Off to Buckingham today to hear Pedro Schwartz talk about “Coase on China: Property rights and transaction costs revisited”. Schwartz is a Spanish economist and libertarian, connected with the Cato Institute and the Mont Pelerin Society. He writes an essay in practically every issue of the on line magazine Econ Lib and this is one of his papers on the welfare state as an underlying cause of Spain’s economic problems.
The University of Buckingham is a private university, the only one in Britain, set up in the 1970s. One of their innovations is to run courses continuously so a three year degree can be completed in two years.
The book How China Became Capitalist was published in 2012 when Coase was 102 (a year before he died). The co-author was Ning Wang. Schartz heard Coase on air in 2010 and he considered that the old man was in full command of his faculties and was a genuine co-author.
He talked about the German miracle of 1947 when Ludwig Erhard, the Chancellor, conducted a bonfire of regulations – freeing up prices and ending rationing. He put the question, how deliberate was the process of transformation in China when the economy rebounded from this disasters of Mao’s communism. He suggested that the process was the unintended result of a rudderless policy aimed at the preservation of socialism by allowing some changes in the system (rather like Gorbachov in the USSR).
The leaders were prepared to allow a measure of private activity as long as they kept control of the state enterprises. There were four major changes at the margin of society.
1. Private farming.
2. Township and village enterprises.
3. Individual entrepreneurship.
4. Special economic zones.
He drew a long bow to suggest that the process was Hayekian in the sense that there was no central planning or direction but instead there was an evolutionary process as the regime more or less blindly fumbled with changes and found that some things produced good results.
At the end he offered some thoughts on the possibility of sustained economic progress and a political soft landing (given that freedom and democracy have not advanced at the same pace as the economy). He noted that Coase and Ning Wang expressed concern about the lack of a market in ideas causing problems with innovation. Schwartz raised the spectre of Chinese nationalism, their insistence that there is only one China (eyeing Taiwan), sabre-rattling over other offshore islands occupied by Japan etc.
At dinner in the staff club it turned out that Schwartz is an admirer of Karl Popper and was sufficiently close as a friend to inherit Popper’s piano. Popper left his piano to the Schwartz family because he knew that Pedro and wife and his son and daughter are music lovers and the children are serious musicians.