Jottings from the Granite Studio

Interesting back-and-forth in the British magazine Prospect between Will Hutton, the author of The Writing on the Wall: China and the West in the 21st Century, and Meghnad Desai. a former director of the Centre for Global Governance and an emeritus professor of economics at the LSE and a Labour peer.

Hutton leads off:

It is a commonplace to observe that the rise of China is transforming the world. Extrapolate from current growth rates and China will be the world’s largest economy by the middle of this century, if not before. If it remains communist, the impact on the world system will be enormous and very damaging. Britain and the US are, for all their faults, democracies that accept the rule of law. This is not true of China. If an unreformed China takes its place at the top table, the global order will be kinder to despotism; the fragile emergence of an international system of governance based on the rule of law will be set back and the relations between states will depend even more nakedly on their relative power.

All that, however, is predicated on two very big “ifs”—if the current Chinese growth rate continues, and if the country remains communist. I think there are substantial doubts about each proposition. What is certain is that both cannot hold. China is reaching the limits of the sustainability of its current model, and to extrapolate from the past into the future as if nothing needs to change is a first-order mistake.

Our concern in the west should be to help China face its enormous challenges without damaging us in the process. If Chinese communism can transform itself, then China could, like Japan before it, smoothly integrate into the world power system. If not, severe convulsions lie ahead.

To which Professor Desai responds:

For a liberal pluralist, you sound oddly like a monist, if not a monotheist. For you, there is only one road to capitalism—the western one—and only one political system—ours.

China has a lot to learn about macroeconomic management, but its failings have nothing to do with totalitarianism. India is also shy about liberalising its capital account. The Asian financial crisis of 1997 taught China and India to keep a pool of liquidity handy, even at the cost of forgoing a better use for the money.

Yes, there is a Leninist party in power within a state capitalist system. But capitalism has no unique path, nor does it require a liberal democratic infrastructure to flourish. Japan’s economic rise took place without a fully liberal infrastructure, and most European states, including Britain and Germany, were capitalist before they were democratic. What the most recent phase of globalisation has shown is that capitalism requires neither the Weberian Protestant ethic nor liberal democracy; any country with a decent savings rate, mass education and access to western markets can “do” capitalism. It is not a western Christian monopoly. Indeed, some Asians are proving better at it than the Europeans.

It is a rich exchange and well worth the read. I myself hew a bit closer to Hutton’s view in that I believe that China’s current problems are deep and systemic and cannot easily be solved without calling into question the whole system. These weaknesses jeopardize China’s continued economic growth, perhaps not in the short-term, but unless the CCP finds its way to resolving key issues of environmental degradation (Anyone want to buy a baby blue dolphin olympic mascot keychain? Anyone?), endemic corruption, and a creaky banking system, the long-term future of China’s economic miracle is uncertain to say the least.

Towards the end of the exchange, however, Professor Desai gets in this parting shot:

I do not defend the inequities or brutalities thrown up by China’s growth. But I don’t think they are a sign of weakness. Despite similar problems in most other economies in the past, none collapsed because of excessive growth. The USSR died because of stagnation.

You see the inequities and brutalities of China’s growth as unique to China’s communist system, and it offends your liberal sensibilities. You want these inequities and brutalities to be swept away. I see them as part of the historic path of rapid accumulation that many economies pass through. This is how income growth occurs in capitalism. What’s new?

Richard at TPD raises an interesting historical question: Do all countries go through their moments of “inequities and brutalities” on the path to prosperity?
——————————————
via Arts & Letters Daily
cross-posted at The Peking Duck