Round The World
New
Delhi, 29 October 2015
Learning From China
DO WHAT THEY DO, NOT WHAT
THEY SAY
By Salvatore Babones
The Chinese economy grew by a factor
of thirteen between 1980 and 2010. It is still growing by more than six per
cent per year. China
is justifiably proud of this accomplishment and Chinese economists might be
expected to claim some of the credit. They should be strutting across the
global policy stage alongside Chinese exporters and internet entrepreneurs,
offering sage insights to all comers.
The problem is that Chinese economists
have not formulated a distinctively Chinese approach to understanding growth
and development in their own country. As in post-communist Europe,
the old generation of Marxist economists was poorly equipped to handle the
transition to a market economy. Also as in Europe,
the new western trained generation answers all problems in free market terms. China's economy
is far from a free market terms.
At least half of all economic output
is in the State-owned sector, and probably much more. No one knows the real
number because Chinese State-owned enterprises are officially encouraged to
work through private “non-State” subsidiaries in which they retain majority
ownership.
Visitors to China are
confronted with a myriad of western brand names but entire industries are State
preserves, including banking and energy. Behind the familiar western shop
fronts are State-owned or State-related real estate developers and
infrastructure providers - plus a plethora of State officials to be bought or
bribed before real entrepreneurs can get down to business.
The universities where Chinese
economists work are also closely tied to local and national governments. They
are often more concerned with meeting government mandated objectives than with
producing knowledge as such. While it is easy to criticise the “ivory towers”
of western academia, insulation from government allows western professors to
pursue knowledge wherever it may lead.
Most Chinese professors make very
little money for their lecturing. Their main sources of income are publishing
and consulting. Chinese universities literally pay professors for each
publication, resulting in much waste as Chinese academics pursue publications
rather than the knowledge that is supposed to underlie publications. When they
are paid for consulting, they are expected to endorse government policy, not
challenge it.
Like many western universities, top
Chinese universities pursue one metric above all others: success in the Shanghai Jiao Tong University's Academic Ranking of World
Universities (ARWU). The ARWU is a quantitative ranking of universities based
on numbers of Nobel prize winners (excluding literature and peace) and numbers
of research citations in the sciences and social sciences (excluding the
humanities). The 3200 social science journals included in the ARWU rankings are
overwhelmingly published in English. Articles that achieve high citation counts
in the database are almost inevitably in English. And it should go without
saying that the country with the highest concentration of English-language,
highly-cited articles is the United
States.
Chinese economists thus come under strong
pressure - including direct financial pressure to publish in English in
SSCI-indexed journals. The easiest way to do that is to publish research that
focuses on the United States
or that applies American ideas to China. And the easiest way for
universities to find professors who can do this is to hire American-trained
PhDs. The result is that most Chinese economic analysis is literally “made in America” in the sense that the Chinese
economists doing the analyses have learned all of their economics in America - and
often even focus on American data in their research. Most Chinese economists
have little knowledge of or expertise in the study of mixed economies like China’s. But
American ideas don't always work for Chinese realities. When the 2008 financial
crisis caused a complete collapse in Chinese exports, the Chinese government
implemented the very un-American solution of massive public spending on
infrastructure.
The post-crisis expansion of the Beijing metro system made
the previous preparations for the 2008 Olympics look like a pregame warm-up.
Confronted with catastrophe, the government rightly threw theory out the window
and did what common sense dictated had to be done. Despite years of western
criticism that its Olympic building programme was a wasteful misallocation of
government resources, the government doubled down on infrastructure spending in
2009. The result was that China
did not suffer a major economic crisis - and Beijing got a first-class metro system to
boot.
Now that the immediate crisis has
passed, American economics is back in vogue in Beijing. In 2013 the government announced
that henceforth the role of the market in economic decision-making would be
“decisive.” Public spending would be reined in, infrastructure spending would
be wound down, and people would be expected to pay more for public services.
Perhaps unsurprisingly, growth has slowed. In mature economies like those of
the United States, Japan, and western Europe, massive government spending might
(or might not) spark inflation and stifle the market. This is hotly debated,
with the mainstream economics profession falling on one side and comparative
social scientists falling on the other.
I personally advocate increased
government spending in developed countries but I recognize the plausibility of
the opposite view In a poor country with inadequate human and physical
infrastructure the conventional American view that public investment should be left to the private sector is just
plain wrong. China is poorer
than Mexico and much poorer
than Eastern Europe. The private sector will
open fast food outlets in China
but it won't build urban mass transit systems, rural high schools, or
nationwide food safety agencies.
If Chinese economists
want to teach the world about economic development, they should look to China's
successes instead of repeating American theories. When people want standard
American economic advice, they'll always go to Washington,
not to Beijing.
China
has the opportunity to teach the world instead how development is actually
done. The world is listening. It's time China stood up and spoke for
itself. ---INFA
(Courtesy,
Centre For International Relations)
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