- Floating Points & Pharaoh Sanders – Promises. This unusual collaboration has been almost universally hailed as a late-career masterpiece for Sanders, the one-time terror of the 60s avant-garde who has mellowed into something like elder-statesman status (see reviews in the New Yorker, Pitchfork, and the New York Times). Richard Williams’ review calls it less challenging than some earlier jazz-meets-ambient work, such as the great John Tchicai With Strings, which is fair enough. But it’s still strikingly lovely.
- Morwell Unlimited – Dub Me. Somehow this didn’t grab when I first listened to it a decade or so ago–whoops, mistake. Perhaps that’s because it’s quieter and more pared-down than an a lot of dub. In fact it is a masterpiece of minimalism, one of King Tubby’s finest efforts. I picked this up back when the Blood & Fire reggae reissue label was still going strong and its CDs were still in circulation; it’s harder to find now (the link is to Deezer).
- Sonic Youth – Simon Werner a Disparu. These instrumental jams are the last studio recordings Sonic Youth made before they broke up in 2011. They were my favorite band back when I was a Young Alternative Dude, and the chime of their detuned guitars can still bring a smile to my face. There’s nothing too groundbreaking here, but if you like the spacey bits of other SY albums then this will also be enjoyable.
- Stan Getz – Captain Marvel. Chick Corea, may he rest in peace, played electric piano on this 1972 date, and his fusion-y Return To Forever band made up with the rest of the sidemen. But the resulting sound bears little resemblance to other offspring of Miles Davis’ electric period: it’s a rare example of electric jazz without rock gestures, just that gorgeous Getz tone throughout.
- Edgard Varèse – “Density 21.5.” Originally composed in 1936, this solo flute piece has had a strange afterlife as a symbol of the potential for cross-pollination between jazz and classical music. A copy of the score with a signed dedication from the composer was found among Eric Dolphy’s papers in the Library of Congress, and Dolphy reportedly performed it at a 1962 concert. Among the many losses from Dolphy’s tragic early death in 1964 is the fact that we will never hear his take on it. The original 1950 recording of the piece is spooky, but actually does not sound too radical compared to the vocalized sounds Dolphy would develop in his own flute playing.
The Chinese Communist Party is now ideologically committed to reducing income inequality. That the previous sentence is not in fact a meaningless circular statement says a lot about the peculiar evolution of socialism in China since 1978. But after dodging around that part of its socialist ideological heritage for the last few decades, China’s leadership is now grappling with the issue of inequality more directly, at least in its rhetoric. The 14th Five-Year Plan adopted in March includes a section that calls for “proactively narrowing regional, urban-rural and income gaps.” And Xi Jinping himself has recently been highlighting the goal of “common prosperity,” a term that has deep political resonance in China because of its use by Deng Xiaoping.
This has not been a sudden shift of direction. Various elements of the bureaucracy have been working over the last couple of years to lay the ground for this new policy focus, a process that I described in a previous post. Attention to inequality is a natural sequel to, and development of, Xi’s now-concluded campaign to eliminate absolute poverty. But how this new rhetoric will translate into reality is far from clear. Officials have not yet put forward big ideas on how to actually narrow inequality, and it seems they could not reach agreement on the details in time for them to be included in the plan. The Five-Year Plan document itself includes only a general discussion of goals, and a pledge to draft a separate “action plan” on common prosperity.
In the US, those who want the government to do more to reduce inequality usually focus on major shifts in fiscal policy, like raising taxes on higher-income households and expanding benefits for lower-income ones. But China’s fiscal policy is peculiarly conservative in its spending priorities and its tax structure is actually regressive. It’s notable that, for instance, the government declined to offer any direct income support to households during the Covid-19 pandemic, which it could have done for a very modest fiscal cost. Rightly or wrongly, a bias toward supply-side policy is strongly entrenched among Chinese officials. Xi’s new political rhetoric about reducing inequality and achieving common prosperity thus sits rather awkwardly on top of a set of entrenched government policies that have long tolerated, or even encouraged, greater income inequality.
The signals so far do not suggest that a radical reordering of the government’s taxing and spending priorities is on the way. At a press conference last week, assistant minister of finance Ou Wenhan was asked about how fiscal policy would help advance “common prosperity,” and his response offered a few clues to official thinking. Importantly, he said that “it is necessary to maintain the overall stability of the macro tax burden” over the coming five years. That means there will not be a major increase, or decrease, in tax revenue’s ratio to GDP. In other words, the government is not preparing to raise revenue to finance a major expansion of the welfare state. Indeed, Ou indicated that it still wants to cut taxes at the margin for manufacturers and small businesses.
Any additional spending on redistributive programs will therefore have to come from moving around existing funding sources. While Ou did pledge to improve the social safety net, there were no promises of a generous New Deal for China’s citizens. Indeed he warned that protections must not go too far, or be too expensive. “We must strengthen our ability to evaluate the fiscal affordability of livelihood policies, and avoid the risk of over-promising and over-protecting,” he said.
Another indication of the government’s interest in keeping down the fiscal cost of addressing income inequality is its focus on the so-called “tertiary distribution.” In the jargon, the primary distribution of income is income directly received from labor and capital, while the secondary distribution of income results from the government redistributing that income through taxes and spending. The tertiary distribution of income refers to the additional redistribution achieved through private charities. Ou said the government will “support the role of charity and other forms of tertiary distribution, and give full play the role of charitable organizations” in supporting the poor, elderly and sick. That suggests a desire to keep some of the costs of political promises off the government’s books.
The finance ministry does sound as if it is getting ready to toughen enforcement of China’s rather lax personal income tax system, and bring many of the high-income individuals that now successfully evade taxes into the tax collection net. Ou spoke of establishing “personal income and property information systems,” and of the need to “appropriately regulate excessively high incomes, outlaw illegal income, and curb income obtained through monopoly and unfair competition.” It does sound like the new era of common prosperity will be one of tougher legal and political scrutiny of high-income and high-net-worth individuals.
The most substantive commitments to inequality-reducing policies were in Ou’s pledges to “Increase financial support to less developed regions and gradually achieve equalization of basic public services” and to “further tilt transfer payments to central and western regions and depressed regions.” China’s government has long preferred to treat poverty and inequality as problems of geography: if poor people tend to be in certain places, just give those places more money. Raising fiscal transfers to lower-income provinces could certainly help those areas, and given that it uses existing institutions, would also be a relatively easy policy to execute. But there has already been a lot of regional aid in China in recent decades, and using government-sponsored investment projects as a tool of regional development has at best a mixed track record.
The name of Malthus will forever be associated with the idea of resource constraints on human population growth– which is unfortunate, because his argument appears to have been completely wrong. But I feel a need to compensate a bit for my little essay on those mistakes after reading John Maynard Keynes’ delightful biographical sketch of Malthus. Keynes offers an alternative intellectual history of Malthus, in which the Essay on the Principle of Population appears as a youthful work that gave him much notoriety, but was far from his most significant intellectual accomplishment.
It is difficult to overstate just how good Keynes’ essay on Malthus is: it is wonderfully detailed yet short, warmly sympathetic yet intellectually sharp. (Among other tidbits, we learn the name of Malthus is derived from “Malthouse,” and should be pronounced similarly.) Tyler Cowen has called Keynes “one of the greatest biographical writers in the entire English language.” And indeed I found Keynes’ Essays in Biography to be very good, though the meat of it is really the biographical essay on Malthus and a more extended one on Alfred Marshall; the sketches of British politicians for me were less interesting and insightful.
Keynes claims Malthus as his intellectual forebear, “the first of the Cambridge economists,” on the strength of Malthus’ early attention to the demand side of the economy, and his invention of the concept of “effective demand,” a precursor to today’s “aggregate demand.” As far back as 1820, in his Principles of Political Economy, Malthus recommended “the employment of the poor in roads and public works” as a remedy to economic downturns. But the first appearance of this idea actually came in 1800, in an anonymous pamphlet called An Investigation of the Cause of the Present High Price of Provisions:
Malthus’s conception of “effective demand” is brilliantly illustrated in this early pamphlet by “an idea which struck him so strongly as he rode on horseback from Hastings to Town” that he stopped two days in his “garret in town,” “sitting up till two o’clock to finish it that it might come out before the meeting of parliament.” He was pondering why the price of provisions should have risen by so much more than could be accounted for by any deficiency in the harvest. He did not, like Ricardo a few years later, invoke the quantity of money. He found the cause in the increase in working-class incomes as a consequence of parish allowances being raised in proportion to the cost of living. …
The words and the ideas are simple. But here is the beginning of systematic economic thinking.
Keynes found that Malthus’ economic thinking was best developed in his long correspondence with David Ricardo, a relationship that managed to combine deep and sincere friendship with equally profound intellectual disagreement:
This friendship will live in history on account of its having given rise to the most important literary correspondence in the whole development of Political Economy. … Here, indeed, are to be found the seeds of economic theory, and also the divergent lines—so divergent at the outset that the destination can scarcely be recognised as the same until it is reached—along which the subject can be developed. …
The contrasts between the intellectual gifts of the two were obvious and delightful. In economic discussions Ricardo was the abstract and a priori theorist, Malthus the inductive and intuitive investigator who hated to stray too far from what he could test by reference to the facts and his own intuitions. …
One cannot rise from a perusal of this correspondence without a feeling that the almost total obliteration of Malthus’s line of approach and the complete domination of Ricardo’s for a period of a hundred years has been a disaster to the progress of economics. Time after time in these letters Malthus is talking plain sense, the force of which Ricardo with his head in the clouds wholly fails to comprehend. Time after time a crushing refutation by Malthus is met by a mind so completely closed that Ricardo does not even see what Malthus is saying.
Malthus’ strengths, on Keynes’ account, are his close attention to the realities of economic life and his detailed investigation into practicalities, which gave him insights that Ricardo’s abstractions could not. It’s interesting, therefore, that he characterizes Malthus’ first writings on population as “a priori and philosophical in method,” the precise terms in which he criticizes Ricardo’s arguments.
While Malthus added huge amounts of empirical material to the second edition of the Essay on the Principle of Population, it is clear that the inspiration for the first edition was not empirical. It was more of an abstract conviction, one that arose during a theological argument with his father. William Otter, a friend of Malthus, relates the story in his Memoir of Robert Malthus:
The mind of Mr. Malthus was certainly set to work upon the subject of population, in consequence of frequent discussions between his father and himself respecting another question, in which they differed entirely from each other. The former, a man of romantic and somewhat sanguine temper, had warmly adopted the opinions of Condorcet and Godwin respecting the perfectibility of man, to which the sound and practical sense of the latter was always opposed; and when the question had been often the subject of animated discussion between them, and the son had rested his cause, principally upon the obstacles which the tendency of population to increase faster than the means of subsistence, would always throw in the way; he was desired to put down in writing, for maturer consideration, the substance of his argument, the consequence of which was, the Essay on Population.
Keynes does not discuss whether Malthus’ theory of population–that it would always grow exponentially while food production could only grow linearly–was actually correct, seeing it mainly as an early example of the power of his intellect. When the early work on population is considered along with the later work on political economy, the intellectual contrast with Ricardo is perhaps not as sharp as Keynes makes it out to be: Malthus too could be bullheaded in holding to his a priori theories in the face of contrary argument. But who among us has not been guilty of that?
Few people are as famous for being wrong as Thomas Robert Malthus, the English cleric and early student of population growth. Malthus thought that while population could grow exponentially, food production could grow only linearly. Therefore population growth would always outpace food production, and famine would always then cause population to decline to a sustainable level. In An Essay on the Principle of Population, first published in 1798, he wrote:
We should be led into an error if we were thence to suppose that population and food ever really increase in the same ratio. The one is still a geometrical and the other an arithmetical ratio, that is, one increases by multiplication, and the other by addition. Where there are few people, and a great quantity of fertile land, the power of the earth to afford a yearly increase of food may be compared to a great reservoir of water, supplied by a moderate stream. The faster population increases, the more help will be got to draw off the water, and consequently an increasing quantity will be taken every year. But the sooner, undoubtedly, will the reservoir be exhausted, and the streams only remain. When acre has been added to acre, till all the fertile land is occupied, the yearly increase of food will depend upon the amelioration of the land already in possession; and even this moderate stream will be gradually diminishing. But population, could it be supplied with food, would go on with unexhausted vigour, and the increase of one period would furnish the power of a greater increase the next, and this without any limit.
The dynamics that Malthus described did hold true for most of human history. Technological improvements allowed the number of people that could be supported off the land to increase, but that increase in population absorbed most of the increase in output and average living standards did not rise much–exactly as Malthus predicted. Before the industrial revolution, there is little evidence of any sustained increase in per-capita income over time. Nonetheless, Malthus stopped being right not too long after the publication of his book. The last two centuries or so of modern economic growth show that the production of food, and other goods and services, can in fact grow exponentially for sustained periods thanks to technological progress. (Gregory Clark’s A Farewell to Alms is a very clear exposition of the Malthusian model for prior human economic history, and how the industrial revolution transformed it.)
One of the most interesting ideas in Charles Kenny’s compact and lively new history of humanity’s struggle with infectious disease, The Plague Cycle, is that this common understanding of how Malthus was wrong is itself wrong. Malthus’ mistake was not simply a failure of imagination, the inability to imagine exponential technological progress. Kenny argues that Malthus’ mistake was even more basic: in fact, food production has never operated as a real constraint on human population growth:
For most of the time civilization has existed, pestilence has wiped out far more lives than famine and violence combined—so much so that Malthus’s proposed final limit of land and resources as the check to human numbers has rarely been approached. Disease has usually kept populations below the levels that could have been supported given agricultural technologies at the time.
Kenny credits Ester Boserup, a Danish economist and consultant to the United Nations, for the insight that food production was always more capable of improvement than Malthus assumed, and that the potential for bringing more land into production, and making land more productive, was hardly ever exhausted. In her 1965 book The Conditions of Agricultural Growth, she argued that population growth actually makes higher agricultural output possible through intensified cultivation (for those who, like me, were not aware of Boserup’s work, there’s a useful review at EH.net.) Malthus’ argument that improvements in food output were only linear rather than exponential was therefore wrong before the industrial revolution, as well as after it.
Something clearly operated to keep human population in check before its explosion over the last couple of centuries. But it was generally not starvation. The real problem is that population growth begets population density, and population density, in the absence of sanitation, antiobiotics, and other checks on infection, begets disease and death:
Earth scientist Jed Kaplan and colleagues suggest that less than one-half of the land currently used for food production was used in 1600 and less than one-third in 100 CE. It is true that making more of the land available takes more work—sometimes brutally hard work, and that risks malnutrition. Again, some land couldn’t be cultivated without innovations, including heavy plows and irrigation. Nonetheless, it seems clear that throughout most of history the number of humans on earth fluctuated far below the maximum possible.
Instead, we should probably thank (or blame) the regulatory mechanism of infection for limiting populations. As the number of people grew, population density drove up disease rates. This thinning mechanism was, in most places, probably the most powerful check on the number of people, particularly during the centuries that humans have been farmers. …And when infectious death declined in the nineteenth and twentieth centuries, population, urbanization, intensification, land use, and prosperity all climbed to historically unprecedented levels worldwide.
Although there’s a lot of interesting history in Kenny’s book, I’m not sure he does enough with this insight. To me it seems a fairly important finding that the foundation of modern technological civilization is the ability to control infectious disease. (To be fair to Malthus, he did discuss disease as one of the mechanisms that acted to limit human population growth, but he generally discounted its importance relative to food supply.) Modern economies are all fundamentally dense, urban economies–the US is 82% urban, China 60%–and this population structure cannot be sustained without a set of technologies and practices that manage infectious disease.
When industrialization and urbanization happened without those controls, as they did in early 19th-century Britain, they led to actual declines in living standards and life expectancy. Rampant disease in pre-industrial cities like ancient Rome killed off residents faster than they could reproduce, requiring a continuing inflow of migrants to maintain their population. If our current systems for controlling infectious disease weaken or fail, therefore, we’re in trouble. That may be a remote tail risk, but it seems at least as serious a tail risk as, say, an asteroid crashing into Earth, a possibility that seems to get a lot more popular discussion. Kenny acknowledges the risk, but ever the optimist, quickly brushes it off:
Given how many infections we share with animals, how many animal diseases may be only a few mutations away from infecting humans, and how rapidly viruses and microbes in particular can mutate and then spread in a connected world, new global pandemics will surely continue to hurl themselves at humanity. Ronald Barrett and colleagues from the Department of Anthropology at Emory University in Atlanta have gone as far as to suggest that the emergence and re-emergence of disease threats owing to globalization and antibiotic resistance is a sign that we’re entering a “third epidemiologic transition” comparable to the rise of infection at the dawn of civilization and its fall in the last century and a half. That (hopefully) goes too far, but it certainly suggests the scale of the risk we need to confront.
The Malthusian fear that physical resource constraints could stop economic advance and population growth has been a persistent one in economic thinking over decades (and one to which I must confess making my own contribution). Kenny’s book suggests we should have instead been working to better understand and manage the fundamental biological systems on which our civilization depends.
Once an obscure topic, China’s industrial policy now gets attention from heads of state. The entire US-China trade war waged by the Trump administration was, in formal legal terms any way, justified as a response to distorting industrial policy. Understanding industrial policy seems to be a requirement for participating in current intellectual debates about China.
Thankfully, Barry Naughton has written a short and highly readable book, The Rise of China’s Industrial Policy, 1978 to 2020, that explains its history and functioning. Even better, it is available as a free PDF download from the Centro de Estudios China-México at the Universidad Nacional Autónoma de México. Based on a series of lectures, the book has a conversational tone and jargon-free style that is rare for this subject matter, a topic both highly technical and highly politicized.
Naughton’s argument is plainly stated in three short sentences:
Until 2006, China never had “industrial policy.” Since about 2010, China has had industrial policy on a massive and unprecedented scale. The outcomes of post-2010 industrial policy in China have not been adequately studied and are as yet unknown.
A prominent economic historian of China–his textbook The Chinese Economy is the standard–Naughton argues that industrial policy on its current grand scale is a very recent development in post-1978 China, and not at all part of the “China model” responsible for its decades-long growth miracle. He sees current policies as a departure from past practice, rather than as part of the deep structures of Chinese socialism.
Powerful targeted industrial policies in China have been generally absent (1978-2005) and have sometimes been overbearing (2010-present), but they have never been a crucial component in explaining rapid Chinese economic growth. That doesn’t mean that government doesn’t matter, or that distinctive Chinese approaches have not been important: it does, and they have been. Indeed, it should be intuitively obvious that the impact of a large-scale fixed investment effort, massive investment in human resources, and the presence of thousands of growth-promoting local governments competing with each other will be much greater than the impact of government efforts to directly intervene in the sectoral development pattern of the economy. Of course, these are not mutually exclusively choices. But targeted industrial policy is still utterly unproven in terms of its impact on China’s development. It may turn out, 20 years from now, to have been a huge success, but as of today, there is very little evidence for its importance or success.
Naughton admits his own skepticism of the benefits of large-scale industrial policy, but his main point is that neither scholars nor the Chinese government have a solid understanding of the actual consequences. The scale of resources being mobilized by industrial policy is enormous, and thus clearly poses some economic risks. He thinks that China was well on its way to being a global technological powerhouse before the introduction of all of these industrial policies, thanks to its highly competitive manufacturing sector and skilled technical workforce. So to him, it is not obvious those risks were worth taking:
It is unclear to what extent Chinese policy-makers have considered the technological, economic, and international risks of their
industrial policies. It appears rather that policy-makers have been seduced by the vision of a technological revolution and a substantial re-ordering of global strategic relations and have rushed ahead with an aggressive and decisive round of industrial policies. At a minimum, this is an enormous gamble. As stated repeatedly in this essay, Chinese would in any case have emerged as a technology giant over the next decade or two. It is not necessarily beneficial to have government forcibly attempt to accelerate the process, creating substantial additional risk, waste, and conflict. Indeed, it may end up seriously retarding the global benefits that are potentially available from new technologies, particularly if the world ends up partitioned into competing technological blocks.
Plainly, the Chinese government thought that the risks of not carrying out industrial policy were also great. And Naughton does a good job of explaining the intellectual framework that has justified their large-scale interventions. I found the book helpful and clarifying.
- Django Reinhardt – Renown And Resistance 1937-1943. Django’s recordings with his string-band group the Quintette du Hot Club de France are legendary, and rightly so. But he played in many different contexts, and this collection brings together a mass of recordings of him with other swing-era musicians. One of the highlights is a session with Rex Stewart and Barney Bigard from the Ellington band; together they make some of the best small-group swing on record.
- John Zorn – More News For Lulu. The original News For Lulu album was a landmark of the 1980s avant-garde, taking on traditional hard-bop tunes with a very untraditional lineup: Zorn on alto, George Lewis on trombone, Bill Frisell on guitar. This live recording is even better, the players more assured and adventurous.
- Duke Ellington – Piano In The Background. A somewhat obscure session that delivers the opposite of what the title promises: it’s a feature for Ellington’s often-underrated piano playing. The repertoire is largely familiar territory for the band but Ellington’s solos lift the playing out of the ordinary. The 1960s were a great decade for Ellington: two years after this he would record the stunning piano-trio masterpiece Money Jungle.
- Steve Lacy – Blinks. A terrific, exciting live recording from a great working band. The rhythm section of Jean-Jacques Avenel and Oliver Johnson push the horn players (Lacy and his longtime partner Steve Potts) to startling heights.
- Archie Shepp – Blasé. Of most interest on this 1969 Paris session are the first two tracks, in which Shepp brings in two harmonica players and the adventurous vocalist Jeanne Lee to improvise alongside his rough-edged tenor. The result feels like a glimpse of a possible new musical genre, a sort of free blues.
That was the question I was asked by Jude Blanchette at an excellent CSIS panel on China’s state capitalism. It’s a reference to an old debate over the phenomenon known pithily in Chinese guo jin min tui, and less concisely in English as “the advance of the state and the retreat of the private sector.” As Jude remarked, it certainly feels like this has been happening in China in recent years, with the government proudly celebrating its state-directed economic model and the contributions of state-owned enterprises. The below are my notes, in which I try to pull together a concise answer to this vexed question:
The answer is yes and no. That’s not a cop-out. I say that because there’s a couple of different ways of looking at the advance or retreat of China’s state sector: you can look at it in a purely domestic context, or in a global context.
I’ve crunched a lot of numbers to get a handle on the economic size of China’s state sector. What I’ve found is that the value-added produced by state-owned enterprises has usually been in the range of 25-30% of China’s GDP. And what’s really striking about those numbers is that they just haven’t changed very much over the past 25 years. The share of China’s economic output being produced by SOEs today, under Xi Jinping, is not significantly different than it was under Hu Jintao, or even in the later years of Jiang Zemin.
In a purely domestic sense, then, there hasn’t been a major change in the balance of the economy between state-owned and private enterprises. I think that’s evidence that there’s some pretty strong continuities between the approach of the Xi administration and that of previous administrations. Xi certainly did not invent the idea that SOEs are and should be a central part of the Chinese economy, and he hasn’t actually taken huge parts of the economy away from the private sector and handed them to SOEs.
What I think has changed more under Xi is not so much the relative size of the state and private sectors, but more the political context in which both private-sector and state-sector firms have to operate. These days, both types of companies are expected to follow the government’s guidance more closely.
But the trajectory of China’s state sector looks pretty different if you look at it from the perspective of the world economy. Let’s not forget the obvious fact that China’s economy has been consistently growing much, much faster than the rest of the world. Since the share of SOEs in China’s economy has been basically stable, that means SOEs have also been growing quite fast, just as fast as the private sector. And that means China’s SOEs have gotten a lot bigger in absolute terms, and a lot bigger relative to the world economy.
The arithmetic here is pretty simple. At the turn of the century, China accounted for about 3.5% of global GDP. Now, China is about 17% of global GDP. The SOE share of China’s economy is about the same today as it was 20 years ago. Therefore, the share of global GDP produced by China’s SOEs has substantially increased: on my estimates, China’s SOEs account for about 4.5% of global GDP now, compared to about 1% back in 2000. I would point out that 4.5% of global GDP is a lot; it is more than the entire GDP of the UK, France or India.
So for those of us outside China, it is very much the case that China’s state sector is advancing. Chinese SOEs are a much bigger part of the global economy than they were before, and their international activities have also become much more important. I think it’s obvious that the rise of China’s SOEs represents a very substantial change in the structure of the world economy, and it should not be at all surprising that there is a lot of debate in other countries about how to respond to that change.
My contribution was pretty small, but the folks on the second half of the event tackled that exact question–how the US should respond–and generated a very useful discussion. I recommend watching the video.
For a compact and highly analytical overview of 200 years of Chinese economic history, it is hard to do better than this new paper from Loren Brandt and Tom Rawski (it’s a chapter for the forthcoming Cambridge Economic History of China but is available as a working paper from IZA).
What’s notable is how it crosses the Great Divide of modern Chinese history–the founding of the People’s Republic in 1949–with a unified conceptual scheme. It looks at long waves of centralization and decentralization under Communist, Nationalist and Qing rulers, and emphasizes the economic contributions from episodes of decentralized reform. Here’s a sample of how the authors draw these parallels:
China’s recent boom emerged from an episode of extreme central weakness following the Cultural Revolution. … Long before the start of China’s recent boom, a parallel episode linking regime weakness and economic innovation figured prominently in China’s nineteenth century history, when twin shocks of foreign encroachment and domestic rebellion stripped the Qing throne of both revenue and authority. Erosion of central power created space for new institutions – some externally imposed, others emerging organically – that contributed to significant growth and structural change through the late nineteenth and early twentieth centuries. …
The creation of semi-autonomous treaty ports unleashed a flood of innovation, especially in Shanghai, which anticipated Shenzhen’s contemporary role as a magnet for ambitious and entrepreneurial migrants, an entry port for new ideas and a hotbed of institutional innovation. … In both instances, local economic dynamism prompted competitive reactions elsewhere: self-initiated open ports under the Qing, multiplication of special economic zones under the PRC and relaxation of restrictions on entry and competition in both systems.
Throughout the paper the authors do an excellent job of deploying a few well-chosen statistics to make broader points. I found the facts below about the extent of China’s economic openness and global integration in the 1930s pretty impressive:
China’s share of global trade rose from 1.3% in 1913 to 2.1-2.3% during 1927-1929 and 3.7% in 1936; comparable PRC figures languished below 1% throughout 1968-1980, regaining the 1936 level only after 2000. Throughout the early 20th century, China was also a major beneficiary of foreign direct investment, much of it from advanced countries. By the 1930s, China held more than 10% of the global stock of inbound foreign direct investment and over 15% of the stock located in developing nations, with the largest portion directed toward (mostly rail) transportation.
Openness strengthened the economy, particularly in coastal regions where modern education, returned overseas students and migrants, and frequent interaction with foreign business stoked the transfer of technologies and the spread of commercial knowledge among would-be Chinese entrepreneurs. … Although foreign firms benefited from a head start, favorable treaty provisions and superior access to capital, Chinese-owned firms offered powerful competition: by 1933, they contributed 73% of nationwide manufacturing output and 78% in China proper.
Yet the Nationalist period also highlighted the limits of decentralized reform: China’s political disunity made it impossible for the government to build on the economic gains that had been made, or for private-sector actors to have real certainty and security. The transition to Communist rule involved a step-change in China’s state capacity, which had some good effects initially, before the state’s new capacity was turned to destroying to destroying private business:
Firm nationwide political control, reinforced by universal presence of Communist Party branches, provided the new government with an unprecedented capacity to implement policy even at the village level with minimal reliance on unofficial intermediaries. … Fiscal expansion demonstrated the new regime’s control. The ratio of government revenue to GDP, which had languished below 10% for centuries, exceeded 20% percent throughout the planned economy period.
Growth initiatives benefited from political unity, the cessation of internal warfare, and the return of monetary stability following destructive wartime hyperinflation. … The new system severely curtailed the engines of prewar growth: private entrepreneurship, commercial competition, and market integration that allowed growing circulation of commodities, information, capital, technology, and individuals within and across China’s national boundaries.
The 1980s are China’s most obvious example of decentralized reform, with both urban and rural initiatives often bubbling up from below. Yet what I particularly liked was their treatment of the 1990s, a pivotal decade in which the foundations of today’s Chinese economy were laid, but one that is less easy to characterize than the freewheeling 1980s. In a way, Brandt and Rawski argue that the 1990s and early 2000s were a kind of golden mean between centralizing and decentralizing approaches, with both going on at the same time and each delivering benefits.
The period between 1992 and the 2008 global financial crisis represents an interlude of relative political calm in which contentious debate about the long-term objective of economic policy continued even as major reforms delivered large and tangible benefits to advocates of both market transformation and state-led development. …
Liberalizing reformers rejoiced as openness, entry and competition swept across large swathes of China’s economic landscape. Jiang Zemin’s dual 2001 initiatives, first opening the CCP to private entrepreneurs, and then proposing a “socialist market economy with Chinese characteristics,” fanned expectations of gradual convergence to market outcomes. …
Developments between 1992 and 2007 equally reinforced the position and prospects for state-led development. … Beijing maintained strong control over large segments of the economy, including major upstream industries (petroleum, electricity), railways and large segments of the service sector (finance, telecoms). Fiscal and banking reforms massively enlarged the central state’s command over resources, while … economic success created vast pools of discretionary funds.
Given this framework, it’s not surprising that Brandt and Rawski are much more negative about the post-2008 economy. They see a breakdown in the 1990s’ balance between centralized and decentralized approaches, with a strong political preference for a more centralized approach being solidified under Xi Jinping. They cite multiple studies showing poor productivity growth as evidence that the economic fundamentals have become poorer as a result:
Multiple studies track China’s transition to “intensive” growth – with the majority of output expansion attributable to higher productivity rather than increased quantities of labor and capital inputs – for three
decades from 1978. Beginning in 2008, however, we see a return to “extensive” growth powered solely by larger inputs. A succession of studies using national, provincial and enterprise-level data point to TFP stagnation or even decline since the eve of the global financial crisis. The size of the private sector and the scale of productivity deterioration suggests that declining performance encompasses both.
There is much more in the full paper, which is well worth a read.
I’ll be giving a talk next week hosted by the University of Washington China Studies program, over Zoom of course. In it I will introduce the results of a research project I’ve been working on over the last couple of years, to measure China’s state-owned enterprise sector and interpret its economic role. I’ll have slides with lots of cool charts, and am looking forward to a lively discussions with friends from UW and elsewhere.
Here’s the blurb, and the link for the event:
The State Never Retreats: State Enterprises in the Chinese Economy, 1995-2018
Even after forty years of market reforms, the question of what role the state and private sectors play in China’s socialist market economy is still unsettled. Is the country experiencing a steady expansion of private businesses, or a new advance of state enterprises? In this talk, Andrew Batson will introduce new estimates of the economic size and structure of China’s state-owned enterprise sector, which turn out to have been remarkably stable over the past quarter century. He will discuss what these research findings show about the nature of China’s political system, how they affect our understanding of the history of China’s reform era, and what they mean for the future trajectory of China’s economy.
Westad: Both in the early 1970s, when Mao Zedong was still around, and maybe even more so in the late 1970s, both under Hua Guofeng and then Deng Xiaoping and his group, there’s this obsession with the idea that there will be war, that China will be attacked from the outside. Most likely by the Soviet Union, but also possibly by the Americans.
The imperative of growth, of rapid growth, came straight out of that. It’s remarkable to see how often leaders in this time period keep repeating that. From their perspective, this isn’t growth to help people get rich and move out of poverty. It’s all about strengthening the state, creating a state that can withstand the storms of that war that is going to come in the future. That was their thinking.
It’s fascinating to see how much of the literature that deals with this time period, especially from a US perspective, gets this exactly upside down. They think that economic reform is simply about releasing setting productive forces free and enabling a market transformation based on what had happened elsewhere. I think from the leadership’s perspective, then and probably also now, it’s the state imperative that is the most important. It’s what the state can extract from its own society in order to prepare for some kind of external conflict.
Karl Gerth: I’m often surprised that the Made In China 2025 plan is talked about as a form of autarky rather than as a form of geostrategic response. Just take the simple statistic that the US military budget is greater than the next 10 countries combined. It’s easy to imagine that China would find itself today, as it did then, in a position where it constantly needs to innovate and unleash productive forces.
Westad: I agree with that. If we look at the situation today, I think that’s very true, it’s exactly where much of this is coming from. It is less specific thinking about rapid economic development per se as it is a preparation for whatever the Communist Party and the Chinese government wants to do. There doesn’t necessarily have to be a contradiction between those two. But it’s very clear what comes first: it is the geopolitical strategy that determines how China approaches its economy, not the other way around.
At this moment, it’s easy to see these historical parallels: with the US openly attempting to strangle China’s technology sector, China clearly feels more externally threatened than it has in a while. As a result, it’s more obvious than usual how its geopolitical position is shaping economic policy. The geopolitical context for Chinese economic policy is also the subject of Covell Meyskens’ excellent recent book on the Third Front–see my review from last year.