Left Outside

A belated reply to Giles Wilkes on China

I wrote a piece shortly following the publication of the Tory’s One World Conservatism on how it was full of crap.

The recommendations of this paper were not particularly different from the policies of our current Administration. Of course it continued within the dreadful framework of the post-Washington Consensus (and therein lies the problem).

I divided my discussion into several subtopics for easy navigation, as it ran to some 3,000 words.

Contradictions, Choosing Winners and Losers, Gimmicks: “Bhutan’s got Talent”, Turing up in pair of flip-flops offering to build a school, Vouchers, Microfinance, Rejecting Universal Education, Rejecting Universal Healthcare, Fixation on Private Sector Wealth Creation, The Sanctity of Property Rights, Fighting the Wrong Battles, Some good points made it though

One topic provoked particular criticism from Giles Wilkes of freethinkingeconomist and CentreForum fame.

China-60.svgUnder the heading “Choosing Winners and Losers” I criticised the Conservatives for withdrawing aid from China despite it still being particularly poverty stricken. The offending paragraphs follow below.

China and the Chinese are often treated as a political football. Those wishing to vacillate on Climate Change can use China’s pollution as an excuse to do nothing.

It appears that the suffering of the Chinese people in sweatshops, mines and factories is now to be rewarded with a banner which reads “Mission Accomplished.”

Please allow me to put this move into perspective, in 1750 England’s GDP per capita (likewise measured in 1990 dollars) stood at $1,328. In 2006 China’s per capita GDP stood $128 below this.

Today, on the brink of the worst global recession in a generation, China’s GDP pet capita is still only half of what the UK had achieved by the end of the 19th Century. The Tories announce that “Every life is precious” but when those live are collectively labelled “the People’s Republic of China” their well-being becomes a necessary sacrifice.

Giles contends that he “smells a rat.” He argues that I am ignoring the clear differences in Purchasing Power Parity (PPP) that exist between modern China and Victorian Britain.

I start with Angus Madison’s data.  In “1990 International Geary-Khamis dollars“, he has China’s GDP in 1800 at about $600.  Two centuries of woe, caused by both internal and external factors, as well as the disasters of totalitarianism, mean that it is still around $600 in 1960.

There is SOME growth to 1980, bringing us to $1000, but then the new freedoms growth starts motoring from a change in ideology. By Madison’s data, this puts Chinese GDP in terms of 1990 dollars at over $4000 in 2003 – in line with IMF figures. In terms of Purchasing Power Parity, it has grown even faster, to $8500 – reflecting, no doubt, the strengthening currency – from $248 in 1980.

Purchasing Power Parity probably explains much of what Left Outside has Left Outside his analysis.  It is what counts in this sort of discussion: what matters is how much you can get for your buck, not the state of international markets in tradeable items.

I have to accept that I was playing a little fast and loose with the facts in my last post. Giles excellently underlines what was “Left Outside” of my post, however the point I was trying to briefly outline remains valid. (Hopefully only slightly wounded by my slapdash short hand argument.)

Left Wing Imperialism

However, Giles oversteps the mark when he accuses me of “Left wing Imperialism.” He is wrong to do so on a number of counts, however for brevity I will try to limit to discussion on China’s relative wealth and poverty. More general discussions on aid and global justice along Marxist, Rawlsian and Humanitarian lines will have to wait for another time.

No one is going to argue that China’s per capita GDP is not still very low. Using the IMF’s Data Mapper China’s 2009 per capita PPP GDP at current international dollars is $6,546. As Giles argues this is significantly more than our Victorian forbears, however the structure of China’s society makes this simple fact increasingly difficult to map onto concrete reality.

Firstly, I would like to turn to Dave Osler’s recent post on Soft Sinophilia, mainly because it caught my eye recently, but specifically because it addresses an important element of Chinese society.

The sycophancy of many on the left to China’s dictatorial, murderous, exploitative, repressive and capitalist rulers is peculiarly disturbing. While China’s GDP has soared since 1978 the results have clearly not led to as widespread a rise in living standards as could be expected. Speaking about a contemporary calculation on the rate of exploitation Dave says…

…perhaps the closest equivalent metric in mainstream economics is the overall wages bill for a given country, expressed as a proportion of gross domestic product. This is, crudely, the workers’ share of the social product. Even despite the onslaught of neoliberalism, it typically amounts to around 55% throughout western Europe.

But a recent study by Chang Xiuze, an economist with a National Development and Reform Commission think tank, revealed that the salary component of China’s GDP dropped from 17% in 1980 to just 11% in 2007. In other words, the bosses are taking a dramatically greater cut.

It appears that the Chinese are getting a smaller cut of a bigger pie. Some would argue that this is a good thing if the pie is big enough, I would argue that this is a sign of the failure’s of China’s economic model and this sort of imbalance will lead to massive problems soon.

Furthermore, Giles argues that the health of the Chinese is one of the most obvious ways in which modern China is a better place to live than Victorian Britain. However,  as always in China it is far more complicated than that.

It is mostly agreed that “wealthier is  healthier.” However, evidence from China is doing a great deal to prove that the form of society and social institutions matter a great deal for how much healthier a society gets for its wealth.

In this paper form the New Left Review (gated) evidence is provided that shows that China is getting healthier far more slowly than other comparable countries as they got wealthier. Again, it appears that the Chinese are getting a smaller cut of a bigger pie. I don’t think this is good enough, because evidence exists from other countries that it can be done better.

According to this report from the UN Development Programme 15.9%  of China’s population live on less than $1.25 a day and 36.3% live on less than $2, my preferred metric. This is the sort of Dickensian poverty which can be missed if you insist on looking at the number of skyscrapers going up in Shanghai.

When you insist on looking at the number of skyscrapers you can be so awestruck by the shear scale of the things that you fail to notice that up to half of the commercial property in the city sits empty.

This dislocate is what interests me. China is no nut, but the sledge hammer that is being used to crack this society is massive.

Football

While I concede that Giles makes some excellent points I find his casual dismissal of my argument that “China and the Chinese are often treated as a political football” somewhat bemusing.

First of all, there is the historical context. In 1949 Mao’s forces declared the foundation of the People’s Republic of China. In the West this was not treated as a mere violent change of government. Repeated, again and again, was the idea that “we have lost China.” We was the West and implicit in that statement is that China was ours to lose in the first place. The fall of China became a central plank of anti-Red hysteria throughout the 1950s and onwards.

China’s many economic successes are used to underline how powerful the development consensus of free-markets and free-trade is.  It is responsible for the majority of those lifted out of poverty in the last few decades. Dani Rodrik argues that China’s development path could hardly be further from the consensus of the last 30 years, and he is right. However, when some argue that it is bogus to include China’s growth and poverty reduction when discussing global poverty reduction strategies they are described as trying to stage “Hamlet without the Prince.”

And the Tories. They want to act tough on aid by cutting help to China. Despite  the dubious ground on which they stand for cutting aid to a country with such manifest problems they were applauded by the right of their party. 60 years ago, 6 years ago and 6 months ago, China is used again and again as a political football.

It is only in the minutiae of real life that the suffering of the Chinese working classes can really be assessed. Per Capita Purchasing Power Parity Gross Domestic Product can’t illustrate the 72.5% of workers who have had their wages paid late or not at all; although perhaps it does include the 6%-12% of GDP estimated to be contributed by the sex industry (page 20 of the preview). I’m no prude, but nobody can fail but to be taken aback by the prevalence of sexual exploitation in China.

The fact is that China is still poor, that there are those in desperate need in China and that the CCP will not provide the assistance necessary to help them.

Further posts will explain exactly why I think that the institutions that helped China to succeed so far as a country of cheap, healthy, educated and disciplined workers are being undermined. I will argue further that the very process of marketising their economy and opening up to the world economy that initiated its tremendous growth, is also undermining it.

My preference is for those involved in multitude of protests, strikes and industrial actions that take place in China on a daily basis to wrest power and control back from those exploiting them. But until then I don’t feel supporting a transfer of wealth, institutions and knowledge from the rich world to the poor as left wing imperialism.

Filed under: Blogging, Economics, Foreign Affairs, History, Politics, , , , , , , , , ,

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