[A-List] Re: [TNF] China not transitional to capitalism: experts

["James Cumes" <cresscourt@xxxxxxxxx>]

China's "miracle" can fairly be classified as a miracle on the basis of the
scale and speed of its economic development in the past thirty years. The
Wirtschaftswunder in (West) Germany, in the 1950s and 1960s, was perhaps
comparable in some respects and had some of the same or similar causes.
However, the German experience had some important differences, relating
especially to differences in size and to stage of economic development at
the starting point.
In both cases, an important element in the two "miracles" was the policy of
the United States. However, in the case of the FRG, the objective was well
defined, especially under the Marshall Plan, and that objective was
realised.
We can argue whether, in the case of China's miracle, United States policies
were more or less important than in the case of West Germany, but what is
clear is that in both cases, American policies were a crucial element.
On a rather different aspect, that of the slide in the value of the US
dollar, I have recently written -

"To understand what the US dollar problem is - and what therefore the
solution is - we
have to understand how the present dollar indebtedness came about.
Inflation is the problem of supply being inadequate in relation to effective
demand.
In that sense, the United States never solved the problem of inflation which
emerged in and after 1969.
On the contrary, United States policies, especially of using hikes in
interest rates to "fight inflation," only made things worse and gave us
stagflation.
The solution - the only genuine solution - of expanding supply through
fixed-capital investment - was never achieved or indeed seriously attempted.
Instead, the continuing excess of effective demand over supply provided
incentives for other countries to bridge the United States supply gap.
First, these included even such countries as Britain which then applied the
same
American policies to "fight inflation," with the same result - an increase
rather than a decrease in inflationary pressures.
Germany and Japan did better. Then gradually the Asian Tigers and, of
course, more
recently and most significantly, China came in to meet the shortage of
supply.
In other words, United States inflation was never "solved"; it was simply
shifted from domestic price increases to deficits in the balance of trade
and payments.
The United States was not alone in this. Australia followed much the same
unhappy path, with much the same results, qualified of course - but not
essentially
transformed - by the massive stature of the United States in the world
economy and world finance.
I know that I am unique in my interpretation of the origins of the
dollar problem - and consequently, of course, of the problems of
manufacturing, labour,
and the downward drift in the living levels of the working and much of the
middle class in the United States, especially in the last 20 years.
However, any other interpretation is difficult to justify.
It follows that the solution to the underlying problems of the United States
economy - and of course, for example, the Australian economy - is to "fight
inflation" by expanding domestic supply, rather than persist with dependence
on overseas suppliers, with what would be consequently even more massive
distortion of world trade and payments and, almost certainly, major collapse
in the world economic and financial "system."
The only way to achieve this "expanded domestic supply" is to promote
fixed-capital investment which will bring real growth to the domestic
production of goods and services.
(We must remember that real, stable and persistent growth ultimately
depends, not on
consumer spending and consumer debt, but in the end on fixed-capital
investment which is the economy's real driving force.)
That promotion of fixed-capital investment is not  easy. It's much easier to
export your industries overseas - as the United States and Australia have
done for the last twenty years - than it is to get them back.
So it'll be a tough struggle.
It'll need all the support and encouragement it can get.
The only way to get this effective support and encouragement on the scale
that will be necessary is to expand fixed-capital public investment on what
will probably have to be an unprecedented scale.
Unprecedented but not impossible. On the contrary, it is now an absolute
imperative if we are to save the world from economic catastrophe - and
political and strategic catastrophe as well.
You see this acceptance of public investment in the European plans and -
very important if the easy exports of the last twenty years are now to be
scaled down - in the infrastructure plans of the Chinese.
That's where VOW comes in and where it is crucial, both to the advanced
economies like the United States and Australia, and to the poorer,
developing countries in all the continents - and that includes Europe which
of course has problems of its own making through, inter alia, the
restraints - most of them foolish - of the single currency."

So the causes of China's "miracle" are neither exotic nor abstruse. At the
same time, of course, the mists and miscalculations enbodied within
America's own policies have caused the Americans inadvertently to provide
thrust to a China "miracle" which many may consider to be contrary to the
United States own economic, political and strategic interests. They may
indeed have given that vital thrust necessary to create a powerful rival to
their own hyperpower status.
At the same time, of course, the United States has destroyed much of the
capacity on which its own strength was based. In some ways, it has travelled
much the same road as the defunct Soviet Union. American policies of the
last thirty, and especially the last twenty years, have gravely weakened the
economic and social base on which their military/strategic preponderance has
been raised.
Unless American policies are fundamentally changed, the United States
"century" will come to an end and what  is largely America's creation - the
modern China - will begin its own Chinese "century."
Of course, it would be foolish to claim that it was enough for the United
States to offer China an opportunity for extraordinary and extraordinarily
rapid economic development - and, ultimately, for growth towards hyperpower
status.
It was for the Chinese Government to grasp this opportunity - as, indeed,
several other Asian countries have done.
We then come to the question whether China is undergoing "evolution to an
unknown world" or whether it is simply applying sensible and practical
policies which are, with clear thinking, available to us all.
That China is not applying the "mainstream" economic policies which the
Americans have spread around the world is obvious. Only to that extent may
the Chinese policies be said to be "exotic" or to be an "evolution to an
unknown world."
What they have done and are doing is to encourage fixed-capital investment
and to join public and private fixed-capital investment on the road to rapid
and domestically sustainable development.
The ambitious infrastructure plans of the Beijing Government contrast with
the way in which vital infrastructure in the United States has been allowed
to run down. Even if a robust start were made right now to restore United
States infrastructure, it would take several to many years - according to
their own official calculations - to restore it to the levels of a decade or
so ago.
Here we have the clues to the grasping of the opportunity that the United
States presented.
China has not buried itself in the past and stultified its own economic,
social, political and strategic development. Nor has it made a mad dash into
the future, with the chaos that we have seen, for example, in Russia and
some other components of the late Soviet Union. Above all, it has been
astute enough not to swallow whole the theories, concepts and policies of
mainstream economics, especially as expressed in the United States.
At the moment at least, it appears that China has formulated a melange of
policies - a "mixed economy" with ingredients mixed in a particularly
skilful way - that will carry it forward, even if the world economy falters
and perhaps even if it undergoes a substantial collapse in the next few
years. Such a collapse, involving the United States, might provide another
opportunity, inadvertently offered by the United States, for China to stride
towards unprecedented greatness and to become the new, single hyperpower of
the 21st century.
Separately, I am sending a message on VOW relevant to much of the above.


James Cumes
http://VictoryOverWant.org
http://members.chello.at/schulte-baeuminghaus/
http://www.authorsden.com/visit/author.asp?AuthorID=3473
http://www.kokodatrail.com.au/forums/?showtopic=54


----- Original Message -----
From: "Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>; <a-list@xxxxxxxxxxxxxxxxxxx>;
<TheNewForum@xxxxxxxxxxxxxxx>
Sent: Monday, October 27, 2003 6:12 PM
Subject: [TNF] China not transitional to capitalism: experts


> China not transitional to capitalism: experts
>
> Nearly three decades ago, no single Western economist could have
> predicted that China's economy would grow at the fastest rate in the
> world over the following 25 years.
>
> At that time the preconditions set as necessary in standard Western
> economic textbooks - a well-established market, private property rights
> and effective rule of law - were not present.
>
> But overall progress has been made along the years, even in the first
> half of 2003 when the country was hit by the outbreak of severe acute
> respiratory syndrome (SARS).
>
> A group of economists, politics experts and law experts gathered late
> October in China's flagship business municipality of Shanghai to seek an
> answer to what Westerners have hailed the "China miracle".
>
> Mainstream economics in the West categorizes the Chinese economy as a
> "changing socialist economy." This definition was called into question
> by Chinese scholars. Shi Zhengfu, an economic professor with the
> Shanghai-based prestigious Fudan University, said what has been produced
> in China is probably not a change from one social and economic system to
> another, nor "transitional" to capitalism in Westerners' view, but an
> "evolution to an unknown world."
>
> "This situation provides an epoch-making opportunity for the creation of
> China's own economics," said Shi, who is director of the New Political
> and Economic Center of the Fudan University.
>
> His view was echoed by a string of senior Chinese economic experts
> attending the seminar on "Marching to New Politics and Economics" held
> in Fudan.
>
> China's economic system undertaken profound changes after 1979, and
> choices for its unformed economic structure were many: from that of the
> former Soviet Union to the Neo-classic economics of the West, and to the
> "New Institutional Economics" based on transaction cost and property
rights.
>
> But they fell into malfunction when applied to analyze unique economic
> phenomena in this country. "According to Western economic theories, a
> populous nation like China is less likely to have an economic blast-off,
> but we made it," said Chen Ping, a professor with the China Economic
> Research Center in elite Beijing University.
>
> According to Chen, forces driving China's economic growth have many
> aspects at odds with what Western classic economics think necessary. For
> example, in China a competitive system has emerged before the reform of
> property rights, and some regions have had earlier and faster economic
> development because of favorable location.
>
> "China's experience validates a growth pattern of moderate competition
> and economic evolution in co-existence (of different ownership), which
> is distinctive from the Western economic growth model of consuming
> natural resources and saving on manpower," Chen said.
>
> Wang Dingding, a renowned economist, said Western economists focus on
> processing small issues in economics, but Chinese economists face
> systematic changes, which may lay a foundation for the building of
> China's social sciences, including economics theories.
>
> "China's economic growth, to a very large degree, relies on energies
> released by a series of system reforms," Yao Yang, Chen Ping's
> colleague, commented.
>
> Prof. Shi said China's economics could play a role in the following
> three aspects: the enterprise system of multiple ownership including
> public ownership; the pattern of social wealth distribution with the
> creation of middle class going before privatization; local governments
> acting as "administrator", not "night watchman" as they are in Western
> countries.
>
> "The research based on China's economics is not a copy research of
> matters Western economics had done, nor is the goal of the research to
> let China copy the Western style of economic development. We have been
> confronting the same issues as US economists: all being untouched ones,"
> Cui Zhiyuan, a professor working in a German-based institute, said.
>
> Although to create an economic system fit for China's own economic
> development has become a consensus of Chinese economists, few
> innovations or inventions have been worked out, while they work on
> criticizing and analyzing Western economics.
>
> "The content of China's economic research is new, but the means of
> research is old," said Shi Jinchuan, vice director of the Economic
> School of Zhejiang University.
>
> Stephen Green, head of the Asia Program of the Royal Institute of
> International Affairs in Great Britain, said that "No matter what the
> result will be... the Chinese are full of confidence in their own mode
> of economic development."
>
>
>
> People's Daily Online --- http://english.peopledaily.com.cn/