Raghuram Rajan: evaluation

Transcript context

…If I think, say, about China, which has done pretty well in terms of economic growth — didn’t they, in some sense, trash localism? They said, “We’re going to do the state really well. We’re going to do the market somewhat well. We’re not going to try for balance.” United States has a somewhat dysfunctional government, but we have great markets. We’re not trying for balance. Isn’t it better to have a cultural specialization in either state or market than to try to balance all three of the things? Well, first, I would disagree a little about your characterization of China. I think one of the things they’ve done very well is have pretty strong, in fact impenetrable, business regulation around — that’s not a recommended path, but what they’ve done is empowered the local government officials to essentially work with those regulations and open them up for local businesses. So in some sense, they’ve incentivized the local officials by giving them strong rewards for growth — they get promoted faster up the Communist Party — and allowed them, in a sense, to build the local community around their abilities. So Chinese growth — a lot of it is not because China has the best business regulation in the world, but because it has empowered Communist Party officials who know how to break the rules selectively. Now, is that a recommended mode? Certainly not, but it’s worked. If you were to cite a particular place in India that right now is doing community especially well, what would it be?…

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