How can government-business relations be structured to most likely generate good economic policies? A huge question with perhaps no good answer. In the late fall I gave an interview to a reporter from the China Enterprise News (CEN) on this question. My answer, published a couple days ago, borrowed from Peter Evans' 1995 book, Embedded Autonomy. In a nutshell, businesses need to have access to government to collect information and provide ideas, but at the same time not be too closely enmeshed with their regulators and politicians.
CEN was kind of enough to publish an extensive transcript of the interview in which I compared governmen-business relations in the United States and China. America certainly has huge problems with powerful lobbyists, but more and more Chinese I meet are confounded by the increasingly unbreakable ties that bind business and the state in China. And it's not just SOEs. Private companies, in order to survive economically have had to come to terms with the system politically. In most cases, they now go along to get along. China appears to be moving further and further away from the reasonable ideal that Peter Evans described.
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