Defector to Communist China Revolutionizes Development Lending

choi

Bloomberg, Apr 30, 2015.
www.bloomberg.com/news/articles/ ... development-lending

Quote:

“Within a week of becoming World Bank chief economist in 2008, Justin Lin Yifu rebelled against the ‘Washington Consensus’ view that interventionist industrial policies [government picking winners] don’t work. He packed his bags for Ethiopia and Rwanda to urge their governments to promote manufacturing. * * * He believes the quickest way to ignite growth is government support for industries with a comparative advantage, a departure from development banks’ traditional reliance on free-market principles. * * * [Lin’s 2012 paper] says governments in emerging markets can encourage the rise of light manufacturing by using their limited resources to create industrial areas with business-friendly environments, as China did with its special economic zones in the 1980s.

“ ‘He’s very influential among the top leaders’ and advises both President Xi Jinping and Premier Li Keqiang, says Huang Yiping 黄益平 [a professor at 北京大学], who works with Lin at Peking University and has known him since 1987. ‘His views are favorably received by some of these top leaders.’

“The counter to Lin’s thesis is that governments are poor allocators of capital, a task that should be left to markets.

My comment:
(a) There is no need to read the rest.
(b) Ever since I heard his talk at MIT two decades ago, I have always thought his overly optimistic view of China’s economy was and is unwarranted.
(c) Bu this article is about competing models of economic development. Taiwan has always follows Japan economics-wise. The notion has been instilled into Taiwanese that bureaucrats know the best, and should guide and lead. (Japanese economy has been in doldrums for 2 ½ decades. But that was a future Taiwanese did not know yet.) I came to US in 1984, and was puzzled by the contrary concepts; Be they liberal or conservative, no Americans advocate government picking winners. Then a decade ago, I chanced upon a one-page sidebox of Paul Krugman’s classical textbook, which said government was poor at this job. Put it this way, how did bureaucrats know whether to pick Betamax or VHS?  Ever since, I have become a convert.