How China Escaped the Poverty Trap by Yuen Yuen Ang

The second part of the book is equally thought provoking. And the types of growth that are more likely to generate the diverse and balanced interests that may give impetus to developing the strong institutions essential for preserving markets. Instead of inconveniently writing off outlier cases such as China, Vietnam, Rwanda, Bangladesh or Cambodia, we should instead unpack how they evolved institutional solutions to commitment, cooperation and coordination problems as their economies evolved. We need to engage more with research of this nature. The cooperation of a massive number of cadre members with the investment promotion campaign was achieved through strong performance management. At the early stages of development, these functions are likely performed by informal institutions.Īs the author illustrates, at the beginning of Chinese reform, the commitment not to expropriate investment wasn’t backed by strong legal institutions it was based on personal relationship and trust between the investors and their local hosts. The 2017 World Development Report on Governance and the Law highlights three institutional functions that are essential for policy effectiveness: making credible commitments, inducing cooperation, and coordinating beliefs and complementary actions.

Yuen Yuen’s work, in contrast, highlights the possibility of using existing institutions to generate inclusive growth and further impetus for institutional evolution. This provocative message challenges our prevailing practice of assessing a country’s institutions by their distance from the global best practice and ranking them on international league tables. Nations don’t have to be stuck in the “poor economies and weak institutions” trap. The first takeaway of the book, that a poor country can harness the institutions they have and get development going is a liberating message. We chose to highlight this book for the World Development Report (WDR) 2017 Seminar Series as its focus on institutional functions rather than forms and on adaptation resonates strongly with the upcoming WDR 2017.

How China Escaped the Poverty Trap by Yuen Yuen Ang