Sixty years ago on October 1, 1949, Mao Zedong, head of the victorious Red Army and chairman of the Central People’s Government, stood at the entrance of the Forbidden City and solemnly declared the founding of the People’s Republic of China (PRC). Before him stood a celebratory throng of 300,000 assembled in
Of course, the Chinese government is planning spectacular birthday festivities for its upcoming National Day and for good reason, there is much to celebrate. In 1949,
This revival is even more notable because of the dramatic 20% decline in exports, once the driving force of its economic engine. So what is the explanation?
By comparison, it is the largest stimulus of any recovery program, anywhere. It already accounts for 13% of
For example, substantial new expenditures were just announced in May, 2009. Set aside was $290 billion to subsidize purchases for a variety of modern home kitchen appliances and another $733 million for purchases of more efficient automobiles.
The "swapping new for old," as it is dubbed, is a more inclusive version of President Obama’s "Cash for Clunkers." Though limited to automobiles, "Cash for Clunkers" was heralded as one of the few success stories of the
In its September 7, 2009 issue, Business Week asks for an assessment of the
For example, a massive rail network is under construction that will extend to virtually every city, town and county. China is far outspending U.S. rail expenditures by building this extensive, environmentally-friendly and ultra-modern national transportation system comprised of heavy rail for freight, commuter rail for urban dwellers, light rail for short-travel convenience and high-speed rail for long distance.
This goes hand in hand with
Of course, all this has the additional benefit of employing millions. In this,
In a world plagued by low industrial production, China’s industrial output grew by 9.1% in the second quarter of 2009 from a year earlier, according to RTE Business (July 16, 2009). In June, industrial output grew by 10.7%. This illustrates bustling activity in the nation’s millions of factories and workshops.
Progress at a Price
The country’s economic development particularly accelerated after July, 2001 when the government first learned it was hosting the 2008 Olympics. But the frantic pace of economic growth has left some huge noticeable gaps, both socially and economically.
Regarding the economy, there were already significant imbalances in the government’s strategy even prior to the recent world market collapse. For too long, China’s emphasis on investments in steel, heavy machinery, textiles, garments and electronics for the export market far exceeded consumer-friendly domestic production in health, education, housing, the environment and social services.
This lop-sided investment strategy produced two related phenomenon. The focus on an export-oriented economy accounted for the huge trade surplus that reached a milestone in 2008 of $2 trillion. At the same time, low capital investment in commodities geared toward domestic consumption resulted in substantial savings among consumer-deprived Chinese workers.
These foreign enterprises earn big profits employing an educated, low-wage workforce represented by a rather compliant state labor union (ACFTU). The 200-million member union has, up until recently, been reluctant to challenge the multi-national investor "guests" who were treated more as partners than as collective-bargaining adversaries.
In addition to these economic distortions, there are accompanying social inequalities derived from past concentration on export production.
Critics are quite justified who assert the country’s rapid modernization conceals significant underlying injustices which are especially acute in the rural areas where half the nation’s 1.3 billion reside. Despite current massive stimulus spending, the countryside is still brewing with discontent.
According to Ministry of Labor 2007 statistics, there are 100 million unemployed farmers with another 26 million returning migrant workers recently displaced from city jobs.
It is a growing concern for authorities, especially when coupled with the glaring income gap between urban and rural workers.
According to the
Enormous domestic investments by the government are an attempt to resolve these contradictions but it may be a matter of too little too late.
Modernization despite Mistakes
Nonetheless, encompassing almost 20 percent of the world’s population, modern
Over the years,
Massive inefficiencies and waste result from not democratizing the bureaucratically planned economy. In addition, when the people are not consulted they are far less sympathetic to the sacrifices they are asked to make when these mistakes interfere with their lives.
Nonetheless, China’s historic leap from oblivion into one of the top 21st century economies and its impressive results from recent stimulus initiatives both vividly illustrate the basic superiority of a centralized rational investment plan, even one so intrinsically flawed, over one dictated exclusively by the mad, chaotic rush for individual profit.
This fundamental divergence explains why we in the
Carl Finamore lives in