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Wednesday, September 24, 2003

How Backward is China Today? An Exchange with a Visitor

A visitor, Gordon Silliker, has left us the following comment, all the more interesting because it's based on first-hand observations in China. The buggy response follows.

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.


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

More generally, 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.


The Central Dilemma

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 logic of political authoritarianism, rampant corruption and power-hogging on one side, with all the political alienation and social discontent it has bred . . . along with a top-heavy, stifling administrative control over Chinese life in almost all aspects except for some of the private parts of the economy,

---2) and 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 . . . all of which would require vast changes in the role of the state in Chinese life, the hold of the CP on it, and the political-administrative smothering of initiative, decision-making, and innovation in the economy and society.

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 in the article on this published September 23rd. And note too that there will be a lengthy follow-up article on the Chinese economy's prospects --- already posted on the Brad DeLong site two days ago --- that I'll update and publish here when I get a chance: tonight or tomorrow at the latest.