China and India are leading examples. In 1978 China began allowing private agricultural plots, permitted private businesses, and ended the state monopoly on foreign trade. The result has been phenomenal economic growth, higher wages for workers—and a big decline in poverty. For the most part all the government had to do was get out of the way. State-owned enterprises are still a large part of China’s economy, but the much more dynamic and productive private sector has been the driving force for change.
In 1991 India started dismantling the “license raj”—the need for government approval to start a business, expand capacity or even purchase foreign goods like computers and spare parts. Such policies strangled the Indian economy for decades and kept millions in poverty. When the government stopped suffocating business, the Indian economy began to flourish, with faster growth, higher wages and reduced poverty.
This has got to be one the greatest achievements in history. Consequentialists rejoice!
HT: Carpe Diem and WSJ
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ReplyDeleteThis is a classic example of how business works. When the government got out of the way, the people of the state were able to create transactions that created wealth. They were able to sell products cheaper than paying them to be imported. This made people in China buy Chinese products instead of importing them. This also provided Chinese people with a job. This also created people of China to care about their land. They lived longer and took better care of the land. This allows the next generation to continue the fight to allow a more productive private sector.
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