Saturday, July 14, 2007

Growing rich in a rubbish dump

A couple of weeks ago I posted on the problems China faces in growing from being an authoritarian communist society where most people had brutalised, difficult lives to a modern, decent society. Here is Business Week’s shot at the same topic with a slightly different emphasis. (By the way, look at the slide slow accompanying this article, the photos are fantastic).

Business Week makes strong claims although it does qualify them with recognition of the scale of China’s achievements. China is portrayed as a mess of administrative failures that thwart its future prospects: endemic corruption, illegal and unsafe products, a stock market that is little more than a casino, an astonishingly despoiled environment that and no social safety net. The economic model used has a single objective – expand production. China’s power structure is one obvious obstacle to reform and yet it seems almost impervious to reform. Moreover, even the Chinese leadership are aware of the systemic problems. Premier Wen Jiabao recently labelled the economy "unstable, unbalanced, uncoordinated, and unsustainable."

Unbridled capitalism delivers the good and the bad – more consumption goods, more pollution – and in China it is delivering the positive benefits to a party-based power elite who will resist reform.

Business Week asks:
‘After decades of efforts by reformers, why assume China will build the financial, legal, and administrative systems required to become a modern industrial society? The only way up is to tame the unregulated, raw self-interest that flows from Deng's historic compromise with the party and the people. That would require a legal system that doesn't let local cadres circumvent regulations, grading officials on metrics that go well beyond simple GDP growth, and capital markets that nurture and reward entrepreneurs. In short, it means getting the party out of business. At this stage, such revolutionary change seems politically impossible. So it's just as plausible that the flawed China we see today is basically what we will have a decade from now, after all’.

It seems to me that this argument is consistent with my earlier post. It is comparatively easy to develop a society from a low resource base by allowing wild-west capitalism. It is much more difficult for a society to escape its history and its social and political traditions.

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