The Parallel Partial Progression (PPP) Approach to Institutional Transformation in Transition Economies

Abstract

Many economists have attributed China's high growth to the implementation of the correct sequence of reforms. The authors reject this interpretation because it does not characterize the reform process correctly; it does not recognize adequately the interaction among reforms that sustains the progress of each individual reform; and optimal sequences exist only when the policy maker is constrained to introducing only one new policy measure at a time (so-called optimality disappears once simultaneous implementation of policies is allowed). We propose the parallel partial progression approach as the alternative conceptual framework for the gradualist approach. Parallel partial progression is not the same as the step-by-step sequencing approach because a “partial reform” is not a “completed step.” Simultaneous partial implementation is preferable to policy sequencing because it eliminates the costs of incoherence among policies. Incoherence among reforms results could cause a “reform bottleneck,” and the two major bottlenecks that China is facing right now are financial reform and political reform.