Blog Post

Democracy and China: Help or Hindrance to Growth?

Sep 26, 2011 | Lynann Butkiewicz

Over the past several years, China’s economy has grown by about nine percent on average, while India’s has grown by about eight percent. Both countries are taking ambitious steps to reduce their carbon emissions. India has established a program called Perform, Achieve and Trade (PAT) that will set efficiency levels for the country’s top polluters, and China is launching pilot carbon trading schemes in its provinces that could become part of a fully realized national carbon market by 2015. Coupled with its global lead in solar and wind infrastructure, China appears to be boosting its domestic climate policy more than India. The question remains as to why this is happening.

Economist Yasheng Huang might have some insight. He compared China and India to answer the question of why China’s economy is growing at a more rapid rate, which, according to Huang, is twice the rate of India’s economy if measured over the last 30 years. His argument is relevant to climate policy in that it can answer some of the same questions—specifically, why does China appear to be taking more ambitious action?

In his TED Talk, he explains the Shanghai Theory to Growth: “The Chinese government can act above rule of law. It can plan for the long run benefits of the country, whereas, in India you cannot do that because you have to listen to the public. You’re being constrained by public opinions.” The same might hold true for environmental progress.

But Huang argues that this is a simplistic approach. As far as political systems, there is no question that China has an authoritarian one-party system. However, “Dynamically, it has changed over time to become less authoritarian and more democratic,” says Huang. The two countries’ different growth rates are not due to their political systems, but other factors—notably their starting points in terms of human capital. In fact, he argues that in order for China to continue on the path to growth, its government needs to continue moving toward political liberalization.

This turns the Shanghai Theory on its head. Long-run societal benefits—like those that could come from investments in environmentally friendly policies—emerge from the conditions provided by sustainable economic growth. And Huang says that open societies are the best bet for getting there.