How did China emerge from the wretched poverty of the Mao era to build such a vibrant economy that it is now perceived by the United States as a viable contender for global supremacy? Historians look to Deng Xiaoping’s post-Tiananmen Southern Tour. Economists point to China’s extraordinary investment in infrastructure. Political scientists, in their haste to reconcile China’s economic success with its rejection of Western liberal democracy, tout its state-controlled model. In Professor Yasheng Huang’s view, these explanations are not merely insufficient, but alarmingly misguided, as they often get the cause and effect backward. To understand China’s economic boom, he argues, we need to return to the 1980s, when a more liberal leadership allowed for mass, grassroots experimentation. More important than looking at the right era, he said, is “getting the details right”.
Yasheng Huang is a Professor of Global Economics and Management at the MIT Sloan School and also holds the Epoch Foundation (时代基金会) professorship of Global Economics and Management . He is the author of The Rise and Fall of the EAST: How Exams, Autocracy, Stability, and Technology Brought China Success, and Why They Might Lead to its Decline, and Statism with Chinese Characteristics. His previous appointments include faculty positions at the University of Michigan and at Harvard Business School.
Alice Liu: Dr. Huang, you published a new edition of Statism with Chinese Characteristics earlier this year. What’s the book about?
Yasheng Huang: The book is a substantially revised and expanded version of my book published in 2008. One objective of the book is to update the Chinese economy today. The book is, at its most basic, a narrative and an interpretive history of Chinese reforms. I say it’s both a narrative—documenting what has happened—and an interpretation of these historical policy developments, reforms, and resulting economic performance. So that’s the idea of the book. The other purpose, and I’ve said this many times in my book, is to get the details right.
So, my reading of a lot of the Chinese economic books, by the way, in both English and Chinese, is that they are at a very high level. A lot of the details are missing, especially about the earlier period. And missing those details, in fact, has consequences for how we interpret Chinese economic performance and Chinese policy development. So what I aim to do is to provide those details.
AL: One of the book’s central arguments is that, in scholarly discussions of China’s economic takeoff, the era of the 1980s deserves far more analytical attention than it has received. Why is the decade often overlooked, and what significance does it hold?
YH: I think it’s overlooked for a number of reasons. One is that American academics only began to pay attention to China in the 1990s. Even Chinese scholars didn’t pay as much attention to China in the 1980s as they did to the later period. I was just a student in the 1980s, and I have to admit that I myself didn’t really know what was going on. Only by writing my 2008 book did I begin to have a considerably new perspective on the decade. And the other reason is that the Chinese statistics from the 1980s are very fragmented and incomplete. The Chinese Statistical Yearbooks didn’t have many data series at a level that is important for doing in-depth research. Academics, at least Western academics, really didn’t undertake complicated income surveys. One happened in 1988, and that was already toward the end of the 1980s. So that’s the lack of materials and data.
And then, crucially, there was a powerful idea that emerged in the study of the Chinese economy: gradualism. The person who was most instrumental for that literature is Professor Barry Naughton, who is a professor at UCSD. In 1996, he published the book Growing Out of Plan. As the title suggests, his view is that China can grow out of the central planning rather than having to reform central planning directly to grow. The implication is that China began to take small-step reforms at the beginning and then generate growth and then China gradually built on these steps and began to undertake bigger and more radical reforms. Naughton’s perspective was tremendously influential in that it set a tone for how the rest of the academic community viewed China. They drew the conclusion that reforms in the 1980s were gradualist, small steps, and they only grew radical after the eighties. A lot of these pronouncements about the 1980s are based on this framework, rather than based on actual observations of that era. As such our views of the 1980s are really inferences rather than direct observations.
AL: What else is mistaken about Chinese reform history? What would you find problematic about orthodox explanations of China’s economic miracle? You called the whole China model “ahistorical” and “getting cause and effects backward,” and I’m especially interested in hearing more about that.
YH: Well, I think these two critiques of mine, ahistorical and getting the cause and effect backward, are interconnected. It’s ahistorical in the sense that people essentially view the 1980s from their perspective on the 1990s, and by the way, this is one reason why so many people have a very high opinion of Zhu Rongji, who passed away recently. Globalization, state-owned enterprise (SOE) privatization, these are well-known events that people talk about, and they are meaningful reforms, but they all happened in the 1990s or early 2000s. And then the view is that China did none of that in the 1980s. Well, it’s ahistorical, because China implemented a lot of incredibly meaningful reforms in the 1980s. In fact, on some dimensions, the reforms in the 1980s were far more radical and fundamental than the reforms in the 1990s. But more importantly, and what is completely missing in the standard account of the Chinese economy is that in the 1990s, the policy makers reversed many of those reforms of the eighties.
Going back to your first question of why academics don’t know much about the 1980s, it is in part because a lot of these reforms in the 1980s happened in the countryside. In the 1980s, the Chinese countryside was massive. Remember, in the 1980s, the countryside was 80% of the population. And so substantial reforms took place in a part of the economy that has 80% of the population.
Another thing about the 1980s is that it was a decade in which meaningful political reforms took place. That has been largely overlooked; those political reforms have inextricable links to the nature and the type of the growth in the 1980s—more equitable and beneficial type of growth to the average Chinese. The other portion of your question was about reversing the cause and effect. The narrative that emerged in the 1990s is that the Chinese economy succeeded because of industrial policy, massive infrastructure building, and state-coordinated programs. And that became the dominant narrative of why the Chinese economy succeeded. It’s a cause-and-effect view: building roads leads to economic growth. Well, it turns out that China, in the 1980s, had terrible roads and had very little really respectable infrastructure.
As you may know, a lot of people believe that China succeeded due to superior infrastructure, whereas India did not. But in effect, in the 1980s, by one measure that mattered at the time—railway, India had better infrastructure than China. In terms of this cause and effect, well—this cause was practically non-existent in the 1980s. And I would argue that causal direction is exactly the opposite. The reforms in the 1980s, plus the momentum built in the Chinese countryside, created economic growth and resources, which in turn led to infrastructure-building. Infrastructure is a result of, rather than the primary cause of, China’s growth.
AL: You just highlighted the importance of political reforms of the ’80s. Will you elaborate? What is its connection to economic growth?
YH: Very good question. We’re not talking about democratization, free elections, or press freedom. Although there were some elements of that, for example at the village level. In the 2026 edition, I go into that issue more deeply, as we collected data and facts about politics. One thing that is very unique about Chinese politics at that time is that the high politics, like Politburo, Central Committee, etc., was more distributed—meaning that there were different power centers—in the eighties. And one aspect was this division of labor between the elders: Deng Xiaoping and Chen Yun didn’t manage day-to-day economic affairs. They set general directions, but a lot of the implementation was done by Hu Yaobang and Zhao Ziyang. Consider Xi Jinping’s extreme centralization of power. That’s a big difference.
In my 2023 book, I described the Chinese politics of the 1980s as a “frictional autocracy”. A frictional autocracy is one in which an autocrat faces frictions rather than an unimpeded path toward the objectives he wants to achieve. Making changes from the top down is more difficult, either in a forward direction or in reversal. While frictions themselves do not automatically lend themselves to reforms, a frictional autocracy is gravitationally liberal, as it is more permissive of divergent views and voices and crucially more permissive of initiatives coming from below. In an autocracy, a divergent view, by definition, is a liberal view, just as a divergent view in a liberal democracy is illiberal. A liberal autocracy and an illiberal democracy are alike in one aspect – there are different viewpoints in tension and in contention with each other.
In the 1980s, China was that frictional, liberal autocracy. Chinese politics were intramurally contentious – with different factions vying for power, influence, and policy decisions – and, crucially, there was a degree of power sharing. The top leadership of the 1980s was known as “two and a half,” with Deng Xiaoping and Chen Yun as two coprincipals with more or less equal stature and prestige. Li Xiannian was the half, a rung down in the power hierarchy. The power sharing was formalized, and the distributiveness of power reached its apex in 1988. Five different individuals held top positions in the state – the general secretary of the CPC (Zhao Ziyang), the premier (Li Peng), the presidency (Yang Shangkun), the chairman of the Military Affairs Commission (Deng Xiaoping), and the chairman of the Central Advisory Commission (Chen Yun). Deng also enacted term limits and created the norms of mandatory age requirements that institutionalized Chinese politics further. The importance of these divisions of power becomes evident when we compare with China today. We don’t have the Central Advisory Commission anymore. The Party Secretary and Chairman of the Military Affairs Commission is one person. But the fusion of these institutions didn’t happen under Xi Jinping. That big political centralization happened in the early 1990s.
What has that to do with the economy? The biggest impact is that this distributed political arrangement allowed for experimentation and trial by error. It is not because, you know, Zhao Ziyang had a Milton Friedman view of the economy, although he was more market-oriented in his philosophy. (He actually met with Milton Friedman). It is because he allowed experiments. The other reason is that, because of this distributed nature of the political system, the central government retained the veto power, rather than the decision power, which means that usually the decisions to do certain things came from localities. The central government can still veto, but they normally don’t, as more often than not those experiments turned out to be successful.
Whereas if decision power is centralized, that’s a very different dynamic because the top leader can shut down proposed experiments even before they take place. Here, I’m talking about seemingly minor distinctions but in fact they are incredibly consequential. If you cannot experiment, you cannot have any outcome to rely upon to make your judgement. Within a one-party system, having some flexibility vis-a-vis no flexibility at all makes a huge difference. Recently, I learned that during the 1980s, China ran experiments on population control. They allowed a more flexible population policy to see if it would lead to higher fertility. Turns out it didn’t lead to an explosion of birth rates, proving the one-child policy unwarranted. Hu Yaobang and Zhao Ziyang wanted that experiment to continue, but these leaders were purged and the experiment did not continue and China continued its disastrous—and utterly inhumane—population control for almost another three decades. The year 1989 was a turning point. After 1989, Chinese leaders reversed these liberal reforms and put in place the dirigiste China Model.
And the biggest thing for the economy was the rural financial reforms which happened on a large scale in the 1980s, improving financial access for hundreds of millions of Chinese rural residents. Economist Nicholas R. Lardy published China’s Unfinished Economic Revolution in 1998. The book’s core argument was that China has done every reform except financial reform. The book came out in 1998, but he did not know that China, in the 1980s, undertook substantial financial reform. But all of that was in the countryside, and by the mid-1990s, all of it was reversed or stopped by the post-Tiananmen leadership. I want people to get the details right about political reforms, financial reforms, and the power of experimentation.
AL: Let’s talk about financial reforms. You said that they’re exclusively concentrated in rural areas. How do they work, and what are the effects?
YH: Well, 80% of the population lived in the rural areas. Both entrepreneurship and economic dynamism came from the rural areas. The entrepreneurship and economic dynamism didn’t happen in a vacuum but under supportive conditions. Financial reform was one of the most historic economic developments of our times, a development very few people know about. Small farm economies don’t need much outside financing, but farmers entering industry or service to transition out of agriculture need funds to pay for equipment and transportation. Finance is incredibly important in industrialization and transformation from agriculture to industry to services.
This is where financial reforms were really unique. These financial reforms encompassed two areas—improving access to finance for the private sector and permitting or even encouraging private entry into the financial service sector. Private entry into finance was allowed, private financial institutions were developing very fast, and private activities in finance were vibrant. And the state-owned banking system began to make more loans available to rural households who started non-agricultural businesses. The famous township and village enterprise phenomenon was a result of that. Otherwise, we can’t really understand how you can have such an incredible burst of entrepreneurship in the rural area.
And so, in the 1980s, the rural economy was, and when we say rural, we don’t mean agricultural economy. We mean industrialization, services, and industry that originated from the countryside. The financial reforms of the 1980s, even though limited to the rural areas, had a disproportionately contributory effect on the overall entrepreneurial and market development because rural China was already predisposed toward small-holder capitalism in the first place. A survey that I got hold of was conducted in 1991, and even though it was 1991, it reflected the situation in the 1980s. It showed that the vast majority of the entrepreneurs were born in the countryside. Even the ones who operated in the urban areas originally came from the countryside.
And when I was a student in the 1980s, I remember seeing this construction of the building near the Beijing Railway Station, maybe around 1985. I believe the name of that building was International Hotel, or something like that. I knew nothing about it at that time. I didn’t really pay attention. Many, many years later, I learned that it was built by a township and village enterprise firm from Hebei. By the standard of China at that time, it was a high-rise and high-end building. Rural firms already had that capability just seven years after the reforms began.
Another TVE operated an airline business. But all these incredible things people have no idea about, and I just found it the most fascinating period of the Chinese economy. And another detail is that Chinese growth was more virtuous, meaning that Chinese people gained more from economic growth than they did later. Though the GDP growth was not substantially faster than the 1990s, the great difference lay in household income growth. If you break Chinese economic history into the 1980s, 1990s, 2000s, and since the 2010s, the eighties saw, in terms of household income growth, by far the fastest growth. And China had none of the overcapacity problems, all these things. Income inequality began to improve. Of all the problems we’re talking about today, none of that existed in the 1980s.
AL: You wrote that China, after the Tiananmen massacre, went to great lengths to dismantle the liberal policies of the ’80s. And you said that this reversal was at the hands of a group of people who you call “Shanghai technocrats”. Who are these people?
YH: There was a connection between Tiananmen and the policy reversal, but the biggest sole factor was the post-Tiananmen leadership change. This is where the Shanghai technocrats came in. This group of Shanghai technocrats who took over China after Tiananmen reversed rural financial reforms and taxed rural economy heavily, resurrecting an ingrained, deep feature of a centrally planned economy—urban bias. And I don’t think just because Tiananmen happened, they had to do these things. But their vision of the model of economic development has several components. One is that the idea is that cities are the most important. The countryside is useful to the extent that they produce rice and vegetables, but otherwise, it is a burden. They view the countryside as baggage rather than as a source of entrepreneurship and GDP growth.
And the other thing is that technology is everything in the economy, very much the pervading view today. When looking at rural businesses producing, say, bricks and concrete, they see them as competing with state-owned enterprises and draining away precious resources. So the financial reversal happened under that perspective. The other aspect is that they find centralization a precondition for undertaking big projects: building airports, highways, and whatnot. In comparison, a lot of the financial support for the rural economy happened at a local level and was a spontaneous response to the market demand.
In their effort to conserve resources to a few select state-owned monopolies, the Shanghai technocrats engineered a mass privatization program of small firms that employed a lot of people. (Some economists keep saying that China never did shock therapy. They have no idea what they are talking about.) In contrast, the key thing for 1980s leadership was employment. The rural economy created a lot of employment opportunities. Whereas in the 1990s, the employment emphasis came down. It was all about technology and industrialization.
AL: Would you say that their policy of prioritizing cities is what sowed the seeds for the urban-rural divide that we see in China?
YH: Absolutely. That was the beginning of it. And the thing that we need to keep in mind is that, in a political system, favoring the urban economy is embedded in that system. So in the 1980s, I’m not saying there was no urban bias, but that urban bias was balanced by other considerations. This is where a frictional autocracy really mattered—there were competing views, some favoring cities and others favoring countryside. Beginning in roughly 1993, 1994, though, the urban bias won the debate decisively because Shanghai technocrats gained the control of Chinese economy. By the way, urban bias is almost like a universal phenomenon in many other developing countries, in Brazil and in India, the urban bias is ingrained in the policy thinking. It’s actually in the rest of East Asia—Taiwan, Japan, and South Korea—that we see less urban favoritism and that was a critical factor why East Asia succeeded.
AL: You noted how some American liberals, in repudiation of Western free-market capitalism and democratic structures, fervently praise the China model. Why, in your opinion, is their reasoning incorrect? For example, some economists took the view that local government ownership is an optimal arrangement compared to private ownership; another theory holds that Western rights and rule of law actually served as obstacles to economic development.
YH: I can sort of critique that view both narrowly and broadly. The narrow version of my critique is that they simply got things wrong. In my book, I coined the terms “directional liberalism” and “directional rule of law.” Which is that China, at no time, even in the most liberal 1980s, was a liberal democracy. I mean, we all know that. It didn’t really have strong property rights protection, didn’t have any judicial independence, didn’t have any real rule of law.
But let’s think about this issue in a slightly different way. After this interview, I’m going to play tennis. But I’m an amateur, that’s why I’m doing this interview with you now, rather than playing at Wimbledon. In terms of my tennis ability, I’m nowhere near that of professional players. But because of practice, I’m a better player than I was 10 years ago. To me what matters is the direction of the change, not whether I can beat a professional player. I’m becoming a better, not worse, player.
So, if you ask the question, was China a rule-of-law country in 1988? No, absolutely not. But if you ask, was China in 1988 more of a rule-of-law country than China in 1976? The answer has to be yes. Likewise, it is the direction, not the level, that matters for economic growth. Back in the 1980s, an entrepreneur wouldn’t have said, “I won’t start a business just because my country lacks the rule of law that America has.” But he would probably tell himself, “Look, in 1976, there’s no way I would start a business. Because once I do that, I will find myself behind bars.”
In the book I distinguished between security of property and security of the proprietor. China has never achieved a sort of absolute level of security of property. But immediately after Deng Xiaoping came to power, they achieved substantial security for the proprietor. A person who started a business became more secure. Not getting arrested in the 1980s had a massive incentive effect. So, that constitutes a huge difference from the Mao era.
A recent and popular book argues that China grew not because of its lawyers but because of its engineers. I find that deeply flawed. I see the book as confusing the level with the direction. Here’s the thing, and this is really a problem with the mainstream media—when conducting interviews with these authors, they fail to challenge them on logic and evidence. If one were to argue that China does not need lawyers, I would follow up with a question: “Are you telling us we should go back to 1976? The number of lawyers in 1976 was precisely zero.” If you’re honest, your answer has to be no. If your answer is no, you are supportive of having more rather than fewer lawyers. And this sort of time-series perspective is completely missing in a lot of these discussions of China. And this is a big problem. (By the way, the Soviet Union was ruled by engineers—all the way to collapse.)
I’m happy to do this interview with you, because I spent years writing my books, and I try to get the data right and get the facts right. But the price of doing that is nobody reads it. People are bored by data and by pages and pages of factual details. But it is so crucial to get the details right; you have to get the data right in order to get the perspective right.
As an example, I collected data on the number of lawyers and patents in China. It turns out that the most inventive regions in China also have more lawyers. If an argument is wrong for China itself, it is guaranteed to be wrong as an explanation to compare China with America. This narrative is interpretively wrong and more damaging is that they lead to wrong policy conclusions, because by that perspective, you need to strengthen the power of the state, whereas I believe that the right thing for China to do is that the state should reduce its power to allow more decentralization and more entrepreneurship. The policy implications are dramatically different from these two perspectives.
AL: I hear you. What frustrates me a lot about discussions of U.S. politics is that, in our haste to criticize the neoliberal order, we sometimes invoke the wrong models. Personally, I find many of these conversations phony.
YH: I do think there’s a lot about America that one should critique. And I think you and I treasure our rights to critique it. But at least for me, I can critique America on its own terms and I don’t think you have to critique it by praising a wrong model.
You could just critique it because it has violated its own principles, you know, look at the Trump administration. I do believe that there are a lot of problems with the neoliberal order, and I do believe in certain areas, the government should step up more in this country. But to argue that China has done right by having this amount of state control, state command, that’s just totally wrong. If anything, Chinese reforms happened when the state reduced, rather than increased, its control. In my book, I compare the power of the state to cholesterol: Too much of it you die; too little of it you die as well. The key thing is to get it right.
AL: You have an insistence on getting the details right that almost borders on obsession. Let’s talk about details. What are some of the other details you think your readers should understand?
YH: Well, let’s look at a definition. Township and village enterprise. And on this issue even the most seasoned scholars get it completely wrong, including many scholars in China, who can read Mandarin as much as I can. The overwhelming consensus in the economic literature on TVEs is that the vast majority of the TVEs were local government enterprises. That’s just flatly wrong. The Chinese official definition directly contradicts that perspective.
In my book, I went through document after document, official definition after official definition, data after data, just to show that the vast majority of the TVEs were private businesses. And the official definition is actually super clear. And this is where the confusion lies, which is that the Academics, including Chinese academics, are making this mistake. They mistake the term 乡镇企业 as an ownership concept. Their logic is: Township 乡 is a local government, village 镇 is a local government. Imagine you see a “Huang Enterprise”—you would think that the enterprise belongs to me, Huang Yasheng. But if you check the official definition, it says very clearly: Xiangzhen Qiye are enterprises located in townships, and located in villages. It’s like saying enterprise located in Boston as opposed to an enterprise belonging to Boston city government. It’s about location, not ownership.
And amazingly, people like Wan Li, who was vice premier and in charge of agriculture, repeatedly said, “Many people thought the TVEs belonged to the government. That’s not true.” And then I look into official data. Just to give you a sense, there were about 12 million TVEs in 1984. 10 million of them were household enterprises, run by the household. 10 out of 12 million. Don’t tell me that’s not an important detail to get right.
You still see pronouncements about this issue among Western academics, who are associated with what is known as “heterodox” school of political economy. They often cite China as a contradiction to the mainstream neoliberal perspective and they say that TVEs are public and China never adopted shock therapy. These are FACTUALLY untrue. Here are the facts: 1) 10 million out of 12 million TVEs as early as 1984 were private and 2) China laid off probably 35 to 40 million workers in the late 1990s. I have no problem critiquing neoliberal economics, but shouldn’t you start with right facts?
This is a huge problem in journalism as well as in academia. In journalism, there is very little in-depth discussion of these topics that get out these details and journalists do not have the knowledge to confront these perspectives and have no interest in history and factual details. Then in academia, you get published—and tenured—by pursuing very micro topics without getting into these big, consequential topics. The result is that these falsehoods or half truths are left hanging there and get perpetuated.
By the way, people who have this view of TVEs are some of the biggest names in academia, including a Nobel Prize laureate. Very early on, in the early 1990s, he visited a very successful TVE in Guangdong that produced refrigerators. He and then other economists used this firm and TVEs in general to build a theory arguing why local public ownership was good for enterprise development. By the way, at that time, when I read those papers I was convinced and that was my view as well but at least I had the presence of mind to probe further and find out more details. In the late 1990s, I taught at HBS and unlike at MIT, professors at HBS have to write case studies. So I wrote a case study about Kelon to get more details about the company and I found out it was nothing like what these academics portrayed in their papers and it was virtually the opposite of the theoretical model they came up with. All the equity financing was 100 percent private and the firm was registered as a local government firm only because at that time—in early 1980s—China did not have an existing legal registry for a private firm of that size. But that registration would haunt Kelon many years later and it was destroyed by local government interventions before being sold off to another firm.
And the other sides we already talked about: large-scale rural financial reforms, the rise of personal security, directional movement toward rule of law, more political flexibility, and meaningful political reform. But these days, people have no knowledge that all these things happened in China. Just the other day, I gave a lecture to a group of Chinese executives. I asked them, do you know that Zhongnanhai (sort of China’s White House), in the 1980s, was open to the public? None of them knew. Zhongnanhai was open to the public. Staggering.
AL: I had no idea.
YH: I took the mainstream view that the reforms of the 1980s were limited, mild, incremental, and all that. And then after ’89, there’s not a single visitor to Zhongnanhai, unless you were a guest. But as a tourist, there’s no way you could visit Zhongnanhai today. You can’t even get close. The shutdown immediately happened after ’89.
Until 1989, prominent Chinese intellectuals, such as Fang Lizhi and Liu Binyan, criticized Deng by name. Again, the 1980s was, by no means, a liberal democracy, definitely not. But compare with 1976, and compare with today, there’s no question it was more liberal. Directionality matters. My framework is dynamic rather than static. What matters most is the direction of movement, not just how far along the movement has progressed. Under my framework, the relevant question isn’t whether the United States is already an autocracy—any objective assessment would not describe it that way today. But that Trump is moving the country toward autocracy and it is that movement that matters. You can apply the same perspective to China. China was an autocracy under Mao and it was an autocracy under Deng Xiaoping but it was less autocratic under Deng and economic growth happened under the less autocratic Deng than under the more autocratic Mao. Tell me how that is an argument for autocracy?
AL: If you were to advise Chinese leadership today, what would be the first set of reforms that you would implement? What are the things on your mind?
YH: I wouldn’t describe myself as a radical person. And my book is also very much about Chinese history, Chinese culture, and its tradition. I believe any country—be it Canada, US, Japan—has to move with respect to its own history. So I won’t suggest that China transition into a constitutional democracy tomorrow. But I would advocate for a more distributed political arrangement like that of the 1980s. I would advocate collective leadership and more local autonomy and agency.
On the economic side, I would suggest hukou reforms. It’s more important than anything else. The countryside can make or break China. You know, Chinese today still has 600 million rural residents. I believe getting the rural issues right is the key for continued Chinese economic progress. Definitely not building more high-speed railways. I would advocate reforms on social security, public education, and public health. I would advise the government to do more in those arenas, and delegate business decisions to private enterprises and entrepreneurs.
AL: Thank you. One last question: what can other countries, especially Asian countries, learn from China’s economic takeoff?
YH: Earlier, we talked about this view among some Western intellectuals that liberal democracy has failed. I think that’s a very wrong lesson. And if we look at the US more closely, a lot of its failures come from its features that are undemocratic. I do not think electoral college is democratic; I do not think Senate is democratic; I do not think campaign finance is democratic; I do not think gerrymandering is democratic. I think there are two important lessons from the Chinese experience and from the whole Asian experience.
One is that something that I didn’t discuss at great length in my book, but I do believe that this is an important factor. One thing that China got right was making investments in basic education. And I think this is one area India could learn from China. India traditionally invested in tertiary education, but they should really improve their basic education. Other Asian countries, like Thailand and Malaysia, should pay more attention to human capital. Not only at the university level but also at the basic level of public health and things like that.
And the other thing is I would advocate more rule of law—at least rule by law—governments. I wouldn’t put industrial policy at the top of my recommendation. It’s extremely costly, especially risky. It misallocates a lot of the resources, and you can succeed, but you can also fail fantastically.
I really want your readers to know that getting facts right and getting the details right are incredibly important. There’s nothing more important for a scholar to pay attention to details and facts and data but I think it should apply to policy discussions and to media discussions as well.