Business, Government & the International Economy

- March 16, 2023
- Other Article
How Putin Uses Hanoi’s 1960s Playbook to Divide the American Public on Foreign Policy

By: Jeremy Friedman
- March 16, 2023
- Other Article
How Putin Uses Hanoi’s 1960s Playbook to Divide the American Public on Foreign Policy

By: Jeremy Friedman
- March 2023
- Case
Russia: A Drama in Three Acts (B)

By: Rawi Abdelal, Kateryna Olkhovyk and Davit Gasparyan

Supplements the (A) case.
- March 2023
- Case
Russia: A Drama in Three Acts (B)

By: Rawi Abdelal, Kateryna Olkhovyk and Davit Gasparyan

Supplements the (A) case.
- 2023
- Working Paper
Rule by Market: The Chinese State in Factor Markets

By: Meg Rithmire

Political economy on China and beyond generally has been premised on a trade-off between state and market power. In the context of China’s reforms, markets and market mechanisms were hypothesized to replace state power in allocating important economic resources. Yet, even as market mechanisms have been introduced in important realms, the state appears to retain power over supply and demand, and, by extension, prices. This paper examines the introduction, and eventual adjustment and constraint, of markets in two important arenas: land and equity markets. Through process tracing and by analyzing a large body of policy documents from various levels of government in both arenas, I uncover a cycle by which the Chinese state embraced market mechanisms to address problems of misallocation, met uncomfortable outcomes of instability and “bubble” behavior during partial liberalization, and reconfigured state control over supply and demand of land and capital while retaining market mechanisms to facilitate competition but not set prices. In both arenas, the Chinese state “rules by market,” by which market mechanisms facilitate, rather than replace, state control over allocation of resources. Rule by market is characterized by authoritarian responses (including populist crackdowns and the use of the state’s coercive apparatus) to respond to market instability as well as institutional reconfigurations involving “red lines” to structure exchange, the setting of indirect price controls, and the rise of novel institutions to enforce these. Rule by market helps make sense of a number of empirical puzzles in China’s political economy, such as bubbles that never seem to pop and cycles of liberalization and crackdown, and suggests amendments to several ideas about how the CCP has managed markets with monopolized political power.
- 2023
- Working Paper
Rule by Market: The Chinese State in Factor Markets

By: Meg Rithmire

Political economy on China and beyond generally has been premised on a trade-off between state and market power. In the context of China’s reforms, markets and market mechanisms were hypothesized to replace state power in allocating important economic resources. Yet, even as market mechanisms have been introduced in important realms, the state...

About the Unit

The BGIE Unit conducts research on, and teaches about, the economic, political, social, and legal environment in which business operates. The Unit includes scholars trained in economics, political science, and history; in its work, it draws on perspectives from all three of these disciplines.

The following demonstrates one way of classifying the approaches the Unit takes to learning and teaching.

The Unit examines the “rules” and policies established by government and other non-business institutions that affect business in the United States.
The Unit turns to history to understand the origins of today’s business environment as well as some of the alternatives that have emerged from time to time.
The Unit examines other countries’ business environments and their historical development.
The BGIE group is deeply interested in the impact of globalization and the way rules are emerging to govern international economic transactions as globalization proceeds.

Recent Publications

How Putin Uses Hanoi’s 1960s Playbook to Divide the American Public on Foreign Policy

By: Jeremy Friedman

March 16, 2023 |
Other Article |
Jurist

Keywords: Public Opinion; International Relations

Citation

Read Now

Copper Nationalization in Chile

By: Jeremy Friedman

March 2023 |
Teaching Note |
Faculty Research

Teaching Note for HBS Case 722-016.

Citation

Purchase

Russia: A Drama in Three Acts (B)

By: Rawi Abdelal, Kateryna Olkhovyk and Davit Gasparyan

March 2023 |
Case |
Faculty Research

Supplements the (A) case.

Keywords: Russia; Ukraine

Citation

Educators

Mossadeq’s Gambit: The US, UK, and Iranian Oil Nationalization

By: Jeremy Friedman

March 2023 |
Teaching Note |
Faculty Research

Teaching Note for HBS Case No. 722-065.

Citation

Purchase

Stalin’s Capitalists: American Business and Soviet Industrialization

By: Jeremy Friedman

March 2023 |
Teaching Note |
Faculty Research

Citation

Rule by Market: The Chinese State in Factor Markets

By: Meg Rithmire

2023 |
Working Paper |
Faculty Research

Political economy on China and beyond generally has been premised on a trade-off between state and market power. In the context of China’s reforms, markets and market mechanisms were hypothesized to replace state power in allocating important economic resources. Yet, even as market mechanisms have been introduced in important realms, the state appears to retain power over supply and demand, and, by extension, prices. This paper examines the introduction, and eventual adjustment and constraint, of markets in two important arenas: land and equity markets. Through process tracing and by analyzing a large body of policy documents from various levels of government in both arenas, I uncover a cycle by which the Chinese state embraced market mechanisms to address problems of misallocation, met uncomfortable outcomes of instability and “bubble” behavior during partial liberalization, and reconfigured state control over supply and demand of land and capital while retaining market mechanisms to facilitate competition but not set prices. In both arenas, the Chinese state “rules by market,” by which market mechanisms facilitate, rather than replace, state control over allocation of resources. Rule by market is characterized by authoritarian responses (including populist crackdowns and the use of the state’s coercive apparatus) to respond to market instability as well as institutional reconfigurations involving “red lines” to structure exchange, the setting of indirect price controls, and the rise of novel institutions to enforce these. Rule by market helps make sense of a number of empirical puzzles in China’s political economy, such as bubbles that never seem to pop and cycles of liberalization and crackdown, and suggests amendments to several ideas about how the CCP has managed markets with monopolized political power.

Keywords: Economic Systems; Government and Politics; China

Citation

Read Now