Tuesday, March 27, 2007

China's Social Experiments and The Velocity of Change

Peter A. Browne writes that ‘Capitalism causes sects in China’, on timesunion.com, 27 March:

“But 21st-century China is neither fish nor fowl; it is the world's fastest-growing economy, where capitalism seemingly has replaced socialism as the financial model with a zeal that would make Adam Smith proud. This has greatly raised Chinese living standards. But, in the process, it has created a tiered society; a growing middle class that has benefited enormously from the shift toward capitalism, and the largely rural poor who have been left behind.”

At precisely the time when Western Europe was awakening in the 15th century from a millennium of stagnation, following the fall of Rome, China was a fairly vibrant economy, well advanced in science and technology and on the eve of continuing through into innovation and application, when the Chinese political regime embarked on a self-destruct policy of cutting itself off from the rest of the world, abandoning expeditions to explore the continents overseas and curtailing economic development and trade.

The rest, as they say, became history. The maritime powers of Europe embarked on world explorations, improved primitive science and technology, began the shift from superstition within fractured religious orthodoxy, and slowly and gradually raised gross domestic products as revitalized trade spread across its lands.

By the time that the powerful trading nations and their colonies confronted mainland China in the 19th century, the gap between them was manifest, not just in naval power, but also in commerce, technology, basis science and active markets. China was stagnant, technically backward and not developing (noted by Smith in Wealth of Nations). In the mid-20th century, China added to its woes by embarking on a massive social experiment, under the influence of a minor European ideology for the proletariat, a version of Marxism, adopted to fit a peasant society by Mao and his communist party. It was as disastrous a 50-year social experiment as China's 500-year experiment adopted in the early 15th century.

The rapidity with which China has abandoned the Marxist faith almost hides the haste with which it has embraced market solutions, albeit within the bounds set by the Communist Party. The skylines of Shanghai, Guangdong, Beijing and dozens more testify to the surface transformations of a stagnant, state-run socialist economy into the most vibrant market economy on Earth, unprecedented in history.

But the speed, breathtaking as it is, raises serious concerns. The ‘largely rural poor who have been left behind’ are inevitable, for while no country needs to take as long as it took the original market powers in Europe to move from stagnant agriculture to markets, and then to industrial capitalism, there is limited scope for even China to do other than ‘leave behind’ vast segments of its population. Smith always used the phrase ‘slowly and gradually’ for all cross-societal changes because that is what happens, whatever the inclinations of commentators, analysts and forecasters to have everything change at once. Social change does not move at infinite velocity, neither do markets, despite what is expected from half-understood diagrams in price theory.

Peter Browne mentions that in 2006 there were ‘23,000 "mass incidents," which is bureaucratese for riots’ in rural China. My immediate reaction is ‘only that few’? People’s expectations of change may be low, but their anger at exclusion is easily provoked into impatience.

But I do not think that Smith would have been ‘proud’ at the ‘zeal’ of the Chinese communist party functionaries. He was always suspicious of changes promoted by legislators and princes, especially when guided by ‘men of system’ (the Chinese Communists leaders combine all three roles in one). Markets tend to devolve decision-making downwards, and while they are not dependent on secular democratic forms of government, they tend to be compatible with them, and, most important, people living in market economies are more comfortable with democracy than with authoritarian dictatorships (hence, authoritarian leaders – e.g., Malaysia and Singapore – dress their political support in ‘democratic’ clothes).

[Read the article at: http://www.timesunion.com/AspStories/


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