Myths of US Academics about Chinese Economy
This entry was posted on 12/6/2007 9:33 AM and is filed under uncategorized.
I read an editorial in a Indian newspaper about a symposium at Harvard. The writer summarized some of the pertaining views about China's reform presented by a Professor Gallagher of Michigan. I have not read Prof Gallagher's paper but the summary makes for a good method of presenting some of the myths and realities about China perpetuated by US academics. The greatest myth is that the economy will keep growing. When was the last time you heard that? Does Dot.com revolution will put an end of business cycles ring a bell? All economies suffer recessions.
According to the editorialist Ms Gallagher's analysis fits well with a standard story of reform and how the Communist government managed the process of change. These are presented as myths followed by the reality.
Myth: The Chinese government centralized through the Communist Party apparatus.
Reality: China has a real problem with command and control. Each province is politically and fiscally semi independent
Myth: Reforms were sequenced to insulate potential losers until late in the game, until the winners from reform could build influence.
Reality: The GINI coefficient shows that China is becoming one of the most unequal societies in the world. There are over a hundred million migrants who do not have any security net and often do not get paid. The only way that China created winners was to open its markets.
Myth: In some cases, potential losers were converted to eventual winners, as growth created fruits that could be spread around.
Reality: There are no winners because everyone is being poisoned by pollution. Most of the water used for crops is poisoned as are the plants. Most of the cities are polluted. In Guangdong province there is a labor shortage because 25% of the workers have been killed or injured.
Myth: Political will and foresight played an important role in shaping this successful transition.
Reality: The only political will was to do anything to enrich party members and insure control. They encouraged foreign companies to build an export machine because, unlike local private companies, they were not a political risk. The party has preserved most of the domestic economy for state owned companies. Foreign companies are actively discouraged when they compete directly with state owned companies in the domestic markets.
