Revelation: State Capacity and Economic Development

This chapter explores a key prerequisite for economic rise: state capacity. It uses the three cases of historical “Great Divergences” (The Great Divergences between the East and the West, between China and Japan, and between East Asia and the rest of developing world after the WWII) to illustrate: Countries with relatively smooth political and economic restructuring and earlier economic growth are all those whose state capability has been strengthened first, followed by economic development. As far as China is concerned, what it lacked in contrast to the West and Japan in the early modern era was a state with essential infrastructural power (in particular, coercive capacity and extractive capacity). In contrast, the country’s economy has been able to take off since the foundation of the PRC mainly because the new state demonstrated unprecedented capacity to formulate, implement, and monitor policy initiatives nationwide.