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China: Does it have to become more like us? [Copy link] 中文

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Post time 2012-12-29 10:54:47 |Display all floors


BBC   Stephanie Flander Economics editor

Many in the West have a shaky grasp of China's internal power dynamics, but they are confident about one thing - that China is facing a key moment on its path to economic development, and that it will grow into a rich economy only by becoming a lot more like us.

In public, at least, China's leaders would sign up to the first part of that statement. But they don't seem to agree on the pace of reform that is required - or its ultimate direction. They think that China - the "middle kingdom" - can get rich on its own terms, not by simply mimicking everything that happened in the West.

But of course, there is a third possibility, that it doesn't get rich at all. The lesson of centuries of economic history is that China is likely to get stuck in the middle: neither a poor economy nor a rich one.

This chart, from the World Bank's China 2030 report earlier this year, makes the point. Of the 101 countries that were "middle-income" in 1960, only 13 had managed to break from the pack to become advanced economies by 2008. It's interesting to note that only three of those 13 countries has a population of more than 25 million.

Less than a fifth of the 180 countries in the world have made it to being advanced economies. The rest are low-income or "emerging". You might say it's only a matter of time before others join the club. But most of the countries we now call "emerging" - especially in Latin America and the Middle East - would also have been put on that list, 40 years ago.
One big economic reason why countries get stuck in this "middle-income trap" is that they reach what is known as the "Lewis Point". Put simply, this is the point at which a developing country stops being able to achieve rapid growth relatively easily, by simply taking rural workers doing unproductive farm labour and putting them to work in factories and cities instead.
Then there is upward pressure on wages and prices, and growth starts to slip.

Many economists think that China has now reached this point, while its population is ageing fast. Some slowdown in its growth is therefore inevitable. The question is how much.

China has grown by just under 10% a year, on average, since 1980. If it can grow by at least 6% or 6.5% a year from now on, the World Bank reckons it can graduate to become a high-income country before 2030 and overtake the US as the world's largest economy. (China's income per head, of course, would still be much lower than America's.)

Six or 7% growth doesn't sound so hard, for a country that has defied the sceptics for so many years with its continued economic success. But from where it is now, growing at that pace would mean China transforming itself from a country driven by exports, manufacturing and investment to one centred around domestic services and consumption.

Investment and consumption each now account for around 50% of China's GDP. To achieve sustainable growth from now on, the World Bank thinks the consumption share needs to rise to about 66% - and investment to fall by a similar amount.
Every developed economy has made this fundamental transition. But few, if any, have done it while continuing to increase productivity - output per head - by 6-7% a year. America, Europe and Japan had the advantage of a growing labour force for most of this stage in their development. China will not. Its population is ageing much more rapidly and its labour force will be shrinking after 2016.

How will that happen, if at all? The World Bank has a long list of answers, but most of them come down to increasing the amount of competition in the economy and fostering innovation.

This is where the "becoming more like us" part comes in. It's conventional wisdom in the West that you can't foster innovation without strong property rights, for example. Many would also put a free press on that list - and what the World Bank euphemistically calls "higher public participation in public policy formulation".

The World Bank is prohibited - by its founding statutes - from saying that democracy is better than other forms of government. Instead, in its 2030 report the Bank offers China's leaders this deliciously delicate piece of wisdom:

"As economies grow in size and complexity, the task of economic management becomes more complicated, and governments usually find that they alone do not, indeed should not, have all the answers.

"Governments, therefore, tend to tap the knowledge and social capital of individuals and non-government agencies, including universities, communities and think tanks.

"One of the hallmarks of advanced economies is their public discussion of public policies. Indeed, such discussions are already beginning in China, but there is a long way to go."

You might be tempted to call all of that democracy. The World Bank couldn't possibly comment. But you can see why, to many outside experts and commentators, the job of transforming China's economy and its political system seem to run together.

They don't see how you can become the kind of country that produces the Googles and Facebooks of tomorrow and puts the consumer in the driving seat without also becoming a more open and democratic society.

China's leaders think you can have modern economic success without - in the medium term at least - a modern democracy. Many in the West disagree. That could be a reflection of Western arrogance. But it's possible that they're all wrong. China may well not look like us in 20 or 30 years' time, but it might not look like an advanced economy, either.

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Post time 2012-12-29 13:19:21 |Display all floors
Thats a good article.  China will have more old people past working age than the entire population of the USA within 20 years and all the associated problems.

Some tough choices regardless of system of government.
Your own mind is a sacred enclosure into which nothing harmful can enter except by your permission. Arnold Bennett

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Post time 2012-12-30 02:51:16 |Display all floors
Excellent article.

I'm really curious whether or not China will become democratic. After all, you can be non-democratic and still establish a decent protection of property rights and a working rule of law. The mere fact that elections are possible does not change that much after all: US Americans don't have much choices on national level elections and the US is still one of the richest and most innovative nations around the world.

If there is a thriving civil scociety and many different associations, people could put their knowledge into governmental action without electing their leaders.

However, China will still have to tackle many problems - of which corruption could be the least - if it wants to develop such a society. And like the author, I agree that such fast growth rates could be impossible, as China will have to develop social, political and economic models that have never existed before in mankind's history - and nobody knows whether or not they are even possible. The only way to achieve this is try and error - and that can be pretty slow, as history has shown.
So the Chinese could become impatient and go for a western system (like the ones in Taiwan, Hong Kong or Japan), as copying a working solution is much easier than developing a new solution from scratch. Either way, we are seeing increadibly interesting developments in China in our lifetime - and I am sure that in the end, the best solution will win and the world will be better off.

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Post time 2012-12-30 10:53:24 |Display all floors
""This is where the "becoming more like us" part comes in. It's conventional wisdom in the West that you can't foster
innovation without strong property rights, for example. Many would also put a free press on that list - and what the
World Bank euphemistically calls "higher public participation in public policy formulation".""

This is another way of saying you can't have innovation unless the filthy rich can benefit financially from it.
A hallmark of capitalism.
It's also an out-right lie. The overused word "innovation" doesn't have much to do with inventiveness. Instead it has
everything to do with marketing existing inventions so the fad seeking consumers are lead into buying the lastest toys.
All the high tech devices on the market today are based on inventions decades old. Only the packaging and size has
changed significantly.
"Strong property rights" has been reduced to who can win in court over the latest 'got to have' product that has
nothing really new technology. And guess who can afford to market a new product successfully and then prevent anyone
else from manufacturing and selling something similar at a reduced price. Only the filthy rich of course.
This actually discourages technical progress. All the resources are concentrated on recycling existing technology
since this is much cheaper than research and development of new technology. Anything the filthy rich can do to make
themselves even more filthy rich, that is what capitalism is all about. Nothing more.
The iPad has no new technology. It has a microprocessor which was invented in 1970, give or take a few years.
It has dram which was invented in the 1970, flash memory which was invented in the late 1980s.. nothing new here.

Actually limited property rights will vastly improve the chances of truly new technology coming about.
If someone comes up with something new they can be allowed to reap the benefits up to a point. A reasonable limit
can be set and the technology is open source after that. As it happens today in the capitalist west if someone
comes up with a new technology it is immediately 'owned' by the filthy rich through the built-in corruption of
this sytem. If a university student comes upon a new and useful technology it is quickly snapped up by the rich
benefactors of the university and put into production. The original inventor may or may not see any real financial
benefits from his or her invention. They would be lucky if a senior professor or dean didn't lay claim to their
discovery. Outside the university the prospects are even worse for the inventor. Virtually all companies in the
USA make employees sign a 'non-disclosure' agreement before they are officially hired which automatically gives
all rights to anything they might discover or invent to the company. Again, only the filthy rich benefit.

If a limit is put upon the wealth any individual or private business cartel of 50 million USD then more people
will be able to benefit from their inventions and nobody will be able to accumulate a stifling advantage that
discourages true technological progress.
Once the inventor or inventors have reached the 50 million USD threshold (which won't take long if the invention
is truly useful) then the invention becomes public domain. This will encourage futher improvements on the
invention by anyone with no fear of repercussions from law suits by the filthy rich trying to maintain their
stifling advantage.


If capitalism promotes innovation and creativity then why aren't scientists and artists the richest people in a capitalist nation?

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Post time 2012-12-30 11:13:36 |Display all floors
----------------------------------------------------------
"As economies grow in size and complexity, the task of economic management becomes more complicated, and governments
usually find that they alone do not, indeed should not, have all the answers.

"Governments, therefore, tend to tap the knowledge and social capital of individuals and non-government agencies,
including universities, communities and think tanks.

"One of the hallmarks of advanced economies is their public discussion of public policies. Indeed, such discussions are
already beginning in China, but there is a long way to go."
----------------------------------------------------------

As economies grow in size and complexity it is time for the government to hire more accountants and to increase
the power and capacity of their information technology systems.
It is not time to hand over the riches earned by the hard work of the people to a few filthy rich who are
accountable to no one.
The western propagandist never tire of trying to convince the people of China that privatization is the way to go.
Privatization simply means turning over the wealth of a nation from the government to a few filthy rich who are
accountable to no one. It is really that simple.

Private enterprise has its place in small business but must be limited to no more than 50 million USD in the extreme.
Its most useful place is in small businesses such as restaurants, shops, entertainment venues, and the like.
The government is by far the best place to manage the nations resources. The simple principle of economies of scale
will bear this out. There is nothing complicated about this. The only complications appear when capitalists try to
make their case for taking over a nations wealth. They have many tricks in their bag but they all boil down to
taking over the wealth of the people away from the government and into their own private accounts. After that
the wealth disappears. The trickle down theory has now become nothing more than a cruel joke we all should be
ashamed of for ever buying into.

China is entering the primary phase of socialism. More of the nations wealth should be protected by the government
in state owned enterprises. Private enterprise should be scaled back now. It has outlived its usefulness on scales
exceeding 50 million USD.
If capitalism promotes innovation and creativity then why aren't scientists and artists the richest people in a capitalist nation?

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Post time 2012-12-31 05:13:12 |Display all floors
In short, the World Bank represents the capitalist west. Why else would this article be titled
"China: Does it have to become more like us?"
What really needs to happen is the "us" needs to become more like China.
It will happen. The current situation dictates this.
The CPC outsmarted the west.
If capitalism promotes innovation and creativity then why aren't scientists and artists the richest people in a capitalist nation?

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Post time 2012-12-31 06:09:29 |Display all floors
This post was edited by robert237 at 2012-12-30 14:09

""Many in the West have a shaky grasp of China's internal power dynamics, but they are confident about one thing - that China is facing a key moment on its path to economic development, and that it will grow into a rich economy only by becoming a lot more like us.""

You mean by accumulating so much debt it exceeds the yearly Gross National Product?
You mean by teetering on bankruptcy?
You mean by depending on other nations to do the manufacturing?
You mean by losing your edge in science because of religious concerns?
You mean by letting the rich 1% accumulate more money than the 99% doing all the work?
The last one can't be rebuffed by false propaganda my friends.. much as they well try.
The money in the state owned enterprises of China belongs to China, not to individuals as in the west.

The west needs to become more like China if they want to survive.
Don't let them fool you.
Socialism is the government of the future. China is proving this on a daily basis.


If capitalism promotes innovation and creativity then why aren't scientists and artists the richest people in a capitalist nation?

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