i answer that statement with another of Deng Xiaoping's quotes. Politics and Economics are hardly separable.
(forgive the long lectures, i have to research too!
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What is socialism and what is Marxism? We were not quite clear about this in the past. Marxism attaches utmost importance to developing the productive forces. We have said that socialism is the primary stage of communism and that at the advanced stage the principle of from each according to his ability and to each according to his needs will be applied. This calls for highly developed productive forces and an overwhelming abundance of material wealth. Therefore, the fundamental task for the socialist stage is to develop the productive forces. The superiority of the socialist system is demonstrated, in the final analysis, by faster and greater development of those forces than under the capitalist system. As they develop, the people's material and cultural life will constantly improve. One of our shortcomings after the founding of the People's Republic was that we didn't pay enough attention to developing the productive forces. Socialism means eliminating poverty. Pauperism is not socialism, still less communism.
If an idea is to survive, it must adapt and evolve.
Chairman Mao's idea is great, but the conditions present during his time and the conditions today are very different.
Compared with Latin America, China had more favorable conditions when it came to reform and open-up and bettering the living standard and infrastructure. But just as well she had to get her hands dirty and be very circumspect in the way she went about it. I believe the Reform and Opening-up Policy was characterized by the fact that industries with comparative advantage (âIWCAsâ) have been quite successful, thereby securing a steady source of income from international trade.
China has put its head down and worked steadily to develop different levels of industry on the basis of comparative advantage. She started off with the primary, moved up and sank her teeth into the secondary and tertiary. China centered the development on competitiveness and would not protect any industries that it had resolved to develop. Instead China struck a balance between opening up and protection, tempering overseas imports with self-invention. When the time was right, China opened up (the market) and let the state enterprises, the foreign enterprises and the Chinese-civilian-run enterprises compete in a murderous and bloody dog fight. The triumphant party was bound to be globally competitive. This way China were able to secure a few industries that were competitive in the world as well as a steady source of income. One of those industries used to be textile, then we had electric products, both immense in scale, a small portion of either could pillar up a small economy, China instead took the industries as well as related opportunities over without much exchange of civilities.
From there on, China becomes different from other developing countries. They did not find an IWCA, and were preoccupied with all kinds of crisis. Should there be any âwind blowing and grass movingâ, calamity befell. China instead has her IWCAs which form the base skeleton on which solutions and progress are made.
There is high development every year. Where IWCAs are concerned, she is not different from the Four Little Dragons, as all have developed on the basis of comparative advantage instead of following the developmental economy of Latin America. Chinaâs issues and problems are not any fewer than those in Latin America. The divergence of the rich and the poor, as well as corruption etc, are more insidious. She has little land, few resources, massive population and too many job seekers, all in all she is less well-endowed than Latin America. Yet with her reliable industries, she has bigger hope than Latin America in overcoming these issues. Where a country does not find an IWCA, it will normally resort to selling raw materials. Of course unless a country is endowed with an unnatural streak of good fortune and oil and diamond can be scooped up everywhere, it is very vulnerable to wild fluctuation in prices. In general raw material does not solve too many problems. As a matter of economic principle, these countries have less way out than their industrialized counterparts.
China puts a lot of emphasis on industrialization as do the Four Little Dragons, yet there is a difference in the way they go about it. The Little Dragons had to upgrade after a while, shifting production elsewhere. They invariably found themselves caught up in tertiary production, high CPI and internal inflation, currency appreciation, virtual economy and consumption on credit. This path leads to flipping and speculation and aligns itself to the developed countries. For China, she engages in an industry and works her way up. Once she establishes a foothold, she will not let it go. She does not get involved in speculation either. What she is instead is a long-term low-price system. This is a strategy that sets its eyes on production capacity, rather than quick success and instant benefit and firing up of nominal GDP. Therefore, other regions have little point in aspiring to compete with her while she develops toward the direction of a global production base. Given the robust economic growth since the Reform and Opening-up Policy, it is only natural that wages will go up as well, isnât it? Not really. Instead China works to suppress the prices of consumer industrial goods. There were a few wage increases but at a rate insignificant when compared to that of other countries. There has been in fact little increase in the wages of the population. Though in substance, there is a big rise in living standard. Real estate underwent a bit of speculation and the government immediately stepped on the brake, because speculation is inconsistent with the governmentâs strategy. Were China ever to throw herself into speculation though, then what with a general price hike and appreciation of RMB, her GDP would have long shot up into the sky. But the government says no speculation, no appreciation, do honest work and produce industrial products for self-consumption, and export as much as we can. Raw materials and advance equipment are two major components of our imports, and after going through processing at a few stages, they bring about added-value and favourable international trade balance. Yet the favouable balance is becoming a bit of a problem, this is an unprecedented economic phenomenon in history. There seem to be similarities with the Four Little Dragons, the developing countries and in terms the mode of international trade, with the developed countries, but there seem to be differences as well.
The appearance of a country like China, out of nowhere, has caught the developing countries, actually as well as the developed countries, quite unprepared. When China went ahead with the depreciation of RMB in 1993 and 1994, there was little murmur across the world. Nobody thought very much of it. Actually it was very âdarkâ. I mean China was able to devalue so substantially in one go, it could be considered a sneak attack accomplished. Should it take place nowadays, I mean as it is, people are already going ballistic just because China refuse to appreciate the Yuan, a heap of people will go ape shit were China to depreciate it instead. SE Asia as well as Latin America have found out that they are no competition to China â foreign capitals rush in, infrastructure gets better and better, chains of production congregate, there is âa war feeding a warâ. Over time a positive self-reinforcing cycle will form, and competition will be just out of the question. The government has gone to extraordinary lengths and spared no effort to make it happen. China is not talking about a tiny shortfall in competitiveness, we are talking about being driven out of the competition altogether. To compete they have to build high-end infrastructure, assemble all related plants and have a multitude of high-quality and low-wage labour. Not any one of these factors is easily attainable. Mexico was hard-hit, and had been dragging her feet in consenting to Chinaâs entry to WTO.
Does that remove any doubt you have on the Economic Genius of Deng Xiaoping?
Posted: Sat Nov 03, 2007 7:11 am
