An East Asian Challenge to Western Neoliberalism

Critical Perspectives on the 'China Model'

Niv Horesh, Kean Fan Lim

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781317404989
• Edition: 1
• Topic: Economics
• Subtopic: Economic Theory
• Index: Economics

Analysts generally agree that, in the long term, the biggest challenge to American hegemony is not military, but rather China's economic rise. This perception is spread in no small measure because Xi Jinping has – in the face of patent military inferiority – conducted himself much more boldly on the world stage than Hu Jintao. Meanwhile, China has also begun conjuring up an alternative vision for global leadership, now widely termed as the 'China model'.

This book therefore offers a critical and comprehensive explanation of the China model and its origins. Using a range of case studies, covering varying historical and geographical approaches, it debates whether the Chinese experience in the last three decades of economic reform should be interpreted as an answer to the reigning hegemony of neoliberalism, or rather a further reinforcement of it. To answer these questions, it provides an investigation into what China may have learned from its East Asian neighbours' earlier economic successes. It also examines how it is responding to and might even reconfigure the world political-economic system as it develops fresh and potentially more powerful regulatory capacities.

Providing a multi-dimensional analysis of the 'China model', the book will be of interest to students and scholars of Chinese Economics, Economic Geography and Chinese Studies.

1
Introduction

East Asia as an alternative modernity?

Complaints about the political apathy of many of today’s’ reality TV and social-media-ridden students are not uncommon amongst baby-boom professors. Recently, eminent historian Mark Lilla of Columbia University deplored, in an article for Die Zeit, that very apathy, diagnosing it as one that affects not just American students but nowadays even Chinese students born after 1989. For Lilla, to animate the heady ideological battle of the Cold War in the classroom felt, at present, like a “poet singing of the Lost Atlantis”. He therefore ridiculed the Western impulse to prescribe “individual freedoms” as a quick fix to all the world’s post-1989 problems.¹

Lilla may be exaggerating the ideological vacuum left by communism’s downfall. For, as David Brooks recently suggested in The New York Times, the kind of “democratic complacency” that followed the Soviet Union’s disintegration is now being quickly filled by global wonderment at the East Asian developmental state model. Brooks argued that authoritarian countries like Singapore, as just one example, seem “more successful right now” in view of the economic and political malaise afflicting Washington since the 2008 Global Financial Crisis.²

Following the fall of the Berlin Wall, Francis Fukuyama famously and quite sanguinely pronounced the triumph of American ideology as the “End of History”.³ It was perhaps one of the classic cases of a social scientist lending oneself to what Butterfield dubbed as “Whig” historiographical teleology, presenting the past as a linear progression towards liberal democracy around the world.⁴

Fukuyama’s 1990s sanguinary is now assailed on several fronts, not least by Vladimir Putin’s second-term attempts at reincarnating Russian global influence in defiance of Washington, or the spectre of the so-called Islamic State (ISIS) sweeping to power in the Middle East on the back of two controversial American military interventions. There are emergent signs that Xi Jinping, the current leader of the ruling Communist Party of China (CPC), might opt, towards the end of his tenure, to more closely align with Putin by way of tempering American global hegemony.⁵

And here is the crux of the matter: in the long term, the biggest challenge to American hegemony is scarcely military; most analysts agree instead that America’s military cannot be surpassed any time before 2050. Rather, East Asia’s success in general, and China’s economic rise, in particular, are seen by more and more analysts as incrementally undermining American global leadership, even if it will take many more decades for Chinese per-capita income to reach developed-world levels. This perception is spread in no small measure because Xi Jinping has – in the face of patent military inferiority – conducted himself much more boldly on the world stage than Hu Jintao, stepping up China’s assertive handling of the territorial disputes with Japan over the Senkaku/Diaoyu Islets and with Vietnam and the Philippines over the South China Sea atolls. Concomitantly, under Xi, China has begun conjuring up an alternative vision for global leadership now widely termed as the ‘China Model’.⁶

This nascent narrative is still riddled with internal contradiction, however. At the rhetorical level, it skirts between a “great awakening” (weida fuxing) and “dreams” (meng) of the Chinese people – an obvious oxymoron. On substance, political economists remain uncertain whether the Chinese experience of the last three decades of economic reform should be interpreted as an antidote or fillip to the reigning hegemony of neoliberalism.⁷ And as prominent economist Richard Burdekin has observed, China’s efforts at turning the renminbi (RMB) into a veritable global reserve currency like the US$ or pound sterling are far from complete:⁸

Although a growing array of bilateral currency swaps and offshore renminbi centers have expanded RMB usage as far as Europe, Africa and South America, the most long-established offshore RMB market remains Hong Kong.

It would thus be helpful to evaluate the supposed exceptionalism of the Chinese developmental experience and the remit of China’s global ambition on the premise that historical objectivity is always open to (re)evaluation.⁹

The basic goal of this book is to examine the historical framing of the China Model discourse compared with perceptions of the broader East Asian and Western trajectories. It proceeds from two angles. First, we seek to problematise the historical basis of what many in the advanced ‘First World’, particularly in America, used to see as their superior model of governance. Second, we posit the alternative ‘China Model’ as similarly problematic upon re-examining its historical record.¹⁰

This double complication circumvents the question whether this recently much-discussed regulatory prototype can be abstracted and empirically concretised. Addressing this question presupposes the existence of an internally coherent and objective template, from which deviations or alignments can be ascertained, whilst in reality, the postulation of putatively superior models and their (by implication inferior) alternatives more accurately reflect wishful thinking and psychological needs on the part of their proponents. In the final analysis, the current enthusiasm, in some quarters, of the international media (particularly in western Europe and North America) about the ‘China Model’ may have nothing to do with China per se, but more to do with the decline of self-celebrated models that are in and of themselves ideal-typical abstractions rather than historically grounded entities. Similarly, triumphant portrayals of Chinese exceptionalism by China-based scholars have been predicated on a troubled Mao-era legacy, the implications of which remain unclear for understanding the increasingly fragmented and globally involved Chinese political economy today.

Emerging insecurity about neoliberal superiority

Commentator Joshua Ramo has famously lumped various threads of that narrative under the rubric ‘Beijing Consensus’. Subsequently, that narrative took on new dimensions, both in China and the abroad, countervailing along the way the International Monetary Fund (IMF) and World Bank as the organs behind globalising Anglo-American neoliberal discourse (‘Washington Consensus’).¹¹ Why then has Beijing’s narrative attracted so much attention if the Chinese experience is, in reality, so hard to define? Mainly, it would appear, because of an emergent insecurity amongst policymakers and the intelligentsia in western Europe and North America about the validity of their own social and political values, and the salubrity of their own societies.

Evidence to that effect can be found beyond Brook’s litanies about the loss of American dynamism and the bumbling of the Barack Obama administration. More importantly, a growing body of academic literature has built up over the last few years to underscore how grossly unequally distributed income has become in the West. Many economists, not just on the far left, now indict the Ronald Reagan–Margaret Thatcher project of neoliberalism for reversing the great post-war baby-boom march towards equal opportunity. Inequality seers like Paul Krugman, Joseph Stiglitz, Thomas Picketty or Luigi Zingales may not necessarily agree about the salubrity of the Chinese economy per se, but they certainly share a platform when it comes to inveighing against the godfathers of financial deregulation, which they see as underlying America’s post-2008 recession.¹²

To be sure, there has always been critical interest in American academe in the failings of the ‘system’, and in democratic ‘optimisation’ of economic outcomes. Buchanan and Tullock’s pioneering 1962 work on public choice is a case in point. They sought a free market-friendly mathematical formula that would curb the ability of vested-interest groups to bypass the will of the silent majority through, for example, ‘pork-barrelling’ swing voters or ‘lobbying’ career politicians. However, in the 1960s, even studies such as Buchanan and Tullock’s were informed by the “genius” of America’s founding fathers and its 1787 Constitution,¹³ whereas today many commentators of different partisan persuasions see the Constitution itself, if not the Union’s whole political architecture, as anachronistic and unfit for purpose in that they paralyse decision-making in Washington.¹⁴

In search of new answers, the previously mentioned insecurity has resurrected interest in once-marginalised, “heterodox” economic theories, ranging from Mancur Olson, through Hyman Minsky through Wolf Ladejinsky, and Karl Polanyi to John K. Galbraith. All heterodox thinkers shared, in their time, deep-seated suspicion of the ability of free markets, or representative democracy for that matter, to pre-empt resource misallocation. In other words, they rejected in one way or another neoclassical economic theory. As has been argued elsewhere, this disillusionment with neoclassical diktat has also led to renewed interest in the lessons economic history, economic sociology and new institutional economics might offer, thus revitalising these three disciplines.¹⁵

Recent historically informed work by economists is now almost de rigueur, going well beyond left-leaning circles. Taking issue with the root causes of the 2008 Global Financial Crisis, such work – ranging from Reinhart and Rogoff’s right-leaning This Time is Different, to Acemoglu and Robinson’s more centrist Why Nations Fail – hankers back in its temporal scope several centuries earlier. At the same time, older work by contrarian economic historians and economists that has been somewhat neglected in 1980s, when neoliberalism was at its height, is now finding new readers amongst conventionally trained economists – from Paul Bairoch through Chalmers Johnston to Alice Amsden. Outside academe too, authors like Joe Studwell draw on that once-neglected work and converge on the view that the East Asian experience belies neoliberalism and exposes the small government biases thereof.¹⁶

Freshly published, path-breaking and quantitatively compelling research in economic history is further validating Studwell’s insights. Ha-Joon Chang, Robert Allen, Michael Lind and others have respectively shown, for example, that un free-market, industrial espionage and big-government designs not only typified the East Asian path to industrialisation. In fact, such grand design could also be attributed to England’s take-off well before the Industrial Revolution and to America’s global rise later in the early 19th century. Baldly put, Chang, Allen, Lind and others argue that wealthier countries start preaching to poorer countries about the need for free trade (read: reduce tariffs designed to protect nascent industries) and the need to reduce government size (read: allow foreigners to buy up vital sectors of the national economy) only after they themselves had completed industrialisation on the back of very protectionist measures.¹⁷

For these reasons, the human rights discourse in the modern developed world is critiqued by scholars like Naomi Klein, Noam Chomsky, Daniel A. Bell and Martin Jacques as a value-laden, ahistorical sugar-coating of what is in essence crude economic interest. Much like “free markets” in neoclassical parlance, human rights are conceived of as bringing about immediate betterment of the human condition irrespective of time and place, whereas in the Chinese narrative “individual” rights and “markets” are both viewed as contingent on “collective will” and on evolutionary social reform.

Yet, as Stiglitz alluded to, the wealthier “collectivist” China becomes, the harder it is to shrug off its affinity with the “individualistic” US. Whilst, on the right, some Western critics still cling to the democracy-vs.-tyranny binary, and on the left, some critics starkly posit American neo-imperialism vs. China’s “peaceful rise”, both contending powers are in fact experiencing flagrantly unequal wealth distribution; they are both big polluters, big military spenders and capital-punishment enthusiasts; they also both incarcerate large segments of their population.¹⁸ In short, not only are their logics of socioeconomic regulation increasingly more similar to each other, China and the USA are now more economically inter dependent than at any other point in history.¹⁹

Much of the...