From platforms associated with certain international organizations, it is often repeated that, in order to prosper, poor nations must develop independent courts, meritocratic bureaucracies, and property rights. In other spaces, such as social media, it is also common to find posts attributing China’s growth to the late adoption of these institutions associated with liberal capitalism. This view confuses causes with effects.
Paraphrasing political economy expert Yuen Yuen Ang, demanding advanced institutions from a poor nation is like asking a child to wear adult shoes in order to learn how to walk. China’s economic development was not achieved by following that recipe, at least not in the order prescribed in the West.
Using what is at hand
In her book How China Escaped the Poverty Trap (2016), Ang argues that development does not work like a predictable machine, but rather like a complex ecosystem. China did not escape poverty by importing Western models, but through a much more dynamic process. State and market transformed each other in a process of coevolution.
Contrary to the prescriptions offered by economic orthodoxy, before building modern institutions, China solved practical problems with the imperfect tools it had at hand.
Following the disaster of Maoism in the 1970s, China lacked commercial laws and protections for private property. Instead of stopping to wait for formal reforms, the government made use of existing institutions. One emblematic example was the Township and Village Enterprises.
These enterprises were the legacy of commune and brigade enterprises imposed on the rural sector during Mao’s forced collectivization process. Once the model collapsed, these institutions were reorganized, assuming the role of a substitute entrepreneurial force.
To mobilize local officials, Beijing set revenue-collection quotas and authorized municipalities to retain 100% of the profits. Moreover, this made it possible to blur the political stigma attached to capitalism by mobilizing capital registered as rural collective property.
An initial lesson is to accept that “weak” institutions are not necessarily an obstacle. Personal trust, community networks, and goal-oriented arrangements can substitute for courts in the early stages. Of course, as the economy becomes more complex, the need arises to professionalize the state and formalize the rules of the game.
Improvisation under control
I am sure that if Hayek, one of the leading figures of neoliberalism, had studied the Chinese model of directed improvisation, he would have been surprised to find parallels with his famous paper on the use of knowledge in society. Deng Xiaoping’s regime understood that progress depends on local knowledge.
To mobilize its immense bureaucracy toward results, Beijing acted like a film director who defines the plot, while mayors and governors operate like actors improvising on the ground.
In fact, the regime used the ambiguity of language as an intentional tool. Through flexible slogans, the regime strictly defined what was prohibited, but left a broad gray area for regional experimentation. As if they were corporate franchisees operating within an adaptive government framework.
Local officials receive political promotions and personal income directly tied to the economic growth of their districts. This unleashed fierce competition among counties to attract investment. Even agencies unrelated to commerce were mobilized by this logic, such as the Family Planning Bureau and associations for people with disabilities.
The entire state apparatus became a market-promotion engine.
Corruption and lobbying
For Ang, the relationship between corruption and growth is redefined under this decentralized model. The direct theft of funds by bureaucrats and senior government officials deeply harms economic development.
However, the decisive phenomenon in China was access money. This refers to the exchange of high-level privileges between political elites and investors. The private actor does not pay bribes to expedite a minor administrative procedure, but rather offers commissions, stakes in projects, or favors to senior officials.
In return, these officials grant concessions over public land, infrastructure monopoly contracts, exclusive licenses, and even financial bailouts. In other words, these are not minor administrative matters, but major projects. Before any reader interprets this in a moralistic tone, it is important to remember that in the West this practice is known as lobbying and was fundamental to the growth of the United States.
This phenomenon—the collusion between private capital and Party cadres—accelerated the construction of infrastructure and entire cities. Of course, this fuel also leaves consequences. For example, unchecked growth fueled astronomical debt, real estate bubbles, and patronage networks that threaten the country’s stability.
Flying geese and lessons for the region
Another key lies in territorial integration schemes. Coastal regions absorbed the higher-value-added industries. This caused labor costs to rise in those areas, which led lower-cost manufacturing to move toward inland provinces. This made it possible to maintain global competitiveness throughout the production chain.
There are some reflections here for our region, which is characterized by a political class obsessed with importing sophisticated regulatory frameworks that frequently end up as dead letters, time and again.
If we follow Ang’s ideas, development does not require copying the form of institutions found in wealthy countries, but rather ensuring that existing structures perform essential functions such as generating trust, reducing uncertainty, and fostering investment.
Today, the Chinese model itself is facing its structural limits. Xi Jinping’s centralizing authoritarianism threatens to stifle the local improvisation that made the miracle possible. The most important thing is not to impose rigid targets from the top, but to increase the capacity to unlearn mechanistic dogmas and adapt to the complexity of social reality.
Autor
Coordinator of the Organizational Culture Diploma Program at the Universidad de las Américas Puebla (UDLAP). Holds a PhD in History from Universidad Francisco Marroquín.
