April Reflections – Different Ways

It is difficult for any of us outside China to fathom their completely different approach to government and planning. We are so used to our own systems, which are essentially organic and reactive and where our political classes and their intellectual reserves, the academic class, have lost so much of the depth and statesmanship that we associate with the 19th century.

China’s leaders have, since 1949, debated the widest concepts of where China should and would go. The outcome of those well-informed and well-researched debates have identified the course of China for over 60 years.

When the media gets into a heightened state of anxiety about shadow banking, property prices, and a wide variety of issues, they usually do not see the historical context. It is very difficult to consider the British government deficit without considering the original, fundamental ideas about the Welfare State, and the waste of North Sea Oil tax revenues which lends its authorship to ideas of Milton Friedman.

The Welfare State was an ideal to right the social injustices of the Industrial Revolution.

Using North Sea Oil revenues to cut taxes was again a political ideal around a small state and consumerism, the freedom to spend money as one wants.

The Chinese debate on the Welfare State was ongoing from before 1949 as a political ideal, but it moved to global study and research in the 1980’s. This involved deep study of Western models, and how reality and ideals interacted, and the effect on the State where it delivered the product.

The Chinese Welfare State is only now being slowly rolled out, and all in the West should take it very seriously as we created it. It is the result of a belief in Socialism and Responsible Capitalism that economic growth should be a catalyst for social justice, and not be seen as an idol that has no other dues.

A civilised nation has a duty to ensure that the young, old, sick and vulnerable are cared for but is it for all, and who pays and how long-lasting are the benefits, or should we call them core rights.

When you see British privatised companies doubling and quadrupling their profits….by cutting their work forces, they are merely transferring the costs of their increased profits onto the State in the form of unemployment pay and benefits. It is a simple self-evident fact that companies are the best organisations to retrain and reposition their excess work forces. There is no justice in imposing costs on taxpayers to enable major companies to make profits.

The costs expand, managed by the unaffected, and the value dissipates. The motivation to address the core problems is lacking. China will develop a Welfare State that learns from us.

In the field of healthcare, the Chinese Prime Minister must have been surprised to see our Prime Minister speak in defence of GSK, the pharma giant. True the PM was trying to help a British company out of difficult waters in China. But the Chinese analysis of Western Welfare States has shown one of the key problems is the high profits made by the pharma companies, who see the doctors as their market, and not the patients.

These are just a couple of examples of how the Chinese take political ideals, then spend up to 20 years researching them globally, and then reinventing the concepts to suit the need, the resources, and the global experience.

This then defines the methodology of China’s development – some call it the scientific path.

But to understand President Xi, his fellow stalwarts, and the powerful ideology of the economic development road, one really needs to go back to 1949, and trace the two-line struggle between politics in command, and the economic development road.

In 1949, this debate was carried on at a low level as all focused on winning the war against Japan, and then the Civil War. But as China embarked on taking its nation out of dreadful poverty, creating an agricultural capability to feed their people, eradicate disease, so China’s leaders and Party began to debate the two lines.

Of course, there is a simple obvious truth that economic development comes out of political ideology, but the depth of the two lines based themselves in those who believed in social justice and the quality of the Chinese character, and, on the other side, those who believed that China could only thrive if the economy developed.

Mao was more associated with the politics in command approach, but the Sino-Soviet split of 1956 onwards was very damaging to the Chinese economy as the Soviets dismantled their plants and cut aid. So he engaged in the Great Leap Forward to build a stronger and more self-reliant economy. Three years of terrible harvests, the impact of Russian withdrawal, and some core industrial policy faults created not development but a backward step.

The lessons were learnt. The Party leaders associated with economic development fought for the policy leadership of the Party and succeeded, when in January 1963 the Four modernisations were announced in Shanghai by Premier Zhou Enlai. Working with Liu Shaochi, Deng Xiaoping, and Chen Yun these four men laid the outlines for what was implemented in 1978 as the reform and opening up.

In between we have the Cultural Revolution, which I suspect was Mao’s politics in command answer to the economic development priority approach of the Four Modernisations. Clearly Mao felt the Chinese people deserved something better than mere economic development, and felt that it would take China too close to the sugar coated bullets of Western bourgeois societies.

Maybe in 200 years there will be an appraisal of that debate, with the benefit of hindsight.

But it is not just jargon – it is very real and is about quality versus quantity and the soul of China.

We know that debate as we see progress defined in terms of numbers, and wish our streets were safer and cleaner, and that the internet was free from gambling and pornography.

Of course, in the end the right way is the balanced way that sees economic development as a road to a socially just and moral nation helping its global partners to a better and more sustained life. That is, in a poor nutshell, why Xi stresses the Chinese Dream – to show that the goal is not numbers but quality.

With the Cultural Revolution came the spirited search for ideals of good citizenship, followed by a lurch into crude power politics, using names to defeat perceived opponents. Eventually the chaos was apparent, and Chinese Party leaders waited for the passing of Mao, so they could rid the cancer of the Gang of Four, and go back to the Four Modernisations which advanced the economic priority but within a newly defined version of Socialism, which keeps to many of the basic tenets of Socialism without being chained to literal definitions and ideas that were based in reality of 1850, and which had changed in major ways.

1978 was the dawning of the age of economic development as the main priority of the Party and Government. Its first stage was the building of a low cost export economy to provide the motor of the first stages of getting the Chinese people out of the doldrums they had been consigned to for the previous 20 years.

The preparation lasted for 10-15 years and then China bounded out on to the worlds’ shops, and by 2006 China had the biggest reserves in the world. Every biggest…. Became a label that China passed.

But from 2002 the next stage was to be tested out, with the intention of rolling it out from 2012 onwards. That stage is a modern economy with substantial drive from domestic demand, personal and state – as China has huge infrastructure needs.

The development of a Market Economy with powerful shareholders and Regulators was not a passing spin, but a deeply researched idea, that was tested extensively in the 10 years from 2000 to 2010.

As the preparation for the new leadership from 2012 continued it became clear that sheep were wandering from the farm. The Chinese had tested shareholdings and expected corruption, but it was deeper and worse, and the remedies were not adequate.

Some inside the Party and outside argued – and some still do – that Western capitalism is the only way to build a prosperous economy in China – not sure what they are looking at…..

Then some argued that without political reform the necessary accountability and Rule of Law would be unable to develop.

Others, like Bo Xilai, argued that China’s soul had become lost and they needed to rein back, and rebuild the political soul of China.

Xi Jingping represented a very clear and unambiguous constituency of seasoned Party officials who drew from a broad experience of Chinese history, and knew the dangers of solution policies, as I call them – if you will only do this then everything will be ok.

This groups view is that economic development is the absolute priority because of the huge population and the global stage is unsettled and changing, and taking their eye of the ball would lead to totters and worse.

He knows that corruption must be stamped out, but that includes many officials and leading business people who have lost sight of the wider goals of China.

China’s trajectory is changing but back to the one envisaged by the Four Modernisations and Reform and Opening Up.

In the attached two speeches I think we see the depth of Xi and the depth of the thinking to which he is attached.


Stephen and friends

Xi College of Europe speech

Xi UNESCO speech

Categories: China growth, Infrastructure, Welfare state

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