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The Middle Kingdom rises again
KEEBLE McFARLANE
Saturday, August 28, 2010
There was a running joke for many years about who really won the Second World War. The punchline was "Germany and Japan", because out of the wholesale carnage and ashes those countries showed phenomenal economic and social growth in the ensuing years. Both nations grew so rapidly and so solidly that the only country which surpassed them was the one which enjoyed spectacular growth during and because of the war - the United States.
Both held their second and third positions as the world's biggest economies for years, but suffered considerable turbulence of their own. What we knew as West Germany swallowed the then East Germany 20 years ago, an action many outsiders predicted would end in disaster, since the smaller German Democratic Republic, a firm member of the Soviet bloc, was much poorer than the wealthy Federal Republic. But the dislocation, while problematic, turned out to be much less painful than many had feared, and the unified country rolled on as the largest exporter of manufactured goods and right near the top of the heap in ratings of the world's strongest economies.
Japan began on wobbly legs, churning out cheap and poor quality imitations of Western goods. Many of us who were children right after the war can remember receiving toys stamped out of recycled tin cans from the west or moulded from newly invented plastics, labelled. "Made in Occupied Japan". Pretty soon, though, Japan's economic machine grew up, negotiating a steep and arduous learning curve, into a source of among the highest quality goods you can find anywhere.
Brand names like Sony, Toyota, Honda, Panasonic, Seiko and Nintendo became ubiquitous around the world and symbolic of utility, style and quality. Forty-two years ago, Japan overtook West Germany to rise to second place among the economic giants of the world.
But the so-called real estate bubble of the 1980s quenched the sizzling growth rate and led to a serious contraction in the early 1990s. During that decade Japan wallowed in an economic malaise from which it still hasn't recovered. The current government, led by Prime Minister Naoto Kan, faces a forbidding roster of difficulties: chronic weak domestic demand coupled with decelerating growth in vital export markets, a population which is shrinking and rapidly growing older, along with deflation and a strong currency which makes exports more expensive than those of its competitors.
In the meantime, another country began on a path of spectacular growth resembling that of Japan and Germany. At the end of 1978, China's leadership, headed by a reformer named Deng Xiaoping (pronounced Dong Shaaoh-ping) introduced a programme of reforms they called "Socialism with Chinese Characteristics". Their goal was to transform the moribund planned economy which had consigned China to backwardness into a market economy which could generate strong economic growth and make life easier for the country's citizens.
The first thing they did was to dismantle some of the fundamental things put in place by the founder of the communist state, Mao Zedong. They de-collectivised farms, opened China to foreign investment and allowed entrepreneurs to start up their own businesses. But the state still owned most industries which were inefficient and therefore hindered economic growth.
The government, while holding on to monopolies like petroleum and banking, went on to dismantle protectionist policies, lift price controls and relax oppressive regulations, contract out or completely privatise many state-owned industries. The result was unprecedented growth, averaging a spectacular 9.5 per cent, along with widespread changes in Chinese society. Poverty was reduced and many people grew wealthy. The drabness which was an overwhelming characteristic of the Mao years largely disappeared. Cities became vibrant places, with an explosion of modern facilities and services evident in many other parts of the world. By 2005, China had surged past Britain and France and two years later overtook Germany.
Then came the news last week - China had overtaken Japan to become the second-largest economy in the world. In the first half of this year, China's economy expanded by more than 11 per cent compared with a year ago. In the last quarter, its gross domestic product reached US$1.337 trillion and shows no sign of slowing down. China has become the workshop of the world, churning out coffee percolators, toasters, DVD players, computers, cellphones, air conditioners and a myriad other products - even those annoying vuvuzelas heard during the recent World Cup in South Africa. It now makes more cars than the United States and Japan combined and the International Energy Agency says it has surpassed the US as the world's largest user of energy.
All this has led many analysts to predict that China will outstrip the United States for the top spot before the middle of the century. But hold on a minute - they made the same prediction about Japan when its share of the world's automobile market rose from three or four per cent to 30 per cent within a decade. But that was before the so-called housing and investment bubble burst and led to the rapid deceleration of economic growth there in the 1990s.
Impressive as China's performance is, some serious drawbacks remain. Wealth has increased, to be sure, but so has inequality in the distribution of that wealth. China still has a huge deficit in the provision of social services such as health care, decent housing, pensions and rural infrastructure. Prices have skyrocketed along with the spectacular growth - during the past year, house prices have increased by 40 per cent in 36 big cities, and even more in Beijing, Shanghai and Shenxhen. In per capita income, China is way down the list at a mere US$3600 a year. That's the same as Albania and El Salvador, and way below Japan (US$28,000) and the United States (US$38,000).
Until the 19th century, China had one of the world's largest, wealthiest and most advanced economies. In fact, in 1820 it constituted fully one-third of the world's gross domestic product. But because of internal disunity and pressure from rampantly self-confident European powers, China fell into more than a century of disorder, dislocation, discord and death. Two world wars only made matters more miserable. Then Mao triumphed and succeeded in unifying the country - at the point of the gun. He also succeeded in destroying much traditional culture and causing a disastrous drop in living standards. That ended when Deng came along and deposed the notorious Gang of Four, a bunch of ultra-leftists who succeeded Mao.
The question left to be answered is whether China can sustain the dizzying growth it has enjoyed for the past three decades. Some analysts predict that it will continue at 7 to 8 per cent a year, but that could be curtailed by the environmental constraints China faces. A Chinese financial official says even a rate of 5 to 6 per cent a year into the 2020s would mean China would have maintained rapid growth for 50 years, an achievement unprecedented in human history.
Throughout its 400-century history, China's description of itself has been the "Middle Kingdom" - one that exists above the rest of humanity but a bit below heaven. As the 21st century marches on, it seems the rest of the world will once again have to deal seriously with a resurgent Middle Kingdom.
keeble.mack@sympatico.ca
http://www.jamaicaobserver.com/colum...-again_7909927
KEEBLE McFARLANE
Saturday, August 28, 2010
There was a running joke for many years about who really won the Second World War. The punchline was "Germany and Japan", because out of the wholesale carnage and ashes those countries showed phenomenal economic and social growth in the ensuing years. Both nations grew so rapidly and so solidly that the only country which surpassed them was the one which enjoyed spectacular growth during and because of the war - the United States.
Both held their second and third positions as the world's biggest economies for years, but suffered considerable turbulence of their own. What we knew as West Germany swallowed the then East Germany 20 years ago, an action many outsiders predicted would end in disaster, since the smaller German Democratic Republic, a firm member of the Soviet bloc, was much poorer than the wealthy Federal Republic. But the dislocation, while problematic, turned out to be much less painful than many had feared, and the unified country rolled on as the largest exporter of manufactured goods and right near the top of the heap in ratings of the world's strongest economies.
Japan began on wobbly legs, churning out cheap and poor quality imitations of Western goods. Many of us who were children right after the war can remember receiving toys stamped out of recycled tin cans from the west or moulded from newly invented plastics, labelled. "Made in Occupied Japan". Pretty soon, though, Japan's economic machine grew up, negotiating a steep and arduous learning curve, into a source of among the highest quality goods you can find anywhere.
Brand names like Sony, Toyota, Honda, Panasonic, Seiko and Nintendo became ubiquitous around the world and symbolic of utility, style and quality. Forty-two years ago, Japan overtook West Germany to rise to second place among the economic giants of the world.
But the so-called real estate bubble of the 1980s quenched the sizzling growth rate and led to a serious contraction in the early 1990s. During that decade Japan wallowed in an economic malaise from which it still hasn't recovered. The current government, led by Prime Minister Naoto Kan, faces a forbidding roster of difficulties: chronic weak domestic demand coupled with decelerating growth in vital export markets, a population which is shrinking and rapidly growing older, along with deflation and a strong currency which makes exports more expensive than those of its competitors.
In the meantime, another country began on a path of spectacular growth resembling that of Japan and Germany. At the end of 1978, China's leadership, headed by a reformer named Deng Xiaoping (pronounced Dong Shaaoh-ping) introduced a programme of reforms they called "Socialism with Chinese Characteristics". Their goal was to transform the moribund planned economy which had consigned China to backwardness into a market economy which could generate strong economic growth and make life easier for the country's citizens.
The first thing they did was to dismantle some of the fundamental things put in place by the founder of the communist state, Mao Zedong. They de-collectivised farms, opened China to foreign investment and allowed entrepreneurs to start up their own businesses. But the state still owned most industries which were inefficient and therefore hindered economic growth.
The government, while holding on to monopolies like petroleum and banking, went on to dismantle protectionist policies, lift price controls and relax oppressive regulations, contract out or completely privatise many state-owned industries. The result was unprecedented growth, averaging a spectacular 9.5 per cent, along with widespread changes in Chinese society. Poverty was reduced and many people grew wealthy. The drabness which was an overwhelming characteristic of the Mao years largely disappeared. Cities became vibrant places, with an explosion of modern facilities and services evident in many other parts of the world. By 2005, China had surged past Britain and France and two years later overtook Germany.
Then came the news last week - China had overtaken Japan to become the second-largest economy in the world. In the first half of this year, China's economy expanded by more than 11 per cent compared with a year ago. In the last quarter, its gross domestic product reached US$1.337 trillion and shows no sign of slowing down. China has become the workshop of the world, churning out coffee percolators, toasters, DVD players, computers, cellphones, air conditioners and a myriad other products - even those annoying vuvuzelas heard during the recent World Cup in South Africa. It now makes more cars than the United States and Japan combined and the International Energy Agency says it has surpassed the US as the world's largest user of energy.
All this has led many analysts to predict that China will outstrip the United States for the top spot before the middle of the century. But hold on a minute - they made the same prediction about Japan when its share of the world's automobile market rose from three or four per cent to 30 per cent within a decade. But that was before the so-called housing and investment bubble burst and led to the rapid deceleration of economic growth there in the 1990s.
Impressive as China's performance is, some serious drawbacks remain. Wealth has increased, to be sure, but so has inequality in the distribution of that wealth. China still has a huge deficit in the provision of social services such as health care, decent housing, pensions and rural infrastructure. Prices have skyrocketed along with the spectacular growth - during the past year, house prices have increased by 40 per cent in 36 big cities, and even more in Beijing, Shanghai and Shenxhen. In per capita income, China is way down the list at a mere US$3600 a year. That's the same as Albania and El Salvador, and way below Japan (US$28,000) and the United States (US$38,000).
Until the 19th century, China had one of the world's largest, wealthiest and most advanced economies. In fact, in 1820 it constituted fully one-third of the world's gross domestic product. But because of internal disunity and pressure from rampantly self-confident European powers, China fell into more than a century of disorder, dislocation, discord and death. Two world wars only made matters more miserable. Then Mao triumphed and succeeded in unifying the country - at the point of the gun. He also succeeded in destroying much traditional culture and causing a disastrous drop in living standards. That ended when Deng came along and deposed the notorious Gang of Four, a bunch of ultra-leftists who succeeded Mao.
The question left to be answered is whether China can sustain the dizzying growth it has enjoyed for the past three decades. Some analysts predict that it will continue at 7 to 8 per cent a year, but that could be curtailed by the environmental constraints China faces. A Chinese financial official says even a rate of 5 to 6 per cent a year into the 2020s would mean China would have maintained rapid growth for 50 years, an achievement unprecedented in human history.
Throughout its 400-century history, China's description of itself has been the "Middle Kingdom" - one that exists above the rest of humanity but a bit below heaven. As the 21st century marches on, it seems the rest of the world will once again have to deal seriously with a resurgent Middle Kingdom.
keeble.mack@sympatico.ca
http://www.jamaicaobserver.com/colum...-again_7909927
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