the middle‐income countries may face higher bills, and in this sense the effect of the HIV epidemic may be worse in the more developed world.

The supply of services will be affected by increased morbidity and mortality among health care workers. This is already happening. The generous terms and conditions of service that most governments offer to workers in the public sector will make the problem worse.

HIV has served to improve the quality of health care in most of the developed world. Patients have sought to take control over their own care, and staff have been more rigorous in taking universal precautions. But in developing countries external aid often determines how health care is organised, and money spent on AIDS is diverted from other areas. This may also be true of local funding.

The effect of HIV on health care is lamentably under‐researched. This is particularly worrying as the effects of HIV will be felt first by the health care sector. The problem must be confronted urgently from the point of view of the suppliers of health care services, the users, and the policy‐makers.     

The identification of liquidity effects in the EMS: Italy 1991–1992

We study the impact of liquidity shocks in Italy in the 1991–1992 period, when the lira belonged to the narrow ERM band with no exchange controls. We conduct our analysis by constructing (not simply assuming) predetermined measures of liquidity supply shocks, taking into account the institutional features of the money market and the reserve requirements' average computation system. We find that the supply of liquidity did significantly affect short-term interest rates; however, in contrast to earlier periods, most of the interest rate variations were attributable to foreign-exchange-related factors, as predicted by the asymmetric view of the ERM.     

Politics of the development of small and medium‐sized firms in Japan

Since the 1980s, small and medium sized firms in Japan have adjusted themselves remarkably to the market changes of the post‐Fordism industry, and have significantly contributed to the country's economy. This paper emphasizes the interaction of the state and local producers in building a social environment for nurturing the development of small and medium‐sized firms in Japan. An important role assumed by the state is the creation of local firm‐supporting institutions which have been the foundation of constructing regional industrial system. These local institutions were effectively utilized by the local producers of small and medium sized firms. In this process, central political power and local economic power fused in organizing ‘production’ in a new way of horizontal collaboration.     

Infant mortality and the health of survivors: Britain, 1910–50

The first half of the twentieth century saw rapid improvements in the health and height of British children. Average height and health can be related to infant mortality through a positive selection effect and a negative scarring effect. Examining town-level panel data on the heights of school children, no evidence is found for the selection effect, but there is some support for the scarring effect. The results suggest that the improvement in the disease environment, as reflected by the decline in infant mortality, increased average height by about half a centimetre per decade in the first half of the twentieth century.     

The Application of the BSC in Enterprise Strategy Management

As an achievement appraisal tool, the Balanced Scorecard （BSC） is applied in enterprise＇s strategic management. Combined the strategic goal with the applied process, through a series of index systems, it can make the enterprise＇s prospect accord with reality, as well as the strategic management organizational behavior operation keep unanimity with achievement in the information age.