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”.