Now, in the model, I would say the really important part of it that you can't leave
out is that central leaders need to permit some liberalization.
They need to decrease the regulations slightly so that the signals
from the global market, the domestic actors can actually know the prices,
know the benefits, know what we call them, know their interests, and they can see
the benefits that might be derived from these kinds of global transactions.
Now, in terms of the relative prices in goods and services for China,
we can focus on two aspects.
As I mentioned before, one is labor, the other is technology.
And in the late 1980s and 1990s, Chinese began,
they recognized that bringing in foreign technology that was unavailable in China.
So you go out, you get this technology, and you actually bring it in,
often through a joint venture, that you could produce goods for
which there was no competition in the domestic economy.
And you could then get extra normal profits.
You could charge more for the good, because there was a no competition, and
very few firms had that same technology.
So that was one good way that people could, or
firms could charge high prices and make a lot of money until somebody else began
to bring that technology in and then compete for those profits.
This situation also, as I mentioned before, creates incentives for
moving goods across the China, out of China, right?
So social goods, social groups you could benefit from exports, labor.
They could benefit from bringing in management skills of mobilizing
the factories, running the factories more effectively, and then exporting those
goods internationally, and they could make a lot of profit on that.
I also talked before about the bureaucrats and the fact that bureaucrats
become the facilitators, and at the same time controllers.
They actually become the gate keepers, right?
What I call here he gate keepers or those linkage agents
who really controlled those channels of global transactions.
Now, as bureaucrats, they're quite cautious.
And so, in '78, '79, beginning into the 1980s, they really,
the bureaucrats really blocked the opening.
They try and hold back.
They think that they want to keep control.
They want to keep control of their foreign trade companies,
if they work in a foreign trade company.
They may want to keep foreign influences away, but
they started to get the message, and the message was that they could
only charge fees if they let goods cross the border.
It doesn't do you any good to stop a good going in or out.
No one's going to give you a payoff.
No one's going to give you a kickback for
letting that good go through if you don't let it go through, right?
So as I like to say, no flow, no dough, right?
And dough being the American slang for money.