Wednesday, September 20, 2017

China’s size may not make it dominant

Economic historian MARTIN HUTCHINSON below has a very different view of the emerging China. There should however be no doubt that China today is very modern in economic development.  Great steel skyscrapers, masses of cars and huge highways are everywhere

For sheer Silicon Valley silliness, the FT article “China is leaving Donald Trump’s America behind” by Sequoia Capital boss Michael Moritz will take some beating. It is inaccurate and politically unbalanced about the United States, but even more so about China. It also misjudges China’s present position, its actual policies and its future prospects. China’s share of global GDP could double from what it is now, but without good management it would still be geopolitically puny.

For proof of that apparently extreme statement, I would refer you to Angus Maddison’s admirable calculations of countries’ share in world GDP, dating back 2,000 years. China’s current share of world GDP, based on purchasing power parity, is estimated by the website at 18.3%. In AD1000, in the early years of the highly intelligent Song dynasty, in many ways China’s relative high point in civilizational terms, it was somewhat higher, at 23%. Since its share of the world’s population in AD1000 was only 22%, it was slightly richer than the average country, and it is reasonable to believe that its global influence and its share of human knowledge and innovation were both at least proportionate to its economic and demographic size.

But according to the Maddison figures, China’s share of world GDP did not peak in AD1000, it peaked around 1820, when China had a munificent 33% of world GDP, nearly double the current percentage. It was still near the mid-point of world wealth, with population 37% of the global total it was about 10% poorer than the global average. Yet it was close to helpless militarily and economically, ruthlessly exploited through the opium trade by a country with a pathetic 2% of world population and 5% of world GDP.

The 1820 figures illustrate the fallacy of assuming that a mighty share in world GDP equates to global domination, militarily, economically or intellectually. China had more than six times the GDP of Britain, yet under the Jiaqing Emperor (1796-1820), feeble son of the great Qianlong Emperor (1735-96), it counted for nothing in international diplomacy, its economy was stagnant and intellectually it was even more so (several discoveries of the Song period had subsequently been lost.) The only thing it had in superabundance was population, which had increased from 59 million in AD 1000 to no less than 381 million, at a time when the world’s great Industrial Revolution population bloat had yet to take off. (China today represents only 18% of world population, about in line with its output.) Britain, on the other hand, even with an 1820 population of only 21 million, had already had the Scientific Revolution, and was in the most dynamic phase of the Industrial Revolution.

The point is clear. Simply outstripping the United States in GDP (which it has so far done only on a purchasing power parity basis) will not automatically make China likely to become more powerful militarily or intellectually. The Jiaqing Emperor never faced a military challenge from Lord Liverpool’s Britain, because Liverpool’s was a peaceable and non-expansionist regime, but 20 and 40 years later, against the more aggressive Palmerston, China’s military performance was abysmal, losing the Opium War and seeing the Summer Palace burned. (Palmerston’s over-aggression was a significant contributor to the decline of Britain’s transient hegemony, but that is another story.)

Moritz’s Sequoia is a big investor in China, possibly the leading US venture capitalist in China, so it’s not surprising its leader would tout China’s virtues. All the same, when he explains about China’s “tolerance for Muslims” we should be reminded that the country force-installs spyware onto Muslims’ phones, detains thousands of Muslims in “training camps” without trial and removes loudspeakers from their mosques so Muslims cannot issue the call to prayer.

Moritz is very impressed with Chinese payments systems. Indeed, the Chinese government is assigning everyone a credit score, compulsorily, whether or not they have credit outstanding. However, it wants to use a “social credit system” so that the quality of your citizenship, your adherence to Party norms, your social networks and behaviors, etc. are used not only for credit ratings, but to deny you air travel, for example. The People’s Daily denied indignantly that the system was “Orwellian” but it would say that, wouldn’t it. Looked at in this light, the sophistication of China’s payment systems appears less benign.

Big Data in the Chinese government’s hands is a truly sinister force. Not only is there universal surveillance, but the data so collected is for sale – not just to major reputable corporations, but to anyone, no questions asked, such is the level of China’s corruption. Conversely, Chinese private citizens are strictly regulated in what they can know – the Great Firewall prevents access to international sites, unauthorized VPN networks are strictly forbidden, and even the Big-Brother-friendly Google found itself unable to operate there.

You should also remember that China, the supposed export powerhouse of the world, is still so frightened of what its citizens might do with their money that it operates a system of exchange controls. Moritz, as I did, grew up under exchange controls, in force in Britain until 1979; he will thus be able to confirm that they are highly destructive both economically and psychologically. As Moritz must surely remember, the citizens of a country with exchange controls automatically regard themselves as economically inferior to those lucky people without them; the controls produce a kind of “economic cringe” similar to Australia’s “cultural cringe” but more damaging.

Given China’s data policies, if China’s entrepreneurs are “facing the future with an unrivalled sense of adventure and curiosity” as Moritz claims, they must be a pretty frustrated lot. Finally, Moritz suggests that Trump should send his hotel staff to visit hotels in Shanghai, where they will find “a level of service unparalleled in New York.” Alternatively, Trump could send his staff to almost any U.S. small town, where he will also find service unparalleled in New York, whose service quality is lousy, second only to London and Paris for hostility and greed. Further, it is a long time since I was in Tokyo or Singapore, but I’ll bet they both still beat Shanghai hands down.

One problem with writing about China is that its figures are dodgy. GDP figures are produced almost immediately after the end of the quarter, and clearly come from the Planning Ministry’s computer rather than through actual observation of reality. Furthermore, China’s growth rates have always been suspiciously high, and its consumption a suspiciously low percentage of GDP, for a country whose richer citizens are famous for their bling.

So, let us suppose that the GDP figure is overstated, but that the consumption figure is approximately accurate, and that China’s consumption is in reality not 37% of GDP but 57%, close to that of India (59%), Indonesia (55%) and Japan (57%). Then its GDP at purchasing power parity is 37/57 x $23.2 trillion (the official 2017 estimate) or $15.1 trillion, just 78% of the U.S. level, and its growth rate, if you amortize the GDP shortfall over the past 20 years, is about 4.5% annually rather than 6.7%.

At that rate, if it continues to grow 2% faster than the U.S. on average, it will pass the United States in purchasing power GDP in about 2030, and in market-exchange-rate GDP about a decade after that. China will still have heavy social and information controls over its citizens, and therefore will still operate less efficiently than the truly free society of the United States. It is also quite likely that it will have retained its exchange controls, and so still have an “economic cringe.”

Given the existence of nuclear weapons, it is probably unlikely that a future aggressive U.S. President will burn whatever is China’s current equivalent of the Summer Palace (the Great Hall of the People?) But if China’s society remains as restricted as it now is, with gigantic loss-making state corporations, an official ideology of Communism and exchange controls on its domestic citizens, then it will still be limited to a position in world affairs like that of the Jiaqing Emperor, isolated and uninfluential. However large its population, and however dominant its share of world GDP, China will not be central to the surging economic, intellectual and political forces of the world, any more than was the Jiaqing Emperor’s celestial domain.



True socialism always ends with the Stasi

Leftwingers who boast that they’d never kiss a Tory are blind to the intolerance at the heart of their own ideology. Daniel Finkelstein comments from Britain

Laura Pidcock doesn’t like me. I don’t take it personally because it isn’t personal. I’ve never met her and she’s never met me. But I’m a Conservative and she doesn’t like Tories.

Fair enough. It’s a free country. For the time being. And the new Labour MP for North West Durham is entitled to pick her friends. She’s not alone, anyway. Her attitude — that Tories are “the enemy” and “I have absolutely no intention of being friends with any of them” — is quite prevalent on the left.

Hatred of Conservatives is common currency on social media, and at Labour conferences you can buy mugs with the words “Never kissed a Tory” on them. The Guardian’s deputy opinion editor, Joseph Harker, complained only that Pidcock didn’t go far enough. His aim (tricky for an opinion editor, even of The Guardian one would have thought) was to avoid Blairites and Liberal Democrats too.

Not unreasonably, many Conservatives are quite hurt. It’s never nice to be thought evil by someone. And the misunderstanding, that Tories are like Mr Burns out of The Simpsons, is quite frustrating. There is also something quite amusing about people who check someone’s position on free schools before they kiss them.

Yet my reaction to Ms Pidcock’s unfriendly (though, it should be acknowledged, civil) comments, and to abusive criticism on Twitter, is somewhat different. I am relaxed about her social attitudes, I don’t agree that they make it hard for her to do her job, and I’m sure (indeed I know) that there are a few Tories with a similarly short-sighted view.

But I think nevertheless that this attitude to Conservatives is of profound importance, and points to a big hole in socialism.

Ever since 1956, when news of Nikita Khrushchev’s so-called secret speech began to leak out to the West, socialists have been trying to find an alternative form of socialism. One that works. One that does not lead to the errors of Stalinism that Khrushchev identified at the 20th Congress of the Communist Party of the Soviet Union.

Social democratic parties and new liberals had succeeded in reforming capitalism, with a welfare state and progressive tax systems, but after decades of trying still had no model for replacing it. The only attempts that had been made had produced dictatorship, murder and relative economic failure. A new left, the secret speech indicated, was needed.

There is no workable, sensible alternative to western capitalism
For more than 60 years since then, this has been the project of socialist intellectuals and politicians from Ralph Miliband to Tony Benn. The new left has, with progressives and liberals, been involved in important campaigns to end colonialism, to promote gay rights and women’s equality, and to reduce and eventually eliminate racial discrimination. But how successful has it been in identifying and propounding an alternative to capitalism?

Completely unsuccessful. After six decades of thought and political action there remains not a single successful example of a socialist society anywhere in history and anywhere in the world. Most recently they all got very excited about Venezuela. We were told by Jeremy Corbyn that we could honour Hugo Chávez by treating him as an example to us all.

This does not, of course, mean that there haven’t been successful centre-left governments or that there are no alternatives to whatever policy the Tory party puts in its manifesto. I am not equating Yvette Cooper with Mao Zedong. I am simply saying that for all the slogans about the evils of capitalism, nobody has come up with a workable, sensible alternative. Not ways of changing it, you understand. An actual alternative.

Remember the kid with all the badges in class who tried to explain to you what socialism was, and you couldn’t quite understand how it worked? Well we are still basically there, and the failure in comprehension wasn’t yours.

And this is where Laura Pidcock comes into it. Paul Mason, the former BBC journalist and political ally of the Labour leader, recently published a book called Postcapitalism: A Guide to Our Future. It attempts bravely to articulate what modern socialism, operating without central state planning, might look like.

I confess I was hanging on for dear life trying to grasp his scheme, but I think I got there in the end. He sees a future, as did the Occupy movement, as did the authors of New Left Review and the Bennites, in which market exchange is replaced by friendly, voluntary co-operation and free provision. Wikipedia is his model.

Reading his book on the Tube, I was wondering how he might get someone, for instance, to clean station platforms or do an extra shift without being paid. But socialists do have an answer to this of sorts. Amity.

Corbyn’s spin doctor regrets the demise of East Germany
Without the market competition that makes us ruthless and has us jostling for position, we will all muck in. Someone will notice that there is a need for someone to work in the human resources department of the organisation that produces the ink that is used on Twix wrappers, and they will pop in and do it. For nothing.

I am sorry if this sounds preposterous but it’s not my idea, is it? And if I’ve misunderstood how it all works, then answers on a postcard please. But I think you will see where Pidcock fits in. Socialism depends entirely on love and complete trust in the willingness of every person, after capitalism, to co-operate in a spirit of friendship.

So where are you left if there are whole groups of people with whom friendship is impossible, on account of their view of the world? Counterrevolutionary elements who don’t accept their socialist responsibilities. Either these people make socialism impossible, or they have to be eliminated on the grounds of their counterrevolutionary position.

Pidcock would probably laugh at this. She’s just saying she doesn’t want to chum up with Sajid Javid, and here am I saying she wants to obliterate him. And she’s probably right to laugh. But not because socialism wouldn’t require such obliteration. It would. It’s just that socialism is so vague and incomprehensible she probably won’t get anywhere near it.

The other day I was listening to a (really quite shocking) interview that Jeremy Corbyn’s adviser Seumas Milne gave to George Galloway. Have a listen on YouTube. It’s amazing.

In it, Milne regrets the passing of East Germany, really he does. He adds that obviously we wouldn’t want the Stasi back. But he misses the point. You can’t have East Germany without the Stasi.



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1 comment:

C. S. P. Schofield said...

The post on China is well worth the attention of all kinds of people who will ignore it. China's government has no intention of producing any facts that might reflect poorly on China's government, so why the pluperfect hell would anyone with any sense rely on statistics coming out of China?

I had this problem with the late (and by me, unlamented) USSR. Countless people who I had previously considered sensible buttonholed me in the early years after the fall of communism, demanding to know how I explained the precipitous drop in the Russian Federation's economy. I would ask "Drop from what?", and they would gleefully answer "From the economy of the USSR!"

And I would say "That drop signifies the shift from a government that lies about everything to one that only lies about SOME things."

And they would wander away, looking like I'd hit them in the head with a board.

We won't know what China's economy really looks like until people who are prepared to watchdog its government are not routinely arrested.