Harford tells us that rich countries have better institutions which foster stag-hunting.

What about China? The Communist party isn't big on trust, but have found a way, nevertheless, to move their country on a path to wealth. But even if the premise holds true there as well, these better institutions didn't just suddenly appear creation ex nihilo. Was there something else that fostered the creation of these better institutions?

If so, what?

And does any of this negate Jared Diamond's thesis presented in Guns, Germs and Steel? He argued that the Eurasian land mass had a leg up due to its East-West orientation which proved biologically helpful in the development of grass species that form the basic food stock of agricultural societies. Africa and South America are at a distinct disadvantage here.

The Commies never moved China towards economic freedom, greed did.

I'd have to argue quite to the contrary. Despite numerous very bad mis-steps, the Communists produced vast economic growth. Of course growth is even greater now that the traditional communists are dead and gone, but nonetheless charting Chinese economic growth from the end of WWII shows fairly steady growth. Even the "Great Leap Forward" was not the total loss that it is often described in the West. At the end of WWII the *gross* industrial output of China was about equal to that of Belgium. I'd also suggest that it is not as much greed that drove the changing economic philosophy in China as necessity. Those in power want to stay there, and they've got to keep people fed and be able to afford security. It's not that they lusted after more physical wealth, but rather they needed wealth to protect their vital political power.

And does any of this negate Jared Diamond's thesis presented in Guns, Germs and Steel? He argued that the Eurasian land mass had a leg up due to its East-West orientation which proved biologically helpful in the development of grass species that form the basic food stock of agricultural societies. Africa and South America are at a distinct disadvantage here.

Let's not go crazy here. Diamond never claimed to explain all differences in wealth with his theory. For example, if I remember the book correctly, Diamond admitted he does not have a good explanation for the divergences that occurred around the time of the Industrial Revolution. Specifically, why did Britain lead the way in the Industrial Revolution rather than all the other countries of Eurasia? Furthermore, why do the former colonies of Britain tend to be wealthier than the former colonies Spain? I don't think you will find a clear answer in Guns, Germs, and Steel.

I disagree Run. Nothing happens in China without the permission of the CCP. And I often read in The Economist, that mag's alarm at the lack of transparency in much of China's business, a huge portion of which is actually 'owned by the People's Army.' Yet, despite this they've achieved 8-10% year over growth for quite a while now, doubling their economy every 7-9 years!

Harford's thesis is that institutions of trust lead to wealth. If so, where are those institutions in China?

Hi MnZ,

I'm not claiming that Diamond's thesis explained everything. Harford's the one doing that with his game theory analysis. I'm just saying other factors may have come into play that biased the ultimate outcome.

I could also have thrown in Weber's theory on the rise of capitalism, which adds a religious element to the picture.

fozzy:

Were the Communists the actual leaders in this or was it Mao who incorporated the workers into the fold of economic resources? The greed of one man to be a power in the world led the growth and eventually forward. Greed does not just exist in Capitalist societies, it exists in others as well. I would say Sun, Chiang, and Mao all had their portion of greed involved by using Communism as the vehicle to move China. At no time during this era were things allowed to operate 'laissez-faire." Rambling here; but, does that make sense?

It was estimated that 30 to 40 million Chinese starved to death in China during the fifties and sixties. This occured under Mao and while exporting wheat to Russia. One man's vision for the economy and what he felt to be best for China and himself. China refused agricultural aid from the US and hid the famines.

Do I believe it will happen again? Perhaps, within the next 20 years as the population continues aging in China. China's birth rate has not been replacing its population and more importantly the birth of boys has not exceeded that of girls (now there would be a war! think Iraq and all the unmarried males). So without a young population and inefficient productivity gains, they do not have the economic growth yet to sustain the elderly. Also culturely driven, all of the married women care for his parents first and hers secondarily. 25% of the world's populaton over 60 resides in China. We are at the precipice for another huge die off of people in China, the elderly.

To answer another question that you may ask . . . pollution continues to eat up much of China's economic growth and China productivity is not near what the US is today (all of those WalMart factories working OT). Even though the US is replacing its population, its productivity growth and economy would continue to support the population without population growth. Perhaps, China will begin to cash in some of those US treasury bills to support the elderly? I somehow doubt it. I think they will let the elderly die the same as China did not care about the famines. To answer another question, yes; I believe they will squash any uprising harshly and with more brutally than ever before.

My initial answer was short and raw. I hope this explains more of my position.

rev:

Nothing happens in China without the permison of the "gang of 7" and before that Mao. They are not the Communist party and were and are the dictators of the China. If they want it, it happens. Anything they want is for their betterment in the end. I suppose one could argue their wants are in consideration of what the Chinese people want; but, I would doubt it. Mao certainly did not care one hoot for the millions who died in the faminines as long as he remained the power with the influence. Which gets back to my point "greed."

Having worked in China, the trust issue is still a problem, and I even thought about them as I read the article. For example, most purchases are made in cash. Want to buy a BMW? Bring 1 million RMB to the dealership. Want to order something online? In the extreme cases, sites such as DangDang contract a delivery guy to go to your house, plug the item in the wall, and show you that it works, and then you pay that guy. Sure, it may be because some things do not work out of the box. In fact, I recently purchased a DVD player from Five Star (Now a part of Best Buy USA), and they would not let me leave the store without first plugging it in and showing me that it works.

China does have comparitivly better trust both between individuals and with their government than in similiar developed countries in asia and africa. This is because it has a long tradition of strong, centralized states. Combined with its large population and low development base, and access to foreign technologies thanks to globalization, is enought to explain its decades of fast growth.

Still, it is more corrupt than the west and even many middle income countries, and its yet to be seen if China can actually thrive as part of a developed, creative economy, which generally requires more of what one would characterize as 'trust'. The development of a middle class owing to recent growth as well as the aquisitivness of elites may be enough to keep reforms going, or it may not. yet to be seen...