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Tuesday, September 23, 2003

WILL PACIFIC ASIA OVERTAKE THE WEST IN WEALTH? WILL CHINA BECOME AN ECONOMIC SUPER-POWER? Final Version

On Brad DeLong's web site , DeLong --- a talented UC Berkeley economic historian who uses his historical work to illuminate contemporary economic trends, problems, and policies --- posted the following brief paragraph about Pacific Asia, China, and the West and their comparative economic futures, then invited responses. Always happy to offer his two-cents' worth on any topic --- well, almost any --- the buggy prof unfurled two lengthy sets of comments by way of reply . . . both generally critical of the claims in that DeLong paragraph. You'll find the first buggy set here: essentially, a lengthy critical answer in the negative to the two questions enshrined in the title of this article here.

First, The DeLong Post:

"The Asian Century" Martin Wolf looks forward to the Asian Century:

FT.com Home US (the Financial Times of London): "Asia's rise is the economic event of our age. Should it proceed as it has over the last few decades, it will bring the two centuries of global domination by Europe and, subsequently, its giant North American offshoot to an end. Japan was but the harbinger of an Asian future. The country has proved too small and inward-looking to transform the world. What follows it - China, above all - will prove neither... "






INTRODUCTORY COMMENT

There seem to be two issues raised by the Martin Wolf argument . . . to the extent anyway that Brad DeLong's brief summary of it can be grasped. (Note the qualifier here: The Financial Times itself, alas, won't allow those who aren't paid subscribers to see it without payment.) One issue is what will happen to Pacific Asia --- presumably the region Wolf is referring to, rather than Central Asia or the Indian Sub-Continent or the Near East as it used to be called: Iran and the Levant. The other is whether China itself will become an economic giant --- dynamic, technologically advanced, and rich like the European Union and North America.

I. ASIA'S INEXORABLE MARCH TO OVERTAKEN THE WEST?

1) Deja Vu?

Remember how claims about the inexorable rise of Pacific Asia, especially in the sense of its displacing West Europe and North America as the strongholds of the world economy, were once rife in the media throughout the late 1980s and early 1990s . . . only to die down after the major financial meltdown of Pacific Asia after mid-1997 and the very erratic economic growth of the countries in the region, whether in North and Southeast Asia, ever since? Martin Wolf, it now seems, has now revived the claims . . . dubiously so. That doesn't mean that economic growth, now more or less institutionalized in Pacific Asia, won't continue way into the future. It does probably mean that the growth will continue erratically, and at lower levels than in the decades before 1997. See the Asian Development Bank's figures. Note that since Japan, a rich developed country, isn't included in the ASD stats here, you'll be able to view its dismal economic performance here at the World Bank.



2) The Underlying Causes of Pacific Asia's Problems

The main reason for Pacific Asia's slowdown in growth and up-and-down growth since mid-1997: the financial and currency crisis underscored how tenaciously rooted and far-ranging the countries' institutional problems in the region happen to be --- legal, financial, business organizational, political, and administrative. This is a pivotal point. It deserves to be repeated and blazed with light.

The chief causes of the Asian crisis weren't just a transitional financial shock; they were also institutional, structural, and cultural. Since 1997, moreover --- with the big reform of South Korea's financial system a notable exception --- few of the serious legal, administrative, and economic deficiencies have been tackled with vigor anywhere. True, some policy changes have been undertaken; but not critical ones --- including the lopsided reliance on export-led growth . . . with its heavy dependence on the health of the American economy and continued export drive to it. (Between 1997 and the end of 1998, the US --- which imports three times more in Asian manufactured products on a per capita basis than the EU (and even more than that for Japan) --- found its current account deficit with Pacific Asia (and the rest of the world), close to $110 billion in 1997, soared 60% the next year, and then by about 70% in 1999. See the Bureau of Economic tables for the balance of payments.



3) Can the Pacific Asian Region Continue To Rely Mainly on Export-Led Growth to the US?

All told, up to now, central banks in North- and Southeast Asia have accumulated an astonishing $1.3 trillion in foreign reserves --- more than half the total in the world. In the last three years alone, the pace of buying dollars with the various countries' own currencies has surged to near-frantic levels . . . Chinese and Japanese central banks (and finance ministries) buying up to $300 million each daily over the last year alone. The aim, of course, is to keep their own currencies under-valued in dollar terms, and hence to keep the export-spigot --- especially into the fast-growing US economy --- open without halt.

In the process, of course, the Asian central banks don't keep the accumulated dollars under their mattresses. They re-invest them abroad, overwhelmingly in US Treasury securities, and hence help to keep interest rates lower here than otherwise. Still, despite mutual benefits so far, this pile-up of protectionist backlashes in the US --- at a time of stubborn resistance in US business to create new jobs, what with the higher levels of productivity that allow them to continue to keep margins and profits going (at least for the time being) --- has accelerated, especially in response to the Chinese export deluge here . . . over $120 billion worth at an annual clip this year, the trade imbalance with the US scheduled to be, after subtracting $16 billion of US exports to China, around $105 billion. Most of it, moreover, is concentrated heavily in a few industries. In the process, China's one-sided trade with the US has now noticeably overtaken the historic trade deficit the US has run with Japan for over 25 years now. [See the charts in The Economist]

What will likely happen in the near future?

Current trends are unlikely to persist for years and years into the future. True, to repeat, so far there's been mutual benefit for the US economy in re-invested dollar inflows from Asia as Asian countries keep their currencies under-valued and export like mad to the US. The problem is the markedly lopsided nature of the world economy at present . . . with the US economy alone accounting, astonishingly, for 60% of the world's total GDP growth since 1995, and yet the percentage American share of the world economy is less than half that. (See the revealing chart in The Economist Note how Japan's economy has been a negative drag on world economic growth in this period, and the EU's contribution puny, around 10% vs. the US's 60% contribution.) At some point, to deal with the world economy's imbalance --- excessive reliance on the US economy for growth, a dollar over-valuation, blatant Asian under-valued currencies, and a rapidly growing US current account (liable to be $500 billion this year, a startling 5% of GDP) that is unlikely to be sustained for many more years --- current trends will have to change.

When big changes will occur, though, is anybody's guess. About all one can hope --- something of a prediction --- a decline in the dollar's value of around 25 - 50% will, in a very plausible scenario, repeat what happened when the dollar fell by a similar amount in the period between 1986 and 1993: American exports doubled, the current account balance turned briefly positive, no inflation was set off in the US, and economic growth actually accelerated in the EU and Japan, at any rate until 1992. (See the buggy prof article on this, published a few days ago: Should We Worry about the US Trade Deficit? See too a follow-up exchange with a visitor on this topic.)






3) A Big Exception

There is one exception to the poor institutional record in Pacific Asia, and strikingly it's political. Everywhere except in Malaysia and in the Communist countries of China, North Korea, and Indochina, political democracy either arose for the first time as in Indonesia or consolidated and improved in quality as in Taiwan, South Korea, the Philippines, and Thailand. It's an encouraging trend, no two ways about it --- and a credit to the peoples of the region. All the same, it hasn't led to any noticeable reforms of corporate governance, financial institutions, crony contacts between political and administrative elites and the business and financial worlds, and a more streamlined, transparent, and accountable system of doing business. On these scores, little has changed at all.



4) What Happened to the Japanese Century?

The fate of Japan's economy --- touted vigorously by the same people and others as late as 1993 or 1994 as a sure-fire bet slated to surpass the US economy in GDP by 2000, and in per capita income a decade later --- ought to be an object lesson here. For the last 12 years, it has compiled the worst economic record of an industrial country since the Great Depression. Industrial production has fallen off, for that matter, more than it did in the US during the Depression.

5) China's Century Now?

Of the Pacific Asian countries, only China has maintained consistent high-level GDP growth --- or so official GDP figures published by Beijing claim. Is the claim sound? Will China's economy emerge as a rival to the US's in economic flexibility, technological progress, and per capita income in the next three or four decades? The answer to this will be what the rest of these remarks will deal with.

 

II. CHINA'S INEXORABLE MARCH FORWARD? WHAT IN FACT HAS BEEN HAPPENING TO ECONOMIC GROWTH THERE?

1) Controversy About Chinese GDP statistics

Nobody knows what the actual rates of Chinese GDP growth have been since the post-Mao era of economic reform began in 1978.. Even before the noticeable slowdown after mid-1997, when the Asian currency and growth crisis erupted, the claims by Beijing that they had grown at an average 8.0 annually --- using official Chinese deflators for inflation --- between 1978 and 1995 were disputed by a variety of western specialists and international agencies. The World Bank's China 2020 --- an unusually well done team effort, advised by numerous academic experts --- put the annual growth rate as 6.8% over that 17 year period. (See p. 3, World Bank: 1997; a fuller explanation of the growth estimates along with a growth-accounting model is found in Annex 1, pp. 105-109).

The academic authors of the widely regarded Penn World Tables, which estimate the per capita income of various countries at purchasing power parity, went further. After closely examining Chinese national income statistics in the 1980s and early 1990s, they claimed that inflation-adjusted consumption growth in China after 1978 was continually overstated by 30% and investment growth by 40%. GDP growth was therefore much lower still than the World Bank's downward adjustment. Note though: some specialists find these large reductions persuasive; others don't; and China 2020 calls them "somewhat arbitrary" and overdone.

 

2) The Controversy Has Grown More Acute

Nor is that the end of the dispute. Trying to arrive at an accurate view of Chinese GDP growth since mid-1997, when the Asian financial meltdown occurred and price deflation began in China, is even more problematic.

To go as far as Thomas Rawksi --- a well-known specialist at Pittsburgh, who noted that there has been price deflation under way since 1997 and probed carefully the input side of the Chinese economy (use of energy, raw materials and the like), to arrive at a conclusion that the economy has hardly had real growth since 1997 --- is probably to go too far. (See his impressive analysis, 2001, based on first-hand observations in China.) Still, even the then head of the government --- Zhu Rongji, regarded as a technocrat mainly concerned with economic growth and efficiency --- complained in March 2000 that "falsification and exaggeration are rampant" in the official national income statistics. A Chinese commentator at roughly the same time referred to a "wind of falsification and embellishment". To arrive at more accurate figures, the official statistical agency in Beijing --- disgusted with the information it was getting from governmental and Communist officials in thousands of localities around the country ---- tried to set up its own local sources.

That was in 1998. The task proved impossible, and to no one's surprise. How could you send a few hundred honest statisticians from Beijing to those thousands of localities, with millions of enterprises (state, collective-owned, and private) operating, and effectively monitor what an economy for 1.3 billion people was actually doing?

 

3) The Pressing Need for Major Reforms If Growth Is To Be Sustained.

There are at least five major hurdles that the Chinese economy has to overcome to even draw near the US in overall GDP within two or three decades, never mind a per capita income gap --- right now on the order of about 7.0:1 (in purchasing power terms, even using official GDP figures) --- that would still only be on the order of about 15-20% of the American. Never mind any technological gaps:

An inevitable slow-down in growth, in the absence of major technological progress --- something that will be hard for the Chinese to achieve unless there are major changes in economic, financial, and political institutions.

Irrespective of technological progress, a big technological gap with the US is likely to persist that won't be easily overcome, if ever,

Acute allocative problems as between investment, infra-structure, social programs, environmental protection, and military capabilities, with the problems growing worse since 1997 . . . much worse.

Most important of all, ever pressing questions as economic development unfolds of the country's overall political stability and governmental effectiveness . . . with a highly charged conflict built into China's developmental course that pits ongoing Communist Party monopoly against the sweeping decentralization and market-openings that will be increasingly essential if China is ever to become an advanced industrial and knowledge-based economy. Nor is that all. As we'll see, since the end of 1978---when economic reform began, initiating fast growth---the Chinese government has followed what's essentially an

"An easy-to-hard" reform sequence . . . with almost all the real difficult reforms delayed until recently and, worse, with Zhu Rongji's determined efforts starting in late 1997 to tackle some of these hard reforms quickly running into a wall of political and bureaucratic resistance, forcing slowdowns and serious tactical retreats. This includes a shaky financial system --- state banks, and the bankrupt state-enterprises that together have a huge bad-debt problem on the order of $1.6 trillion or so (according to one Wolfe estimate) --- that remains so shaky the IMF has warned the Beijing government not to accede to US pressures to let the Yen appreciate, on the grounds that the Chinese financial system could collapse in the process.

Bluntly put , all the difficult reforms --- barely tackled since 1997 --- remain to be done. Will WTO membership accelerate the pace? Yes, likely . . . but at a price: more social tensions, protests, and alienation . . . which leads us to the next set of observations:

 

III. BIG OBSTACLES TO REFORM: SOCIAL PROBLEMS, UNEMPLOYMENT, CORRUPTION, AND POLITICAL ALIENATION IN CHINA: THE OBSTACLES TO PUSHING THROUGH THE DIFFICULT REFORMS

1) Joblessness:

Though the Chinese government claims there is unemployment of around 1.5 2.0% of the work force --- 14 million --- nobody, not even the CP heads, takes these figures seriously. Why otherwise would Hu Jintao have urged the government, "at all levels," to give priority to create jobs and find ways to ensure the livelihood of "millions of unemployed." What might be the actual unemployment rate? We know that tens of millions of former employees in the state-enterprise sector --- roughly 120 million in 1997, just before the Asian financial crunch (and a marked slowdown of economic growth in Asia everywhere, no doubt in China too whatever official GDP figures say) --- have lost their jobs as the CP has pushed ahead to prune that bankrupt sector . . . which remains bankrupt anyway, gobbling up the huge savings of the Chinese people. Some western specialists like Charles Wolf of the Rand Corporation --- who has been tracking Asian and specifically the Chinese economies for decades --- find that the figure is around 20% (or more) --- about 170 million people, none of whom have a social security safety net. A good number of these, probably about 100 million, wander in and out of cities looking for casual work: badly exploited, they are lucky to find it.

2) Social Unrest:

Even in the best-ordered of Communist societies, ordinary people will --- unless they're immediately executed or sent off to something like Stalin's Gulgag (which swallowed up millions and probably tens of millions) or attacked and tortured by Mao's Red Guards --- find ways to fight back against their oppressors. Strikes, mass protests, violent attacks on tax collectors are common affairs, especially in the urban rust areas of the North or in the impoverished regions in the countryside.

3) The Political Fall-out of All This? An Emerging Political Crisis?

(i) In particular, the claim to be building a socialist society---trumpeted as a "socialist market economy" in 1992, as more doses of capitalism were initiated into Chinese life---rings hollow in most Chinese ears, something the party itself admitted in an extraordinary document made public in the early summer of 2001 --- and the rapid growth in economic inequality and the obvious corruption and influence-peddling that mark both government and military behavior leave essentially nationalism as the main means to mobilize popular discontent. Several public opinion surveys authorized by the party have underscored the growing alienation of the public.

In 2000, one such survey found that only 35% of the population approved of China's current condition, and the grievances listed by the rest involved mainly rampant corruption, growing inequality, and rapidly worsening inequality. Discontent with China's current leadership and policies was also reflected in a survey that probed the views of mid-level government officials in 2000. In 1998, only 12% thought that the pace of economic reform was either too pokey or had ground to a halt; in 1999, the corresponding figure had grown to 28%; by 2000 it had jumped to 40%. Simultaneously, 44% of these same officials insisted that political reform had emerged as the most important issue facing the country.

(ii) Overall, the prevailing attitudes of China's population and officialdom reflect a growing view that the political system was dysfunctional, braking necessary reforms while degenerating into an engine of self-serving interests on the part of CP members, the military officer corps, and the top bureaucrats in the country. Did the party leadership care? Apparently so. A surprisingly frank report published by the CP' inner sanctum in June of 2001 showed this. For the reasons just mentioned --- runaway corruption and nepotism, rigid authoritarianism, and economic worries, plus rising concerns with crime --- a sense of mass alienation among the Chinese people was said to be rapidly spreading everywhere; and even more worrying, more and more of the mass population was found to caught up "in the grip of a spreading pattern of collective protests and group incidents"---religious, ethnic, and social in nature,.

Why did the CCP made the astonishing report public?. Nobody really knows. Most likely, it had to do with the much awaited leadership transition in 2002: Jiang Zemin would probably retire that year, and the closer his retirement, party infighting in the run-up was bound to pick up in pace. And of course, that is what Jiang did. He retired, his place taken by his close hand-picked associate, Hu Jintao.

 

IV. ALL OF WHICH LEADS TO THE CORE QUESTION:

Assume that no outright political crisis itself materializes. Even so, will the CP leadership be able to overcome the resistance, alienation, and protest-potential of the Chinese masses on one side --- and within its own CP ranks on the other --- and then push through the following measures? It's doubtful.

1) Reform itself and the top-heavy governmental and administrative systems.

2) Implement a rule-of-law, reduce and hem-in pervasive corruption, and overcome the cynicism of the Chinese masses.

3) Carry out the essential reforms of the economy and political systems, including vast decentralization and deregulation and freedom, the outcome of which will destroy the existing power, privilege, and --- thanks to rampant corruption and nepotism --- huge opportunities for wealth-making that the existing CP elite enjoys: less than 3% or so of the Chinese people.

4) Reform of the political system, remember, entails massive opening to the Chinese masses, most of whom feel alienated from the existing system and see the CP and the government as largely engines of self-advancement, self-aggrandizement, and self-enrichment. Has there ever been an entrenched elites of this sort that has carried out necessary reforms, political and economic and legal, that amount to political, economic, and legal suicide?

  Japan as a Comparison, and Warning

Even in the far more open, formally democratic Japan, the single-party dominance of politics by the Liberal Democratic Party --- about 50 years long now --- has been a major obstacle to carrying out the necessary institutional and policy changes to overcome the mountains of market inefficiencies and financial debt that plague the existing economy. China --- far less advanced, far more trammeled by incoherent policies, far more protected, regulated, and debt-ridden --- has an even more entrenched, cut-off elite . . . just as, even more than the leaders and backbenchers of the LDP in Japan, have been able to aggrandize power, prestige, privilege, and wealth for themselves on a vast scale, with corruption, nepotism, and various doses of repression, nationalist imagery, and a very uneven delivery of economic growth (benefitting about 50-60% of the population at best)used to continue their entrenched, highly manipulative control of Chinese life.

No doubt, too --- exactly like the LDP heads --- the CP heads would like simultaneously to make their country as rich as the US and as powerful, or even more so. Not though, it turns out, if it means a reform program that would undercut all their power, privileges, and wealth-orgies that now mark their leadership. Will it change in the future, this hold on power? And if it doesn't, what happens to the quest after China's grandeur and ability to rival the EU and the US economically and the US as a peer-competitor in power and influence on the global scene?



 

V. THE MOST LIKELY OUTCOME BY 2015: CHINA WILL STILL BE A RELATIVELY POOR COUNTRY COMPARED TO THE US

1) Updated Projections of Chinese Growth In the Light of These Reform Problems

Taking all these reform problems into account --- and the doubts about Chinese official GDP statistics --- probably the best up-to-date projections of Chinese GDP growth over the first two decades of the current century have been made by Charles Wolf of the Rand Corporation, a specialist on Asian economic growth, who has been tracking the economies of the Pacific region for over a decade. See Wolfe, Asian Economic Trends and Their Security Implications (Rand 2000), chapter 3, p. 14. In particular, his first projections of Chinese and other Asian countries' growth appeared in 1995, two years before the Asian financial crash. His revised projections took the crash and its subsequent developments carefully into account. The result?

First, Wolf projected GDP growth rates and final GDP down to 2015 at both nominal exchange rates and in purchasing power parity (PPP). Second, taking into account the uncertainties surrounding Chinese statistics and about the ability and will of the CCP to implement a comprehensive reform strategy, he then sets out two different growth paths for China: a low path with few market-oriented reforms, and another with ambitious and timely reforms. Specifically, Wolf's low growth path projects an average annual growth rate at 2.7%, the high one just about double that at 5.0%. The two-pronged approach here seems reasonable on the face of it. Is this too low? Well, even the World Bank's 1997 publication, China 2002 , noted that without steady and vigorous reforms --- not just economic, but social too --- China is likely in 2020 to be regarded as a failure, stuck in Sino-sclerosis. In the end --- systematically comparing the projected alternative growth-paths for China and its regional rivals --- Wolf estimated that the Chinese economy might double in GDP between 2000 and 2015 --- from $1.2 trillion to $2.5 trillion in nominal terms, about twice the size of India's GDP at that date . . . but only about a third of Japan's even with Japan growing at a likely mediocre rate in the interval. Remember, that's in nominal terms. What we're more interested in is purchasing power parity translations. The outcome here? In PPP terms, China's GDP might end up at either $8.5 trillion or $12.4 trillion. If the former, it will be about 2.5 times the size of Japan's economy, and possibly as much as 4 times bigger, with India not far from China's GDP at the low end, but only about half it at the high end.

 

2) The Conclusion: China's GDP Compared with the US's in 2015 - 2020?

Wolf's projected estimates don't deal with the US economy. A back-of-the-napkin projection isn't hard to make though.

In 2000, our GDP in chain-weighted 1996 dollars was $9.1 trillion. (Chained-weighted is how the Bureau of Economic Analysis deflates current GDP for inflation.) Thanks to major improvements in US productivity, our country's new long-term growth path seems to be around 3.5% annual growth. (See, for a more detailed explanation of this new improved growth, the buggy professor article, Prospects of the American Economy, Part II --- published in July this year.) At that rate, the US economy will also have nearly doubled in size from around $9.1 trillion in 2000 to around $18 - 19 trillion by 2015. The comparative outcome?

* If China's GDP reaches the high-level outcome in the Wolf estimates --- remember, by following a growth path increasingly marked by improved economic reforms of the difficult ones set out just a moment or two ago here --- it will reach $12.4 trillion and hence be about 2/3 the size of the US economy. In per capita terms, that means its population --- which will be about 4.5 times larger than the US's --- will be in the 12.0 - 15.0% range.

* That's the comparative outcome if systematic, challenging reforms are steadily implemented by the Chinese CP. If most of the reforms prove too dificult, conflict-laden, or elusive for other reasons, China's GDP will be around $8.5 trillion, less than half the US's, and its per capita income around 10.0% of the US level.

Either way, China will still be a comparatively poor country. Nor is that all Even China 2020, put out by the World Bank in 1997, estimates that even with most reforms undertaken, the Chinese economy's technological prowess will be more like that of Southeast Asian countries in that year, rather than South Korea's, Singapore's, or Taiwan's.

That doesn't mean that China won't be an increasingly big force in world trade and a country to be reckoned with. It does mean that the ballyhooed worries or projections about China's inexorable advance toward the status of an advanced, post-industrial knowledge-based country seem way overdone . . . at any rate over the next 15-20 years.

 

3) And Beyond 2020 --- say, 3 or 4 Decades Further On?

There's a good reason to halt such estimates about 15 - 20 years into the future. Beyond that, nobody can project into the haze of the future world in the decades down to mid-century with any reasonable claims that rise above science-fiction . . . not with the fast-paced changes in globalizing forces and constant technological innovation in an era of a knowledge-based economy, being driven by big radically restructuring advances in ICT, bio-tech, and increasingly in the near-future nano-tech. The latter, note, works at the molecular level of materials, and it promises to be the most radical technology of all time . . . at any rate, since the discovery of fire and the ability of some human communities 6,000 - 10,000 years ago to discover animal power, plows, and plant seeds to produce the agricultural revolution and eventually rising city-states and literacy. Nor is that all. Political change in authoritarian systems, including tightly controlled Communist ones, can erupt all at once in ways nobody can foresee: not even a few years before they collapse.

Consider an analogy: the Soviet state and empire at the height of the cold war.

Who in the early 1970s --- when the Soviet Communist leadership expected its country's economic advance to continue at a fast pace, closing the gap with an US that seemed mired in inflation, then stagflation, then pokey economic growth compared to West Europe and Japan, never mind the Soviet Union itself --- that in two decades, the Soviet Union would disappear as a state, the Communist system of rump-Russia destroyed, and 15 new independent countries evolve out of the defunct Soviet imperial state? Or that, globally, communism as a force in the world would itself peter out, with essentially only North Korea the last Stalinist outpost, and post-Maoist China itself caught up in an epochal economic upheaval, whose political outcome is still very uncertain?







 





Replies: 3 comments

Capitalism should be a fairly simple system and it should make it easy for all to be good. No matter how you look at it Globalism and Free Trade are not simple systems being based primarily on the survival of the fittest. It is not simpe and not easy to be good. The Far East is far from any orderly Capitalistic process. They have governments in control of the process with even the Chinese Army owing part of the largest shipping company in the world. In Japan, there are entities that would be illegal in the USA here controlling the flow of business. There are consortiums of companies that would be outright monopolies in this country. Now the new "ism" of Globalism has Capitalism lying in the same bed with Communism and Socialism. It does not care about the old "isms" Free Trade is not even trade as historically defined. Free Trade is moves production and outsources jobs based on the cheapest labor markets. When one gets too pushy for workers rights etc., the factories and jobs can be moved from place to place readily leaving behind a succession of burn out communities and societies. Capitalism becomes a series of manipulations by Governments acting as power brokers, trans national corporations with many larger than nations now, world entities like the WTO and the World Bank that operate outside of any real democratic process and outside the consent of workers. Capitalism should be an easy system where it builds up and adds value to local economies. It should allow the opportunity for any worker to make a sufficient living to pay for their daily needs and have a bit extra for others who are not as fortunate plus grow the common good in local environments. Capitalism should be based on a simple mark up from raw products up through 5 to 7 levels of value added stages up the retail levels adding lifelines to all up and down the line in term of decent incomes. Unfortunately, we now have a "lost leader" economy where the stock markets rewards growth no matter what with companie able to go on for years putting out other companies who have less money to survive until a market is captured. Then the survivor tries to plug in a decent margin or mark up only to find someone following them behind with sufficient funding to do to them what they did to others. The cycle is endless in Globalism. Back in the heyday of the Stock Market, some companies sold things for nothing to bring in cash just to take advantage of the Stock Market. The writer worked at several factories while going to college and found out how far is it from the factory floors to the business classroom. Most times they never meet. The made commodity being traded under Free Trade is workers who have to trade their human dignity for survival. They are put on a world trading block to compete with the lowest common denominator down to wage slave labor. You can have all the high sounding economic analysis but this is what it all come down to. For more information and thought proking social economic art that talks the issues see http://tapartnews.filetap.com http://tapsnewstory.filetap.com http://www.absolutearts.com/portfolios/a/arklineart

Posted by Tapart News Editor @ 10/09/2003 03:49 PM PST

Isn't everyone forgetting about India while talking about the Asian century? Agreed, India's growth is nowhere is near as spectacular as China's, but even so, growing at 6% is not bad at all, I'd say?

The WSJ had a story on the 25th about the prospects of the Indian economy.

Posted by Reuben Abraham @ 09/26/2003 01:07 AM PST

Having been to China as recently as last year, I think anyone who predicts China meeting or surpassing the wealth of the United States or Europe anytime in the next 50-100 years needs to get their head out of the books and go take a look. China is like a million square-mile Tijuana. It is poverty-stricken, dirty, shoddy, and crowded. If you go into the countryside there are scores of people who live the same as they did 300 years ago, except for a counterfeit Nike shirt and a baseball cap perhaps. The only way for China to become a wealthy nation will be for the billion or so Chinese people to do it for themselves, because there are just so many Chinese people, and they are so poor, that any concentrated government-led effort would never address the magnitude of the task that is making China rich.

THE BUGGY RESPONSE:

Thanks for the first-hand comments, Mr Silliker. They are matched by what others encounter, provided they travel other than to Hong Kong, the coastal booming cities of the southern coast, and Beijing.

For all the big epochal changes under way since 1978, they add up, it seems, to a very lopsided growth record. A few regions have flourished, most haven't; the countryside where over a third of the population still finds a livelihood has been badly neglected since the early 1980s; huge inequalities in income across social classes have occurred; unemployment is probably around 20%; the state-dominated enterprises in the northern rust-belt continue to gobble up Chinese savings, funneled by bad-debt ridden state banks, to stave off bankruptcy; the environment has suffered badly; and no social security safety net looks like emerging soon. Probably about half the Chinese population has gained, on balance, from the changes since 1978; and the other half either hasn't and been hurt. In the process, as the buggy article tries to show, the CP has transformed itself into a self-serving engine of corruption and wealth-grabbing on a vast scale, all the while clinging to its power and prestige as social tensions mount and political alienation proceeds apace.

At some point, China's prospects of ever becoming an advanced, post-industrial knowledge-based economy --- rich and technologically creative, with far more balance in its economic life --- hinge on a vast looming clash between, 1) the political authoritarianism and rampant corruption and power-hogging on one side, and 2) the logic of markets, decentralized decision-making, economic flexibility, a rule of law, and the ability to unleash the obvious energies and talents of the Chinese people.

So far, the emerging outcome of the clash looks like further trammeling the reforms needed --- including the CP's political suicide --- for the logic in 2) to succeed.

You might note that earlier today, I added some lengthy comments about Chinese-US economic projections down to 2015 - 2020.

Posted by Gordon Silliker @ 09/24/2003 04:10 PM PST