Lessons from China in ending poverty

Xiamen, a prosperous port city in south-east China, reflects the country's transformation into the world's second-largest economy.
Xiamen, a prosperous port city in south-east China, reflects the country's transformation into the world's second-largest economy. PHOTO: EUROPEAN PRESSPHOTO AGENCY

Luminaries and experts convened (in October) in Washington, DC, to debate the age-old problem of ending global poverty. At the annual meetings of the World Bank and International Monetary Fund, ambitious goals of development were tabled. Like before, surprisingly little spotlight was given to the world's most successful country at poverty eradication: China. A joint statement by the multilateral banks to end poverty by 2030, for instance, never once mentioned it.

China alone accounts for three-quarters of the reduction in poverty around the world. Within a single generation, this country has morphed from a socialist backwater, poorer than Bangladesh and Chad in 1980, into the world's second-largest economy. True, there remains tremendous inequality in China. Many have not benefited from prosperity. Still, its past growth has lifted 700 million people out of extreme poverty, which is no mean feat.

The global community has been either reluctant or unable to take lessons from China's success for one striking reason: It is an autocracy. The ruling party bars national elections. Individual rights are not protected by law. China fails many standards of good governance. Hence, it is set aside as an anomaly: conspicuous, but not recommendable.

Clearly, it would be a shame to dismiss China's experience entirely. To take lessons from it, however, we must discern what to learn and what not to learn.

Let's be clear about what not to learn. Developing countries should not adopt China's autocratic rule. Autocracies are good at getting things done, once their leaders decide on certain goals. But, if such goals are misguided, as was in China under Mao Zedong's rule, the results can be disastrous.

Nor should other developing countries copy the Chinese leadership's futile attempts at exerting precise control, such as over stock markets or the Internet.

Such control often backfires, as seen in the billions of dollars lost by the government to save the stock market last summer.

Xiamen, a prosperous port city in south-east China, reflects the country's transformation into the world's second-largest economy. PHOTO: EUROPEAN PRESSPHOTO AGENCY

So what is there to learn from China? Beneath the veneer of autocratic rule lies tremendous improvisation and creativity, often within the party-state and at the grassroots level of society.

Bottom-up improvisation - not central planning - has been the driver of China's escape from the poverty trap.

Contrary to popular views of China as a monolithic dictatorship, it is one of the world's most decentralised administrations.

Leaders in Beijing sketch out grand visions but the routine work of development is done at a local level, where the government interacts directly with investors and people.

One remarkable feature of this highly localised model is the eagerness of local officials and entrepreneurs to kick-start markets using what appears to be the "wrong" methods.

To get this point, we must review history. Looking back at the past of wealthy coastal cities in China today, did they escape poverty by first establishing formal property rights, eradicating corruption and hiring technocratic officials, like in Singapore?

No, they did not.

Instead, these places launched development by making best use of their resources at the time: communist officials with family and friends. Hence, entire bureaucracies were dispatched like bees in eager search for investors.

Then, as local economies grew, the goals of development evolved: from desiring any investor to only quality investors. These changes pushed local governments to recruit professionals and formally protect property.

In other words, the template of "good governance", championed by the World Bank, was not the cause of market emergence, but rather its outcome. Good governance serves to preserve markets that already exist. Building new markets, however, requires improvising with existing features of poor societies, which often look weak, wrong or even corrupt.

To be clear, the lesson here is not that other countries should copy the exact things that China did. That's foolish. My point is that poor societies must leverage their own unique features to jump-start development, rather than import best practices from the wealthy.

Consider other examples beyond China. In Nigeria, local film-makers exploited piracy as a distribution channel, enabling their films to sell rapidly in an otherwise hostile terrain. In Bangladesh, dense informal networks in villages became the basis for Bangladeshi social entrepreneur Muhammad Yunus' successful experiment at microfinancing. Seizing advantage of poor public transportation and weak regulations, hail-a-ride businesses are booming in Indonesia.

Stories of failure among the poor are plentiful. It is easy to argue that bad institutions, corruption and weak governments cause poor countries to fail.

But, what we really need to understand is how to create success under adverse conditions, how to turn the problems of developing nations into potential solutions, and how to leverage local knowledge to meet challenges.

On all these fronts, China is a textbook case. Its experience must not, and cannot, be copied wholesale, just as the experience of any country - including the United States - should not be blindly replicated elsewhere.

As leaders continue the work of implementing the United Nations' 2030 Agenda for Sustainable Development after a week of intense deliberation, China's experience is surely one that cannot be ignored.

Join ST's Telegram channel and get the latest breaking news delivered to you.

A version of this article appeared in the print edition of The Straits Times on January 06, 2017, with the headline Lessons from China in ending poverty. Subscribe