It takes a lot of throat-clearing for Richard Bernstein to get to the point in his analysis of the “China model” for economic development at RealClearPolitics but he does, eventually. Here’s the kernel of the piece:
“I basically don’t believe there is a China-centric model of growth,†Nicholas Lardy, a specialist on China at the Peterson Institute for International Economics in Washington, D.C., said in a phone interview. In his most recent book, “The State Strikes Back,†Lardy challenges the narrative of Chinese efficiency, arguing its political system’s insistence on control has led it to invest in inefficient and often unprofitable state-owned enterprises, rather than in the private sector where most growth is generated.
“The ‘China model’ is one in which you have a very dynamic private sector with a very bad, resource-consuming state sector that doesn’t show much sign of improvement,†Lardy said. “So in that sense you could say that China does have a model, but it’s not one that many people would want to emulate.â€
concluding:
The basic question, of course, has to do with a key element of the “China model,†the authoritarian control exercised by the CCP and the country’s constantly reiterated claim that this has always been indispensable to “the miracle of development never seen before in human history.â€
There is no “control†in this experiment, no proof that had China become more democratic, its economic record might actually have been better. The experience of South Korea and Taiwan suggest that it may well might have been, and that an authoritarian political system wasn’t necessary.
It wasn’t necessary unless, of course, you were running it in which case it was vital.
For the last 30 years I’ve been warning that the risk China faces is that they’re following the same path the Soviets did. In the 1930s the Soviets achieved enormous economic growth by moving relatively unproductive labor resources from agriculture to manufacturing. China has done the same thing, becoming the low cost provider of labor with an effectively inexhaustible supply. That phase has ended—they still have an effectively inexhaustible supply of labor but they’re no longer the low cost provider and for the last decade of so they’ve been bolstering growth with enormous borrowing. How long that can continue is anybody’s guess. You also can’t remove labor resources from agriculture indefinitely and maintain the degree of food self-sufficiency the Chinese authorities have wanted.
Sleepless last night and watched the Discovery channel’s Bio on Stalin.
Totally impressive how much coal, iron ore, and concrete Stalin could move in the interwar period. (Hitler as well).
Stalin was proud of being able to shed “That humiliating chimera we call conscience”.
Hitler was his match in that regard.
Interesting though today, given that advantage, how did that work out for them?
China’s on the same path and I really pray it doesn’t take 40 million dead to disabuse them of that notion.
https://www.ahctv.com/tv-shows/apocalypse-stalin/
There are some basic facts that are wrong here.
“The experience of South Korea and Taiwan suggest that it may well might have been, and that an authoritarian political system wasn’t necessary”
South Korea and Taiwan were dictatorships until 1988.
And of course, China, South Korea, Taiwan’s economic development model followed Japan — which was authoritarian throughout its development into a world power prior to WWII.
Like it or not, all of East Asia has followed a distinctive development model — authoritarian governments mixed with a state led development model that heavily subsidized exports.
It needs to be acknowledged as a model that has worked and is in tension with “Washington consensus” that was fashionable in the 90’s.
I would remark it is a model with challenges once a country hits developed status. Basically a State-led overemphasis on exports leads makes it very hard to rebalance the economy to be driven by consumer demand. See Japan lost decades, 98 Asian financial crisis, etc. That’s where China’s challenges are at.
But the author needs to be real — for the billions who live in countries that have a GDP per capita of < $1000 a year, a model that can get you to $10000/$20000 in 30 years and leaves the country with issues in 30 years is almost a no-brainer vs a "Washington consensus" model that doesn't go anywhere in 30 years. You can't beat something with nothing.
The biggest problem with state-subsidized exports as a path for development is that China makes it essentially impossible for other countries, say in Africa, to follow its model. How can they if China is exporting everything to everybody?
IMO the biggest risk for China is additive manufacturing. What good is cheap labor when it’s competing with no labor? Materials and shipping become the most important costs.
Also keep in mind that the American model for over a century was a large free trade zone with internal markets and tariffs on imports.
I am with CO here. Not sure how they could believe there was not an authoritarian background in S Korea and Taiwan. A lot of this is also catch up growth. Build a road where there were none before or add electricity. Lets not forget how poor China was.
Steve
Again, Bernstein, a denizen of the establishment, doesn’t get it. No one in the establishment does. They’re all delusional.
Deng’s basic reform was to introduce some laissez-faire capitalism into the Chinese communist economy. That has been wildly successful in terms of economic growth. It has also caused a number of scandals regarding product quality, intellectual property theft, … just like 19th Century US. China has also curtailed the various companies once owned and run by its military. That was a necessary part of China’s military reform. And the share of China’s economy occupied by nationalized companies continues to fall.
Since Deng, China’s economy has outperformed every other economy in the world, especially ours. China has moved 400 million people from rural poverty to middle class urban dwellers. It builds and populates the equivalent of one entire San Francisco a month. It operates thousands of miles of high-speed rail, more than Europe in toto, far more than Japan. It is now on a par with the US in basic research published in high end science journals and is ahead of us in patents. Actually since a least one-fourth of US STEM grad students are Chinese nationals, and grad student do and write up the research, China is likely well ahead of us in patents and research papers.
Take a long look at pictures of China’s thriving, newly built, violence-free cities, and then look at the urban waste lands we have: Baltimore, Detroit, St. Louis, even Chicago, San Francisco, New Orleans, etc, have hundreds if not thousands acres of decay and blight. Thousands of homeless people live on the streets of ever large American city, mostly mentally ill men who have been abandoned by American governments to their own devices.
China does have environmental problems due to rapid growth. The air in Beijing is terrible, like 1950’s Pittsburgh or Los Angeles a generation ago. But that is changing. Water pollution is wide-spread.
China still has one billion people to raise up, but it has eliminated abject rural poverty. China’s new Five Year Plan focuses on internal development. Is Bernstein aware of that? I think not. He lives in his bubble insulated from any external information.
By contrast, rural poverty in the US has gotten worse, and the US working class has suffered declining real wages since 1970. That is not an accident. US policy has been to transfer manufacturing to China. Once Deng opened the door, our leaders helped his program mightily.
No member of the establishment is a reliable reporter on America or China or Russia or any other country. If you want to know about China or Russia or even the US, read Pepe Escobar or Andrei Raevsky (The Saker) or Dimitri Orlov (Club Orlov) or even Adrei Martyanov (Reminiscence of the Future).
The fact is that the US is on the verge of becoming a failed state. The Biden administration is pushing hard to see to it that we fail. Tell Bernstein and his ilk to sober up.