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Association for Evolutionary Economics & Association for Social Economics
Indeed, a wide range of evidences associated with the development of various economies and industries around the world could be retrieved to showcase the proposition of PIC and its real-world applications. In this article, I argue that effective social and economic policies that are contributive to economic development must be progressive in terms of their accountability of possible influences (both positive and negative) to and acceptance by the mass community, and their reactions. In particular, hard evidences derived from China’s economic reform from 1978 and the process through which the Chinese government constructs a socialist market economy are scrutinized and analyzed. It is shown that under different contextual settings, trajectory and practices of PIC across different economies may not necessarily be identical.
Finance and Economic Transition
Paper Session
Sunday, Jan. 5, 2020 10:15 AM - 12:15 PM (PDT)
- Chair: Thomas Kemp, University of Wisconsin-Eau Claire
Financing for Development: An Institutional Analysis
Abstract
The standard market-based financial models consider the development financing as a mere question of reallocation of available funds between the supply and the demand through the market price (the interest rate). Therefore, the financing of development pertains to the market conditions in force: more markets are free from any external (mainly state-related) constraints more would be efficient and possible the financing of the development process. In the face of such a simplistic approach, I adopt an institutionalist perspective and maintain that development is not only a mere shift (an increase) of growth (usually the GDP changes) that could be supported by free market mechanisms and market-related financing procedures but a structural change that requires some specific conditions under some specific constraints and call for a “special financial attention”. Institutions are supposed to play a key role in this process whose path is also related to the characteristics of each society and cannot be thought of through a unique standardized model that would fit all. To sum up, financing development is highly related to the following question: can we think about the monetary capitalist economy as humanly progressive through the reorganization of fundamental infrastructures such as financial mechanism, rules and institutions? A literature survey recalls the work on financing for development and related monetary and financial interactions (Easterly, 2006; Moyo, 2009; Sachs, 2005; Severino and Ray, 2010, to quote but a few). It presents the specific models on finance and development nexus as well as the usual ways of development financing such as Official Development Assistance, Foreign Direct Investment, loans, etc. in order to assess their relevance, limits, and benefits with regard to the needs of the development process according to institutionalists.Policy Dimensions of Progressive Institutional Change: Lessons from China’s Construction of a Socialist Market Economy
Abstract
In "The Theory of Institutional Change," Paul D. Bush (1987, 1101-1102) underlines that progressive institution change (PIC) involves erosion of ceremonially dominated practices through introduction and diffusion of new instrumental value in a society. Nevertheless, by referring to the discourse of J. Fagg Foster (1981), Bush (1989, 459) further explicates that “for ‘progressive’ institutional change to take hold in a community, it must involve minimum dislocation of instrumentally warranted behavior.” Based on these insights into the notion of PIC, I put forth in this article to address its pragmatic implications to the formulation or revision of social and economic policies for the sake of related advancements.Indeed, a wide range of evidences associated with the development of various economies and industries around the world could be retrieved to showcase the proposition of PIC and its real-world applications. In this article, I argue that effective social and economic policies that are contributive to economic development must be progressive in terms of their accountability of possible influences (both positive and negative) to and acceptance by the mass community, and their reactions. In particular, hard evidences derived from China’s economic reform from 1978 and the process through which the Chinese government constructs a socialist market economy are scrutinized and analyzed. It is shown that under different contextual settings, trajectory and practices of PIC across different economies may not necessarily be identical.
Chinese Experience of Advancing Financial Inclusion in Light of Foster’s Three Limiting Conditions of Institutional Change
Abstract
China has been developing ‘financial inclusion’ since 1990s so as to deal with financial exclusion, a problem that facing rural residents and small and micro enterprises as well as the poor. Analysis is conducted in light of Foster’s theory of institutional change，especially the three limiting conditions. As to the first limit of availability of knowledge, it is largely when digital finance was introduced into China in early 2000s that provides the potential to solve the long existing problem in a sustainable way. Thus digital financial innovations were boldly encouraged with a very loose regulation environment especially before 2015. Many of the nontraditional providers of internet financial services, including nonbank digital payment, internet based lending, crowd funding and virtual coins, etc. advertised themselves to be advancing financial inclusion and hence received social permission to do such well-intentioned but poorly understood social experiment. However, as traditional financial service providers saw their market standing dropping rapidly, bad practices such as Ponzi Scheme, usurious lending and P2P platform chaos, etc. were gradually laid bare, lowering the social reputation of internet finance. As social dislocations were accumulated to an unexpected extent, the old saying that “It is difficult and costly to obtain financing” still went around. Since 2015, a new policy bundles have been developed in China and the concept and practice of financial inclusion has been transformed greatly. On the one hand, financial inclusion was formally recognized as a national strategic objective and a 5-year plan have been implemented since 2016. One the other hand, strict regulation and heavy strikes targeting illegal practices and financial crimes have also been carried out. Traditional financial providers and main fintech-based companies are now cooperating to create well-designed innovative products and services instead of competing as rivals like before. Although great achievement has been made, China is still facing challenges marching toward financial inclusion. Given the availability of knowledge, people’s capacity for understanding and adaptation and the principle of minimal dislocation must be carefully considered in formulating policies.Discussant(s)
Thomas Kemp
,
University of Wisconsin-Eau Claire
Charles Whalen
,
State University of New York-Buffalo
JEL Classifications
- E0 - General
- O2 - Development Planning and Policy