Sunday, July 29, 2012

Against the Invisible-Hand Only If It Gets Us Contracts


Zheng Yangpeng and Lu Yanyu  write in China Daily HERE 
On right track for growth model change”
“In an interview with China Daily, Aeroe - whose organization is tasked with helping small business in developing and transition-economy countries - said the Chinese government's very visible hand on the economy, is working better than the international market's often invisible, more natural influences in helping companies here build their competitiveness around the world, and change their image.

"In my opinion, there is no invisible hand (in an economy).

"It doesn't exist. For a well-functioning market, it is amazing how many intelligent policies are needed," Aeroe said.

He said that the government's tackling of issues "simultaneously from industrial development to education to infrastructure to urbanization" has been well planned and delivered, and in contrast to many Western economies, China's evolution is being handled with "long-term vision" in mind, not short-term gain.”
Comment
When I read this post earlier today, I thought that the challenge to the myth of the “invisible hand” had reached mainland China.  This would be good news, but my rising euphoria was quickly tempered by reading and noting who said this and what his reasoning may be.
But after several visits to China, Anders Aeroe - a senior director of the World Trade Organization-linked International Trade Centre - says that he thinks the country remains firmly on track to successfully transform its manufacturing-led growth model of the past 20 to 30 years, into a more sophisticated economy, led by innovation and services.


In an interview with China Daily, Aeroe - whose organization is tasked with helping small business in developing and transition-economy countries - said the Chinese government's very visible hand on the economy, is working better than the international market's often invisible, more natural influences in helping companies here build their competitiveness around the world, and change their image.”
Comment
Call me cynical but can you spot what caused my excitement to cool?   Look at the clues:
Touting for business in China is not easy.  Especially when you represent a “organization … tasked with helping small business in developing and transition-economy countries”.
Yes, he’s selling consultancy services to small businesses to help them in “developing and transition economies”, which is almost a perfect fit China –  a “transition-economy” country if ever there was one.  And one that has a state bureaucracy, via its national and regional power centres, “tasked” by the political regime to carry out that transition.
The interview in China Daily is a PR job.  Bureaucrats reading the piece, if they are unaware of Anders Aeroe’s visit, may seek him out, as might small ambitious business enquire of the echelons of the State with which they are familiar.
Anders Aeroe covers a political requirement – not mandatory but always helpful – he does not criticize anybody.  He also praises what China is doing, hence does not threaten regime solidarity:
He said that the government's tackling of issues simultaneously from industrial development to education to infrastructure to urbanization "has been well planned and delivered, and in contrast to many Western economies, China's evolution is being handled with "long-term vision" in mind, not short-term gain.
 He said the "interplay between politics and economics" in China has played a hugely beneficial part in changing that business and economic model, and also reported that during his tour of the country he was enormously impressed by the number and standard of business graduates from universities.
 "The interplay ... has certain advantages and allows China to do certain things and help it move faster on its development path, which I don't think has been seen in any places elsewhere in history," he said.”
Now if that does not get him a banquet or two he is not trying.  I am Aeroe does know what he is doing; after all he “heads the ITC's key market development division”,  for which China is a clear priority target, and he has to be good at his job to hold that portfolio.
It seems we shall have to wait a little longer for the penny to drop in China that there is no “invisible hand” in a market economy in China or anywhere else; it is a fiction pushed by economists sympathetic to bigger business when we were under threat from Soviet Russia, as you once were too, to win over our State bureaucrats in market economies to the importance of leaving the market to bigger businesses.  In China the story is inverted: use our business special skills to improve what your bureaucrats are doing without an “invisible hand”.

2 Comments:

Blogger airth10 said...

Anders Aeroe is on the right track, working in his own self-interest.

Sure, China is doing great. But we shouldn't forget that its economic greatness is due and based on techniques and methods developed in the West. China has adopted the capitalistic and free market principles of the West, not a system that is specifically unique to the Chinese character. Moreover, China has had to become enmeshed with the West in order to succeed and grow. The hidden hand of China has been, If you can't beat them, join them.

One thing the Chinese excel in is disciple and central planning, things that are often lacking in Western economies. But as the Chinese economy matures it will find the need to liberalize and give individuals a freer hand in order to maintain growth, renew and remain sustainable, just like in the West.

Adam Smith's invisible hand was about an insecurity. An insecurity exists amongst the Chinese people. That is why they have one of the highest personal savings rates in the world. That money that will need some cajoling to be spent in order to keep the economy growing.

2:23 p.m.  
Blogger airth10 said...

"Against the Invisible-Hand Only If It Gets Us Contracts"

That is a curious title. Adam Smith wrote that the invisible hand had to do with businesspeople having a bias for investing in domestic industries and its unintended consequences. How, then, does that title mesh with what Smith wrote?

I guess it means that a businessperson is going to ignore his/her bias for domestic industry and succumb to neoliberalism when there is a profit to be made elsewhere.

The old invisible hand was about insecurity. The new invisible hand seems to be about taking risks and initiatives.

5:53 p.m.  

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