Mapping the Coevolution of States and Markets: a Dynamic Approach to Development
Abstract: How do poor and weak countries escape the poverty trap? Which comes first in development—economic growth or good institutions? My forthcoming book, How China Escaped the Poverty Trap (Cornell University Press), examines these enduring questions through China’s stunning transformation from a socialist backwater to a global powerhouse in the reform era. Experts have long debated whether it is good institutions that cause growth or growth that enables strong states. Challenging the linear causal logics that underlie existing debates, I propose, instead, a coevolutionary approach to the study of development. This chapter introduces an analytic template for mapping coevolutionary paths and then applies it to analyze the coevolution of markets and bureaucratic structures in divergent localities across China. My analysis reveals that market-building institutions vary in function (what they do) and in form (what they look like) from market-preserving institutions found in developed economies. More precisely, I find that it was actually the “wrong” type of bureaucracy—seemingly corrupt and in clear violation of Weberian precepts of specialization and impartiality—that stimulated early growth. Subsequently, it was the emergence of markets through such unconventional means that then triggered the rise of conventionally good institutions like professional bureaucracies and formal property rights. In short, market-preserving institutions are necessary for growth only after markets have already been established. It takes a drastically different set of institutions to build markets. A summary of my forthcoming book is attached.
