January 30, 2010
China: A Very Bad Example
There’s a worrying tendency emerging in some sections of the left. I noticed it in this blog post. Today I saw it writ large. The willingness of some leftists to cite China as a positive example for the UK.
At the appalingly-titled “Progressive London” conference, Ken Livingstone gave a speech in which he declared that the proof that government investment ends recessions lies in China’s staggering rates of state spending, and enormous correlate levels of growth. (He also claimed that British kids should have fewer holidays, so that they can receive the structured educations that will make them good British citizens who are competitive with Chinese children studying “from 7am to 6 at night”. They don’t call him Red Ken for nowt, eh?).
Later, John Ross of Socialist Economic Bulletin (and Ken’s former economic adviser) took some time out from claiming that Britain’s national debt didn’t need to be repaid, that the triple-A rating is meaningless, and that all spending cuts are completely a choice and not imposed by brute economic circumstances, to cite China as proof-positive that government-led investment ends recessions. He waxed lyrical about China’s 9% growth in the last quarter, and how the Chinese government simply told banks to lend and – hey presto – they lent.
Don’t get me wrong, I’m all for keeping government spending as high as possible to protect the tentative recovery. But citing China as a model for UK growth is idiotic, and deeply troubling.
Firstly, it relies upon deliberate economic simplification. Why might China be experiencing such high rates of growth? The fact it possess enormous and largely untapped natural resources, which it is beginning to put to use, has something to do with it. That China is still in a stage of rapid industrialisation from what was effectively a peasant society, ravaged by the Cultural Revolution, helps too. Britain is incomparable on both these metrics.
Likewise, Chinese growth is in large measure driven by enormous government-led infrastructure projects (as a component of rapid industrialisation). It also has as an enormous manufacturing base, fuelling western demand for cheap consumer goods. Britain, by contrast, relies heavily on its financial and service sectors. The two economies are thus radically different.
So pointing at China and simplistically saying “look, they have lots of government spending and lots of growth, QED” is stupid. You might as well point to Angola and its 12%+ oil-driven growth, and it would tell you as much about the UK’s situation (we, after all, still possess some reserves of North Sea Oil). Indeed, if one wants proof that government spending leads to economic recovery, why not turn to history and take the case of America’s New Deal? That at least tells you something about relatively comparable economies and circumstances – though again one would need to adjust for situation and the complex nature of macroeconomic recovery. (h/t)
But more importantly than all that, let’s remember a key method by which China achieves its phenomenal growth: by systematically denying the civil and economic rights of its domestic population.
Chinese workers have no meaningful rights whatsoever (their right to unionize, for example, means a right to join the union which reports to the Communist Party). They are paid pitifully low wages (averaging around $0.50 an hour in 2006), and have no hope of securing anything better. That’s a key way in which China’s export-manufacturing sector booms: low wages equal low costs, after all.
Another way China grows is by doing what I observed last summer: going to places like 1000-year old Yancheng, raising it to the ground, and erecting a city the size of Chicago in its place. And what do you think happened to the people living in Yancheng who didn’t want to have their homes demolished. Do you think they were consulted nicely and offered new places to live with guaranteed legal redress? Or do you reckon they were forcibly re-located as is the Communist Party’s preferred approach?
China may have very high growth rates. But it has no democracy, no civil rights, and no effective rule of law. It is a totalitarian dictatorship, achieving “economic miracles” at a cost no desirable society would ever contemplate.
Yet when John Ross was pointedly asked why Iceland and Ireland don’t simply adopt the “Chinese approach”, he simply claimed that the political consensus in those countries wouldn’t tolerate a more state-centred economy. He made it perfectly clear that he thought this a mistake: that China was leading the way, and should be followed.
We have been here before on the left. From the 1930s to the 1980s there were many who persistently claimed that Soviet Russia was a workers’ paradise, a successful alternative to capitalism. They were wrong, and millions of graves testify against them.
The left must not repeat the mistakes of history. China is an example of what we must always be against, not what we must aspire to. We forget that at our peril.
–
End Note:
The irony, of course, is that the nutty left are usually the ones blithely decrying “neo-liberalism”. If “neo-liberalism” is anything, it is usually claimed to be an economic approach which privileges growth and profit above the welfare of ordinary people.
For reasons I cannot comprehend, some of those rabidly decrying “neo-liberalism” suddenly forget those concerns about growth über alles when it comes to hailing the totalitarian dystopia of modern China.
–
UPDATE
John Ross’ views on China are well laid-out at this Guardian article. You will notice that NOT ONCE does he mention China’s horrific record on human rights, or the fact of its totalitarian dictatorship.
The comments beneath his piece are almost universally spot-on in calling him out on this matter.
Also, Nick Cohen (and you know it’s bad when Nick can successfully call you out on your shit) made the following observations of this nasty neo-Soviet Apologist two years ago:
“John Ross, Livingstone’s economic adviser on £121,000, is typical. He is so lacking in economic knowledge that he decided that the Russian Communist party was a force for the future in 1991, two years after the fall of the Berlin Wall. His economic advice at the time was for the ruling class to learn ‘that they will be killed if they do not allow a takeover by the working class’.”
Peter said,
January 31, 2010 at 12:56 am
Great post.
John Ross said,
January 31, 2010 at 12:09 pm
Sorry Paul but China has raised 620 million people out of poverty – not my claim but the official UN measure. For a study see Professor Danny Quah of the London School of Economics.
To give a comparison, that is greater than the entire population of Western Europe. It is indeed the total number of people raised out of absolute poverty in the world.
It is not necessary to believe that China is some sort of perfect society (which I certainly don’t), let alone stupidities about a ‘new civilisation’ a la Webbs, not to recognise this is a gigantic contribution to human well being. And to believe that raising 620 million people out of poverty is a not a huge net plus to welfare of humanity is simply to fly in the face of that fact.
Paul Sagar said,
January 31, 2010 at 12:19 pm
John,
Are you telling me that poverty-reduction is China’s main priority?
In a country where almost 50% live on less than $2 a day? (http://b4md.com.au/country.asp)
Yes, there has been absolute poverty reduction in China. It would be absolutely astounding if there had been none, given what’s being done there. But the poverty reduction is a by-product of industrialisation, and the welfare of the ordinary Chinese is clearly not the priority of the Communist Party.
Or else why do they continue to deny ordinary workers basic rights? Why is there no democracy or rule of law? No methods of legal redress?
Yesterday you cited the fact that the Chinese government could simply order banks to lend as a wonderful thing. You left out the part about this being backed-up by the barrel of a gun.
Yes, China has instigated poverty-reduction for many – though many more still live in abject destitution.
But that doesn’t settle the issue about whether it is a desirable regime that it is appropriate for the UK to draw lessons from or to be cited approvingly.
And especially not in the selective, over-simplified manner in which you do: claiming that high government spending = growth, look at China, QED.
And your insistance that Ireland and Iceland are cutting their deficits and not engaging in vast state-funded investment programmes simply because “they don’t want more state involvement” – as though that’s all there is to the package of China’s economic strategy was, I felt, highly instructive.
I already had my suspicions that you were an old-guard apologist for soviet-style totalitarianism. Seeing that you are in the pay of the Chinese Government via your professorship, I’m inclined to make that conclusion final.
Don’t worry, when China takes over the world you will be safe and sound. Then you can come along and throw me in a dungeon, torture me and execute me without proper trial to get your revenge for my daring to speak against you.
Paul Sagar said,
January 31, 2010 at 12:22 pm
Also, I saw with my own eyes and heard with my own ears that the Chinese authorities don’t give a flying fuck about the rights of ordinary Chinese:
http://badconscience.com/2009/07/24/china-neither-fish-nor-fowl/
And that was what they were prepared to boast about to an official delegation.
God knows what they keep secret.
Paul Sagar said,
January 31, 2010 at 12:28 pm
Also, two more points:
1) Why is it desirable for the Chinese authorities to lift people out of absolute below-subsistence poverty?
Because that way they are more productive workers, who can slave away in factories for 12 hours a day making Nike shoes for export.
It’s not fucking alturism, it’s sensible exploitation: healthy slaves are more productive slaves
2) And how is this relevant to the UK? The UK does not have millions of people living in peasant-economy level poverty. What does China’s over-all poverty reduction (in relative terms, because the Chinese are still extraordinarly poor) have to do with UK growth in a radically different economic situation?
NOTHING
You are an apologist for dictatorship and tryrany.
leftoutside said,
January 31, 2010 at 12:42 pm
Hear Hear!
Will blog in agreement soon.
John Ross said,
January 31, 2010 at 1:11 pm
Paul,
The most important issue is not intentions (whether ‘altiruism’ or otherwise) it is the fact that 620 million people don’t live in poverty anymore – 100% of the world’s poverty reduction to repeat the reality. That is far more important than anybody’s ideas,
Most people in the world don’t face the choice between the bad and the perfect. They face the choice between the bad and the better. In 1941 people in Russia had only the choice to fight on the side of Stalin or of Hitler. Anyone with a grain of sense fought on the side of Stalin. Anyone who in that situation spent their main energy saying ‘Stalin is very bad’ aided Hitler.
Today in China 620 million people have been lifted out of poverty – the entire reduction in poverty in the world. Anyone who spend their main time condemning the system that achieved that somewhat aids those who have ensured the rest of the world had no reduction in poverty,
Nobody has to pay me a single penny for me to think that – indeed I am quite content to spend my own money, and my energy, to get that point out.
The economics arguments are more complex. China achieved what Keynes advocated in the General Theory ‘a somewhat comprehensive socialisation of investment’ (p378). Keynes didn’t believe in dictatorship and neither do I. A ‘socialisation of investment’ is entirely compatible with a democratic society. You might understand such a it as ‘a Scandanavian model with teeth’.
Tim Worstall said,
January 31, 2010 at 1:43 pm
Wayull…..your figures are a tad suspect.
Here’s the paper they come from.
http://www.bls.gov/fls/Chinareport.pdf
They’re actually 2002 wages. GDP has near boubled since then so it would be amazing if they hadn’t risen as well. Secondly, you’re quoting the market exchange rates, not PPP. This makes a huge difference when comparing with a relatively poor country like China. At PPP urban manufacturing wages are more like $6,000 a year. Still low of course but very different from what you quote.
Thirdly, J Ross does have a point there. As old Adam S himself pointed out, it’s not from regard to our interest that we get our dinner from the baker and the butcher. That China has been reducing poverty at that phenomenal rate is important, whatever the motivations for those promoting it.
Finally, of course they’re complete shits for not caring about liberty and rights. But then t’was ever thus wasn’t it? I certainly get the impression from those on hte left in hte UK that every right the workers got had to be torn from the claws of the bosses…..
Paul Sagar said,
January 31, 2010 at 2:07 pm
Tim,
Fair point on wages – thanks for that. Willing to be corrected there. (Born of ignorance – and not taking enough time – rather than an intent to deceive).
But surely you of all people agree with me that appealing to China as a model for the UK economy is sheer, dictator-apologising insanity of the worst order?
And as for the Adam Smith point: i completely agree. My point is that J Ross can’t be absolved from the charge of apologising for tyrany and dictatorship by simply waving the figure of poverty reduction at us (which, again, has nothing to do with UK growth). Yes, poverty reduction is a good thing. But how it’s achieved – and what we say about the regimes that achieve it – matters too.
Paul Sagar said,
January 31, 2010 at 2:12 pm
John,
Re Hitler vs Stalin: for most people it wasn’t much of a “choice”, was it? And why was it more sane to fight for Stalin? If you got captured by the Germans, then released at the end of the war, Stalin shot you or put you in a gulag.
And why no mention of the millions of Ukrainian kulaks Stalin liquidated?
And what on earth has 1941 got to do with China in 2010?
As for “Scandinavia with teeth”, that’s just nonsenese. Scandinavian economies consist of relatively small numbers of people in the national population, with high levels of personal taxation and government spending and welfare provision, but fairly de-regulated private sectors freed from state interference. There is just no sensible analogy with China, where there exists no proper contract law, the state part-owns all major industries, and can arbitrarily intervene in private economic affairs completely at will, imprisoning or executing those who dissent.
Oh, and China is industrialising, whereas the Scandinavian nations are well and truly industrialised.
And you can keep bandying about the absolute poverty reduction figure – but it hardly touches my main points against you.
As for your not taking any pay from the Chinese state, am I to understand that you work for free in Shanghai? Perhaps the bon homie and pure air of the Chinese sustains you. Or maybe you’ve got savings left from your £100K+ pay-packet from Ken. Who knows.
But if you tell us your hands are clean, I’m sure we must believe you.
Paul Sagar said,
January 31, 2010 at 2:17 pm
“But then t’was ever thus wasn’t it? ”
In China, yes.
But isn’t that another reason why nobody should cite that place approvingly?
Tim Worstall said,
January 31, 2010 at 3:23 pm
“But surely you of all people agree with me that appealing to China as a model for the UK economy is sheer, dictator-apologising insanity of the worst order?”
It’s certainly some of those words, yes.
I did note in the G piece that you linked to though that Ross is at least very clear (and correct) on how the division of labour, imports and exports, do work and how import substitution doesn’t.
I have to admit to an ambivalence here. A good 70% of what J. Ross is saying about economics here is simply straight liberal ( not even neo-liberal) stuff about how to encourage growth. 30% is nonsense, entirely belied by the facts (not theory!). For example, socialisation of investment. The point about China’s growth is that almost all of it has come from outside any plan or any government investment. The old plan, the old rust belt industries, where the State does control investment, have lagged very badly behind the areas where, as you point out, there’s not really any rule of law let alone any othet State involvement.
As to your other issues: the Gulag, the slave labour, the absence of civil liberties (although they are growing of course) etc. Yes, but those are very diferent from the economics…..it’s entirely possible to study growth, appreciate the reason s for growth, even attempt to emulate them, without desiring the political of civil structure that surrounds it.
I’m entirely willing to say that many of Pinochet’s economic policies were not just workable but entirely desirable. Doesn’t stop me arguing that torturing people in hte soccer stadium is vile.
John Ross said,
January 31, 2010 at 4:17 pm
Paul,
Well if you believe people should not have fought on the side of the USSR under Stalin against Germany under Hitler, or maybe even it was better/more rational to have fought on Hitler’s side, which appears to be your argument (‘If you got captured by the Germans, then released at the end of the war, Stalin shot you or put you in a gulag’) then we really do have a much bigger difference. I really think most people in the world won’t agree with you – more importantly you are wrong.
The relevance of this point is simple. As I said most people only have the choice between the bad and the better, not between the bad and the perfect. In China 620 million people were lifted (the better) out of poverty (the bad). That is a gigantic contribution to human welfare – indeed one of the biggest, possibly the biggest, made in the world in the last thirty years. The reason you don’t want to discuss this is because discussing it creates proportion in the argument. The issue is whether the general progress of China has added to or subtracted from human welfare – that is the criteria for judging it. And the answer is it has hugely contributed to – precisely because of the 620 million people (10 times the population of the UK, bigger than the entire population of Western Europe) you apparently don’t want to discuss. It is not necessary to believe China is even remotely a perfect society (I don’t) to recognise that progress.
As for my salary, which evidently I am paid together with literally thousands of other foreign academics in China, that no more invalidates my arguments than the arguments of literally hundreds of thousands of academics in Europe and the US who support the policies of their governments are invalidated by the fact that they are paid by the latter. I reply to their arguments, not accuse them of being hired agents of the government that invaded Iraq (for example) – because it is an elementary rule of thought that the reason why someone puts forward an argument does not invalidate an argument itself. Even if someone were a ‘hired agent of the US government’ their argument in favour of the invasion of Iraq might still be right. The fact that it is wrong is not because they are or are not paid by the US, it is because the invasion of Iraq was wrong. But I learnt a long time ago that if someone insults you it is because they can’t reply to your arguments so I have no intention of replying in kind or returning to the matter.
The economic argument I was making, to repeat, is that as Keynes said it is necessary to create ‘‘a somewhat comprehensive socialisation of investment’. That is not the same as the administrative direction of investment – which is what Tim points to. It is setting macro-targets for investment and letting its precise allocation be determined by the banking system and companies. That is what China achieved and why it has grown rapidly including during the financial crisis. Other countries haven’t and that is why they have suffered very large recessions in the financial crisis. Tim and Paul may disagree with Keynes’ point. I agree with it.
The idea that to have ‘a somewhat comprehensive socialisation of investment’ it is necessary to have the gulag, or to suggest anyone in this discussion supports either it or Pinochet, is just a lie. It is, of course, the typical neo-liberal argument against socialism that the role of the state in the economy necessarily suppresses liberty and therefore it is necessary to have a private sector based economy. That isn’t true either.
John Ross said,
January 31, 2010 at 7:08 pm
PS.
I have just seen Paul’s update. I did not say what Nick Cohen claims I said in 1991 and my ‘forecast’ was summed up in the articles I wrote at the time explaining that the economic reform in China would be successful and shock therapy in Russia would be a disastrous failure. This was against the majority wisdom of the time which said that shock therapy in Russia would be a success and China would be a failure – 19 years later that forecast stands up very well on two of the most important developments in the world economy. At the time. I was also writing, again against majority opinion, that British membership of the ERM would be a disaster, which it duly was – this was probably the biggest economic issue prior to the election of the Labour government. If Paul wants to read my analysis of the economic basis of the decline of the Tory vote, written at the height of Thatcher’s electoral success in 1983 and foreshadowing the Tory catastrophe in the 1990s, and describing a process still taking place, he can also find that. I could add a lot of other issues which were dealt with in Socialist Economic Bulletinso I am quite content to rest on my economic forecasting record. Paul, who is trying to have a serious discussion, should not repeat things without checking them. He may well disagree but it does not aid a serious discussion to repeat things which are not true and to accept Nick Cohen (!) as a serious source.
donpaskini said,
February 2, 2010 at 12:29 am
Hi Paul,
I am closer to your position on this than John’s, but I think the tone of this debate is unhelpful. You’ve written in the past about how the left is clueless about economics and we should spend more time learning about what works – whether he is right on this specific issue or not, John is someone who does know a lot about economics and his ideas are worth engaging with rather than denouncing. Specifically, do you have a more reliable source than Nick Cohen for the “update” section – if not then I think that’s worth a correction.
On the substantive, I guess one question is whether “socialisation of investment” requires the suppression of civil and political rights.
John – I’d be interested in your response to the rather compelling point that jamie made over at Liberal Conspiracy:
“There’s another point here: namely that China has very little in the way of welfare: pretty much everything – health, higher education – is pay as you go and insurance markets are either rudimentary or nonexistant. It’s this that helps drive China’s enormous savings rates, which in turn provide the money the government can use for domestic infrastructure projects, investing overseas and buying up US debt.
There was talk last year about the establishment of some kind of NHS/single payer system in China precisely to free up savings for more domestic consumption. As it happened, the government decided to direct its stimulus programme to capacity building against the day when US and Western markets would recover.
So firstly, Ken LIvingstone and John Ross are proposing an alternative model that socializes most risk to the poorest sections of Chinese society in order to create the state-led investment model that they like so much. And secondly, this isn’t an alternative model at all, since it’s still designed largely to facilitate exports and inward investment: as such it’s entirley complementary to the finance-led economy of the US and other western countries.”
Paul Sagar said,
February 2, 2010 at 9:58 am
Dan,
John may know a lot about economics.
But he appears to have a deep and vested interest in deploying the example of China to push far more than just technical economic lessons.
I’m all for the left learning about economics. But I’m also very much for the left maintaining a commitment to democracy, rule of law, and human rights.
I think it’s clear from the above exchange that John is not interested in these things, at all. There are plenty more economists out there to learn from – and most of them aren’t in the game of apologising for tyrany.
Tom N said,
February 2, 2010 at 2:52 pm
‘Yes, but those are very different from the economics…..it’s entirely possible to study growth, appreciate the reason s for growth, even attempt to emulate them, without desiring the political of civil structure that surrounds it.’
Spot on. Keynesians of any stripe love to talk about China. The difference between the economies is profound but there is talk to be had about massive infrastructure projects in Britain (new high speed rail networks etc.).. Since you don’t mind the deficit ballooning even more, I’m surprised you’re not in favour of it.
Other things:
First, ‘totalitarian’ in an inaccurate and unhelpful term for the Chinese regime. The crucial move China has made since Mao’s death is from an insane totalitarian personal dictatorship to a highly authoritarian clique one. Given how much better China is doing now, this is no small thing. The most wild excesses have been curbed. Repressive retrenchment phases that can last for half decades aside, the general direction of travel is positive. I admit it’s a different story in the ‘autonomous’ regions.
Chinese citizens now enjoy a genuine private sphere and one that is expanding all the time. Look at Burma and North Korea for places where the term totalitarian is accurate and useful.
It’s already been pointed out that the nominal wages you mentioned take no account of purchasing power, which is the key. To put it in perspective, an urban migrant worker earns about 1000-1500Y a month. They are housed in spartan, purpose-built, onsite dormitories, so no living costs. Many get food included too. You can buy a hot, steaming bowl of noodles for 5-10Y, which is also the price of the average Shanghai metro fare. Outside the biggest cities the money goes a lot further too. Most are able to send half to two thirds of their wages home to their families in the countryside, where genuine poverty is much more wide spread. Chinese wages are rising and living costs in the big cities are shooting up. Genuine poverty is now primarily an rural phenomenon and one that is receding as China industrialises.
Also, simple Marx. Wages are lower at least in part because of a billion strong reserve army willing to work for them.
I think it’s unquestionable that the number of people lifted out of poverty is unprecedented and a good thing to be praised. Any regime that has presided over it deserves some credit for it. The more interesting challenge is the counter factual. Could it have been achieved earlier and in a more humane fashion? Taiwan and Hong Kong are embodied rebukes to the CCP. It will be a very long time before the average Chinese citizen enjoys anything close to what is available there.
‘As for your not taking any pay from the Chinese state, am I to understand that you work for free in Shanghai?’ Childish ad hominems Paul. Maybe you’re right and John Ross is one those creepy power worshippers (they do exist) but why not behave as if the case is separate from the person who makes it. Again, how can you throw around such accusations and then say that PMQs is juvenile when they do exactly the same thing?
Paul Sagar said,
February 2, 2010 at 3:07 pm
Hang on, Thomas Nunn – the libertarian – is singing the praises of China and siding against me with somebody who is an avowed Marxist and is advocating the increased scale of the states intervention and presence in the UK economy?
Eh?
As for “Again, how can you throw around such accusations and then say that PMQs is juvenile when they do exactly the same thing?”
well firstly I’m not the prime minister, secondly bad conscience is not the national legislature and thirdly because this isn’t an idle ad hom attack: if Ross has a vested material interest in defending China then that matters to the debate.
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February 2, 2010 at 5:05 pm
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Tom N said,
February 3, 2010 at 1:41 pm
Yep it’s a funny old world,
Living and working in China gives you a more close up perspective. I’m not sure how pointing out inadequacies in a characterisation is defending human rights abuse in China.
I don’t know this John Ross character – I doubt we’d see eye-to-eye if he worked for Livingston, but much of his economic description of China is accurate as is his praise for the rise of millions of Chinese from poverty.
It’s easier to be generally criticial of the things that go on here when you get your facts and descriptions right. Let’s keep ‘totalitarian’ as a meaningful word.
Rising living standards didn’t have to happen. They did. It’s a good thing. It was managed by members of the CCP. The pace of the transition was managed well and meant that China didn’t have a traumatic ‘shock’ change, a la Russia circa 1991. This is good. This doesn’t absolve the leaders from criticism in other contexts. Is this really so controversial?
As for the ad hominems, no this isn’t PMQs. But it’s a bit hypocritical to decry debate involving false dichotomies, name calling, and constant claims of hidden agendas in one arena and then do the same thing on a blog where you can actually ensure that they don’t happen, especially in your own posts.
Is it really automatically ‘he who pays the piper calls the tune’? I’ll remember that next time you praise Labour for its support of trade unions.
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