The Parallel Partial Progression (PPP) Approach to Institutional Transformation in Transition Economies: Optimize Economic Coherence, Not Policy Sequence

Many economists have attributed China’s high growth to the implementation of the correct sequence of reforms. We reject this interpretation because it does not characterize the reform process correctly; it does not recognize adequately the interaction between reforms that sustains the progress of each reform; and optimal sequences exist only when the policymaker 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 (PPP) approach as the alternative conceptual framework for the gradualist approach. PPP 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.