THE ASIAN AFFAIRS PUBLISHER'S MOOD
CHINA: WHO NEED ECONOMISTS ANYWAY? (issue nș 05)
Science, which has succeeded religion in our mind, bestowing its imprimatur upon any proposition which can be stated in terms of the requisite statistical-scientific mumbo-jumbo, is a thoroughly objective enterprise. Therefore we expect its priests to be impersonal, dispassionate and objective. But as Richard Feynman, the iconoclast physicist and Nobel prize winner, said, this is manifest nonsense.
Science is a people-driven activity, and certainly subject to fashion and whim. The best example of this simple, but often ignored, remark is in the field of economics. No less than forty economists, given one or two, have received the Nobel prize since it was instituted in 1969. None of them is a Chinese economist (80% come from the United States and Britain). However if the principle of science is that experiment is the sole judge of scientific "truth", then obvioulsy, we have to conclude that economists are not good for economy, since China's economic performance, for the past twenty years, is in a league of its own.
Two explanations are possible for this inverse relationship between China's economic performance and economic science.
First, it might be argued that China's economic performance has little to do with economics. One way to do so, and it was done at length until the end of 1997, is to state that the facts as reported are inaccurate. They are only an approximation that, on closer analysis, proves to be incorrect. It was quite common to read in many articles in the Wall Street Journal that "Beijing's policies are not conducive to sustained growth" or that "Mainland's day of reckoning is certain" (Washington Times). Yet, about two hundred million people in the coastal areas are living proof that progress was not all a statistical trick.
The second and more interesting argument is that economists seem to prosper in the societies that do not need them. It is a damning statement but in view of the recent debacle of the hedge funds, bankers might agree.
China has always had many friends who, year after year, century after century, forecast her demise. Recently, the fault-lines of the country were made all the more obvious by the disintegration of the Soviet empire. Hence the assumption throughout the last decade that the Chinese system was irretrievably doomed, and that some form of capitalist economy was the only way to salvation was inescapable everywhere. The political and economic arrangements which produced so tragic and lamentable a state of affairs in the Soviet Union were bound to be discarded for ever.
But it did not happen.
What did we miss then? Maybe the fact that China has never been, was not, and will not be a Soviet Union clone. What China is, is a subject that will always continue to engross scholars, economists and historians well into the future. Voluminous writing so far has mainly explained its failing (at being unlike Western countries) but little has been said dealing with its success. Furthermore, for some, it is a source of concern!
Notwithstanding the prognostication, as things turn out, in the middle of the worst economic crisis facing the capitalist system since the Thirties, the socialist system, as amended by the pragmatism of the Chinese elite seems to be in a more flourishing condition than the very sick system espoused hastily by the emerging economies of the world.
Of course, nobody will deny that the United States, where the exigencies of capitalism are the most respected and its operations the least impeded, has a richer and, technologically speaking, a more resourceful human community than China. However, it is also true that such prosperity is based on an ever-increasing accumulation of indebtedness towards the rest of the world, as the US record trade deficit of US$16.8 billion of August points out, and the fact that the savings of the country are now in negative territory.
That capitalism seems to thrive on indebtedness is not a new concern. People who had witnessed the ravages of the Great Depression thought that the capitalist system was irretrievably doomed and that some form of collectivist economy, whether or not called communist, was inescapable. The Soviet Union saga cured everyone of that assumption, but the failing of the new Russia and the "Asian" crisis which is less and less "Asian" and more and more a "Great Global Depression" show that we are far from the end of the story.
Recent events in Asia and New York ram home the message that we may have got it wrong. China's struggle to reform was important but it could have been undone, as was undone in Indonesia twenty years of progress because somewhere (actually in New York), as John Kenneth Galbraith said about the Great Crash of 1929, illusion replaced reality and people got rimmed.
What is refreshing when talking with Chinese officials is that reality is always present. It is maybe because they deal with much stronger forces, made of 1.2 billion particles if you want, than the forces the West is used to dealing with. It may account for the fact that we perhaps find their reply naive or unsophisticated, and therefore suspect.
But there is a lesson we can learn from natural laws. It is that size matters. Quantum mechanics teach us that it is not possible to predict exactly what will happen, whereas Newtonian laws which do not apply to infinitesimal and immeasurable objects were reputed to predict exactly what will happen in a given experiment. Of course, most experiments will just come out the same, but nevertheless, some won't.
To understand the dilemma we face when trying to understand China, just consider the following: on the one hand, there is an economic arrangment that works in the West on a number of assumptions that provide progress for about 800 million people, out of which only half are well-off. On the other hand, there is a country where economic arrangments, whatever we called them (socialist or communist) have to provide for 1.2 billion people. Can both arrangments be the same and provide the same result (that is 50% well-off)? Quantum mechanics make it a doubtful proposition.
One of our greatest handicaps is the conviction that a unique system, whatever its name, can organize everything according to one's will, in other words, we can tame the world. Chinese leaders don't think they can tame China. They are not under the illusion that economics will solve all dilemmas and has unlimited capabilities. What they are trying to achieve is to choose the more humane and least chaotic course to overcome the short comings of their enormous society. And who can blame such an approach?