Demystifying the Chinese Economy by Justin Yifu Lin

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Demystifying the Chinese Economy by Justin Yifu Lin

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Category: Business and Finance
Rating: 4/5
Reviewer: Andy Lancaster
Reviewed by Andy Lancaster
Summary: If you are less than seventy-five (or even more) today, the chances are that some of Lin's ideas and interpretations in this book will have a profound effect upon us all within our lifetimes. Serious economics by the Senior Vice President of the World Bank is never going to be a light read, but in our current world, this is a book that you should at least sample.
Buy? Maybe Borrow? Yes
Pages: 330 Date: October 2011
Publisher: Cambridge University Press
ISBN: 978-0521181747

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The success of the Chinese economy, and as Lin makes us aware, a success which contrasts strongly with what appeared major failure in the recent historical past, is something which needs explanation. No one can ignore it, and we are confronted with the effects of it from the ownership of Thames water to the faces of tourists in London and Stratford on a daily basis. And in the roots of its success are the potential seeds of future change, a change that now more than ever is crucial to the way the world economy works.

Of course this is not a subject which has been ignored by others, and one of Lin's self-appointed tasks is to contextualise modern change in historical development, and to unpick the contrasting theories which have been framed to make sense of these huge changes. What emerges from this, at its simplest, are two major themes, the role and operation of state policy and the command economy, and a very clear case that no one state or economy develops except within its own historical and cultural context.

By ranging across other economies, historical change in the USSR and Japan, the growth of the Eastern Tiger economies as well as detailed explication of the ideological switchback that was and is Chinese government, Lin clearly shows that it was the underlying conditions coupled with rigorous state intervention that enabled (and at times inhibited) the Chinese growth as we see it today, and advances the fundamental case that China's growth has been the result of the subtle interplay between these two elements. Without rigid intervention at key times, China would not have emerged from the agrarian state it was barely a century ago, yet neither would the expediential boom have occurred without individual capitalism and entrepreneurial spirit.

So far so interesting. But there are some problems ahead. Stylistically, because the book was based on a series of lectures each section does begin in a somewhat repetitive way, as though we were errant students who needed to catch up with the last session. But more significantly for me at least, the book moves into some heavyweight economic theory when dealing with more recent times, and frankly I struggle to keep up. Justin Lin is not only the Senior Vice President of the World Bank but also a doctor of economics and for this ordinary reader some of his case became something that only a student of higher economics could really appreciate.

But that shouldn't put you off reading this, because Lin does help us gain a sense of where China's future problems might lie. Because of the growth of quite unequal levels of income in a society which is culturally more likely to save than consume, problems in the economic (and perhaps political/social) system seem inevitable, especially when Western markets begin to dry up. It is clear from his analysis that the future may contain internal change which might create challenges to the seeming inevitable growth.

But also, there is something essentially hopeful in his conclusions. At the heart of the 2007 Party Congress was the concept of balance and harmony amongst the competing needs (urban/rural, social/economic etc), and it is the unity of insightful control and intervention in economic matters, of NOT abdicating responsibility to just the operation of the market, but at the same time allowing space for human potential and energy which emerges. There lies a humane spirit just visible beneath the numbers.

This book really inhabits a very specialist world, but it is possible to find similar if not so academic territory explored in , for example, The Death of Mao: The Tangshan Earthquake and the Birth of the New China by James Palmer which reviews the moment of monumental change from Maoism to the new vision of China. The issues of 'whither modern economies' is the subject of much popular non-fiction, and a stark contrast in style, as well as focus, is provided by How the West was Lost: Fifty Years of Economic Folly And the Stark Choices Ahead by Dambisa Moyo. You might also appreciate The Price of Fish A New Approach to Wicked Economics and Better Decisions by Michael Mainelli and Ian Harris.

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