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China’s Politics of the Economically Possible

Mar 16, 2012 Minxin Pei

When sound economic advice is divorced from political reality, it probably will not be very useful advice. Unfortunately, that is true of the World Bank's impressive new report on China, which the country's one-party regime has a strong interest in ignoring.

CLAREMONT, CALIFORNIA – When sound economic advice is divorced from political reality, it probably will not be very useful advice. The history of multilateral financial institutions like the International Monetary Fund and the World Bank is littered with well-intentioned and technically feasible economic policy prescriptions that political leaders ignored. But that has not stopped these institutions from trying.

The latest attempt is the World Bank’s just-released and much-applauded report China 2030: Building a Modern, Harmonious, and Creative High-Income Society. As far as technical economic advice goes, the report is hard to top. It provides a detailed, thoughtful, and honest diagnosis of the Chinese economy’s structural and institutional flaws, and calls for coherent and bold reforms to remove these fundamental obstacles to sustainable growth.

Unfortunately, while the Bank’s report has laid out a clear economic course that Chinese leaders should pursue for the sake of China, the Bank has shied away from the most critical question: Will the Chinese government actually heed its advice and swallow the bitter medicine, given the country’s one-party political system?

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Konrad Kerridge Apr 17, 2012

Of course China will move to a more inclusive form of governance over time. In fact it is doing it now. Encouraging independent civil society organisations. Spinning off industry bodies from the Party. Gradually elevating elections up the hierarchy.

But what is clear is that Democracy should come in a Chinese style. What fits that very large, diverse and unique nation will be its own solution and model.

It won't be the Swedish model or the Indian model. It certainly won't be the weak US model that has all but ground to a halt.

In future I would suggest to Minxin Pei that he writes as if explaining the issues and solutions to a Chinese audience. That will stop him writing as if for 3 year old ignorants.
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R. Fox Mar 20, 2012

The final two paragraphs of the article frame the crucial question people outside China have to address, for it concerns all of them. Both practical economics and ethical propriety require that the Chinese people become empowered, at the expense of the authority of the totalitarian state. The article describes the two possible routes to that outcome, thus -

Self-generated internal evolution to a form of democratically accountable governance (viciously opposed by ruling elites and deemed unlikely to happen),
or -

Abrupt change in political structure precipitated by a "system-threatening crisis".

The question we in the West have to answer is - Are we ethically obligated to do what we reasonably can to inspire a crisis situation in China that can lead to internal reform, even if that is likely to result in short-term financial discomfort for ourselves, or -

Can we ethically ignore the institutional inequities of the existing system and continue to make money by engagement with, and acquiescence to, the present regime?

Personally, I don’t think we can ethically ignore the political reality of contemporary China. We have an ethical responsibility to do what we reasonably can to bring about the empowerment of the people of China, whether the current regime approves of that or not, and whether or not that is the short-term, profit-maximizing approach.
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Jonathan Lam Mar 19, 2012

Gamesmith94134: The Future of China’s Growth

Andres Arellano Beaz,

This is the worst possible plan for China, if is because the same institution like Politburos do not have the control of the state-enterprising which are largely own by individuals who represent the state and the military. It is why China is facing serious challenges simultaneously: rising inequality, large and growing levels of environmental degradation, stubborn external imbalances, and an aging society. At present, there is about 50% of China’s population is still living in the 60s, which is the age of cultural evolution; and there is real case of inequality among the 1%, by the “gang of descendant” or the corrupted officials, and the 99% of those must work over hundred years to buy a house. It is just another case of banning cigarettes smoking while we are selling them. I realize that your criticism on the improvement the World Bank insisted, but how would you justify those in pursuit of prosperity by looting the poor and getting rich themselves and they also wear the same uniforms with a good motto.
Perhaps, I sympathize Chinese Politburo in fighting corruption among the powerful just like I quitting cigarettes; ‘ The proposals contained in China 2030 could provide a framework for Chinese policymakers as they seek to achieve their goal of sustainable and harmonious growth.’, may not be appropriate to meet World Bank President Robert B. Zoellick’s demand. However, I do believe the Chinese Politburo is working gingerly toward its goal.
Take the recent case of Wen verse Bo fought in Beijing now; Premier Wen Jiabao must circumvent a trillion debts, originated to “Chongqing Model” that Bo Xilai and the military are tied to all goods and services to the Chongqing, and most its people or government cannot afford. How can the Politburo undo privatized properties off the officials of a region where they rule? Or how does the Politburo define the opportunity for growth if they cannot resolve the corruption by its ‘new left’ that has the controls of all business and government?
In paraphrase of the era of glasnost and perestroika, it is similar to Putin verse Khodorkovsky, head of Yukos, in 2003, that Khodorkovsky was charged with embezzlement and money laundering, and jailed as dissenter to Russian authority; but, Wen Jiabao cannot charge Bo and his family for overdoing in development of his “Chongqing Model” if it runs on plutocracy that left Chongqing Model with great prosperity and a trillion debts without bankrupting itself in the first place. Besides, there are more cases of “Chongqing Model” to many regions in China that created a serious debt problem for China, and many local governments are at brink of bankruptcy.
At present, despite of the 7.5% growth, China had the first trade deficit. I am not sure of why it is happening, but the situation may continue if manufacturing sector is running on a hybrid course that would leave the local government with a great risk of uprising and discontent.
Sometimes, I wonder if I have seen the fact of negativity of smoking, but quit smoking is not going easier than just a conscious mind after smoking for forty years . So, as an American, the proposal for 2030 for China is longer than expected, however, the resolution to its problem demand a tougher choice and determination. I just think it is better off if China is not going back to its 60s for another Cultural Revolution.
Good try! Mr. Wen Jaibao.
May the Buddha bless you?
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Zsolt Hermann Mar 18, 2012

Basically following the two previous comments, we could easily erase the name "China" from the article, and substitute it with any other nation's name, especially with the US or other leading western countries.
If it is not state owned entities who cause the inequalities and stop further progress then it is the so called 1%, as everything from economical changes to political changes is controlled by them, going through them, which we can watch at the moment live during the US election campaign, or how the 1% owned media is influencing and deciding any important decision in western "democracies" totally brainwashing public opinion.
It is not China that needs to take the advice, or change, but the whole global system.
This is the reason we are in a global crisis, more precisely in a system failure, as our previous, false, exploitative system, regardless of governance structure, has brought us into a dead end.
Moreover in today's totally closed and integral world system a single country cannot change anything alone, if we want true changes the whole system has to change mutually and together, as we are all part of the same network, and any change affects all of us together.
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David Joseph Deutch Mar 17, 2012

Andres, I agree with your first two points regarding forced change and privatisation. Multilateral financial institutions in the past have been institutors of the American desire for a 'free market' and countries liberalising their economies.

Although the last part of the article, regarding social spending and the need for a progressive tax system, was bang on the money. If only the United States would follow that advice too.
- Andrés Arellano Báez Mar 17, 2012
  
  You are right too in that aspect.
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Andrés Arellano Báez Mar 16, 2012

Are you crazy, blind or ignorant? First, in the third world "multilateral financial institutions like the
International Monetary Fund and the World Bank" do not given advices and theirs "technically feasible economic
policy prescriptions" are imposed. Because of that, those prescriptions have been applied and the results can
not be worst. History can easily prove that: latin america in the 80 and Argentina in 2001.
Second, STOP BELIEVE that western companies are super efficient because they are private. They are big and
powers because they are support by governments: oil companies are subsidized and create wars financed by people
taxes for stole oil, banks are saved over and over again with taxes and companies like Nike and Apple are big
because they explode their workers in a lot of countries.
I really hope that China do not applied that World Bank plan. Those ideas in the past have proven been wrong.
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