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What can the ‘developing’ world learn from China?

October 28, 2007 - 3:00am -- Nick Young

The government of China has long taken the view that its own development must be sui generis, resisting ‘foreign models’ or at least adapting and investing them with ‘Chinese characteristics.’ International development agencies and some developing countries are now asking what lessons they can draw from China’s own fast-forward growth. This essay, which was presented as a discussion paper to a Wilton Park conference in November 2007, questions whether the diverse forces that have propelled China forward can be emulated. A shorter version entitled ‘Saving Globalisation’ appeared in the Winter 2007 (No. 41) issue of China Review.

Is there such a thing as a ‘Beijing model’ of development, and might other developing countries learn from it?

The World Bank, certainly, has for several years been highlighting China’s exemplary success in reducing poverty. According to the Bank’s most recent estimates, the number of people worldwide living on less than a dollar a day declined from 1.47 billion in 1981 to around 970 million in 2004, with China alone accounting for the majority of that decline. Indeed, outside of China the numbers living below the dollar a day line actually increased slightly, although now comprising a smaller percentage of a global population that has grown considerably. China’s poverty reduction success thus makes the global balance sheet look less grim, prompting the Bank’s head of mission in Beijing, David Dollar, to tell me in an interview last year that ‘China has saved globalization.’

But it is easier to praise apparent success than to account for it or to identify elements that could be applied elsewhere.

In his bestselling 2001 book, ‘Globalization and Its Discontents,’ former Chief Economist at the World Bank, Joseph Stiglitz, attributed China’s sustained growth to the gradual pacing and sequencing of reforms in areas such as relaxing price controls, introducing competitive incentives for industry and allowing local governments to lead rural industrialization in a kind of half-way house to a market economy. All of this, he pointed out, was in marked contrast to the approach of Russia and the Czech Republic, which followed the Washington consensus prescriptions of ‘shock therapy’ privatisation and liberalisation that resulted in a decade of economic contraction, severe privation for ordinary people and the creation of a powerful elite who grabbed state assets by means more foul than fair.

On this account, an essential ingredient in China’s success has been a government that maintains a leadership role and that sets its own course, appropriate to its understanding of the country’s actual conditions. This is pretty much the story that the Communist Party tells about itself. It is not an easy course to emulate—in that it implicitly rules out off-the-peg solutions—but it has resonated with political leaders and intellectuals in smaller developing countries that have laboured under structural adjustment programmes pressed on them by international financial institutions bent on rolling back the state.

Although in many ways China has embraced global market forces the state has by no means withdrawn completely from economic production. Foreign investment was initially encouraged largely in order to acquire modern industrial technologies (including management and marketing approaches) through joint venture partnerships, with a view to creating globally competitive, yet still state-controlled, ‘pillar’ industries in sectors that are deemed strategic. This was the latest variant in China’s quest, since its military humiliation in Opium Wars more than 150 years ago, to acquire Western know-how while rejecting harmful aspects of foreign culture.

At the same time, China’s local governments have been crucial in building up the stock of capital assets, in large part by conversion of peri-urban farmland—with little or no compensation for the peasants who surrendered it—to residential and industrial use. This enormously profitable and invariably opaque business has been supported by massive public investment in infrastructure, and its main beneficiaries have been local governments and politically well-connected property developers who now rank high among China’s nouveau riche. Endemic ‘corruption,’ or at least cronyism, has thus been integral to the development process, rather than an external threat to it.

A more responsive state

It would be extremely generous to suppose that, in these processes, China’s leaders have always shared a clear vision of where they are going. Their own rhetoric of ‘finding the stones to cross the stream’ suggests a piecemeal, groping process, marked by the ‘pragmatic’ endorsement of anything that is seen to promote growth. And some critical steps in the process have been prompted at least as much by grassroots demand as by inspired policy making. Notably, the de-collectivisation of agriculture, which kick-started reforms thirty years ago and produced the early, dramatic surge in rural incomes, was initially driven not by central policymakers but by farmers’ active resistance to collective production (as described in Kate Zhou’s 1996 book, ‘How the Farmers Changed China’).

Later, tens of millions of peasants, no longer tied by food rationing to their place of registered residence, began voting with their feet to seek work in urban areas. Although factories in export processing zones and building sites across the country needed a cheap and disciplined labour force, the state’s response to the new labour market was initially grudging. Local authorities imposed administrative controls on the flow, levied charges from the migrants, excluded them from urban services, bulldozed migrant communities that were deemed unsightly, threatening or too permanent, and repeatedly sought to reserve jobs for urban residents (even though the latter showed no interest in competing at the dirty and low-paid end of the market). Only gradually did government agencies begin to acquire a more enabling approach, with a new emphasis on job information and vocational skills training. And only in the last few years have local governments begun actively to integrate migrants as ‘new citizens’ (although generally with low social status) in ongoing urbanisation programmes. The evolution in the government’s approach can be attributed at least in part to the efforts of international aid agencies on the one hand (eg, from the mid 1990s the World Bank began to finance job information, placement and legal support services for migrants from southwestern provinces) and, on the other, to the careful but persistent advocacy of Chinese intellectuals, journalists and NGOs.

Popular pressure has also helped drive government policy in provision of basic services and social protections.

Some observers, including Columbia University economist and UN Millennium Project director, Jeffery Sachs, have suggested that China’s economic take-off in the 1980s owed much to the existing foundations of a relatively healthy and educated workforce. This may be true, but it is worth stressing that health and education services in the Maoist era were delivered at very low cost to the state, with public expenditures as a proportion of GDP well below Asian or world averages. Back in those days China was a leader among developing countries in the relative efficiency of its barefoot doctoring and schooling. Public spending has remained low in the reform era, with the government presenting a veritable model of fiscal prudence, strongly averse to social investments that do not bring a rapid financial return (not least because government revenues, although now rising, have been very low as a proportion of GDP). Tight government purse strings combined with soaring costs left the population paying much more for health and education services at the same time that vulnerable populations had lost the social protections of urban work units and rural collectives.

To plug the gap and cushion the impact of lay-offs from state owned enterprises in the late 1990s, the government introduced a guaranteed minimum income scheme for urban populations. This was assembled very rapidly, and it seems likely that it happened partly in response to the scary evidence of widespread support for the quasi-Buddhist Falun Gong group, which drew on ‘reform loser’ constituencies among older, laid-off citizens and retirees whose pensions had disappeared.

Moreover, a direct line can be drawn from episodes of rural unrest, which began to escalate when poverty reduction stalled and inequalities rose steeply in the late 1990s, to the ‘new socialist countryside’ policy unveiled in 2006. This basket of measures ranges from the provision of genuinely free primary schooling to the licensing of village banks, and includes efforts to extend the minimum income scheme to rural areas as a safety net for the poorest of the poor. These are rational policies that will likely prove at least partially successful in alleviating rural hardship and that may mark a departure from the regressive trends of recent years. And they were conceived under pressure from society. This is a far cry from the Maoist days when millions died of famine caused by the policies of a government that could or would not listen to its people.

Democratic deficit

In various ways, government agencies have become more consultative, taking soundings through opinion polls and surveillance of internet bulletin boards as well as through wider dialogue with academic, managerial and professional elites. Yet the state remains fundamentally authoritarian and implacably hostile to any version of civil society that might develop oppositional tendencies. Pluralism in such a huge country, which retains many imperial characteristics, is still seen as risking the fragmentation that has been the nightmare of China’s leaders ever since unification of ‘the warring states’ 2,000 years ago.

To what extent, then, might a more or less benevolent—or at least responsive—authoritarianism have been integral to China’s development over the last thirty years? And might this in fact be the authentic signature of a ‘Beijing model?’

The idea is anathema to Western donors who, since the end of the Cold War, have been linking development to ‘good governance’ and ‘democratic institution-building.’ If China is indeed a success story, it is a major embarrassment to this line of argument.

‘Westerners think democracy will bring development, whereas Chinese people think that development might bring democracy,’ concluded a Chinese friend studying for a Masters in the UK.

There are some uncomfortable aspects of China’s trajectory that Western liberals are perennially reluctant to acknowledge. First among them is population control. China’s family planning authorities calculate that 400 million births have been prevented by the coercive policies introduced at the beginning of the ‘reform and opening’ period. Despite the suffering and adverse social impacts these policies have certainly caused, it is hard to see how 500 million people could have been ‘lifted out of poverty’ if those births had occurred. And it is by no means certain that softer methods could have yielded the same, rapid results.

More generally, although there has never have a been a template for the kind of dynamic, mixed economy that has emerged in China, it has involved transitions that are momentous by any standard and have been delivered by a government that has no electoral mandate.

The risk now is that other developing countries, fed up with Western lectures that invariably protect Western interests, will look upon China as ‘a poster child for development sans democracy,’ as the Nigerian writer, Ndubisi Obiorah, puts it in a 2007 collection of essays. (‘African Perspectives on China in Africa,’ published in Oxford and Nairobi by Fahamu). Thus conceived, the ‘Beijing model’ could serve as a fig leaf for crude tyrannies that deliver much less to their subjects than Chinese authoritarianism. Robert Mugabe was notable among African leaders for warmly welcoming the new winds from the east.

However, it is in fact too early to declare China a success. The Communist Party presides over a seriously degraded natural environment, a people whose aspirations have been raised and whose access to information can no longer be effectively controlled, and a society whose profound inequalities could develop into sharp conflicts.

Political liberalisation would be immensely difficult, but postponement may be even more dangerous, and less sustainable. The longer the political lid is kept on the harder it may eventually blow. Even with first-class management skills and the careful balancing of existing interests—and the post-Tiananmen record, whether by luck or judgment, is impressive—the leadership may find the country destabilised by forces they simply cannot control.

It is worth remembering that inflation played a large part in pushing ‘pro-democracy’ demonstrators onto the streets in 1989. If record oil prices and a slowdown in the US economy tip us into global recession, China’s stability, on which its development and growth are premised, could evaporate uncomfortably fast.

Nick Young
November 2007, Boaco, Nicaragua