...(Prof Ang's) insight is that the central government in China had to balance between control that was “too loose” and control that was “too tight.” She shows that the central government issued directives of three types.
One clearly prohibited local governments from doing some things. It was no question of “anything goes.” Another type of directive clearly mandated that all local governments had to do certain things. But the third type specified objectives but was deliberately vague about how to accomplish the objective and made it clear innovation was allowed but did not specify exactly what was allowed.
This created a space in which local governments could create their own innovations and attempts that the central government might have never thought of, while at the same time, allowing the central government the space to claw back if things were headed in bad directions.
This, she argues was central to China’s ability to (in our words) “crawl the design space” incrementally towards a market system. The organizational and institutional forms created on the path—like Township and Village Enterprises—were, as to be expected, unique hybrid forms. These allowed much of the functionality and dynamism of a market economy even before there were private firms and clear delineation of property rights.
Ang also adds that there are other factors like personalities that contributed to the growth story but the focus of her book is to emphasise aspects that other countries can learn from China. Hence, the emphasis on directed improvisation.
On lessons to other countries from Chinese experience, she says that the first thing to do is to not dismiss Chinese experience as something special that works only in authoritarian states. She asks people to focus on the mechanism instead, the "directed improvisation". The directed improvisation can be done even in democracies, in a bottom up manner.
I hope to read this book soon. I will post a detailed review/critique then. The one question at the top of my mind currently is regarding the rate of fall of Chinese poverty across years. Pranab Bardhan points out that "the proportion of people below that poverty line in China fell from 64% in 1981 to 29% in 1987". It's more than a 50% reduction in poverty within half a decade. Did directed improvisation have a role in this? For instance, Pranab Bardhan's argument that the decline during this period is due to removing collective rights in agriculture. If it's the case, where does the directed improvisation theory fit into the poverty reduction process?