The puzzle of China’s productivity

John Kizer

Warren Buffett said a few weeks ago that the Chinese had discovered a secret sauce for productivity. Clearly, China’s productivity is a mystery to him. China is, after all, a totalitarian society lacking the efficiencies of a free market, as well as restricting the free flow of information. The economic determinists have a hard time understanding how the Chinese system can be so successful, laboring under such restrictions as it does.

In a previous column, I argued that the Chinese are so productive because they have a rigorous system of testing, a system which ensures only the very best and the brightest are placed in positions of authority, whether it be in government, or in industry. This eliminates some of the inefficiencies so common in our mixed economy; such as, nepotism, legacy selection and quota preferences.

In the United States, when a student studies the psychology of testing, or of individual differences, the history of the subject usually begins with Alfred Binet’s intelligence test which was developed to eliminate teacher bias in the French schools. In fact, extensive testing predated the Binet tests in the U.S. Charles Guiteau had assassinated President Garfield because he believed Garfield had denied him a civil service job under the spoils system then in place. To prevent future misunderstandings regarding civil service employment, in 1883 the Pendleton Civil Service Act was passed which required that employees be hired on the basis of written tests. Later, in World War I, the Army Alpha was used effectively on every recruit to determine quickly and objectively which ones were best fit for officer duty and every other duty. L.L. Thurstone was later to show that scores on such tests as the Army Alpha correlated well with performance in any job, no matter how menial.

The Chinese use of testing dates back to Confucius in 500 B.C., though the system of merit testing did not take full effect until the Tang dynasty of 618 to 907 A.D. The emperor T’ai Tsung instituted a system of testing open to all Chinese. This permitted able people to rise and fill important civil positions irrespective of their humble origins. The tests were so difficult that only 2 to 10 percent of the tested were able to pass. This ensured that only the most able were in positions of authority. Nor were these tests merely tests of technical competence. Poetry, philosophy, and the classics of literature were all part of the tests. Those passing the tests were expected to know the wisdom of the ages, not just the knowledge of the day.

The result was the flourishing of invention in the form of porcelain, movable type, gunpowder, etc. Cultural historians say that poetry reached a level never attained again in China, with such poets as Li Po. Many historians refer to the Tang Dynasty as China’s Golden Era. The proof of the pudding is in the eating, as they say. A merit system resulted in a golden era.

After a period when warlords ruled over various parts of China, the Song Dynasty began under Chao K’uang, whose brother instituted an even more rigorous system of testing than had the Tang rulers. Fewer than one percent of the applicants were able to pass these exams. With only the most intelligent people making decisions, China became the most glorious country on earth with Hangzhou having over one million residents in 1200 A.D. and several other Chinese cities having over 100,000 residents. This Song Dynasty was the era of Marco Polo. When Marco Polo returned to Venice and told his tales of the magnificent civilization he had encountered in Cathay, many people thought he must be lying, that it could not be true. They later found to their amazement that he was telling the truth. China was, in fact, that glorious.

Throughout history, Chinese civilization has generally risen and fallen with the use of rigorous testing. By allowing the cream to rise to the top, all of society benefitted. The Chinese today have a system of testing so rigorous and so objective that the son of President Xi Jinping could not be admitted to a university without passing the test. Under this system, the Chinese real income has risen 1,700 percent in the past 30 years. They have discovered, or re-discovered the “secret sauce” of productivity. We, in the U.S., have abandoned, even outlawed, objective testing for social reasons. Our real income has been stagnant for the past 30 years. All events, of course, have multiple causes, but it is hard to ignore what are the plain facts of history, and their possible relationships.

As Santayana wrote, “Those who cannot remember the past are condemned to repeat it.” Those who learn of the past will benefit from the lessons of history.

John Kizer

John Kizer has been published by the Foundation for Economic Education, and some of his submissions have been included in The Encyclopedia of Freedom. Kizer, who lives in Portsmouth, can be reached by email at

John Kizer has been published by the Foundation for Economic Education, and some of his submissions have been included in The Encyclopedia of Freedom. Kizer, who lives in Portsmouth, can be reached by email at