Business, Politics & Society

China: The Disruptive Miracle

Paul Krugman

Lesson time 14:29 min

Paul explains China’s rapid economic growth and details how the influx of their exported goods impact economies and rules of trade worldwide.

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Paul Krugman
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I went to grad school in the mid-1970s. I had to pick a field of specialization. And I thought to myself, what really matters for the world is development economics. The most important thing is taking the really poor people in the world and helping them make their way up towards a higher standard of living. And I didn't. I didn't do development economics. Because in the mid-1970s, development economics was a very depressing field. It was about trying to understand why developing countries didn't actually seem to develop. It was about why does India stagnate. But all of that changed. First, a few smaller Asian countries-- Korea, Taiwan-- had remarkable economic takeoffs. And then the big kahuna, China, goes into this massive surge. And there's been nothing like it in the history of the world. No one has ever had this much economic growth for this many people over such a sustained period as China has achieved. This is one of the great economic miracles of human history. I think if I were Chinese, I would probably start by saying China is naturally the center of the world. And there was this brief interregnum when these upstarts from elsewhere crowded in on us, but now nature is returning to its proper course. And there's something to that. You have a communist regime which, for the first 40 years of its existence, was totally hermetic, inward-looking, barely dealt with the outside world. But then they reformed. They opened up. They opened up to trade. They opened up to private enterprise. It was not, by any means, a full free market society. It still remains a place where political influence matters a lot. It's still a very crony capitalist place. It's still a very undemocratic place. But they opened it up enough so that enterprise-- people with energy, people trying to make something happen-- had room for their drive, for their talents. And it turned out that there's an awful lot of drive there. How much of it was good policy? I don't actually think there was a whole lot of effective government direction. I don't think that the bureaucrats had any very good idea where they were going. There has been a great willingness to invest in the essentials. The Chinese don't shy away from building roads and railroads and bridges and ports. They don't dither about it. They get the job done in a way that I think we could learn something from. They had a huge reserve of underemployed people in-- essentially peasants with too much time on their hands who they could put to work. And that drives a lot of the growth. They've actually, I think, almost stumbled into taking advantage of some of these economic geography factors. They have an economy which is a series of industrial clusters, groups of firms producing related or the same product all benefiting from all of those forces-- the specialized suppliers, the strong local market, the interchange. So there's one city that produces most of the world's buttons, and there's another city that prod...


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For Nobel Prize-winner Paul Krugman, economics is not a set of answers—it’s a way of understanding the world. In his economics MasterClass, Paul teaches you the principles that shape political and social issues, including access to health care, the tax debate, globalization, and political polarization. Heighten your ability to read between the lines and decipher the underlying economics at play.



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Comments

A fellow student

Paul Krugman is the only unqualified masterclass teacher on here. He's been wrong on virtually everything. The epitome of an academic in an ivory tower who is blind to the real world.

A fellow student

I wonder how he would change his view now that we can see the dangers of outsourcing essental manufacturing in a globalized world. I like his point of view but i feel that he is leaving out many variables especially with regards to China being an objectively bad actor government who is trying to do harm to the rest of the world. He is right about domestic politics being the source of our problems. We need to become more competitive aka less socialistic in order to improve the welbeing of the poor in our own countries similar to how China became less socialistic and more capitalistic which resulted in them lifting millions out of poverty .

AC G.

If the real issue with China is intellectual property rights (IPRs) and, according to Krugman, the best way to deal with it is a comprehensive IPR global framework shared by many other countries around the world... Why did US walked away of the TPP?? (which was basically a comprehensive multilateral agreement to establish IPR trade rules)

Kathryn H.

I agree with his objective view of China. We will learn to trade with them or become firmly placed in a 2nd world nation.

Johnny K.

Dr. Krugman, public transfer is not going to fill the void in terms of lack of purpose in life for most people. Welfare maybe a way to deal with income problem for working class in developed countries, but not on the problem with lack of purpose from unemployment and underemployment.

Evelyn S.

------ I disagree with Krugman's assessment that China "stumbled" into economic prosperity via capitalizing on cheap labor. Senior economists like Justin Yifu had a huge part in advising China to invest in labor-intensive industries such as manufacturing and raw goods. The Chinese thrived by doing what they did best, labor, rather than trying to develop high-skill, capital intensive sectors first, as so many other developing countries did.

sue

I really enjoyed Paul thus far, however in this particular class on China, it appears Paul has some prejudice and to certain level discrimination against China and Chinese. For one, he called Taiwan a country which is inaccurate because it is a disputed region, and not recognized as a country internationally. Two he said "Chinese are not good guys, they are in it for the money", I think he meant to say SOME Chinese businesses. But rarely businesses are not in for the money. I understand that China comments are not his point, but to generalize in a reckless way is a bit disappointing.

Diane L.

Thank you for explaining China in a concise, thoughtful manner. I wonder what your take on The Belt and Road Initiative is and how it will impact the future of the Chinese and international economies.

RJane @.

We should not put all the blame on Trump. We should put the blame on the politicians in Electoral College (part of the U.S. Government) who hired and elected Trump as the CEO and the president of United States. Those politicians need Trump’s business skills in the White House and have connections with rich people and big companies and corporations. I hope hiring Trump is for the Americans’ benefits and advantages.

Pisko

I agree Trump is performing poorly not only by imposing trade barriers, but everything he does is in his own interests n in the long run it will hurt the USA economy. I disagree on the chinese not beign good guys because they r in 4 da money... Say what? Like USA is in 4 world peace n avoiding global warming?? Hint: Every company is in 4 da money, every government is in 4 its own agenda. I wonder what the chinese people in this class has 2 say