Can China find an 'eastern' model of development?

Not quite heretical - but certainly controversial - comments on China's economic development:

...from my own layman's point of view, I don't believe China will ever manage to find its own uniquely "eastern" model of development. The past is the past, and there is no room for "what ifs". More than 2,000 years passed between the country first being unified under a central dictator in the Qin dynasty (starting in 221 bce) and the overthrow of the imperial system in 1911. In this period, what did China actually develop on its own? Virtually nothing. In the words of Hegel, China "has no history", but merely the cyclical rise and fall of various monarchs, out of which no progress can emerge.

I might have expected these from a western commentator. But from a Chinese journalist and former editor of a supplement to the China Youth Daily? Now that's a surprise. The piece is by Li Datong and appeared on opendemocracy.net: China’s modernisation: a unique path?,

Comments

[Danny L. McDaniel]

The Chinese are master forgers and they are copying what works best: plain old fashion, simple American capitalism. The Chinese have the luxury of living America's golden-era bygone yesterday of the late 1940's, 50's, 60's and early 70's. A strong industrial base that attracts the attention of the rest of the world that want to invest and visit their counrty.

The US could relearn a few thing from the Chinese, especially those Americans born in the 1980's that are now graduating from college and university with engineering and MBA degrees. It is those people that never seen the US at its' industrial zenith. That experience would be like reliving history they never experienced. China has become the business worlds paradise. They don't have to worry about climbing on the "green" bandwagon or adapt social policy to their corporate lifestyle. American business has to relearn that they are in business for the sake of capitalism and not social work.

Danny L. McDaniel
Lafayette, Indiana

[Arthur Eckart]

Danny, I doubt the U.S. wants to adopt China's poor economic policies. Throughout the 2000s, China's gains of trade became increasingly smaller, which was required to maintain export growth, and acceptable levels of output and employment. So, U.S. gains of trade became increasingly larger. Consequently, the U.S. increased net assets and consumer surplus by huge amounts, which raised U.S. living standards substantially.

Over the next few years, U.S. producers will sell at high prices and more dollars will be spent by foreigners, unlike some foreign producers who sold to the U.S. for almost nothing. I doubt anyone alive will see an economy similar to the U.S. economy of the 2000s this great again, except perhaps the U.S. economy of the 2010s.

[Arthur Eckart]

Also, I may add, you state: "American business has to relearn that they are in business for the sake of capitalism and not social work."

In the 2000s, U.S. firms had a record 18 consecutive quarters of double-digit earnings growth, while there were massive foreign capital inflows, which created an "oversupply" of U.S. assets and goods. Many Americans "supersized" their houses, autos, electronics, etc., because after zero percent financing, no down payment, cash rebates, etc., monthly payments were only a little more for the supersized assets and goods.

The global economic imbalances were created by export-led countries. The U.S. responded with appropriate policies that captured the greatest gains of trade at near an optimal rate.

[Arthur Eckart]

Moreover, I may add, in real terms, foreigners will pay much more for U.S. assets and goods than Americans paid for foreign assets and goods. So, the U.S. "wins" both in the prior and future periods, i.e. the U.S. captured the greatest gains of trade, including imports, profits, and investment. International trade increases the world economic pie, e.g. through the Law of Comparative Advantage. So, no matter what happens in the world economy, the U.S. will gain the most or lose the least.

Export-led countries needed the U.S. (e.g. to maintain output growth and employment) more than the U.S. needed export-led countries. The U.S. is the only economy that can expand with huge negative net exports. The excess dollars export-led economies absorbed, to maintain overproduction, will be absorbed at slower rates, which in effect increases the U.S. money supply and stimulates the U.S. economy, while slowing export-led countries.

Conventional wisdom doesn't understand how powerful the U.S. economy has become. One example is U.S. firms offshored productive jobs in manufacturing or in obsolete industries, because of declining prices and/or rising costs (e.g. energy costs) for huge profits. Then shifted those resources into higher quality goods, e.g. with market power. So, foreigners will pay high prices in real terms, e.g. through the depreciated dollar (U.S. producers can raise prices and foreigners will still buy), improving U.S. "terms-of-trade" (and deteriorating foreign terms-of-trade), U.S. supply constraints, etc. However, U.S. inflation domestically won't accelerate, until the slack is taken out of the U.S. economy to where there's economic strain. Over this future period, U.S. consumers will pay-down debt and build-up saving, while real U.S. income rises at a faster rate.

Of course, there's a housing bust, after an extended housing boom, which will basically affect the entire U.S. economy. However, there are also positive forces, e.g. the U.S. export and tourism booms. There are hundreds of major forces pushing and pulling the U.S. economy. What's important are sound U.S. economic polices. Inferior foreign economic policies are a bonus for the U.S., particularly when the U.S. responds appropriately.

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