Sessions with Professor Young - 3

Sessions with Professor Young - 3

by Team C (Simon, Hugh, Jeremy, David)

One of the overarching themes when discussing the business context of China is the complexity in which it operates from western perspective.

Despite this perceived complexity, the way China has been able to develop is remarkably simplistic in nature, especially so in comparison to another nation of a similar size being India.

This is partially attributed to the land ownership model which can now be credited to remarkable foresight of the decision by Mao Tse in 1949 to rid the country of landlords, which has had a two fold impact on the way in which China has been able to develop at a rapid pace.

• Firstly, labour in China is cheap as there are no landlords to extract money from the labour pool. The presence of landlords in most countries does not provide any tangible value, on the contrary it presents a loss to the economy
• Secondly, China has been able to free up land for major infrastructure in a simple manner as it does not have to deal with a raft of landlords which, in other countries, leads to a price premium and a long and convoluted process

One of the key points to take away from this is the lack of value that is added through landlords in countries such as India, providing is an avenue for a selected few to become very wealthy and in general resulting in a deadweight loss for the economy.

The insight to be gained from this discovery is the absence of a layer in beauracracy in the form of landlords who do not offer any value or advancement in development for the economy.

For countries such as India, the presence of landlords makes development of infrastructure and personal savings very difficult, and also increases the costs of the labour pool in comparison to China.

The way in which labour prices in China have remained low due to a lack of landlords mirrors what was experienced in United States during the industrial revolution with respect to the advantages associated with a lack of private landlords.

The Great Plains of the USA were used to feed the workers in industrial cities in the United Kingdom, and these properties were not owned privately but rather from land confiscated by Native populations. This enabled a lower cost structure in much the same way that China has developed recently.