Thread by @michaelxpettis

1/8
I just finished reading Chris Miller's excellent book on the collapse of the Soviet Economy. Some people might think that the topic is interesting, but largely irrelevant to global economic conditions today. They would be mistaken. This is a very relevant book.
@crmiller1

2/8
Among the important points it makes is this: "The notion that political and economic reforms were separate processes misunderstands Soviet politics. The most decisive debates during the perestroika period were about the distribution of economic resources."

3/8
Miller notes that China's reforms began in the late 1970s, when its economy was in such terrible shape that they resulted in an immediate surge in productivity, the benefits of which could be used effectively to buy off potential elite opposition (especially in the 1990s).

4/8
This wasn't the case in the USSR. There the immediate productivity benefits of the proposed economic reforms were initially not enough to satisfy elites who ultimately paid for the costs of reform. That is perhaps why reform was both urgently necessary and impossible.

5/8
We saw something similar in Latin America during the liberalizing reforms of the early 1990s. Elites in Argentina, Brazil and Mexico who controlled manufacturing and agriculture and who would normally have opposed the reforms of that period nonetheless benefitted...

6/8
enormously from the accompanying surge in capital inflows that drove up asset prices and drove down financing costs. The result was that they embraced liberalizing economic reforms that, ten years earlier, they probably would have vehemently opposed.

7/8
This suggests that radical economic reforms might be politically possible only if there are compensating benefits to the existing political elite. But for the reforms to leave everyone better off, these benefits must be fairly substantial and fairly immediate.

8/8
Japan's radical reforms in the 1950s and 1960s, for example, left most groups, especially the elite, much better off. By the 1990s, however, this was no longer possible, and it took Tokyo painful decades to manage its much-need economic restructuring.