, 85 tweets, 16 min read

According to @brankomilan

[ Warning: a LOOOONG thread ]
First, I would like to thank Branko for sending me a copy of his book

Second: as you would expect from Branko, his discussion of inequality & related issues is fantastic. Sources of increasing inequality in the rich countries, the rising capital share, assortative mating, & intergenerational mobility, inequality in China, etc. all truly first-rate
Also his exposition of the “adverse selection of immigrants” is theoretically clever (even if IMO empirically crazy). And he has crafted an interesting theory of the evolution of liberal capitalism, driven by its internal, ‘systemic’ features, not just the 'incidental' ones.
According to Branko: “communism is a social system that enabled backward & colonized societies to abolish feudalism, regain economic & political independence, & build indigenous capitalism.”

“Communism is the functional equivalent of the rise of the bourgeoisie in the West”.
India/China seems to be the natural contrast, for communism created a “tabula rasa of all ideologies & customs that were seen as retarding economic development & creating artificial divisions... (such as the caste structure, which [India] never succeeded in erasing)..."
This is because communism extirpated, and swept away, the institutional bottlenecks of traditionally agrarian societies.
{ In Acemoglu-Robinson terms, communism functioned as the exogenous shock that swept away the extractive institutions, at least in the poorest countries -- much as A&R have argued the French Revolution and Napoleon did in Europe. }
( NB: Mancur Olson made the ‘tabula rasa’ argument in various contexts. )

{ But Branko shuns the AR language, because, he says, their framework cannot deal with communism because communist states were not economically extractive because their inequality was not high enough. }
{ OTOH @mmpiatkowski in his book on Poland makes a similar argument to Branko, but using the AR language. Except Marcin is frustratingly vague about the ‘feudalism’ in interwar Poland, so I’m sceptical of his argument. }
On China itself, Branko does not get more specific than the passages I’ve already cited, and what he means by ‘feudalism’ is not entirely clear. His only citation on this point is Gabriel, but Gabriel also says very little, his only citation being Bramall.
{ By the way, “feudalism”, when applied outside the European context, is a term of art of what I call Marxist Orientalism. }
Bramall also says little except the CCP swept away “landed and industrial capitalists”. His larger point seems to be a kind of Marxist public choice theory. But his interpretation does not square with the political economy of the East Asian developmental state
In Japan, South Korea, Taiwan & Singapore, the state was founded on a rent-seeking coalition of business supporters, but somehow the state still pursued what looked like the right set of policies in industrial policy/promotion.
Nor does the political economy argument square with European history, where most countries (including England, Germany, & France) appeased the agricultural interest for a long time (the Corn Laws in Eng until repeal; Junkers in Germany, small farmers in the case of France).
In From Farm to Factory, Allen argued Tsarist Russia w/o a Bolshevik rev would have faced long-term income stagation. But (says Allen) Stalinist industrialisation allowed the USSR to perform better than other developing countries, controlling for initial income, except for Japan
So Allen makes essentially the same argument, but with less Hegelian rhetoric.

This chart from Allen compares growth rates across countries, controlling for initial income. This is the most basic control in cross-country comparisons.
As first empirical support of his “communism destroyed the traditional growth-retarding institutions” argument, Branko compares growth between communist and non-communist European countries controlling for 1950 income.

{ Branko’s chart adapted from Vonyo }
{ And here comes a tiny splash of cold water poured on the heads of all those don't want to think of communism as a catastrophic detour in development, and who jubilantly retweeted this tweet }
This says, the poorest country grew the fastest amongst both communist & noncommunist European states, which is the convergence predicted by the bare-bones Solow growth model.

{ BUT noncommunist European states outperformed the communist, at every initial income level. }
'Benefits' of communism were greater, the less advanced the economy already was. By this metric, Poland ‘benefited’ the least from communism compared with its E. Euro peers. This is something Branko emphasises. The 'advantages' of communism were probably nonexistent for E Germany
Acc to Carlin et al.sciencedirect.com/science/articl… countries which had low levels of initial income at the time of communisation, the costs of the lack of market incentives were outweighted by the benefits of things that communists did relatively well, such as infrastructure & schooling
{ Carlin et al 2012 also confirm that post-communist countries had substantially different endowments from never-communist countries, at similar levels of income. }
We might say, in the absence of state capacity in traditionally agrarian societies, communist central planning created the brute ability to build relatively simple things with economies of scale like dams and railways relatively quickly.
Likewise, controlling for income, and at low levels of GDP per capita, communists invested more in education and health, than non-communist states. I myself have elsewhere called this “premature human development”
{ Branko is an old-fashioned central planning socialist for the most ‘backward’ countries, but an egalitarian capitalist for more advanced societies. His ideas on the ‘Third World’ recall the 1950s-70s, when the old-old-left sang hymns to hydroelectric dams & steel factories }
However, Branko does not compare growth in all communist countries with all non-communist countries.

Instead, Branko wants to judge the benefits of communism for developing countries by evaluating their post-communist performance.
Except he does NOT look at all post-communist countries; instead he compares the growth rates since 1990 of the United States with the growth rates of China and Vietnam, which he considers to be the two great exemplars of “political capitalism”.
This is possibly the most meaningless exercise in cherry-picking! You can't compare growth rates w/o minimally controlling for initial income. Already-rich countries have lower potential growth rates than poorer countries! Branko knows this; in appendix C he says the same thing!
A bit later he (sort of) examines the growth rates of a wider group of countries qualifying as “political-capitalist”.
“Political capitalism”, in Branko’s narrative, is the ideological competitor to “liberal meritocratic capitalism”. PC is exemplified by China; LMC is by the USA
Branko’s criteria for inclusion in the “political capitalism” category are basically (a) must be post-colonial; and (b) de facto or de jure one party-state.

{ Earlier, he also seemed to include Burma, Russia, the Caucasus states, but these are not repeated.}
The growth rates in Table 3.1 in the above tweet are the ONLY evidence in support of Branko’s assertion that “political capitalism promises much more efficient management of the economy and higher growth rates”!!!
Clearly not all of Branko’s “political-capitalist” states are post-communist, but Branko implies — there is no explicit statement — that political capitalism is more likely to emerge in post-communist post-colonial states.
As far as I can tell, “political capitalism” is just Branko’s own special word (borrowed from Weber?) for what everybody else today has called a “developmental state”, except democracies are necessarily excluded & it must be a one-party state.
{ There have been many other post-colonial de facto/jure one-party developmental states, such as Syria or Iraq under the Ba’ath, or Egypt from Nasser on, or Ataturk’s Turkey. South Korea and Taiwan were both post-colonial developmental autocracies until the 1980s/90s. }
{ John Williamson, who coined the phrase “The Washington Consensus”, has called the Chinese model that could be inspirational to other countries “The Beijing Consensus”, without trying to point out which countries are actually following it. }
Personally I don’t think “political capitalism” is a useful category. Branko’s theorising is mostly about China and I don’t think there is anything useful in an analytical framework which throws Algeria and Rwanda into the same political economy category as China.
Has ever there been an efficient bureaucracy successfully (and recently) promoting rapid development outside of East Asia? Do Rwanda and Algeria have a ‘MITI’ ?
[a bit of editorialising] IMO this is the latest phase in Branko’s longstanding war against the “democracy is good for growth” aspect of what he believes is the Acemoglu-Fukuyama-democracy-and-capitalism neoliberal consensus....😁
(I’m personally agnostic about democracy and development. But there is an argument that an ‘institutionalised’ autocracy is better able to promote development than dictatorships in general. See scottgehlbach.net/wp-content/upl… )
But I’m not interested in evaluating the category called “political capitalism”. Rather I’m interested in testing the “world-historical role of communism”. And looking at “politically capitalist” states, as Branko seems to do, isn’t a good way of doing that.
I might be more sympathetic to the idea that communism was a necessary stage in the development of indigenous capitalism in developing countries IF THERE WERE MORE CHINAS AND VIETNAMS amongst post-communist countries!!!
Here are some post-communist states:

Which of the above strikes you as a poster-boy for the benefits of having had your ‘feudalism’ abolished by communism? (Maybe there is some potential in Ethiopia, but at the moment I say: wake me up when it converges on Bangladesh.)
Moreover, Carlin, Shaffer, & Seabright (2012), which Branko uses to support his argument about poor states benefiting from communism, also argues that the effects are not persistent; they disappear as these states get richer and quality matters more than quantity of inputs
“Communism abolished feudalism” is certainly plausibly true in the case of majority-Muslim ex-Soviet states. Some of the Central Asian states such as ‘Turkmenistan’ and ‘Kazakstan’ had been filled with steppe or desert nomads who were coercively sedentarised by the Bolsheviks.
Here is a concrete example of “anti-feudal” Bolshevism: Central Asia + Azerbaijan + Albania have gender metrics more advanced than those of the most progressive Muslim societies like Morocco, Indonesia, Tunisia, and Turkey.
e.g., the female/male ratio in labour force participation rates


or the female/male ratio in educational attainment


On those particular gender metrics, even Albania is (slightly) better than Greece!
For EAsia, China is a bit better than Japan & the ‘tiger’ states when it comes to F/M ratio in labour force particpation but this could have something to do with the difference in the average age of the population. And when it comes to educ attainment, there is little difference
My point is — YES, communism does seem to engage in ‘premature human development’ (many of its social development indicators are higher than you would predict from its income level). (I’ve mentioned this aspect with respect to Cuba pseudoerasmus.com/2014/06/25/hum…
BUT communism did not seem to create decent preconditions for a robust indigenous capitalism outside of China and Vietnam, and outside of Eastern European countries closest to Western Europe, culturally and geographically.

Maybe communism just isn’t the common factor??
Yes, no doubt, the failure of Uzbekistan et al. to turn into exporting industrial powerhouses will be blamed on the contingent circumstances of their botched transition away from communism. And of course in other cases, there were ruinous wars/civil wars in the transition.
Alternative theory: the transition was endogenous to pre-communist conditions. Maybe the communist experience was not nearly as transformational as Branko imagines.
China and Vietnam are perhaps just exceptional, in the same way the rest of East Asia as a whole is exceptional amongst non-western countries? So maybe China and Vietnam don’t illustrate anything grand about communism? Maybe?
That reminds me: the most salient thing about Branko’s description of the Chinese model of capitalism is that East Asia is basically absent; he erases/disappears the commonality of the EAsian developmental exprience. China is treated as mostly sui generis in global history
Almost all elements of the Chinese developmental state are precedented elsewhere in East Asia. Some basic commonalities in the East Asian developmental model:

— efficient bureaucracy
— state-business relations
— corruption
— murky corporate governance

— industrial policy with export orientation
— financial repression with state-owned or -directed banking
— high savings rates
— long work hours
— anti-unionism
— heritage of patriarchy
— emphasis on education
— similar human development
— agrarian history
— relatively egalitarian growth record
— Japan’s Meiji Restoration in 1868 as an inspirational role model for strong, indigenous modernisation*

( Interestingly, Park Chung-hee also claimed to be inspired by Ataturk and Nasser. )
Unlike Japan & Korea, Taiwan even had dual track development like China! TW until 1980s saw a big role for state-owned enterprises. Private firms tended to be exporters whilst SOEs catered to the domestic market. This mirrors the PRC: exporters relied on foreign direct investment
One of the few times Branko mentions other EAsia is when he argues à la Baldwin: since China is plugged into global value chains its development is very different from Japan or SKorea. True since the 1970s China’s domestic value added has fallen as it has moved away from autarky
BUT trend for China since at least 2000 has been to INCREASE the domestic content of its exports (esp. in manufacturing), which bucks the global trend & this is making China more similar to Japan & SKorea which also increased its domestic value added content of industrial exports
(Basically, Japan and South Korea tried to source as many industrial inputs as possible domestically, as a way of promoting backward and forward linkages). This should actually be easier for China because of its massive domestic market.

Cross-country regressions struggle to ‘explain’ EAsia’s growth rates. The coefficient on the East Asia dummy variable is always large & difficult to reduce, i.e., the only explanation for East Asian success anyone can come up (statistically speaking) was because it was East Asia
IMO this irreducible coefficient on the East Asia dummy variable is the only thing being captured by Branko’s “political capitalism” that’s modelled purely out of China. For what ever reason, the recently successful developmental states have been in East Asia.
So why disconnect China from the wider East Asian context? Is this Branko’s way of heightening the importance of communism in the emergence of Chinese capitalism?
Branko looks back on the history of the Chinese state (e.g. during the Song dynasty the state was supreme over merchants!) to explain the developmental state. But isn't it more relevant to observe that state-business relations share important commonalities across East Asia?
IMO Branko also exaggerates Chinese ‘feudalism’ prior to communism. He even talks about the Chinese Communist Party’s “rejection of Confucianism”. What is this, a reprise of Weber’s The Religion of China?
Did the “rejection of Confucianism” even matter? It certainly didn’t matter in Taiwan and South Korea! To the contrary, in cross-country regressions, the variable “% Confucian” is one of the more robust predictors of growth!
Likewise with "clan-based social relations". Neither HK nor TW nor the Ch diaspora seem to have been handicapped by the lack of a communism which supposedly weakened clan/kin networks. To the contrary such networks have been argued as an important element of CH businesss success

(1) Chinese agrarian institutions prior to communism were not Latin-American-style planter-class latifundism. Yes China was grindingly poor, but rural institutions in 1945 were not the same as in 1911 or even in 1860.
{ The problem with Chinese farms before the revolution was operational farm sizes were too small. 92% of farms were less than 2 hectares (that’s less than half an acre for the anti-metric people.) }
(2) China in 1937-45 was no more ‘feudal’ than Spain, Portugal, Greece, or Finland was in the 1930s, none of which required a communist takeover for rapid post-war growth & convergence.
(3) China in the 1930s was less ‘feudal’ than Japan in 1868, yet Japan did the sweeping-away of ‘feudalism’ on its own. (Meiji land reform eliminated absentee landlords, but NOT landlords who stayed in the villages, and tenancy was not eliminated.)
(4) Dikötter in The Tragedy of Liberation puts it succinctly, “There is little question...absent landowners abused their power, while malpractices were rife in the countryside, but the country did not have a dominant class of junkers or squires, and nothing equivalent to serfdom”
{ Dikötter sometimes sounds like he denies landlordism existed in China, which is DEFINITELY NOT TRUE. But it’s certainly exaggerated. In North China, absentee-landlordism was not an important element of rural society, and small-scale freeholding was the norm. cf Huang
(5) Landlordism & tenancy were bigger issues in South China, but even in SC, absentee landlords were in the minority. Majority were within-village landlords (sometimes called “managerial landlords”) and the social differences were not vast.
Moreover the combination of agricultural depression, warlordism, Japanese invasion, civil war, investment opportunities in industry, etc. all undermined absentee-landlordism. IMO deadweight of landlordism on the eve of the communist victory is mostly a legacy of Maoist propaganda
Also see the distribution of land in prerevolutionary China, see the tweet below; it’s taken sciencedirect.com/science/articl…
According to Kung et al., inequality in the distribution of land in prerevolutionary China was not vast, in fact it was similar in most provinces to Taiwan’s land distribution PRIOR to its much touted land reform.
Brandt & Sands publishing.cdlib.org/ucpressebooks/… has higher estimates but even theirs are lower than LatAm inequality. B&S (+ others) have argued rural income inequality (per capita & household) & occupational-farm inequality were lower because the land rental market operated fairly well
Rural DEBT with high interest rates was a much bigger problem. But this debt overhang was wiped away by the hyperinflation after 1937.

{To be continued later, with more on EAsian land reforms, both the technical/economic aspects + their supposed political economy implications.}
{ FOR THE MOMENT, my free publicity for Branko's book is finished but I will resume later with land reforms in East Asia... }
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