These essays reveal how China's Communist Party selected a new generation of leaders in late 2002 to maintain the position of a regional and world power. They explain how China's leaders are promoting a market economy and undertaking gradual political reforms and note the problems they are having in handling mounting political corruption, spreading unemployment, growing disparity of wealth and income, and a crisis of belief.

As seen in the previous sections, China's reformers, more than anything, have followed a
strategy based on providing incentives through property rights reforms, even though in China the shift to private ownership is today far from complete. The reforms started with the Household Responsibility System (HRS), a policy of radical decollectivization that allowed farmers to keep the residual output of their farms after paying their agricultural taxes and completing their mandatory delivery quotas. Farmers also began to exercise control over much of the production process (although in the initial years, the local state shared some control rights and in some places still do today). In this way the first reforms in the agricultural sector reshuffled property rights in an attempt to increase work incentives and exploit the specific knowledge of individuals about the production process (Perkins, 1994). In executing the property rights reforms, leaders also fundamentally restructured farms in China. Within a few years, for example, reformers completely broke up the larger collective farms into small household farms. In China today there are more than 200 million farms, the legacy of an HRS policy that gave the primary responsibilities for farming to the individual household. McMillan, Whalley and Zhu (1989), Fan (1991), Lin (1992) and Huang and Rozelle (1996) have all documented the strong, positive impact that property rights reforms had on output and productivity. 

In addition to property rights reform and transforming incentives, the other major
task of reformers is to create more efficient institutions of exchange. Markets-whether
classic competitive ones or some workable substitute-increase efficiency by facilitating
transactions among agents to allow specialization and trade and by providing information
through a pricing mechanism to producers and consumers about the relative scarcity of
resources. But markets, in order to function efficiently, require supporting institutions to
ensure competition, define and enforce property rights and contracts, ensure access to
credit and finance and provide information (John McMillan, 1997; World Bank 2002).
These institutions were either absent in the Communist countries or, if they existed, were
inappropriate for a market system. Somewhat surprisingly, despite their importance in
the reform process there is much less work on the success that China has had in building
markets and the effect that the markets has had on the economy.

Ever since 1998, the year of India and Pakistan's nuclear tests, many commentators have argued that, in the absence of U.S. intervention, the two nations are headed for armed conflict that will likely end in nuclear war. The logic underlying this view is twofold. First, that religious radicalism--defined as the participation in political and/or military activities by groups in the name of religion--has become sufficiently powerful in Pakistan to make ongoing support for the Kashmir insurgency inevitable. Second is that India's concurrent growth of nationalism and religious radicalism, as well as a rise in economic power, will make the state less willing to tolerate Pakistan's support for insurgency in Kashmir. Against this seemingly inevitable clash, Pakistani President Musharraf is viewed as a lonely holdout against the forces of religious radicalism in Pakistan. U.S. support is therefore argued to be critical for sustaining Musharraf, whether through political support for Pakistan's policies in Kashmir, or economic support.

This paper reaches a different conclusion: that peace is about to "break out" between India and Pakistan. Our conclusion is based on the following analysis. First, Islamic radicalism in Pakistan relies (and has always relied) on the army to survive, as it lacks sufficient popularity to influence state policy through political parties or popular agitation. Second, the army has previously supported Islamic radicalism tactically, but not ideologically, providing such support only when it has perceived the state to be in crisis. Contrary to a common view, the elections of 2002 were no different in this respect. Third, Hindu radicalism in India, though gaining in both popular and political support, is insufficiently popular to support irrational aggression against Pakistan. At the same time, India's improved economic prospects have influenced its rulers to favor accommodation with Pakistan. Third, the outcomes of recent elections in India and Pakistan have shifted the Pakistani army's strategic priorities toward negotiating a civilian-military balance, and away from destabilizing civilian politics through "crisis-mode" tactics that have included support for Islamic radicalism.