Freeman

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Book Review: The New China: Comparative Economic Development in Mainland China, Taiwan, And Hong Kong by Alvin Rabushka

JULY 01, 1988 by TOMMY W. ROGERS

Pacific Research Institute for Public Policy, 177 Post Street, San Francisco, CA 94108 • 1987 • 254 pages • $32.50 cloth, $12.95 paper

Why have Taiwan and Hong Kong experienced greater economic progress than mainland China? And why has the economic vitality of mainland China increased since 19787 While the thriftiness, diligence, and other virtues of the Chinese people have resulted in their flourishing almost everywhere they have settled, the Chinese culture thesis cannot account for sharply higher growth rates in Taiwan and Hong Kong than in mainland China during the past three decades, nor account for the fact that per capita income in Hong Kong in 1985 was thirty times that of mainland China. In fact, mainland China enjoys a greater abundance of natural resources than either Taiwan or Hong Kong, which suggests that other factors, such as political stability, economic institutions, secure property rights, the rule of law, and individual incentives play important roles.

The author concludes that the postwar development experiences of mainland China, Taiwan, and Hong Kong demonstrate that economic institutions matter more than cultural traits and natural resources in fostering eco nomic growth and raising living standards. The Chinese, like other peoples, respond to incentives. These incentives are determined by political and economic institutions, which supply the rules and mechanisms for enforcement. The key rules include the definition and enforcement of property rights, which encourage im proved productivity and the expectation that individuals will reap the rewards of their own work or investments. The Chinese have flourished where the economic environment has been free and competitive, with property rights secured under the rule of law.

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July 1988

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