The economist Alice Amsden鈥檚 work unmasked the dirty secret underlying capitalist development: it relied on states breaking all the rules of the free market. But her work also showed that industrialization required corporate discipline, not welfare.

For American defenders of economic liberalism and free markets, China鈥檚 rise has been deeply disorientating. Unmoved by concerns about the market distorting effects of picking winners, the Communist Party of China has engaged in a focused campaign of industrial policy, using the state to discipline firms that have gone on to become globally competitive.

For the economist Alice Amsden, who came to prominence in the late 1980s for her writing on global development and died in 2012, the success of China would not have come as a surprise. Amsden began her career as powerful development institutions such as the World Bank were touting deregulation and privatization as solutions to global poverty. But the experience of the postwar years, in which South Korea 鈥� a recurring object of study for Amsden 鈥� used industrial policy to drag itself into middle income status, was a refutation of the orthodoxies rehearsed at Davos and in the International Monetary Fund.

The embrace of state subsidies to firms, tariffs, and large-scale infrastructure spending under Joe Biden and Donald Trump鈥檚 presidencies is partly a concession to the kind of developmentalist thinking advocated by Amsden. However, Amsden, a fellow traveler, if not devotee, to Marxism offered a more ambivalent assessment of the records of late industrializing nations like South Korea and China than defenders of Biden/Trumponomics are perhaps willing to countenance. For her, the repression of labor was as important to the success of these nations as large-scale economic coordination.

Marxism Without Dogmas

Amsden was born in New York City and studied economics at Cornell University as an undergraduate before completing a PhD in the discipline at the London School of Economics (LSE) in 1971. From the LSE, she had a distinguished career at some of her discipline鈥檚 most august institutions: a stint at the Organization for Economic Co-operation and Development (OECD) followed by positions at UCLA, Columbia, Harvard, the New School, and MIT, her last post before her early death in 2012, aged just sixty-nine.

Power 鈥� an almost undiscussed phenomena within economics 鈥� was central to her analysis of the world. 鈥淚鈥檓 usually driven by injustice or hypocrisy rather than by a two-sector model,鈥� she said in 2008,  to the dominant approach of viewing society鈥檚 key interests groups as households and businesses. Born in 1943, the anti-imperialism of the postwar left played a greater role in shaping her outlook than her discipline鈥檚 dogmas. Like many members of her generation, she protested the United States鈥� war on Vietnam throughout the 1960s. She had little patience for the idea that the West had brought modernity to the Rest: hostility toward the British Empire animated much of her historical writing and she never tired of castigating the United States for attempting to establish a world economy favorable to its firms.The British Empire was, she quipped, a domain in which the 鈥榮un never sets . . . and wages never rise.鈥�

Duncan Foley, emeritus professor of economics at the New School and a former colleague of Amsden in the late 1970s and 1980s, described her as working within the tradition of 鈥渘on-Stalinist Marxism鈥� and the 鈥渘on-dogmatic political left.鈥� As Foley recalls, theory was for Amsden 鈥渁 guide, or a compass, to look at and explain the world鈥� rather than a scripture to be slavishly followed.

The subject of her PhD was the British colonial state鈥檚 role in structuring the Kenyan labor market. The colonial administration, her thesis showed, used coercive means to force African farmers to work for British farms rather than themselves. It seized land and prohibited Africans from cultivating cash crops that might compete with British farmers while imposing taxes on these constrained producers.

These ideas fed into her 2007 monograph, Escape from Empire: The Developing World鈥檚 Journey through Heaven and Hell. The British Empire was, she quipped, a domain in which the 鈥渟un never sets . . . and wages never rise.鈥�

The Janus-Faced Character of Development

Central to her analysis of capitalist development was a set of Marxist assumptions. Chief among these was the concept of surplus value, which explains how capital exploits labor. Surplus value denotes the difference between the value of workers鈥� wages and the value of what they produce. Firms, she observed, aim to increase their appropriation of surplus value by increasing the rate of labor exploitation.Amsden noted that what distinguished more from less successful cases of late industrialization was not the embrace of the market 鈥� as argued for by liberal political economy 鈥� but economic planning organized through an industrial policy.

If they succeed in doing so faster than other competing firms, they can use their greater profits to invest in productivity-enhancing technologies to further their competitiveness. Over time such dynamics shape the structure of a nation鈥檚 market. Firms that prove themselves capable of extracting more value from labor increasingly come to dominate in the sectors of the economy in which they are competing.

Finding a way to increase the productivity of domestic firms was therefore crucial to economic development. Amsden showed how one of the keys to late industrialization is for states to establish a virtuous circle between capital and labor in which high rates of surplus value are extracted from workers and re-invested in modern technologies. In a 1981 , 鈥淎n international comparison of the rate of surplus value in manufacturing industry,鈥� she produced an analysis of the rate of surplus value in different countries, which read like an updated version of Karl Marx鈥檚 Capital:

The magnitude of the rate of surplus value depends on the length of the working day鈥� the level of productivity, and the struggle over wages. The more developed the productive forces, the less time needed to produce the wage goods required for the reproduction of the working class and the higher surplus value.

The conclusion that she drew from this was that capitalist development was a Janus-faced phenomenon because it relied on the suppression of labor.

The extraordinarily high rates of surplus value in countries which are now described as semi-industrialized may be hypothesized to stem from a combination of advanced technology and wage levels that are still abysmal.

In her 1990  article 鈥淭hird World Industrialization: 鈥楪lobal Fordism鈥� or a New Model?鈥� Amsden used these insights to explain South Korea鈥檚 rapid development.

High profits in Korea鈥檚 mass-production industries have been derived not merely from investments in machinery and modern work methods (what Marx calls 鈥渞elative surplus-value extraction鈥�. . .) but also from the world鈥檚 longest working week (what Marx calls 鈥渁bsolute surplus-value extraction鈥�) . . .

Here, too, an analytic clarity, eased by a Marxist realism about the fact of exploitation, led Amsden to adopt a less sanguine view of progress than many in her profession. Cheap labor was, she argued,

the anchor of late industrialization . . . . The discipline of labor by the state lies at the heart of all late industrialization . . . . Labor repression is the basis of late industrialization everywhere . . . .

The identification of how cheap labor and labor repression underpins late industrialization is a vital insight. It should, perhaps, be remembered as 鈥淎msden鈥檚 law of late industrialization.鈥� While early in her academic career she deployed Marxist thinking to understand capitalist development, Amsden rose to prominence as a theorist of the statist political economy, which had emerged in Asia.

The Price is Wrong

In Asia鈥檚 Next Giant, Amsden noted that what distinguished more from less successful cases of late industrialization was not the embrace of the market 鈥� as argued for by liberal political economy 鈥� but economic planning organized through an industrial policy. Effective industrial policy was determined by states鈥� ability to impose discipline on business. From the 1960s onward, the South Korean state used five-year plans to transform a largely agrarian economy into one dominated by heavy industrial and then advanced technology.

This was no accident produced by the invisible hand of the market. South Korea鈥檚 elites deliberately distorted market prices to facilitate late industrialization. Amsden set herself to understand how these elites, by 鈥減icking winners鈥� and presiding over what she called 鈥渞eciprocal control mechanisms,鈥� produced economic growth by flouting all of the rules advocated by free marketeers.The South Korean state owned and controlled all commercial banks, effectively determining which firms received finance and under what conditions.

The significance of this success is hard to overstate. In 1960, South Korea had a similar per capita income to Honduras while by the 1990s observers labeled it one of the increasingly wealthy and powerful 鈥淭iger鈥� economies of East Asia. Classic mechanisms of infant industry protection, crucial to the development of the United States in the nineteenth century, including tariffs to protect domestic firms from more advanced competition and export subsidies to enhance firms鈥� competitiveness in international markets, were crucial. While many postcolonial states protected their nascent industries following their political independence, South Korea did so distinctly:

In other countries, in Turkey and India for example, subsidies have been dispensed primarily as giveaways. In Korea the 鈥渨rong鈥� prices have been right because government discipline over business has enabled subsidies and protection to be less than elsewhere and more effective.

The state worked closely with, and imposed its objectives upon, the Chaebol 鈥� diversified business groups that dominated key economic sectors. Famous Chaebols include Hyundai Heavy Industries group, comprising thirty-six affiliates engaged in shipbuilding, heavy industries, robotics and engineering, and the Samsung group, comprising around sixty affiliates engaged in electronics, semiconductors, and IT.

The South Korean state鈥檚 use of reciprocal control mechanisms compelled protected firms to meet performance targets 鈥� such as increased productivity, higher export volumes, and greater international competitiveness 鈥� on pain of losing state support. Firms that received subsidies had to become internationally competitive:

The sternest discipline imposed by the Korean government on virtually all large size firms, no matter how politically well connected related to export targets. There was constant pressure from government bureaucrats on corporate leaders to sell more abroad.

If firms did not export after a specified period of state largesse, their funds were cut off, and they were even expropriated by the state. For example, few people today have heard of Taihan group, an early South Korean electronics producer. When it failed to expand, the government transferred its ownership to the now world-famous Daewoo Electronics.

The state鈥檚 manipulation of market prices facilitated, rather than dampened, capital accumulation:

Insofar as the state in late industrialization has intervened to establish multiple prices in the same market, the state cannot be said to have gotten relative prices 鈥渞ight鈥� as dictated by supply and demand. In fact, the state in late industrialization has set relative prices deliberately 鈥渨rong鈥� in order to create profitable investment opportunities.

South Korea鈥檚 policymakers used yearly negotiated price controls to curb monopoly power. The state set low prices for industrial inputs such as electricity, steel, chemicals, gas, and synthetic fibers to benefitted protected firms. Paying less for key inputs enabled the latter to plow more of their revenues into research and development.

The South Korean state owned and controlled all commercial banks, effectively determining which firms received finance and under what conditions. It used capital controls to prevent capital flight. It curbed the latter by laws, including one in the 1960s, which specified that any unpermitted export of over $1 million would be punished by a minimum of ten years in jail, or even the death sentence.

Development as Exploitation

As part of the neoliberal agenda from the 1980s onward, many developing country states turned away from their prior infant industry protection strategies and embraced free market ideology.  In Escape from Empire, Amsden castigated the United States, World Bank, and later the World Trade Organization (WTO), for promoting free market policies that constrained developing countries鈥� ability to deploy industrial policy.

In reality, however, as Amsden herself observed, developing states with sufficient political savvy could still work within WTO rules to channel subsidies to favored firms by deploying industrial policies allowed by the WTO to rich countries. State support for new businesses through investments in science and technological innovation, to facilitate regional equality and environmental improvement are  rules. The star student within the cohort of developing nations was China which operated within WTO rules to deploy industrial policy in new ways.

The Chinese state鈥檚 ability to channel finance into selected industries and to pick winners echoes the strategies pursued by the South Korean state. Industries such as mining and energy production are controlled by the state and provide cheap inputs to China鈥檚 increasingly globally competitive firms. The state specifies sectors in which FDI is prohibited, restricted, or encouraged while encouraging joint ventures to facilitate technology transfer.

An example of a global 鈥渨inner鈥� is digital communications giant, Huawei. Established in 1987, by 2012 it had overtaken Ericsson to become the world鈥檚 biggest telecommunications equipment manufacturer. Its rise, comparable to that of the South Korean Chaebols between the 1960s and 1980s, has been supported by state-backed companies, such as Semiconductor Manufacturing International Corporation, which produces cutting-edge computer chips.The lesson to be drawn from Amsden鈥檚 work is that the state can use its coercive powers to shape the economic behavior of firms.

The lynchpin of China鈥檚 late industrialization, however, are the low wages and labor repression that have established the largest workforce in world history. Average working hours have increased significantly since the 1970s. For , at  and other high-tech companies a seventy-two-hour workweek 鈥� twelve hours a day, six days a week 鈥� is the norm. As China鈥檚 firms have pursued technological advances, their ability to squeeze more out of workers for the same labor input has increased.

The Chinese state has also commodified many goods and services 鈥� abolishing secure lifetime employment, marketizing child-care provision, and eliminating most price controls on food. These measures increase pressure on workers to work longer hours for meager pay.

Amsden鈥檚 early observations about increasing the rate of surplus value 鈥� through combining long working days with advanced technologies 鈥� is particularly relevant to contemporary China. The Chinese working class, relative to the value they produce, is cheap, highly disciplined, and increasingly highly skilled, and the state has used it to attract foreign investment, induce technological transfer, and generate rapid economic growth.

Both China and South Korea revealed a tension running through Amsden鈥檚 work. On the one hand, her account of the real mechanisms underlying development served as a devastating critique of free market ideology. But this development had as its dark underside the exploitation of labor, which she showed was the basis of late industrialization everywhere.

But there are reasons to think that this tension may be resolvable. The lesson to be drawn from Amsden鈥檚 work is that the state can use its coercive powers to shape the economic behavior of firms. This could work to serve pro-labor ends, just as well as it can ensure increases in productivity. However, as with all political action, what is required is a coalition of forces capable of shaping the actions of elites. With a Republican right more committed to corporate welfare than industrial policy, such a prospect seems hard to imagine. But the great strength of Amsden鈥檚 work is to show that it could, perhaps, be possible.

Benjamin Selwyn听is a professor of international relations and international development at the University of Sussex, Brighton, UK. His publications include The Struggle for Development (Polity Press: 2017).

Defenders of capitalism argue that cooperation is undermined by individuals鈥� tendency to take more from society than they contribute. The economist Elinor Ostrom refuted this idea, but without identifying capitalism as the real cause of exploitation.

Socialist arguments that cooperation and collective action represent the basis of a better society are often dismissed by supporters of capitalism. 鈥淗uman nature,鈥� so the argument goes, is inherently self-seeking.

The so-called 鈥渇ree-rider problem鈥� purports to prove that large-scale cooperation is unsustainable because individuals seek to benefit from the collective action of others while minimizing their own contribution. This tendency is, the argument goes, a barrier to collective solutions to social problems.

Rather than cooperate, individuals should allow market forces to dictate how they decide to allocate their time and resources. Such arguments are applied by supporters of capitalism to explain why rational collective resource management and attempts to tackle climate breakdown are unlikely to succeed without the aid of market forces.

Since capitalism emerged as the world鈥檚 dominant economic system, its defenders have argued that private property rights and the pricing of natural resources are the only way to collectively manage our social goods.

The economist Elinor Ostrom provided a sharp critique of such notions from within the framework of mainstream economics. She demonstrated that cooperative management of natural resources can preserve rather than degrade them, and that trust between strangers can be established, expanded, and become the basis of collaborative ways of managing what she described as 鈥渃ommon-pool resources.鈥�

Within the field of sustainable development studies, her work became highly influential and helped to bring the notion of 鈥渢he commons鈥� to a broader audience. However, outside of academia, she remains largely unknown 鈥� a glaring oversight in a world in which education, water, and even land are increasingly run and managed for and by private companies.

Against Free-Rider Problem Approaches

Born in 1933 in Los Angeles, Ostrom grew up during the Depression against the backdrop of a socially conservative America and worked as an economist until her death in 2012, at the age of seventy-eight. At school, she was denied the opportunity to study mathematics because she was a woman, a slight that had a long-lasting impact on her career.Ostrom demonstrated that cooperative management of natural resources can preserve rather than degrade them.

Later, when she applied for doctoral study at the University of California Los Angeles, she was denied entry to the economics program because of her lack of earlier training in mathematics. She decided instead to study for a PhD in political science, a move that made her alert to the depoliticizing tendencies of the discipline she would come to shape. Her PhD, completed in 1965, focused on the management of shared groundwater in Southern California.

Perhaps surprisingly for someone whose work had an egalitarian bent, Ostrom associated with and participated in conservative circles. Between 1982 and 1984, she was president of the Public Choice Society. The tradition of public choice is rooted in the assumption that policymakers are self-seeking, that the capitalist market is a public good, and that privatization is desirable.

While she did not entirely accept the dominant ideology of neoliberal economics, she shared many of its assumptions. This put limits on her work that economists of the Left seeking to engage with her thinking would have to overcome.

One of the prime targets of Ostrom鈥檚 work was the aforementioned 鈥渇ree rider problem,鈥� which purported to show that if a person cannot be excluded from the benefits provided by the collective action of others, then that person is motivated not to participate but to 鈥渇ree-ride鈥� on gains of the others.

Perhaps the most pernicious variant of the free-rider problem was what the ecologist Garrett Hardin called the 鈥渢ragedy of the commons.鈥� In 1968, Hardin used the example of common grazing land to argue that, while it is in everyone鈥檚 interest to cooperate, individuals follow their self-interest and exploit shared resources until they are exhausted. Avoiding this tragedy required extinguishing the commons by state control or privatization.

Hardin鈥檚 thesis became popular in conservative circles as part of a backlash against a  that had emerged in the early 1960s. For example, the marine biologist Rachel Carson鈥檚 book Silent Spring illuminated the link between corporate capital鈥檚 profit-seeking and increasingly widespread environmental destruction caused by pesticides. She proposed greater regulation of pesticide use and greater government accountability and public awareness to counter corporations鈥� ability to damage the environment.

Hardin鈥檚 thesis, by contrast, blamed individual鈥檚 self-interest, rather than corporate capital, for environmental degradation.

Ostrom expanded her writing about common-pool resources (CPRs) in the 1980s, when movements for environmental protection and justice were in the news. But she did not see her work as contributing to such struggles.

From the late 1960s onward, the Brazilian military dictatorship began opening the Amazon forest to 鈥渄evelopment鈥� 鈥� a euphemism for land speculation, deforestation, logging, and the expansion of cattle ranching. In opposition to these forces, social movements, often collaborating with radical elements of the Catholic church, fought for their rights to live in and manage the natural resources of the Amazon.

By the 1980s, these struggles 鈥� especially following the murder of the Brazilian trade union leader Chico Mendes 鈥� were becoming increasingly visible and popular among populations in the Global North.

Following Brazil鈥檚 transition to democracy in the 1980s, these social movements succeeded in forcing the Brazilian state to establish new commons for rubber tappers and fisherfolk who hunted along the rivers and estuaries of the Amazon.

Such struggles were not part of Ostrom鈥檚 notion of collective action. She instead provided an image of harmonious collective action that could preserve natural resources.

Ostrom鈥檚 Notion of Common-Pool Resources

Ostrom took issue with the assumptions the free-rider problem made about the individual. 鈥淯sers [of resources] are pictured as trapped in a situation they cannot change. Thus, it is argued that solutions must be imposed on users by external authorities,鈥� she wrote in a 1999 .

Through numerous empirical studies, she showed how individuals cooperate to organize resource use in ways that are environmentally sustainable. She  to people the ability to communicate and to establish 鈥渋nstitutions resembling neither the state nor the market to govern some resource systems with reasonable degrees of success over long periods of time.鈥�

Her interlinked notions of CPRs and collective governance explain how collective action by individuals can successfully regulate resource use.

CPRs are human-constructed and natural resources where a) it is difficult to exclude potential beneficiaries, and b) exploitation of the resource by one user reduces its availability for others. CPRs include terrestrial and marine ecosystems 鈥� ranging from forests to groundwater basins to irrigation systems to fishing stocks.

CPRs can be governed by a range of institutional arrangements that shape individuals鈥� behavior and subsequent economic and environmental outcomes. For example, in the early 1970s in southwest Turkey, the Alanya fishing community was riven with conflict and suffering from unpredictable catches and rising costs due to unregulated fishing. In response, the community found its own collective solution to this problem.Ostrom鈥檚 writing remains valuable, both as a critique of the pathologies of the present and as evidence of the shortcoming of market-orientated solutions to these problems.

They worked together to establish a cooperative that registered all eligible fishers and identified usable fishing locations. Boats could fish in these locations between September and May (to enable reproduction of fish stocks during the summer). Every September, each registered boat was allocated to a fishing location. They spent one day in each location before moving to the next one.

In this way, each boat had equal access and opportunity to harvest the sea, fish stock replenishment was ensured, prior conflicts were practically eliminated, and predictability (and hence incomes) maximized.

Alanya, Ostrom argued in her book Governing the Commons, 鈥減rovides an example of a self-governed common-property arrangement in which the rules have been devised and modified by the participants themselves and also are monitored and enforced by them.鈥�

Limits to Ostrom鈥檚 Thought

Ostrom married her radical ideas about cooperation to some rather conventional ones about economics. She wrote that the 鈥渃ompetitive market 鈥� the epitome of private institutions 鈥� is itself a public good.鈥� What this ignored was the fact that unequal power within the market effected the ability of agents within it to make rational decisions about the collective management of social goods.

While she drew on anthropological and sociological studies for her work, she filtered these insights through the narrow conceptual lens of new institutional economics (NIE), an outlook that recognized the role of the state and other social institutions in shaping market behavior while holding onto a rational-choice view of individual actions within the market.

Consequently, questions of class and power remained absent from her analysis. This omission did serious harm. Thanks to it, she missed the key driver of the degradation of the commons and environmental destruction: unequal class power.

But while Ostrom may have held onto assumptions that undermined the radical insights of her theory, later interpreters of her work did not.

For example, Craig Johnson, a political scientist, has written about how economic inequalities affect how inshore fisheries in Thailand are :

Even for the relatively well-endowed owner-operators, however, the benefits that accrued from common property were barely keeping pace with the escalating costs of coastal fishing and variable returns. Indeed, the only households who appeared to be 鈥済etting ahead鈥� in the industry were those with the capital, influence and contacts to command new or vital market niches, such as contract processing and direct marketing.

Ostrom, by treating capitalist markets as natural, missed the pivotal moment in the establishment of these markets: the destruction of the commons by the enclosures. This was an insight that Karl Marx, writing more than a century earlier, had gleaned in Capital.

In the chapter entitled 鈥淓xpropriation of the Agricultural Population from the Land,鈥� Marx  how between the fifteenth and nineteenth century, 鈥渢he systematic theft of communal property was of great assistance in swelling large farms and in 鈥榮etting free鈥� the agricultural population as a proletariat for the needs of industry.鈥�

But Ostrom, despite moving far from the dogmas of her discipline, was unable to see the harm that imbalances of power have on society. This proved fatal for her understanding of global environmental destruction. In an article written for the , she wrote how

while many of the effects of climate change are global, the causes of climate change are the actions undertaken by individuals, families, firms, and actors at a much smaller scale.

Such a formulation would be music to the ears of the hundred firms responsible for over 70 percent of greenhouse gas emissions, who have  to obscure their environmental impacts. This tendency to equate individuals, families, and firms stemmed from Ostrom鈥檚 NIE approach. But it did not condemn her thinking to irrelevance.

Her ideas continue to be useful as a counter to justifications of privatization and for local-level management of resources. Yet her notion of cooperation between individuals was founded upon the assumption that the definition of success was the sustainable use of local resources through capitalist markets.

Decades of environmental destruction combined with rising inequality have proved the incompatibility of free markets, democracy, and the common good. Against the backdrop of today鈥檚 social and environmental crisis, Ostrom鈥檚 writing remains valuable, both as a critique of the pathologies of the present and as evidence of the shortcomings of market-oriented solutions to these problems.

Benjamin Selwyn听is a professor of international relations and international development at the University of Sussex, Brighton, UK. His publications include The Struggle for Development (Polity Press: 2017).

What if the story of economic development doesn鈥檛 begin with the market, but with the household? And what if property, often assumed to be a static bundle of rights, is better understood as a dynamic institution鈥攁daptive, historically layered, and relational?

These questions sit at the heart of my recent research, which I had the opportunity to present at the Open University鈥檚 legal histories conference Land and Property Beyond the Centenary. While my work focuses on property governance and transformation in rural China, its implications stretch far beyond. It challenges dominant liberal narratives about property and development by presenting institutional change as a process of negotiated adaptation shaped by vulnerability and crisis, rather than a linear path towards free markets and individual ownership.

At its core, this work brings into dialogue three theoretical frameworks that are rarely combined: resilience theory, Martha Fineman鈥檚 vulnerability jurisprudence, and evolutionary institutional economics inspired by Thorstein Veblen. Together, they offer a rich toolkit for reimagining how development happens鈥攁nd for whom.

Resilience Beyond Metaphor

鈥楻esilience鈥� is everywhere these days鈥攆rom climate adaptation plans to corporate strategy documents. But in many of these settings, the term functions as a loose metaphor: a call to 鈥榖ounce back鈥� from crisis, often without interrogating what resilience means, or whose resilience is being protected.

In contrast, resilience theory, which originated in ecological sciences during the 1970s (Holling 1973), initially defined resilience as the capacity of a system to absorb disturbances while maintaining core functions (Walker and Salt 2006). Over time, the concept evolved beyond ecological sciences to address social and institutional dynamics (Humby 2014), culminating in an approach emphasising adaptive governance of socio-ecological systems (SES) (Folke et al. 2005; Duit et al. 2010).

Crucially, contemporary resilience framework is not about stability鈥攊t is about transformation under constraint. Applied to economic development, this approach shifts the focus away from fixed development goals (e.g., free markets, individual land ownership) and towards the processes and institutional arrangements that enable adaptation over time.

This is especially important in the context of land, property, and household governance鈥攚here liberal models prioritising formal markets and individual ownership often fail to capture the lived realities of economic life in the Global South. In this framing, resilience serves as a critical lens for analysing how property systems evolve under pressure, rather than functioning as a rhetorical term.

The Household as an Adaptive Institution

Nowhere is this more evident than in rural China, where the household has long operated as more than a private, familial unit. Historically, it was a key node in systems of imperial governance, tax collection, and collective responsibility. During the Maoist period, it was scaled up and subsumed into communes through collectivisation. And in the late 1970s and 1980s, it re-emerged as the cornerstone of agricultural reform under the Household Responsibility System (HRS).

Under the HRS, rural land remained collectively owned by the village committee or the collective economic organisation, but rights to use, manage, and benefit from rural land for farming purposes were contracted to individual households. These households鈥攖hough not legal persons in a Western sense鈥攂ecame the operative economic units, making decisions about production, investment, and surplus. The state retained oversight, but the locus of everyday governance shifted to the household.

This arrangement defies standard models of property. It is neither fully private nor fully communal. It does not rest on individual title, yet it has enabled a massive increase in agricultural productivity, lifted millions out of poverty, and persisted for over four decades. From a resilience perspective, the HRS is a compelling example of institutional adaptation: a locally grounded, historically informed response to systemic crisis.

From Vulnerability to Institutional Support

Yet resilience alone is not enough. As Martha Fineman has powerfully argued, resilience must be understood in relation to vulnerability. Fineman鈥檚 (e.g., 2004, 2010, 2013, 2017) vulnerability theory challenges the liberal conception of individuals as fully autonomous, rational, and self-sufficient actors. Instead, she posits human vulnerability as universal and inevitable, experienced differently across the lifecycle but requiring continuous institutional support.

Central to Fineman鈥檚 critique is the reconceptualisation of resilience as a socially and institutionally constructed capacity rather than merely an inherent individual trait (Fineman 2013). Acknowledging universal vulnerability demands that resilience be understood as the outcome of supportive institutional structures. Fineman (2010) explicitly calls for a 鈥�responsive state鈥� that mitigates structural vulnerability by fostering institutional support. All human beings are vulnerable: to illness, to economic precarity, and to displacement or the loss of social support systems. What varies is how that vulnerability is mediated鈥攖hrough family, community, legal structures, or the state.

Fineman鈥檚 theory pushes back against liberal assumptions of autonomy and self-sufficiency. She reminds us that informality can also obscure deep inequalities, especially around gender and care. In China, for example, household-based land contracts have often been issued in the name of male heads, with women鈥檚 access mediated by marital status and household registration. This creates hidden dispossessions: when households divide, or when women marry out, their land rights can evaporate. It calls for what Fineman terms the responsive state: one that recognises universal vulnerability and designs systems to mitigate, not reproduce, inequality.

Bringing Fineman into dialogue with resilience theory helps refine our approach. Resilience is not just the ability to adapt鈥攊t is the product of institutional arrangements that distribute resources, manage risk, and support those most exposed to harm. Fox O鈥橫ahony and Roark (2022) also note: resilience must not be confused with endurance alone; resilient property must be assessed in relation to how it confronts or reinforces structural injustice. Their work offers an important reminder that without state responsiveness and institutional accountability, resilience risks becoming a justification for inequality.

Veblen, Evolution, and Development as Process

The third strand of this framework鈥�evolutionary institutional economics鈥攁dds another layer. In 痴别产濒别苍鈥檚 classic formulation, institutions evolve not through design but through selective adaptation: a process shaped by habit, experimentation, and context (Veblen 2007/1899; Hodgson 2012). What persists is not always what is deemed most efficient by liberal standards, but what is most compatible with prevailing ecological and socio-economic conditions.

This evolutionary logic is essential for understanding property and development in non-liberal contexts. It explains, for instance, why Chinese rural households could reassert themselves so effectively in the late 1970s. The HRS cannot be adequately explained solely as a spontaneous market-oriented response. Instead, it emerged from historically entrenched practices of household-based governance. The HRS adapted these historical institutional configurations to contemporary ecological and socio-economic conditions through years of local experimentation.

Veblen also helps us move beyond the binary of tradition vs. modernity. He shows that institutional change is path-dependent, historically situated, and plural. The Chinese case is not a 鈥榯ransition鈥� towards Western models of property鈥攊t is a trajectory of its own, shaped by deep histories of governance and human-land relations.

Implications for Development Economics

So, what does all this mean for development economics?

First, it urges rethinking the role of formal institutions and legal formality. As scholars such as Elinor Ostrom (e.g., 1990, 2010) have argued, communities often govern land and resources effectively through informal norms and shared practices. The challenge is not to impose external models, but to understand鈥攁nd where appropriate, strengthen鈥攖he institutional arrangements that already exist.

Second, it calls for integrating vulnerability into development thinking. Much of the field still assumes economic agents are autonomous, rational, and mobile. But real people live in webs of dependency: caring for children, elders, or the sick; tied to households, identities, and places. Economic policy that ignores this鈥攂y targeting individuals instead of families, or by displacing informal systems in favour of abstract rights鈥攔isks deepening insecurity and inequality.

Third, it suggests taking history seriously. Rather than a fixed problem to be solved, development is an evolving process shaped by ecological pressures, socio-economic realities, and the dynamic interplay of conflict, negotiation, and cooperation across multiple levels of governance. The HRS did not emerge from a blueprint鈥攊t emerged from decades of failed collectivisation, suppressed local experiments, and shifting elite consensus. Development economists need to understand these dynamics, not just measure their outcomes.

Finally, and perhaps most importantly, this perspective opens space for a pluralist approach to institutions and property. There is no universal path to development, no one-size-fits-all model of governance. But by attending to how institutions adapt, absorb crisis, and respond to vulnerability, we can begin to build a more grounded, equitable, and resilient understanding of economic change.

Towards a Resilient Development Paradigm

The concept of 鈥�resilient development鈥� risks becoming another buzzword unless grounded in rigorous theory and empirical nuance. But used critically, it can become a powerful tool: a way to centre adaptation, institutional experimentation, and vulnerability in how we think about growth, property, and justice.

Rural China鈥檚 experience under the HRS offers one case study鈥攂ut not a template. It reminds us that resilience is not about returning to an imagined past or leaping towards a market ideal. It is about building institutions that can change without collapsing, that can absorb shocks without sacrificing equity, and that can evolve with the communities they serve.

Development, in this sense, is not a destination. It is an ongoing negotiation鈥攂etween people, institutions, and their environments. And perhaps the household, so often ignored or oversimplified in economic models, is one of the best places to begin.

References

Duit, A. et al. (2010) Governance, Complexity, and Resilience. Global Environmental Change, 20, 363鈥�368.

Fineman, M.A. (2004) The Autonomy Myth: A Theory of Dependency. The New Press.

Fineman, M. A. (2010) The Vulnerable Subject and the Responsive State. Emory Law Journal, 60(2), 251鈥�275.

Fineman, M.A. (2013) Equality, Autonomy, and the Vulnerable Subject in Law and Politics. In M.A. Fineman and A. Grear (eds) Vulnerability: Reflections on a New Ethical Foundation for Law and Politics. Routledge, 13鈥�27.

Fineman, M. A. (2017) Vulnerability and Inevitable Inequality. Oslo Law Review, 4(3), 133鈥�149.

Folke, C. et al. (2005) Adaptive Governance of Social-Ecological Systems. Annual Review of Environment and Resources, 30, 441鈥�73.

Fox O鈥橫ahony, L. and Roark, M.L. (2022) Squatting and the State: Resilient Property in an Age of Crisis. Cambridge University Press.

Hodgson, G.M. (2012) Thorstein Veblen: The Father of Evolutionary and Institutional Economics. In E. S. Reinert and F.L. Viano (eds) Thorstein Veblen: Economics for an Age of Crises. Anthem Press, 83鈥�296.

Holling, C.S. (1973) Resilience and Stability of Ecological Systems. Annual Review of Ecology and Systematics, 4, 1鈥�23.

Humby, T.-L. (2014) Law and Resilience: Mapping the Literature. Seattle Journal of Environmental Law, 4(1), 85鈥�129.

Ostrom, E. (2009) A General Framework for Analyzing Sustainability of Social-Ecological Systems. Science, 325(5935), 419鈥�422.

Ostrom, E. (2010) Beyond Markets and States: Polycentric Governance of Complex Economic Systems. American Economic Review, 100(3), 641鈥�672.

Veblen, T. (2007/1899) The Theory of the Leisure Class: An Economic Study in the Evolution of Institutions. Oxford University Press.

Walker, B. and Salt, D. (2006) Resilience Thinking: Sustaining Ecosystems and People in a Changing World. Island Press.

is Professor of Law at Essex Law School, University of Essex. Her research focuses on comparative property law; Chinese law; law, governance and development; and political economy. @TingXu7

Every year the Nobel Prize is awarded to different disciplines including Economics. And each year it generates a wave of euphoria and hype. But unlike literature and natural sciences, economics is the only social science where the Nobel is awarded. Even critical voices within the discipline get swayed by the hype of Nobel. Notwithstanding the problem of absolute marginalization of Blacks, Women and economists critical of Capitalism among award winners, there are other serious problems with Nobel Prize in Economics.

First of all, the Nobel Prize in Economics is not actually a Nobel Prize. The award in Economic sciences was not among the original set of disciplines included in the Nobel Prize in 1901. It was established by the Central Bank of Sweden (Sveriges Riksbank) in 1969, after 68 years, rather than by the Nobel Committee itself. The greatest irony is that this fact is mentioned even on the Nobel Prize website, which states, 鈥淭he prize in economic sciences is not a Nobel Prize.鈥� (NobelPrize.org, 2018). Hence contrary to all other Nobel prizes in different subjects/fields, the Nobel Prize in economics is called by the special name 鈥淪veriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel鈥�.Initially, members of the Nobel committee (including family members of Alfred Nobel) strongly objected to naming the prize given by the Central Bank of Sweden as the Nobel prize (Offer & S枚derberg, 2016). To quote Alfred鈥檚 great-grandnephew Peter Nobel, “Nobel despised people who cared more about profits than society’s well-being. There is nothing to indicate that he would have wanted such a prize”, and deliberate association of Nobel prizes in Economics is “a PR coup by economists to improve their reputation” (The Local – Nobel Descendant Slams Economics Prize, 2005).

The prize initiated and awarded by the Central Bank of Sweden and falsely dubbed as the Nobel in Economics has acted as an institutional vehicle to endorse and establish Neo liberal ideas (mostly Free market fundamentalism) within Economics (Offer & S枚derberg, 2016). In fact,  member of the Nobel Award Committee for Economics are known to be affiliated with the notorious Mont Perlin Society (Mirowski, 2020). Notably, eight Mont Perlin Society members including Friedrich Hayek, Milton Friedman, George Stigler, Maurice Allais, James M. Buchanan, Ronald Coase, Gary Becker and Vernon Smith, have won Nobel. Economics, like other social sciences, such as, Political Science, Sociology, Philosophy, and Anthropology has diverse schools of thought and approaches to analyze and study the modus operandi of capitalism often euphemistically referred to as the 鈥楨conomy鈥�. In the last 68-years of its existence, not a single economist conducting rigorous theoretical and empirical research in the Marxian school of political economy has been a recipient of the award; such as, Paul Marlor Sweezy, Maurice Dobb, Samir Amin, Oskar Lange, Josef Steindl, Micha艂 Kalecki, John Roemer, Anwar Shaikh, Prabhat Patnaik and similar others. The fact that the most deserving post-Keynesian economist Joan Robinson was never awarded the Nobel prize is not surprising. In contrast, that very Nobel Prize committee was generous enough to award it to researchers beyond economics including psychologist Daniel Kahneman, mathematician Lloyd Shapley and political scientist Herbert A. Simon. Such acts of exclusion by the selection committee demonstrate their entrenched ideological bias and built-in censoring mechanism against any scholarship critical of capitalism. The selective recognition of economists mostly from the schools favouring capitalism marginalizes all other schools critical of capitalism within the discipline of Economics.

Furthermore, the pseudo鈥揘obel Prize in economics unnecessarily creates 鈥楽pokesperson(s) of the subject鈥� when ideally, they shouldn’t even exist (Offer & S枚derberg, 2016). By awarding economists mostly from the Neo-classical schools, it not only tends to reduce diversity within the subject, but also arbitrarily produces Spokesperson(s) for the subject. The common public, media, universities, and policymakers are thus inordinately influenced by the opinions and suggestions given by the Nobel winners. Economics is a very policy-oriented subject, dealing with decisions such as Taxation, Subsidies, Government expenditures, Regulation etc. The creation of such spokespersons dominantly from Neoclassical school and their inherent bias in favor of the free market (pro-big business) policies and aversion against Welfare state policies can have adverse impact on the everyday lives and livelihood of ordinary people. Media and government often utilize the views of such Nobel winners to justify policies that negatively impact the working class and ordinary people. These policies include dismantling pro worker labor legislations, privatization of public sector companies, tax-cuts to corporates, reducing funds for social sectors, increasing indirect taxes, deregulation of financial institutions, etc. Such policies disproportionately benefit transnational corporates and capitalist class across the world. For instance, the Nobel laureate Milton Friedman was comfortable the illegal coup of democratically elected president Salvador Allende and actively supervised the neo-liberal economic policies of Dictator Pinochet in Chile (Fischer, 2009; Frank, 1976; Klein, 2007). The ideas of several Nobel Laureates such as the Efficient Market Hypothesis, Black- Scholes formula, as well as positions in favour of market deregulation, especially the financial market, and the presumed magical efficiency of unregulated markets led to the greatest economic disaster of our generation i.e. the Great Financial Crisis of 2007 (Bresser-Pereira, 2010; Crotty, 2017). And therefore, quite evidently, the pseudo-Nobel in economics stifles diversity of thought within economics, tends to manufacture spokesperson(s) of the discipline (with of course a pro-market outlook), and has increasingly turned into an institutional mechanism to promote and legitimize Neo-liberal policies throughout the World.

Moreover, recipients of the pseudo- Nobel Prize in economics have mostly been concentrated in few Universities of the Global North. The majority of Nobel awardees are from a handful of North American universities (Totska, 2023). Nearly 46 % of the 96 recipients of the Nobel in economics between 1969 to 2024 were affiliated with just four Universities of USA, namely, University of Chicago, Massachusetts Institute of Technology, Harvard University and Princeton University. It represents only 0.12% of all Universities in the USA, 0.02% in Europe, or 0.00012% of all Universities in the world. Research has shown that most PhD students in economics of the Ivy League universities, where Nobel is concentrated, are from economically and socially privileged backgrounds (Stansbury & Schultz, 2023). Furthermore, Nobel prize winners in Economics are connected through a tight network of professor-student relationships (Tol, 2022) and the possibility of nepotism can hardly be ruled out (Zuckerman, 1977). This finding is not surprising given the fact that the Nobel Prize selection committee allows previous Nobel Laureates to nominate a candidate for the subsequent years (NobelPrize.org, 2018) and getting nominated by a previous awardee dramatically increases the chances of receiving the Prize (Economist Data Team, 2021). By summarily excluding knowledge produced by the Global South, while concentrating on few universities of just one country from the North, where the discipline is mostly pursued by individuals from privileged socio-economic backgrounds, the Nobel Prize further accentuates exclusionary tendencies prevalent within this subject and entrenches monopolization of knowledge production by a few centres in the global North and makes decolonization of economics nearly impossible.

As far as this year鈥檚 Nobel in economics is concerned, it was awarded to three economists: Daron Acemoglu (MIT), Simon Johnson (MIT), and James Robinson (University of Chicago). According to the Nobel committee, they were selected for it because they were “able to demonstrate a relationship between institutions and prosperity. They have also developed theoretical tools that can explain why differences in institutions persist and how institutions can change.鈥� It is difficult to review the听entire corpus of work done by Acemoglu et al here, so a brief review of their most influential (cited) works is presented here at a听very high level of generality. Kvangraven et al., (2024) have also recently critiqued Acemoglu鈥檚 work for which he was awarded Nobel this year. Acemoglu鈥檚 work falls听largely under the New Institutional Economics school and has shown the importance of institutions (social-legal rules/norms governing/influencing economic behaviours) in a country’s economic growth or decline. The crux of their research is figuring out correct institutions for economic prosperity. But if one interrogates the kind of institutions being sought, it becomes apparent, that they are mostly those which enable or entrench the rule of private bourgeois property, that in turn, enhances market functioning and outcomes. In their paper, 鈥淭he Colonial Origins of Comparative Development: An Empirical Investigation – American Economic Association鈥�, they even argue that depending on the type of institutions (extractive or inclusive) set up by colonialists, ex-colonial countries will have different economic consequences in the post-colonial period. However, what their research fails to acknowledge is that it was precisely the web of intricate institutional mechanisms designed by colonialism that allowed for the unilateral expropriation and transfer of wealth from the Global South (ex-colonies with extractive institutions), allowing them to accumulate enormous wealth in the听Global North (settler colonies with supportive institutions) while forcing ex-colonies to be economically dependent and poor (Amin, 1988; Frank, 2013). From 1765 to 1938, the transfer of wealth from Indian colony to UK amounted to $45 trilion( Patnaik, 2017) and such drain of wealth from Global South to global North is estimated around $242 trillion from 1990 to 2015 (Hickel et al., 2022).

Acemoglu et al fail to acknowledge the complex historical and contemporary mechanism of neo-colonialism where the development of the North is pre-conditioned on the underdevelopment of the South (Amin, 1988), the structural constraints imposed on domestic policy space of states of the South (with extractive institutions) by Global financial capital (Patnaik, 2005, 2018) and inability to comprehend capital accumulation as autonomously determined global scale process (Grinberg, 2018). Additionally, Daron Acemoglu argues that all non-capitalist institutional solutions provided under socialism such as economic planning, coordination, nationalisation are 鈥渆xtractive鈥� institutions. Many ex-colony countries, such as India and China, were able to foster industrialization through extensive use of extractive institutions, such as public ownership of private commercial banks and financial institutions and, the use of comprehensive economic planning. Nonetheless, Daron supports mildly social democratic solutions such as minimum wage, breaking monopolies, reducing inequality, unionism, favouring greater democracy, addressing the adverse impact of AI on workers etc. but all within the realm of capitalism. Hence, Acemoglu (and others) getting the Nobel is another example of validating researchers whose research does not challenge the status quo of capitalism. 

Capitalism is posing a real existential risk to humanity, generating unprecedented inequality, subjecting common people to harsh neo-liberal austerity, and consequently emboldening right-wing neo-fascists in Europe, America and elsewhere. At this historical juncture, the celebration of Nobel Prize in economics, which legitimizes apologists of Capitalism and silences its critique puts even Nero to shame. Hence, it’s high time we end fetishising the Nobel Prize in economics and demand what Gunnar Myrdal did 50 years ago, that is, seek the abolition of Nobel Prize in economics (Brittan, 2009).

Dr. Dawa Sherpa is Assistant Professor in the Department of Economics, Kurseong College, University of North Bengal, India.

References

Acemoglu, D. (2005). Institutions as the Fundamental Cause of Long-Run Growth. Handbook of Economics Growth.

Acemoglu, D., Johnson, S., & Robinson, J. A. (2001). The colonial origins of comparative development: An empirical investigation. American Economic Review, 91(5), 1369鈥�1401.

Acemoglu, D., & Robinson, J. A. (2013). Why nations fail: The origins of power, prosperity, and poverty. Crown Currency.

Altman, M. (2004). The Nobel Prize in behavioral and experimental economics: A contextual and critical appraisal of the contributions of Daniel Kahneman and Cernon Smith. Review of Political Economy, 16(1), 3鈥�41.

Amin, S. (1988). Accumulation on a World Scale: Thirty Years Later. Rethinking Marxism.

Brittan, S. (2009, June 30). The not so noble Nobel Prize – Samuel Brittan: The Financial Times 19/12/03.

Crotty, J. (2017). The Realism of Assumptions Does Matter: Why Keynes-Minsky Theory Must Replace Efficient Market Theory as the Guide to Financial Regulation Policy. In Capitalism, Macroeconomics and Reality (pp. 13鈥�38). Edward Elgar Publishing.

Economist Data Team. (2021). The best way to win a Nobel is to get nominated by another laureate. The Economist, 1.

Fischer, K. (2009). The Influence of Neoliberals in Chile before, during, and after Pinochet. The Road from Mont P猫lerin: The Making of the Neoliberal Thought Collective, 305鈥�346.

Frank, A. G. (1976). Economic genocide in Chile: Open letter to Milton Friedman and Arnold Harberger. Economic and Political Weekly, 880鈥�888.

Frank, A. G. (2013). The development of underdevelopment. In Sociological Worlds (pp. 135鈥�141). Routledge.

Grinberg, N. (2018). Institutions and Capitalist Development: A Critique of the New Institutional Economics. Science & Society, 82(2), 203鈥�233.

Hickel, J., Dorninger, C., Wieland, H., & Suwandi, I. (2022). Imperialist appropriation in the world economy: Drain from the global South through unequal exchange, 1990鈥�2015. Global Environmental Change, 73, 102467.

Klein, N. (2007). The Shock Doctrine: The Rise of Disaster Capitalism. Metropolitan Books.

Kvangraven, Ingrid Harvold, and Surbhi Kesar Devika Dutt.2024. The Colonial Origins of Economics. Economic and Political Weekly. Vol. 59, Issue No. 42

MacLean, N. (2017). Democracy in Chains. The Deep History of the Radical Rigth鈥檚 Stealth Plan for America. (No Title).

Maxton, G., & Randers, J. (2016). Reinventing prosperity: Managing economic growth to reduce unemployment, inequality, and climate change. Greystone books.

Mirowski, P. (2020). The neoliberal Ersatz nobel prize. Nine Lives of Neoliberalism, 219鈥�254.

Myrdal, G. (1977). The Nobel Prize in Economic Science. Challenge, 20(1), 50鈥�52.

Nature. (2024). Nobel prizes are globally unrepresentative鈥擳he nomination process must be opened up. Nature, 634(8033), 266鈥�266.

NobelPrize.org. (2018, July 4). Nomination and selection of economic sciences laureates. NobelPrize.Org.

Offer, A., & S枚derberg, G. (2017). The Nobel Factor: The Prize in Economics, Social Democracy, and the Market Turn. Princeton University Press.

Patnaik, P. (2018). Reflections on contemporary capitalism. The Changing Face of Imperialism. New York and Oxford: Routledge, 15鈥�36.

Patnaik U. (2017). Revisiting the 鈥楧rain,鈥� or transfers from India to Britain in the context of global diffusion of capitalism. In Chakrabarti S., & Patnaik U. (Eds.), Agrarian and other histories: Essays for Binay Bhushan Chaudhuri. Tulika Books.

Stansbury, A., & Schultz, R. (2023). The Economics Profession鈥檚 Socioeconomic Diversity Problem. Journal of Economic Perspectives, 37(4), 207鈥�230.

The Local鈥擭obel descendant slams Economics prize. (2005, September 28).

Tol, R. S. J. (2022). Rise of the Kniesians: The professor-student network of Nobel laureates in economics. The European Journal of the History of Economic Thought, 29(4), 680鈥�703.

Tol, R. S. J. (2023). Nobel begets Nobel (arXiv:2207.04441).

Tol, R. S. J. (2024). The Nobel family. Scientometrics, 129(3), 1329鈥�1346.

Totska, O. L. (2023). Nobel Prize in Economics: Retrospective analysis and prediction of laureates. Journal of Management & Technology [Revista Gest茫o & Tecnologia], 23(2), 10鈥�28.

Zuckerman, H. (1977). Scientific Elite: Nobel Laureates in the United States. The Free Press.

The only Nobel Prize that has nothing to do with the will of its creator, Alfred Nobel, was announced on Monday, October 14th. As usual, the announcement sparked a range of reactions, and as economist . This time, the prize did its job and recognized the contribution of neo-institutionalism to economics. Its influence is undeniable, as can be seen from the fact that these authors are widely cited in macroeconomics courses. For instance, Daron Acemoglu had long been mentioned in academic circles as a favorite to win the Nobel, much like Leonardo DiCaprio was repeatedly named a favorite for the Best Actor Oscar. While we are already familiar with the kind of economics that dominates classrooms and the hegemonic media, as well as the economics that influences politics and shapes economic policies, it鈥檚 worth discussing the theoretical and empirical contributions being recognized and their main critical observations.

Daron Acemoglu, Simon Johnson, and James A. Robinson (AJR) have been awarded for studies of how institutions are formed and affect prosperity. Their work addresses what is perhaps one of the most important questions in economics: How do we explain the economic disparity between countries? Why are some nations persistently wealthy while others remain consistently poor? We should understand prosperity as the plain and simple economic growth. If we rule out biological, cultural, or geographical reasons, what remains is dimension of the historical-political order. Development, then, is largely dependent on one key factor: In the early stages of nations, before they became modern states, what forms of government, civil codes, and laws were established? According to AJR, the root of development lies in the different types of political institutions that were established across the world. Thus, inclusive institutions are in sharp contrast with extractive institutions.

Inclusive institutions are those that distribute power and limit its arbitrary exercise, enforcing property rights. In few words: the rule of law. On the other hand, extractive institutions are the opposite: full arbitrariness, little to no property rights, the rule of the strongest. Without the correct institutions, markets cannot function as they should. The rationale goes like this: These early institutions brought with them economic practices that shaped the behavior of both the state and entrepreneurs. Correct institutions encourage the right incentives. Thus, we have the innovative entrepreneur as a product of inclusive institutions, and the rent-seeking entrepreneur as a product of extractive institutions. In short, development is achieved through the institutions of idyllic capitalism: full property rights and democracy.

But this pristine vision of development is vulnerable from many fronts. To start, AJR must empirically prove that their hypothesis is correct 鈥� that it is institutions that generate economic growth, not the other way around. To achieve this, they use historical data on settler mortality rates. In principle, where mortality rates were higher, it was harder for Europeans to settle and bring inclusive institutions. In contrast, where mortality was high, extractive institutions were the only option. Glaeser and his colleagues argue that . For these authors, an equally valid explanation is that settlers brought their 鈥渁dvanced鈥� human capital, which made the long-term difference. In any case, econometrically speaking, it is almost impossible to ensure that it is indeed the institutions, and not something else, that determines who develops and who doesn鈥檛. It could be that the 鈥渞ight鈥� institutions flourished because it was in the settlers’ interest to reproduce the emerging capitalism. Even the mere presence of European settlements facilitated trade flows. Settlers were essentially recreating their societies in the colonies to resemble the metropolis.

Moreover, AJR鈥檚 argument lacks originality or, worse, lacks thoroughness in acknowledging intellectual predecessors. The same argument had already been put forward by Marxist economist Paul Baran in the 1950s. As noted by on X, Baran mentions in his book The Political Economy of Growth that it matters little who the Europeans settlers were 鈥� whether families fleeing religious persecution or expatriated criminals, they all 鈥渃arried capitalism in their bones and encountered little resistance鈥�. Where conditions were adverse, either due to climate or facing advanced forms of statehood, colonialism was simply looting.

Another criticism is the great variability in the types of institutions imposed in the colonies. These institutions were highly dependent on specific contexts and the economic interests of the metropolis. As Vernengo and Perez-Caldentey highlight, when necessary or convenient, the British had no problem establishing exclusive practices, while at the same time, the Spanish could implement inclusive institutions as well. These Latin American economists also question AJR, and the literature they produced,

Political scientist Yuen Yuen Ang, author of How China Escaped the Poverty Trap, also questions whether the so-called inclusive institutions are truly inclusive for all social groups. In North American colonies, property rights certainly protected white settlers, but not Native Americans, slaves, or women. As Yuen Ang suggests, This sophisticated form is called access money: the purchase of economic privileges by those with power. This type of corruption was characteristic of the so-called Gilded Age in the United States, a time that saw the rise of the great industrial barons of the late nineteenth century, who blurred the lines between politics and economics to amass great fortunes. The Gilded Age would also be characteristic of contemporary China. This interpretation of development history is far from AJR鈥檚 鈥渃orrect鈥� institutions.

Another problem is that, beyond using mortality data in their empirical studies, AJR completely ignore the violent nature of imperialism and colonialism. The plundering and extermination of entire peoples are not part of the analysis. The professor of Development Studies, , from the 鈥渋ntellectual鈥� distance of studying the economy without being 鈥渟tained鈥� by etical considerations of the subject matter. Furthermore, the absence of an imperialist context and massive violence reflects that AJR focus on a simplistic and deceptive interpretation of development: GDP per capita.

We should note that neo-institutionalism appears as an approach that covers up the loose ends of neoclassical theory. It is therefore a complement to the dominant economic narrative. It does not seek to critically scrutinize conventional theory but rather to save it. For these neo-institutionalists, solid liberal institutions are the foundation of private property and provide the 鈥渃orrect鈥� incentives for innovation, technological development, and competition. On an ontological level, economic actors are what they are, and incentives determine which behaviors will prevail. There is no discussion of how these actors come to be constituted; their nature is already fixed. According to heterodox economist Ha-Joon Chang, this aspect differentiates the new institutionalists from the classical institutionalists, such as Veblen, who laid the foundation for a much richer economic analysis, one reluctant to conceive of the economy as an entity separate from history and society as a whole.

As mentioned at the beginning, the Nobel Prize in Economics is awarded to those who have been highly influential within the discipline. As has happened before, even if this academic community reaches a consensus that does not signify any progress beyond what has already been advanced by other social sciences, that consensus is still perceived as a demonstration of economics鈥� technical and scientific superiority. It鈥檚 no surprise, then, that the laureates’ work contains methodological and factual flaws. Measurement and manipulation issues suggest that the results lack of solid foundations.

The dominant economic literature on comparative development, which seeks to answer the big question of current global economic disparities, has serious difficulties explaining how countries like South Korea, Taiwan, Singapore, and China can 鈥減rosper鈥� despite lacking the type of institutions that supposedly drive development. The acclaimed book summarizing the studies and contributions of neo-institutionalism is written by two of the laureates, Daron Acemoglu and James A. Robinson, and is titled Why Nations Fail. Neo-institutionalism deserves a book narrating its shortcomings as an example of how theories that claim to be rigorous end up being deeply unsatisfactory. Such a book could well be titled Why Theories Fail.

Yaku Fernandez-Landa, originally from Peru, is a 听Political Economist currently听 based in Geneva. He has completed studies in Economics and Political Economy in Switzerland and the US.

Dependency theory is experiencing some kind of comeback and has been discussed at length on the 黑料社区 blog. However, one criticism that often comes up when researchers work on the phenomenon of dependency is the fact that the separation between the spheres of periphery and centre may be too simple, insofar as the working class is also exploited in the countries of the centre, and the elite also benefits from such a system in the periphery. While some strands of dependency theory may provide important angles for analysis of trade between the Global North and South, such analysis also risks pitting development in the center against underdevelopment in the periphery. It is worth noting, however, that many dependency theorists did not think of the world in such binary terms, but rather centered class analysis in their frameworks.

In our recent work, we approach the problem of dependence slightly differently in an attempt to nuance our analysis. Dependence is linked to the country’s international insertion, , and is reflected in and unfavourable terms of trade. However, 鈥榙ependent鈥� countries have followed varied trajectories, which need to be analysed in their context, as dependency is not black and white. Let鈥檚 zoom in on West Africa. There, dependency is mainly based on . A rent is defined as obtaining income without contributing to the production of additional goods and services. In a , we have sought to understand a very specific historical case, representing an important rentier economy that was also well integrated into the global economy. We have sought to combine dependency and to understand the stability of such a rentier economy. Let鈥檚 explore the economic history of Burkina Faso.

Following decolonization, a post-colonial model was put in place, based on an export economy mainly steered by the cotton industry. The newly-independent state replaced the French administration, enabling the elite to exploit raw material rents. Who were the main characters? Inherited from colonization, the system created a division between a class of urban wage earners – with legal rights – and the great mass of rural workers (), for whom customary rules applied. The Mossi nobility, which controls cotton production in the center and east of the country, has inherited an important role and contributed to the formation of the Burkinabe state. However, in the West of the country, the majority of cotton growers come from various acephalous or segmented societies, escaping the influence of traditional chiefs. The Catholic Church is also an important actor. It retains its coveted position as a training institution for the elite, a position it already held during colonization. The state organized the economy in such a way as to guarantee the rent, thereby curbing all other attempts at accumulating capital. Through this strategy, competition was organized into a monopolistic regime.

The organization of production and foreign trade forced the country to import equipment, food and petroleum products. The economy remained marked by a structural trade deficit characteristic of dependency. In the 1960s, the model went into crisis due to climatic and economic factors, becoming even more pronounced in the 1970s. Monetary and economic policies varied, correlating with the frequent changes in government leadership that marked this early period, indicating an unbalanced rentier regime, with a compromise that is not stabilized yet between the different actors (owners as receivers) of the rent.

The revolution of the Sankara regime marked an important transition, with a reconfiguration of rent redistribution and an upheaval of institutionalized compromises, illustrating the . In 1983, Upper Volta became Burkina Faso. Sankara re-established budget contraction and introduced a policy of self-adjustment, coupled with protectionism important public investment, especially dedicated to rural development. The Sankara period marked an evolution in several areas. Trade unions and traditional chiefs, deemed responsible for the backwardness of rural areas, were sidelined or even repressed, in favour of the peasantry, whom the new regime sought to turn into a revolutionary class. However, tensions built up in the highest spheres of power, undermining the already uneasy legitimacy of formal institutions. The unions gradually began to unite again. International pressure supported the discontent of the former political coalitions left behind by the Sankarist regime.

In 1987, following Sankara’s assassination, power passed to Compaor茅, who prepared to overhaul the state and the economy. The new economic policy formulated in 1991 emphasized liberalization. With this new policy, Burkina Faso embarked on an . This led to the development of export resources, due to the significant growth of Foreign Direct Investments through a deliberate strategy on the part of the government, which is also focusing on new forms of income – those generated by democratic openness and compliance with international standards of good governance. The State is developing marketing techniques to maximize its rents. Decentralization was also introduced in the 1990s, in line with international recommendations. For Burkina Faso’s government, it provided additional space for the accumulation of resources, through the flow of foreign aid to local projects. Thus, the new growth regime does not represent a profound structural break, but rather an exacerbation of rentier tendencies, with a diversification of resource sources. It is actually indicating an accentuation of dependency, in return for international gains and new sources of income for the ones involved in rent gains. The clientelist mode of resolving redistributive conflicts stabilized the regime when Compaor茅 remained in power from 1989 to 2014, implying a continual increase in the number of rent recipients to make it work. Compaor茅 thus re-established coalitions in power before Sankara, in a new configuration. For this, the cotton sector was not fully liberalized, contrary to the recommendations of the World Bank. On the external front though, there is a close link between the government and its technical and financial partners. The Compaor茅 regime’s status as a good pupil in the implementation of the international financial institutions鈥� recommendations and conditionalities has enabled it to maximize its rents.

What do we want to show through this story? Despite the country’s dependence on international trade (since decolonization, it has been confined to the production and export of low-value-added primary resources) and monetary structure (), the particular form of the Burkinabe state, combining the constraints of good governance and clientelist practices, helps to perpetuate this form of dependence, which benefits a small part of the population, to the detriment of all its citizens. The regime changes over time but is maintained. Although it is integrated into international trade and suffers its effects, Burkina Faso cannot be qualified as a passive periphery. Through its political elites, this country has pursued active strategies to obtain international resources, which have repercussions on the forms of production and employment. This raises the question of the diversity of models for dependent economies. The trajectories of these economies are varied, so that even a dominated regime deploys its own internal specificities, which make it possible to distinguish its model of regulation from other countries subject to the same constraints. In this context, a more in-depth analysis of dependence using a regulation approach proves pertinent, as the latter attempts to grasp the overall coherence of external (at the international level) and internal (at the national level) institutional forms.

Juliette Alenda is an Assistant Professor in the chair of economic theory and policy at Radboud University. She works on (environmental) sustainability and transformative governance in sub-Saharan Africa and co-coordinates the research group Transformative sustainable change in Action. 

is a lecturer at the University of Lille, interested in questions of sustainable development in West Africa.

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Korean economist Ha-Joon Chang is a brilliant, best-selling critic of neoliberal orthodoxy. But Chang stops far short of taking the necessary next step: questioning the capitalist system itself.

Ha-Joon Chang is a rarity in the contemporary world: an听听who is highly critical of the neoliberal free-market orthodoxy, advocates progressive social change, writes and speaks accessibly, and is very, very popular.

Chang鈥檚 books have sold millions of copies, and he is a regular contributor to mainstream media outlets. According to Chang himself, his aim is not simply to challenge free-market orthodoxy, but also to support, through his work, the kind of 鈥渁ctive economic citizenship鈥� that will demand 鈥渢he right courses of action from those in decision-making positions.鈥�

While socialists can learn a lot from Ha-Joon Chang鈥檚 work, we also need to read it critically and identify some of the gaps in his thinking. Chang鈥檚 self-professed aspiration is to promote an alternative form of capitalism, but our goal should be to develop an alternative听to听capitalism.

One Size Doesn鈥檛 Fit All

Much of the economics that is taught in universities today and espoused by capitalist elites takes a one-size-fits-all approach. As the former US treasury secretary Lawrence Summers once quipped: 鈥淪pread the truth 鈥� the laws of economics are like the laws of engineering. One set of laws works everywhere.鈥�

According to this perspective, free markets, free trade, and limited political interference are the ingredients necessary to enable markets to work their magic by generating economic growth, jobs, and prosperity all round.Ha-Joon Chang鈥檚 political economy is a breath of fresh air when compared to abstract free-market theories that are detached from social reality.

This dominant approach to economics is abstract and deductive. It relies on theoretical presuppositions, such as the notion of free trade and its benefits, to accurately depict and facilitate processes of development in the real world. Such a worldview generates a hefty degree of misplaced arrogance, as evinced by the quote from Summers.

Ha-Joon Chang rebuts this way of thinking as a modern-day exercise in mythology. He roots his own political economy in historical and institutional analysis, with theoretical generalizations derived from historical cases rather than abstract theory. His historical-institutional political economy is a breath of fresh air when compared to abstract free-market theories that are detached from social reality.

In his book听, Chang rejects, in admirably clear prose, the idea that we can identify a single set of economic laws governing the world. Rather, there is a wide range of economic thought, including Marxism, that we can deploy to understand (and change) the contemporary world.

Varities of Capitalism

Although he puts forward an effective critique of neoliberal orthodoxy, Chang is not committed to transcending capitalism, nor can he envision a successful noncapitalist society. In his own words, he wants to explain the workings of capitalism so that the system can be 鈥渕ade to work better.鈥�

Chang鈥檚 political objectives derive, in part, from his historical-institutionalist political economy. This is to some extent a backward-looking intellectual framework, as it discusses the future from the vantage point of what has worked in the past.

It is also somewhat asocial, as it discounts the centrality of class relations to processes of human development. Marxist political economy, on the other hand, is committed to deciphering how the latent social forces of today 鈥� working classes and their potential for collective action 鈥� can generate a new society in the future.Although he puts forward an effective critique of neoliberal orthodoxy, Chang is not committed to transcending capitalism, nor can he envision a successful noncapitalist society.

Chang鈥檚 political objective 鈥� to generate a better form of capitalism 鈥� and his mode of political economy also generate significant weaknesses in his analysis of really-existing capitalism. At crucial moments, he obscures the reproduction of capitalism through labor exploitation, as we will discuss in greater detail below.

Another problem for Chang is the environmental toll of economic growth. This is a tension that he arguably cannot resolve in view of his commitment to capitalist, growth-based development. A Marxist approach to economics can offer听听to such pressing problems.

Bucking the Market

In the neoliberal mythology, markets work best when they are free. If governments intervene to regulate businesses, or if trade unions attempt to force up wages, markets will cease to operate optimally. Capitalists will move their investments elsewhere and people will be poorer. As Margaret Thatcher put it: 鈥淵ou can鈥檛 buck the market.鈥�Trade has never been free and never will be free, because states determine what can and cannot be traded, and under what conditions.

Chang demolishes this way of thinking. In his book , he shows how markets have always been regulated by states. While these regulations might have been opposed by capitalists at the time, often using free-market arguments, this class eventually came to accept and even support such regulation. Trade has never been free and never will be free, because states determine what can and cannot be traded, and under what conditions.

Take child labor, for example. In Britain, the birthplace of the industrial revolution, the Cotton Mills and Factories Act of 1819 banned the employment of children under the age of nine and limited the working day of older children 鈥� those between ten and seventeen 鈥� to twelve hours. Opponents of the act argued that government should not interfere with a contract between labor and capital that both partners entered into freely and found to be mutually beneficial.

Chang makes the simple point that today, even the most hard-core neoliberals would oppose child labor and support some regulation of the market. He reasons further that it is politics and social norms, rather than a pristine 鈥渓ogic of the market,鈥� that determine whether societies have better or worse wages and conditions, rates of investment and innovation, environmental regulation, health care, and so on.

This is a crucially important point to make against those who stress the virtues of the free market. However, there is something missing in Chang鈥檚 account. While he is correct to identify the regulation of free wage labor as an eminently social and political issue, he does not ask why markets for labor power exist in the first place. In 23 Things, Chang never examines the question of where or how capitalism emerged from a world of precapitalist societies.

To do so satisfactorily, he would have had to engage with the work of Marxist historians on the transition from feudalism to capitalism. They have shown how markets for free wage labor were established in Europe through the dispossession of the peasantry and their subordination to the wage-labor contract, often through extremely violent means. Marx called this the epoch of听. Chang ignores it.

Common Clever Devices

Two of Chang鈥檚 books,  (2002) and  (2007), challenge the free-trade, free-market orthodoxy known as the Washington Consensus. The author provides voluminous evidence to show how countries that are now highly developed made use of a whole range of protectionist and interventionist policies to transform their economies.

Chang shows how state planning can generate more rapid economic growth and more effective industrial diversification than free-market policies. For Chang, state industrial and development policies can lead the way toward a better world, not adherence to free-market mythology.Countries that are now highly developed made use of a whole range of protectionist and interventionist policies to transform their economies.

For example, politicians in the United States often proclaim their country to be a bastion of free trade. In fact, as Chang observes, 鈥渢he USA had one of the highest average tariff rates on manufacturing imports in the world鈥� between 1816 and 1945.

For Chang, the key determinant of whether countries can achieve economic development successfully is their ability to deploy an effective industrial policy. From the seventeenth century all the way to our own time, a series of countries have used state intervention to transform their economies, from Britain, the United States, and Germany to Japan, South Korea, Taiwan, and most recently China.

Such policies have included import tariffs, export subsidies, public investment in research and development, government-backed joint ventures between foreign and domestic capital, and state direction of finance and control of financial markets. According to Chang, we should be encouraging poorer countries to use the same policies today to foster economic development, instead of pressuring them to accept the Washington Consensus.

Why are the rich countries of today now arguing against the approach they took as they developed? Chang argues that rich, powerful states and their corporations use free-market ideology as an imperial strategy to maintain their own dominance in the world system.

The title of Kicking Away the Ladder comes from a work by the nineteenth-century German political economist Friedrich List. Much like Chang today, List subjected the dominant liberal orthodoxy of his own time to a withering critique. His aim was to help Germany to industrialize and compete effectively with Britain, the dominant economic and military power of the Victorian age.

As List wrote in his 1841 :

It is a very common clever device that when anyone has attained the summit of greatness, he kicks away the ladder by which he has climbed up, in order to deprive others of the means of climbing up after him. In this lies the secret of the cosmopolitical doctrine of Adam Smith, and of the cosmopolitical tendencies of his great contemporary William Pitt, and of all his successors in the British Government administrations. Any nation which by means of protective duties and restrictions on navigation has raised her manufacturing power and her navigation to such a degree of development that no other nation can sustain free competition with her, can do nothing wiser than to throw away these ladders of her greatness, to preach to other nations the benefits of free trade.

Much like Chang today, List provided a very effective critique of the free-market nostrums espoused by thinkers like Smith and David Ricardo. List was not interested in promoting a socialist society as an alternative to capitalism: he wanted more effective national forms of capitalism. Mutatis mutandis, the same is true of Chang today. However, this limited political horizon has severe implications for workers.

The Dark Side of Development

Chang is at his best in his critique of the neoliberal orthodoxy. He is much weaker, and quite ideological, when explaining the developmental success stories of countries such as South Korea. It is here that his goal of making capitalism work better and his approach to political economy end up hiding more than they illuminate.

For example, Chang compares the protection of nascent industries by states so that they can become globally competitive to the care of parents for their children. In Bad Samaritans, he poses a rhetorical question: should his own six-year-old son get a job, or should Chang enable his son to accumulate the skills and knowledge necessary for a future career in which he can earn significantly more than if he were to start work at the age of six?Industrial policies require the formation of large, highly exploitable working classes to labor in newly established industries.

No sane person would disagree with such a proposition. But it is an ideological stretch too far to compare parental care for one鈥檚 children to state industrial policy. This analogy conceals the fact that industrial policies require the formation of large, highly exploitable working classes to labor in newly established industries. This has always been the case, from Britain鈥檚 pioneering industrial revolution to Chang鈥檚 favorite South Korean case study.

Speaking to the Financial Times in 2016, Chang made a rather bizarre  about the supposed influence of Marxism on economic policy:

Marxist economics has shaped the world economy. The architects of the east Asian economic miracles in Taiwan, South Korea and Japan were all schooled in Marxist economics, which sees industrialisation as a way of generating surplus.

This would surely be news to the planners in any of these states. In South Korea, the military dictatorship was responsible for  and  against workers鈥� organizations and political activists. This made it possible to maximize labor exploitation. In the 1970s, South Korean workers endured the world鈥檚 longest working week, under .

A woman textile worker  her life in 1980s South Korea, after the country had already experienced two decades of high growth rates:

Our life in the factory is really miserable. Ours is a confined, stifling existence on the job 鈥� prohibited from talking to the workers next to us, poorly fed, not allowed to even go to toilet when necessary . . . we are endlessly plagued by lung tuberculosis, athlete鈥檚 foot, and various stomach diseases. Women workers have yellow, swollen faces from inadequate sunlight. We are also tormented by temperatures of 40 [degrees Centigrade] and by dust . . . We are struggling to free ourselves from these miserable conditions.

Chang is correct to note that states can regulate investment through industrial policies to generate more rapid economic growth and industrial diversification. Yet he overlooks the way that such development often requires extreme exploitation of workers.

Beyond Capitalism

This gap in Chang鈥檚 analysis of successful developmental states partly stems from his historical-institutional version of political economy, which downplays the importance of shifting class relations in processes of historical change. It also stems from his political project, which is to create a better version of capitalism rather than an alternative socialist system.

Chang鈥檚 critique of today鈥檚 economic orthodoxy is very useful. However, his analysis does not take aim at capitalism itself, or imagine a world beyond it. He appears to view Marxism as a blueprint for industrialization rather than as a theory of human emancipation from exploitation.

The challenge for socialists as they draw on Chang鈥檚 work is to conceive of ways in which the world鈥檚 working classes could use industrial and development policies, not to make capitalism work better, but as part of the struggle to establish a new, socialist society.

Benjamin Selwyn听is a professor of international relations and international development at the University of Sussex, Brighton, UK. His publications include The Struggle for Development (Polity Press: 2017). This blog post was first published on .

Having laid out the horizontal dimensions of diversity in property in Part 1, I here offer a critique of the assumption in mainstream economics that all kinds of property institutions need to be or will be transformed into private property to promote economic development. I also reflect on my previous work that applies and develops Darwinian mechanisms of variation, inheritance, and selection鈥攚hich has been extensively discussed in evolutionary biology and evolutionary economics鈥攖o study property regime transformation in China.

While working on , Professor Erik Reinert introduced me to two very important books and encouraged me to think about the relevance of the work of Darwin and Veblen to study property regime transformation in China: by Stephen Jay Gould (1941-2002), Harvard biologist and historian of science; edited by Erik himself and Francesca Viano. Erik also introduced me to the work of evolutionary economists including of Columbia University.

In (1859), Darwin specified three mechanisms of evolutionary change鈥攙ariation, inheritance, and selection. It should be noted that Darwin never liked the word evolution due to 鈥榟is denial of progress as a predictable outcome鈥� (). Gould (1996/2011: 41) argued that 鈥楧arwin鈥檚 revolution should be epitomized as the substitution of variation for essence as the central category of natural reality.鈥� He further argued:

鈥n Plato鈥檚 world, variation is accidental, while essences record a higher reality; in Darwin鈥檚 reversal, we value variation as a defining (and concrete earthly) reality, while averages (our closest operational approach to 鈥渆ssences鈥�) become mental abstractions.

In ,  Hodgson (2012: 287) argued that Veblen had contributed to evolutionary and institutional economics by bringing 鈥楧arwinian ideas into the economic arena鈥�.

痴别产濒别苍鈥檚 ) definition of institution is dynamic:

Institutions are, in substance, prevalent habits of thought with respect to particular relations and particular functions of the individual and of the community [鈥 The situation of today shapes the institutions of tomorrow through a selective, coercive process, by acting upon men鈥檚 habitual view of things, and so altering or fortifying a point of view or a mental attitude handed down from the past. [鈥 The evolution of society is substantially a process of mental adaptation on the part of individuals under the stress of circumstances which will no longer tolerate habits of thought formed under and conforming to a different set of circumstances in the past.

Changing socio-economic contexts may shift and reframe 鈥榩erceptions and dispositions within individuals鈥� and give rise to new 鈥榟abits of thought and behaviour鈥� (Hodgson 2012: 287) and thus new forms of institution. Veblen (1899/2007) termed this phenomenon 鈥榮election鈥� as 鈥榮elective adaptation鈥�. Although Veblen 鈥榙id not make the context, criteria or mechanisms of selection entirely clear鈥�, he 鈥榞enerally saw institutions as units of selection in a process of economic evolution鈥� (Hodgson 2012: 291).

In terms of 鈥榗o-evolution鈥�, it is the 鈥榮ignature term鈥� of Richard Nelson. His 1982 book with Sidney Winter represented the start of the neo-Schumpeterian wave. Most evolutionary economists use the term 鈥榗o-evolution鈥�. Further, the Darwinian mechanisms have been extensively discussed by biologists, institutional and evolutionary economists, for example (discussing creation, selection and variation) and (discussing variation, selection, and niche construction).

Bringing Darwinian ideas and Veblenian institutions to the analysis of property regime transformation, I completed a working paper in 2015 and argued that the works of Darwin and Veblen also contribute to studies of property. The (Darwinian) transformation of property can be elucidated not only by drawing analogies to the Darwinian mechanisms of variation, inheritance, and selection, but also by broadening the scope of the Darwinian framework, from the biological world to human interactions in society.

There are key mechanisms for understanding and analysing the co-evolution of diversity in property and economic development:

1. Variation: the existence of diversity in property in accordance with dynamic socio-economic conditions.
2. Inheritance: the persistence and continuity of the old property regime despite legal and political changes.
3. Selection: the formation of new forms of property more adapted to socio-economic contexts.

Institutions are created or modified to selectively adapt to the changes in socio-economic contexts. But institutions which enable economic development are often brought about by emulation and innovation beyond adaptation. I will leave the discussion of emulation to my next blog posts and focus on innovation here.

To further illustrate the importance of innovation for economic development, we need to bring in Schumpeterian institutions, which are concerned with the importance of innovation in generating new knowledge and modes of production, which helps move the economic activities to the next 鈥榮tage鈥� or 鈥榩aradigm鈥� (). The relevant discussion of Schumpeterian institutions can be found in my previous blog post on 鈥業nstitutions, Economic Development, and China鈥檚 Development Policy for Escaping Poverty鈥�.

When we bring in Schumpeterian institutions to Darwinian mechanisms and Veblenian institutions discussed above, the third mechanism can be developed as selection: the formation of new forms of property more adapted to socio-economic contexts; for economic development, selection need to be prompted by emulation and innovation.

All the three mechanisms can be found in China鈥檚 long-term property (in rural land) regime transformation (see Part 1).

Variation (diversity) existed in all four periods. The introduction of collective ownership to rural China (1956-1978) by political forces did result in the decrease of diversity in property, therefore reducing the degree of resilience of the property regime in instances of natural disasters and economic and political crises.

The attempt to eliminate diversity in property, however, only lasted for a relatively short span of time, as the political programmes could not change the mode of agricultural production, which still relied on household-based productions. Fundamental aspects of the old property regime persisted and continued, despite alterations, if the economic conditions have not been fundamentally changed (inheritance).

The household responsibility system鈥�a development-promoting institution鈥攚as introduced in the late 1970s. This rural land management system was adapted to household-based agricultural productions (selection). Once farmers had discharged their duty to meet the grain quota imposed by the state, they could retain their additional production鈥攖he grain produced over and above the required quota.

Further, beyond being a property institution formed through selection adaptation, the household responsibility system was also an innovative property institution in the period between the late 1970s and 1980s, which gave incentives to individual farmers and their households to engage in farming within collective ownership of rural land (innovation).

In the 1990s techno-economic development in agricultural production, however, began to require a new mode of production for promoting cooperation and consolidated/industrialised farming. The household responsibility system, which was once an innovative initiative that promoted economic development, had come to function as a roadblock to further development. New development-promoting property institutions were created in the 1990s and further developed to promote the new mode of production, initiating a process of 鈥�creative destruction鈥�.

In , I further clarified three interrelated terms: .

Property regime transformation in the broad sense does not indicate either a clear trend or a foreseeable outcome; it need not be progressive. By contrast, innovative property transformation with reference to Schumpeterian institutions conveys a positive connotation of enabling economic development and structural change, which may not be a smooth process. Property evolution in the broad sense conveys a positive connotation (it may even contain a teleological element), but not necessarily the identical form of connotation found in innovative property transformation.

In conclusion, the transformation of property is neither a spontaneous process nor a process solely prompted by external factors; it does not move towards a predictable outcome. Diversity in property and economic development co-evolve. We need to examine changing contexts, in particular techno-economic change over time rather than a linear, normative series of changes such as from communal property to private property, as the inevitable result of property regime transformation.

Ting Xu is Professor of Law at Essex Law School, University of Essex. Her research focuses on comparative property law; Chinese law; law, governance and development; and political economy. She tweets at .

This blog post builds on the 鈥業nstitutions, Economic Development, and China鈥檚 Development Policy for Escaping Poverty鈥� piece and comprises two parts dealing with the key concepts (Part 1) and mechanisms (Part 2) for evaluating the co-evolution of diversity in property and economic development. I argue that diversity in property plays a key role in economic development and that there are two dimensions that are important for examining the co-evolution of diversity in property and economic development鈥攈orizontal (Part 1) and vertical (Part 2).

In this post, I offer a critique of the assumption in mainstream economics that private property is the only kind of property institutions that can stimulate and preserve economic development (I am, of course, not the first to offer critiques of this assumption; for existing studies, see e.g., ). I focus on the meaning of 鈥榙iversity in property鈥�, which concerns the horizontal level analysis.

Introducing the concept of 鈥榙iversity鈥�

鈥樷�� means 鈥榤any different types of things or people being included in something.鈥� Professor Erik Reinert introduced me to the concept of 鈥榙iversity鈥� and encouraged me to examine the nature and significance of diversity in institutions such as property and the co-evolution of diversity in institutions and economic development. I started my research in this area by co-authoring a working paper on 鈥�鈥� with Erik in 2013.  

In , Erik and I examined diversity not only as part of nature鈥檚 strategy for the survival of species from natural shocks but also as a strategy consciously employed in human societies for the same reason. We argued that diversity constitutes a key element in economic development. Starting in the 1400s, Europe鈥攁nd later the West in general鈥攅xperienced an explosion of intellectual creativity and economic development, due to increasing diversity in polities, policies, cultures and ideas. Simultaneously, China started a process of de-diversification in that period and fell behind. We were worried about the lack of concern for diversity in today鈥檚 mainstream economics and development policies.

Due to diminishing diversity in mainstream economics and development policies, economists and policy makers tend to see听 (Reinert 2000: 180) and changes to be predicted or prescribed. When this pattern of thinking is transferred to evaluate the nature of property and the process of property regime transformation, the importance of 鈥榮trong and clear鈥� property rights is emphasised as if they were a panacea that can create and preserve a well-functioning market. Further, to promote economic growth, other kinds of property institutions need to be transformed into private property as 鈥榞ood institutions鈥� understood by (). Diversity in property is eliminated.

Diversity in property

When examining the nature and significance of diversity in property, I see diversity in property as a 鈥榙evelopment-promoting鈥� institution, in contrast to what is considered 鈥榞ood institutions鈥� by the World Bank, which tends to focus more on eliminating corruption and securing private property. To understand the nature and significance of diversity in property, we need to clarify some basic concepts.

First, property refers to both a resource over which an individual, a community or the state has overall control and the way a resource is managed and regulated by an individual, a community or the state. Property is more concerned with how a resource is used, managed, or governed rather than how it is owned. , for example, means 鈥榓 resource over which a community and its members together have overall control and the way a resource is managed and regulated by a community for its collective purposes鈥�. The term 鈥榩roperty鈥� is more helpful than 鈥榦wnership鈥� especially in the Chinese context where ownership is defined by the owner鈥檚 identity (which gives little information on how the resource is used and governed) and closely associated with ideology.

Second, the concept of private property is both ambiguous and broad: individual and corporate ownership are 鈥榩rivate鈥�, while 鈥榞overnment ownership of resources such as office buildings [is also] essentially private鈥�, as ) argued.  When referring to a resource controlled by a human person, it is better to use the term 鈥榠ndividual property鈥� rather than 鈥榩rivate property鈥�.

Third, within communal property, individual property rights/interests may co-exist with communal property rights/interests. Here I use rather than 鈥榩rivate property rights鈥� which may be held by either a human being or an artificial legal entity. The introduced in China in the late 1970s is a classic example. The collective issues contracts to the household, which has responsibility for the management of farming an area of land called 鈥榬esponsibility land鈥�. Farmers have an individual property right/interest in rural land to possess and use it for farming purposes.

including the household鈥檚 interest and the collective鈥檚 interest. Although diversity in property is not unique to China, the household responsibility system is an innovative development-promoting institution introduced in China in the late 1970s, while the ideological function of collective ownership of rural land is preserved but less constrained for individual and communal property rights performing their economic functions.  

Diversity in property in China

Diversity in property has a much broader scope than that of diversity in ownership. The latter exists in China鈥檚 鈥榮ocialist market economy鈥� with a mix of state ownership, collective ownership, and individual ownership. Diversity in property differs from the evolution of diverse forms of property, for example, from communal property to individual property or from informal property to formal property. These are different forms of property existing at different times.

To use my previous work as an example, my book discussed the re-emergence and recognition of private property rights in the context of China鈥檚 social and political transformation and economic development since 1978. Illustrative cases include the revival of private property rights in the reform of State-owned enterprises (SOEs) and development of township and village enterprises (TVEs). The focus was on diverse forms of property.

After my 2014 book, I moved my research area from examining diverse forms of property at different times to diversity in property. Two research projects facilitated this new area of research. I was awarded two research projects on diversity in 2014: funded by the European Commission, Joint Research Centre (completed in 2015); funded by the British Academy International Mobility and Partnership Scheme 2014-17 (completed in 2017).

The meaning of diversity in property (in rural land) in the Chinese context is elaborated in the following table, focussing on four key periods of property regime transformation. The collectivisation period (1956-1978) is not included, as diversity in property was virtually eliminated in this period. Diversity in property includes two levels:

1. the coexistence of different types of property;
2. within communal property, the coexistence of individual and communal property interests.

Table 1 demonstrates that diversity existed in most parts of China鈥檚 long-term property regime transformation except the collectivisation period.

Table 1: Property regimes across vertical and horizontal dimensions

Diversity in property, offering a better reflection of China鈥檚 socio-economic realities than diversity in ownership, plays at least three important functions in reshaping development policies:

1. it shifts the focus away from ideological debate on public versus private dichotomy;
2. it directs the focus to thinking about how a resource can be better governed;
3. it directs policies to match context.

In my next blog post (Part 2)., I will explore the vertical dimension of the co-evolution of diversity in property and economic development by focussing on some key mechanisms informed by evolutionary economics.

Ting Xu is Professor of Law at Essex Law School, University of Essex. Her research focuses on comparative property law; Chinese law; law, governance and development; and political economy. She tweets at .

I recently have had opportunities to reread the works of Professors Erik Reinert and Peer Vries and to reflect on my previous work on the relationship between institutions, economic development, and China鈥檚 development policy for escaping poverty. Professors Reinert and Vries have studied, along with a few other distinguished economists and economic historians, 鈥榩overty traps鈥� at national and transnational levels for decades (eg, Serra 1613; Landes 1998; Reinert 2007; Reinert 2009; Vries 2013). Both argued that innovation and structural change are the keys to escaping poverty.

Professors Reinert鈥檚 and Vries鈥檚 work on economic development has brought the work of Joseph Schumpeter (1883-1950) to light. In this blog post, I will review how the work of Schumpeter, Reinert, and Vries helps us explore three key questions: First, what kind of development does a country need to escape poverty? Second, what kind of institutions can promote development? Third, how to develop? These three questions are crucial to understand China鈥檚 escape from poverty.

Professors Reinert鈥檚 and Vries鈥檚 arguments can be well supported by China鈥檚 national development policy. Below are a few highlights of rich empirical evidence. In 1984 the Chinese government proposed a development-oriented poverty reduction policy to replace the previous aid reliance policy (Central Committee of the Communist Party of China and the State Council 1984; for critiques of relying on massive foreign aid to escape poverty, see e.g. Moyo 2009; Hubbard and Duggan 2009; Banerjee and Duflo 2011). On 18 January 1992, Deng Xiaoping (1904-1997, leader of the PRC from 1978 to 1989) made a famous speech in his Southern Tour, emphasising that 鈥榙evelopment is the absolute principle鈥� (fazhan cai shi ying daoli). Since then, China鈥檚 economic development has entered a new stage. In 1994 the Chinese government fully adopted the development-oriented poverty reduction policy as a national policy.

Schumpeter made a fundamental distinction between economic development and economic growth. This distinction helps answer the first question. Mere quantitative growth does not amount to economic development: as Schumpeter (1934/2012: 64) argued, 鈥榓dd successively as many mail coaches as you please, you will never get a railway thereby鈥�. GDP growth, for example, does not equal Schumpeterian economic development. Economic development 鈥榗omes from within the economic system and is not merely an adaptation to changes in external data; it occurs discontinuously, rather than smoothly; it brings qualitative changes or 鈥渞evolutions,鈥� which fundamentally displace old equilibria and create radically new conditions鈥� (Elliott 2012: xix). A country needs this kind of economic development to escape poverty (Reinert 2009).

Economic development needs Schumpeterian institutions. This answers the above second question. Schumpeterian institutions are concerned with the importance of innovation in generating new knowledge and modes of production, which helps move the economic activities to the next 鈥榮tage鈥� or 鈥榩aradigm鈥� (Reinert 2000: 11). Schumpeterian institutions focus on production, and this stands in sharp contrast to the view of institutions adopted by mainstream economics, which focuses on the free market and trade and favours export-led and FDI-driven economic growth (Reinert 2006: 2-3). Further, Schumpeterian institutions differ from the world bank鈥檚 conception of 鈥榞ood institutions鈥� including those for 鈥榖uilding market institutions that promote growth and reduce poverty鈥� (World Bank 2002: III).

Professor Vries also highlighted the difference between 鈥榞rowth-promoting institutions鈥� (I use development-promoting institution below for consistency with Schumpeterian economic development) and 鈥榞ood institutions鈥� as preconditions for growth as understood by the World Bank. Economic growth existed before the formation of 鈥榞ood institutions鈥�. He argued:

Many institutions [,,,] which in mainstream institutional economics are regarded as necessary preconditions for growth actually only emerged when the economy already was growing and a certain wealth already existed: they, in brief, often were effect or symptom rather than cause (Vries 2013: 377-378; italics original; see also Chang 2002: Chapter 3)

We now need to think about the third question of how a country can develop. It is important to recognise the process of economic development as 鈥榗reative destruction鈥�: 鈥榌a] process of industrial mutation鈥hat incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one鈥� (Schumpeter 1943/2010: 73, italics original).  Combined with the answer to the second question, economic development as a process of 鈥榗reative destruction鈥� can be elaborated as in table 1.

Table 1: Economic development as a process of 鈥榗reative destruction鈥�

Double arrow line indicates a co-evolution process. 鈥業nstitutions and economic activities clearly co-evolve 鈥� the arrows of causality necessarily move in both directions鈥� (Reinert 2006: 10). Single arrow line indicates a causal evolutionary process.

Further, whether due to 鈥榠mprovisation and luck鈥� (Vries 2013: 378) or through purposeful activities, the 鈥榙evelopment state鈥� plays a crucial in promoting innovation laying the foundational elements for escaping poverty, that is, diversity, competition, and emulation (Reinert 1999; see also Vries 2013: 376). Professor Reinert argued:

[鈥 the antagonism between state and market, which has characterised the twentieth century, is a relatively new phenomenon. Since the Renaissance one very important task of the state has been to create well-functioning markets by providing a legal framework, standards, credit, physical infrastructure and 鈥� if necessary 鈥� to function temporarily as an entrepreneur of last resort. Early economists were acutely aware that national markets did not occur spontaneously, and they used 鈥渕odern鈥� ideas like synergies, increasing returns, and innovation theory when arguing for the right kind of government policy (Reinert 1999: 268).

Table 2: The relationship between the state and market

The single line and question mark indicate a non-causal relationship. Double arrow line indicates a co-evolution process. The single line and question mark indicate a non-causal relationship.

The importance of the development state and the mutual relationship between state and market are reflected in China鈥檚 development policy. For example, Wen Jiabao (the sixth Premier of the State Council of the PRC 2003-2013) made a speech at the World Bank Global Poverty Alleviation Conference on 26 May 2004, emphasising:

[China should] continue 鈥渄evelopment-oriented poverty deduction鈥� and enhance the capacity of the poor to escape poverty and become rich [鈥 [We should] adhere to [the policy] that the state plays the leading role, make full use of market mechanisms, and improve the level of self-accumulation and self-development in poor areas by improving infrastructure construction, adjusting economic structure, and developing local resources.

Since how to develop is the central issue or problem of China鈥檚 escape from poverty in China鈥檚 national policy, it has become a key contemporary research topic. A quick search via the National Library of China using key words such as 鈥榩overty traps in China鈥� and 鈥榚scaping poverty traps鈥� gives at least hundreds of research outputs. Every scholar who studies poverty alleviation in China or China鈥檚 escape from poverty would like to give their own answers. I think whether China will continue its past success to develop depends on two key issues: first, whether it continues expanding the 鈥榤arket鈥� to allow exploring, testing and experimenting with different ideas and policies; second, whether the state will continue to promote diversity, competition, and emulation. This will be the subject of my next blog posts.

References

Banerjee, Abhijit and Duflo, Esther (2011) Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty. Public Affairs.

Central Committee of the Communist Party of China and the State Council (1984) 鈥楴otice on Helping Impoverished Areas As Soon As Possible (Guanyu bangzhu pinkun diqu jinkuai gaibian mianmao de tongzhi), the Gazette of the State Council of the People鈥檚 Republic of China, 1984,No. 25.

Chang, Ha-Joon (2002) Kicking Away the Ladder: Development Strategy in Historical Perspective. Anthem Press.

Elliott, John E. (2012) 鈥業ntroduction鈥� to Joseph Schumpeter, The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle, 16^th edn. Transaction Publishers, vii-lix.

Hubbard, R. Glenn and Duggan, William (2009) The Aid Trap: Hard Truths About Ending Poverty. Columbia Business School Publishing.

Landes, S. David (1998) The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor. W. W. Norton & Company.

Moyo, Dambisa (2009) Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa. Farrar, Straus & Giroux.

Reinert, Erik S. (1999) 鈥楾he Role of the State in Economic Growth鈥�, 26 Journal of Economic Studies 4/5: 268-326.

Reinert, Erik S. (2000) 鈥楰arl B眉cher and the Geographical Dimensions of Techno-Economic Change: Production-Based Economic Theory and the Stages of Economic Development鈥� in J眉rgen Backhaus (ed), Karl B眉cher: Theory-History-Anthropology-Non Market Economies. Metropolis-Verlag, 177鈥�222.

Reinert, Erik. S. (2006) 鈥業nstitutionalism Ancient, Old and New: A Historical Perspective on Institutions and Uneven Development鈥�, UNU-WIDER (World Institute for Development Economics Research), Research Paper No. 2006/77.

Reinert, Erik S. (2007) How Rich Countries Got Rich…and Why Poor Countries Stay Poor. Carroll & Graf Publishers.

Reinert, Erik S. (2009) 鈥楾he Terrible Simplifiers: Common Origins of Financial Crises and Persistent Poverty in Economic Theory and the New 鈥�1848 Movement鈥�, DESA Working Paper No. 88.

Reinert, Erik S. & Xu Ting (2013). 鈥樷��,&苍产蝉辫;the Uno Newsletter Working Paper Series, 2(13), 1-21.

Schumpeter, Joseph (1934/2012) The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle (16^th ed). Transaction Publishers.

Schumpeter, Joseph (1943/2010) Capitalism, Socialism and Democracy. London and New York: Routledge.

Serra, Antonio (1613), A Short Treatise on the Wealth and Poverty of Nations, edited by Sophus A. Reinert. Anthem, 2009.

Vries, Peer (2013) Escaping Poverty: The Origins of Modern Economic Growth. V&R unipress GmbH.

Wen Jiabao (2014) at the World Bank Global Poverty Alleviation Conference on 26 May 2004.

World Bank (2002) . Oxford University Press.

Ting Xu is Professor of Law at the School of Law, University of Essex. Her research focuses on comparative property law; Chinese law; law, governance and development; and political economy. She tweets at .

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