First I read all the comments already posted here. Then I read the fine article from beginning to end. This is a good article, and well worth a read. I am old enough to remember the kind of reporting that was done about Japan in the English-language press back when the book Japan as Number One[1] had just been published. Japan used to look unstoppable in the same way that China looks world-beating to many people now. But Japan's "lost decade" of minimal economic growth and declining soft power in the world has lasted a lot longer than just one decade.
Japan in the 1980s already had significant advantages that China still lacks in the 2010s. First of all, it had a political system with actual elections that weren't wholly rigged. (The political system in Japan has opened up more since then, but even thirty years ago it was well ahead of where China's political system is now.) Second, Japan had a free press and unfettered access to foreign reporters and foreign news media for decades by the 1980s. China still doesn't have either of those information channels for correcting problems in sufficient degree. Third, although primary education in China is quite good in urban areas, good primary education in China is still not as pervasive nationwide as it was in Japan by the 1980s. That's illustrated in part by how few people in China (compared to Japan) are even conversant in the national language. Barely more than half the population is conversant in standard Mandarin Chinese.[2]
China is at risk. The "socialism with Chinese characteristics" (中国特色社会主义) economic policy it officially now has cannot be sustained. It looks like it has been growing rapidly in recent years for some of the same reasons that Spain looked like it was growing rapidly a decade ago--a housing bubble. The inevitable correction that has to happen in the investment markets in China may not bring about a recession, but it can't help but bring about a change of investment priorities that may make China look less amazing for a while. China will really rise to world prominence when its common people enjoy free and fair elections, a free press, and good educational opportunity all over the country, something I hope they experience sooner rather than later. Meanwhile, I'm actually more optimistic about India during my lifetime.
South Korea - military dictatorship until the late 80s
Taiwan - one party state + martial law from 1949 - 1987.
Singapore - one party has held power for over 40 years.
These three countries have transformed themselves into advanced high-income economies. My expectation is that China will follow the same path as its neighbours - authoritarian government + restrictions on personal freedom during the rapid industrialisation phase, then eventually a transition to a functioning democracy once urbanisation is mostly complete. If China can attain the same GDP per capita as the Asian Tigers, then it will easily be larger than the US economy.
I believe these 3 countries had a good and free education system (in the periods mentioned) which is still a burden for the majority of Chinese nowadays.
> China will really rise to world prominence when its common people enjoy free and fair elections, a free press, and good educational opportunity all over the country...
People were saying the same thing about the USSR half a century ago ("I have seen the future..."), and we all know how that turned out. The simple fact is that sustained growth is not possible under oppressive governments because they don't permit creative destruction. Those who are in control will fight to maintain the status quo once they can no longer create further growth in a non-disruptive manner. We see this in America as well, as a result of regulatory capture.
The role of government should be to provide for the less fortunate (but only where they are in that situation for reasons out of their control) and to create a level playing field for all entrants (whether that be workers entering the labor market or companies entering industrial markets), no more. Of course, the devil is in the details, since what sort of intervention is required to create a level playing field varies wildly by industry/market, and it gets constantly reshaped as technology advances. And of course, no one has so far found a good solution to regulatory capture.
I think the natural distinction to make here is that the USSR had a poor economic system, but that this is independent from whether their government is autocratic or not. You can have a non Democratic government but still have a high-growth economic policy, which the Chinese have arguably attained.
My whole point is that the contemporary understanding that the USSR's economic system was flawed was not apparent to Westerners half a century ago. This is exactly the "I have seen the future" sentiment that I previously referred to. Many Westerners, including Americans, were genuinely afraid that the USSR would come to economically dominate, that they had developed a superior system. The fact that so few people realize that these days is a testament to the enduring success of the Western system.
In the 30s (yes, during the Great Depression), 40s, and 50s, the Soviets achieved rapid economic growth, largely because they were starting from such an economically backward situation (ring any bells when it comes to China?). But when growth on the basis of "catching up" started to plateau, they could make no further progress.
> But when growth on the basis of "catching up" started to plateau, they could make no further progress.
That's a bold statement, the Soviet Union was far too big and non-homogenous a construct to easily hand wave such generalizations. The post Soviet states are (and were) rich in natural resources and before the exodus of the last 25 or so years, had a very strong engineering and scientific base. You'll have to be a lot more specific about when "cathing up" is supposed to plateu because much, if not most of, the soviet republics had (and still have) a long way to go to catch up with the western world.
I also don't see how it applies to China. Just like it was with the Soviet Union, China's success or failure will depend on their leadership but they are in a very different situation. The Soviet Union's entire political and social structure was in upheaval in the 1980s and all sectors of government suffered as a result, especially the ones in engineering, with wildly mismanaged civil and technological projects. China, although I'll admit I have little confidence in the accuracy of media analysis of the political situation there, doesn't seem to have anywhere near the systemic instability that the USSR did since it's population, although bigger, seems far more homogenous and united under the state. Even though they aren't as resource rich relative to the size of their population, they happen to be a major economic economic partner (supplier) not only of many of its allies, but also its rivals (the US & Europe).
> You'll have to be a lot more specific about when "cathing up" is supposed to plateu because much, if not most of, the soviet republics had (and still have) a long way to go to catch up with the western world.
The plateauing process is gradual, so stagnation started long before they finished catching up (not to mention the chaos of the post-Soviet era resulted in a few steps backwards). When you've got an oppressive government that justifies its legitimacy on the basis of growth, people are going to get antsy from the slowdown long before you actually reach 1st world levels.
> I also don't see how it applies to China.
It applies to China because the authoritarian Chinese government results in the politically powerful directly benefiting from the economic growth. Like I said, innovation requires creative destruction, and this won't happen when the political (and therefore economic) system is controlled by those who benefit from maintaining the status quo.
This is not all that different from how the Japanese government and banks (many of which were nationalized) propped up the "zombie" companies for years, rather than investing that capital in newer firms.
> China, although I'll admit I have little confidence in the accuracy of media analysis of the political situation there, doesn't seem to have anywhere near the systemic instability that the USSR
Because China hasn't yet reached the state that the USSR was in in the 80s. It's still growing, even if not at the same clip that it was a decade ago.
The Soviet Union's economic growth rate was greater than that of the USA throughout most of the C20th,[1] until at least the 1970s. Obviously, they were growing from a very low base, and they arguably "ought" to have been growing much faster.
Because, despite all history written ever, governments do not make nations strong or rich or industrious. People do, ordinary raise-your-kids people. But that is really hard for ordinary people to do if they fear speaking out against stupid ideas (steel furnaces in every home) or taking action that is not approved or hearing about ideas of others.
in short, whilst not tooting the horn of libertarianism, the only ways we have found to turn 18th century standards if living into 20th century standards is the path we are all familiar with.
Because that's what a good important chunk of the rest of the world thinks it means "rising to world prominence", that's why. It doesn't mean it's either bad or good though.
The whole Japanese 'lost decade' thing is misleading. It's based on absolute gdp numbers, not gdp per capita, which makes a big difference for a country like Japan where the population is steady or declining. If you compare US and Japanese growth per capita it's revealed that Japanese growth hasn't been far behind America's.
The problem with that data set is that it can produce huge fluctuations due to exchange rate volatility. I think a better measure would include 'purchasing power parity'.
However, the above figures may not be a good indication of the increase in the standard of living for each county because:
(1) Japan has almost no immigration while US has had a huge influx of immigrants. My guess is that immigrants have lower incomes than the general population but much higher incomes than in their previous country. It is not fair to compare an immigrant's 2012 income with the average US income in 1995.
(2) USD GDP growth between 1995 and 2012 heavily favoured an elite, very small minority. The vast majority of the US population increased their average income by far less than 3.5% per year. I doubt Japan has skewed its income growth to the same degree.
You are, to my understanding, not correct about #2. I don't have a star for you off the top of my head. It is a bit difficult to compare transnationally because of the differing tax regimes of Japan and the US. CEOs of peer companies have similar lifestyles but in Japan they are on the books at low six figures in income, despite massive subsidization of their lifestyle by the company.
Basically, he argues (perhaps my interpretation) through statistics that income equality is very significantly related to what is typically considered a good country to live in, which in contrast to many, does not include salary/GDP and such monetary stats but rather how long you live, infant mortality rates, social mobility, etcetera, where the Nordic countries and Japan outperform all other countries (more or less) and where the USA have it really difficult to compete against other Western/developed nations.
Thus, one can quite easily argue that regardless of the adjusted GDP growth, Japan has managed to develop in a much more healthy way compared to the USA, which may be because of the quickly rising income equality.
"Whereas the U.S. labor force increased by 23 percent between 1991 and 2012, Japan’s labor force increased by a mere 0.6 percent. Thus, adjusted to a per-worker basis, Japan’s output rose respectably. Indeed Japan’s growth was considerably faster than that of Germany, which is the current poster child of economic success."
Yes i heard the opinion on the Japanese economic situation that it's hopeless because you can't fix something that ain't broken. Japanese have a problem with demography, not economy, their labor force is shrinking and people are getting older which explains their GDP being stuck, no other problem to speak of than that.
And here China will also find itself in the similar situation soon due to their one-child policy for the last 40 years. And it will be even worse than Japan's. Fortunately U.S. demographics is healthy - it's nice to have a conservative and religious society :)
With the risk of picking on details (sorry if it sounds that way!): From what my understanding (and also what I've heard is the story from Chinese people and gov) is that the situation of China regarding demographics is the way it is because Mao promoted population growth without end, mainly because a larger workforce would be able to outperform in output (which we've actually seen now is true). The downside with that policy was that there were no thought taken to when it would end, and the government/leaders that came after saw that a growing population would be impossible to feed (it was a big problem already for Mao) and it would eventually cause a sort of population bubble. Thus, they enforced the one-child policy to stop this. The current Chinese government seems to be quite aware of the demographics problems. According to official statistics (based on from what I've heard from a Chinese person), they estimate China will grow from the current 1.3 billion population up to 1.6 before it stagnates and possibly decreases. Considering the problems of a decreasing population and skewed demographics, they have started to loosen up the one-child policy however so there seems to be thinking within the top of China that they need to make a slow transition back to a more healthy size of the population.
By the way, this seems also to be the case in general with the top leaders in China. As been previously stated, China is probably way behind on the prerequisites to be able to run a working democracy (compare for example many of the countries where democracy have been quickly forced upon a country such as many of the countries where the US have been engaged in various conflicts such as Iraq and Afghanistan as well as countries in Central America). The positive sign from the leaders in China is their current and (as it looks anyway) real fight against corruption, which is a huge problem in any democracy (it seems anyhow). Of course, education is another problem but it seems like maybe there's not so much that can be done right now that let it take the time it takes to develop (since old people in general are not targeted for the educational system).
This, in combo with my comment where I mention Hans Rosling's interesting statistics, makes me quite positive about the future of China. Hopefully it lands rather than crashes and perhaps it is healthier to the country to avoid a crash and slowly manage the much needed creative destruction rather than face the consequences of a crash. A crash may for example cause a lot of social unrest, which probably will become a larger problem for China as their growth slows. Hopefully, they'll plateau into a healthy developed country, similar to what (in my opinion) it seems like Japan did. Although we don't here much about it, China is a much bigger countries with many more different groups of people than Japan (as far as my knowledge goes anyhow) and I think social unrest has much bigger potential as a serious issue to China's well-being (and thus probably the world's well-being since we do so much trading with China).
China has a long way to go and lots of problems such as corruption, educational level of the average man, transparency, human rights, and so forth. I hope for the best! :) My 5 cents anyway!
China is at risk, yes. So are all countries. I was just in a guest house this week-end and there were some books about China left left by the guests. Maybe five of them were about the imminent fall of China. One was published in the nineties, the other were in between.
And the article, from my Sino French perspective, smells very strongly as us centric, narrow minded, "only money counts" kind of thinking.
Since I've seen the same reason being given many times, and I don't actually know if it's true or not, I have to wonder: why do you think that free and fair elections along with free press a necessity for China to be world prominence in term of economy?
Democracy and freedom is certainly worth striving for, I just don't know if there is an absolute connection between them and economic power.
The mainstream of political/economic thought is that economic power, in the long term, derives from inclusive political institutions. It can be gained in the short term when totalitarian regimes have incetives for growth and sufficient resources available, for instance the industrialisation of the USSR in the early 20th century, but they will ultimately founder due the contradictions imposed by extractive political institutions.
Since we don't know of any system other than democracy that can produce inclusive institutions, democracy and freedom are a pre-requisite for economic power that will last and continue to grow.
That's my understanding of the argument, based on reading 'Why Nations Fail' by Acemoglu and Robinson. As far as I can tell this is the prevailing line of thought in the West, even if it's not always stated in the same terms.
It's because of the lack of creative destruction blowing through the country. An ossified political strata is resistant to new ideas. A lack of new ideas and lack of dynamism creates a self-reinforcing negative spiral.
China has been down this path before- once a technological leader of the world - it turned inwards and lost ground to the dynamic, open and inclusive societies forming in Europe during the medieval period.
China became a technological leader of the world during its imperialism. Granted there weren't that many democracies around the world at the time, so we have no point of comparison. The few period where there existed a democracy in the world (ancient Roman, for example), it's quite hard to compare the two, and what worked in the past might not work in the present.
But my point is that it's just not simply a clear cut issue of "democracy", "democracy" like everyone in the West like to chant whenever they talk about China (and to certain extend, East Asia as a whole). Look at Japan, one party (Liberal Democratic Party) has been in control of the goverment since 1955 - and not because of corrupted election or anything like that. The social and cultural situation in East Asia is much difference than the West.
The game we Chinese are playing will not lead us to anywhere, but another rise and fall of rulers. We are staggering and stuck in a modern world that we are not able to sync with. Japan is somewhat worth envying since it transformed to better keep pace with the developed world. And yes, Japan has it's own issues or in other words, bottleneck that it is stuck with. Given the geopolitical and it's surrounding conditions, no easy way out for them.
Just to nitpick one of the claims in an otherwise well-reasoned comment - of course a lot of Chinese don't speak the national language. That's because for many Chinese people, Mandarin isn't their mother tongue - other Chinese dialects like Wu, Yue, etc. [1] As the BBC article you linked states, this is an issue of "linguistic unity" more than a symptom of a bad education system. Japan, as a much more homogeneous society, did not have this problem.
> China will really rise to world prominence when its common people enjoy free and fair elections, a free press, and good educational opportunity all over the country.
If you somehow knew that a hypothetical China in 2040 with all these things would still be pursuing domestic and foreign policy divergent from American interests, would you still be saying this? If so, I applaud your intellectual honesty.
The 400m people who can't speak mandarin statistic is a bit misleading. Most of these people are likely to be old and out of the workforce. it's rare to meet someone under 40 who can't speak ok Mandarin. Also a lot more people can understand it than speak it.
Not sure on the relevance on freedoms and election rigging but this statement -
"Third, although primary education in China is quite good in urban areas, good primary education in China is still not as pervasive nationwide as it was in Japan by the 1980s. That's illustrated in part by how few people in China (compared to Japan) are even conversant in the national language. Barely more than half the population is conversant in standard Mandarin Chinese"
To me means they have huge room for easy improvement and as such can continue growth for years.
Japan in the 1980s already had significant advantages that China still lacks in the 2010s. First of all, it had a political system with actual elections that weren't wholly rigged. (The political system in Japan has opened up more since then, but even thirty years ago it was well ahead of where China's political system is now.) Second, Japan had a free press and unfettered access to foreign reporters and foreign news media for decades by the 1980s. China still doesn't have either of those information channels for correcting problems in sufficient degree. Third, although primary education in China is quite good in urban areas, good primary education in China is still not as pervasive nationwide as it was in Japan by the 1980s. That's illustrated in part by how few people in China (compared to Japan) are even conversant in the national language. Barely more than half the population is conversant in standard Mandarin Chinese.[2]
China is at risk. The "socialism with Chinese characteristics" (中国特色社会主义) economic policy it officially now has cannot be sustained. It looks like it has been growing rapidly in recent years for some of the same reasons that Spain looked like it was growing rapidly a decade ago--a housing bubble. The inevitable correction that has to happen in the investment markets in China may not bring about a recession, but it can't help but bring about a change of investment priorities that may make China look less amazing for a while. China will really rise to world prominence when its common people enjoy free and fair elections, a free press, and good educational opportunity all over the country, something I hope they experience sooner rather than later. Meanwhile, I'm actually more optimistic about India during my lifetime.
[1] http://www.amazon.com/Japan-Number-One-Lessons-America/dp/15...
[2] http://www.bbc.com/news/world-asia-china-23975037
http://news.xinhuanet.com/english/2007-03/07/content_5812838...