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How Exceptional Is China’s Crony-Capitalist Boom?

A longstanding consensus holds that Western industrialized economies achieved their unprecedented levels of prosperity only by eradicating corruption, and that modern China's rapid GDP growth therefore breaks the mold. But a clear-eyed appraisal of American history shows that China is not so unique after all.

WASHINGTON, DC – Even as it grapples with a slowdown, the Chinese economy has come a remarkably long way. Since embracing capitalism in the 1980s, China has leaped from being one of the world’s poorest countries to its second-largest economy. Even more remarkably, it has done so despite a relentless string of corruption scandals. Economist Paolo Mauro calls China a “gigantic outlier” for its combination of breakneck growth and widespread corruption.

The longstanding consensus is that Western industrialized economies achieved prosperity precisely by eliminating corruption and establishing good governance. This is supported by cross-country statistical studies which, using global corruption perception metrics, consistently find corruption detrimental to growth. Why, then, did the Chinese economy grow rapidly despite corruption? And why is it only now slowing down, after four decades of a sustained boom?

Answering these questions requires reframing the debate – in particular, reexamining popular narratives of Western history and the validity of global corruption indices.