Thursday, June 28, 2012

Living with China

Re-emergence presents others with unexpected challenge

From a point of view of China’s rulers, among them Prime Minister Wen Jiabao, countries like Argentina and Brazil are there to provide raw materials to keep their growing industries happy and farm products to feed a population that is more than a billion strong and is rapidly acquiring a taste for rather more than the traditional fare.

That may seem reasonable enough, but Argentines and Brazilians have different ideas. They have no desire to resign themselves to supplying the Chinese or anyone else with natural resources. They want to see their own industries expand and become increasingly sophisticated so they can occupy a better place in the international pecking order.

This may prove difficult. Though the Chinese say they are determined to depend less on exports of manufactured goods and more on internal consumption, for the foreseeable future they will have to keep churning out products to sell on the world market, something they are already able to do in impressive quantities. That being the case, they are unlikely to take kindly to the protectionist barriers governments in Latin America assume are necessary to save local businesses from being steamrollered by far more efficient competitors in North America, Europe, Japan or, needless to say, China.

It is entirely possible that, as some Westerners assure us, China is heading for a fall, that its “command economy” is too corrupt, too opaque and too dependent on foreign technology to continue expanding at over eight percent a year for very much longer, but it would be premature, to say the least, to bet on it. In any event, China’s population is so large that even if the per capita output never equals, let alone surpasses, that of the US, Japan and the more prosperous parts of Europe, it will continue to be a formidable presence on the world stage. On the other hand, were it to achieve the level reached by Taiwan, China’s gross national product would be larger than those of the US and the European Union combined; should it ever match Hong Kong’s or Singapore’s, it would bestride the planet.

China’s future, and that of the rest of the world, depends on the use it makes of its human resources. To judge from the educational attainments not just of members of the huge Chinese diaspora but also of the young inhabitants of major cities such as Shanghai, they are second to none. China’s backwardness, which persists in vast areas of the hinterland, is due entirely to the political decisions taken by a long succession of rulers starting with the Ming emperors who made the mistake of trying to keep foreign knowledge at bay, a policy that was continued by the equally dogmatic and xenophobic Maoists until, barely thirty odd years ago, president Deng Xiaoping, who had long been impressed by the extraordinary difference between the economic performance of the mainland under communist management and that of both British-ruled Hong Kong and nationalist Taiwan, decided it would be a good idea to keep hold of political power but to let capitalist entrepreneurs take care of much of the rest. So far, the resulting arrangement has worked very well, though sceptics insist that for China to do even better it will have to become a proper democracy in which people enjoy enough freedom to make full use of their talents.

Ironically, after the communists took over in 1949, North Americans of a nationalistic bent professed themselves appalled by what had happened, but had they succeeded in replacing Mao and company by a democratic administration, or even by an unpleasantly authoritarian rightwing dictatorship, they would have put an early end to what they called “the American century”. Had the Chinese economy developed as did Taiwan’s, within a couple of decades it would have boasted the world’s biggest gross national product, and then gone on from there, so that by now it would dwarf those of the West. With that in mind, the CIA and others interested in prolonging US supremacy would have been well-advised to do their best to keep the Chinese regime on the approved Marxist road. Instead, they did all they could to encourage their rival to adopt ways of doing things that would make it far more powerful.

China’s sudden re-emergence from an eclipse that lasted half a millennium presents all other countries with an unexpected challenge. If leaders in Latin America think that the Chinese will help them escape the rigours of market-driven capitalism they are in for a surprise. In China, many attribute the current problems of the US and Western Europe to excessive welfare spending: they think handouts are for parasites who deserve to go hungry. If, as is quite probable, one of them ends up as head of the IMF, that famously heartless organization would become far less willing to tolerate budgetary backsliding than it has been up to now. What is more, as China’s power increases, so too will its rulers’ ability to put financial and trade pressure on countries that resort to protectionist measures. They will do so with fewer qualms than North Americans or Europeans because, for a long time to come, many millions of Chinese will have to put up with working conditions that are every bit as bad as those confronted by the worst off in Latin America.