Political economy with Chinese characteristics (Beijing Consensus vs PHL neoliberalism: four decades later)

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China’s adherence to commodification and global integration is described by neoliberal economists as an improvement, not a repudiation of the Washington Consensus. However, the Chinese Communist Party (CCP), which led China’s market-oriented economic transformation after Mao’s death, never accepted the WC. China has a completely different economic model.

To understand the Chinese model, it is best to listen to what the Chinese themselves and the CCP are saying about it. In this regard, a good reference is the report produced by the China Institute of Reform and Development in 2000, 20 years after the launch of Deng Xiaoping’s “Four Modernizations” (CIRD, China’s economic transformation over 20 years, Beijing: Foreign Language Press, 2000).

The CIRD report was surprisingly straightforward in its criticisms of the WC. The CIRD wrote that in developing a reform plan, “it is important not to indiscriminately copy Western economic theory of laissez-faire.” In addition, the CIRD opposed the “abandonment of macroeconomic control on the government side” in the reform process and in the transition to commodification. In short, China has never given up the “visible hand” of the state to guide economic development and control the peaks of the economy.

Regarding the direction of economic transformation, the CIRD wrote that Russia and other Eastern European countries paid “sky-high prices” when these countries implemented the “therapy” policy package. shock ”(radical privatization and deregulation / liberalization of the economy) advocated by Western economists such as Lawrence Summers and Jeffrey Sachs. This therapy halved Russia’s gross domestic product in three years (45%), delayed the development of Russia by 20 years, and caused massive unemployment and poverty. The CIRD wrote that the assumption of Western economists and the International Monetary Fund that shock therapy would lead to rapid economic transformation and growth for Russia was baseless and “based on pedantic wishful thinking.” Wasn’t that the same assumption used by the IMF-WB team and Filipino technocrats when they pushed for the so-called economic reforms in the 1980s, which were bundled into a “structural adjustment program?” (NOT) in an effort to transform the Philippines into a roaring export-oriented economy?

When it comes to controlling the peaks of the economy, it should be pointed out that the CCP-led government has never given up its control over state-owned enterprises in strategic sectors such as electricity, telecommunications, transportation. , mines, etc. China limited the privatization program to downsizing or auctioning / shutting down several hundred state-owned enterprises, mainly those engaged in non-strategic areas and / or were too weak and inefficient to survive under commodification .

How big is the public enterprise sector today? In 2019, the US Congressional Research Service (China’s economic boom, Washington, June 2019), said China is one of the “world’s most active users of industrial policy and administration.” As a result, China had 150,000 state-owned enterprises, which collectively account for 50 percent of non-agricultural GDP. Some of these state-owned companies have now become global giants and are helping Xi Jinping realize China’s dream of encircling the world through his Global Belt-and-Road (BRI) initiative. One of the large state-owned enterprises is the China State Grid Corporation, which owns 40% of the National Grid Corporation of the Philippines.

Now back to the CIRD report, another feature of China’s reform process cited is the policy of “gradualism” or the step-by-step implementation of reform measures (called “crossing the river, touching the stones”). Thus, the modernization program has started in rural areas, with the dismantling of the backward commune w and the introduction of the “self-responsibility system” between individual farm families. The pricing system was also placed on a “dual track”, meaning that the prices of essential commodities such as rice remained under government control while other commodities were gradually relaxed. On opening up China to the world market and creating special economic zones, the process started with the coastal provinces before involving the interior regions. As for the development of the “non-state sector” or private industries and enterprises, it has also been allowed to prosper gradually, but the “public sector” retaining overall dominance (still up to 70 percent in 2000).

With the foregoing market reforms, the CIRD concludes that what China was trying (and still is trying) to accomplish in the first two decades of China’s economic transformation was the development of a balanced “mixed economy” led by the state based on Deng’s original vision of “Four Modernizations”.

However, did the outline of the Chinese model by the CIRD in 2000 change over the following decades? Apparently not.

In 2017, two senior Chinese political economists, Cheng Enfu and Ding Xiaoqin, listed the “eight principles” to explain China’s “miracle economy”. These are: 1) sustainability led by science and technology, 2) orientation of production to improve people’s livelihoods, 3) the precedence of public property in national property rights, 4) the primacy of work in the distribution of wealth, 5) the principle of the state-led market, 6) rapid and efficient development, 7) balanced development with structural coordination, and 8) economic sovereignty and openness . These eight principles are the main characteristics of “socialist political economy with Chinese characteristics” (Cheng Enfu and Ding Xiaoqin, “A Theory of China’s ‘Miracle’”, in Monthly, New York, January 2017).

There is no space here to discuss each of these eight principles in detail. But it is clear that the Chinese model is clearly the opposite of the Washington Consensus. On the last principle, sovereignty and openness, Enfu and Xiaoqin wrote:

“China should insist on the two-way open state policy that integrates domestic and international politics, developing a higher-level open economy by taking advantage of domestic and foreign markets. This involves adjusting trade policy to find and exploit mutually beneficial agreements, while protecting China’s development and actively guarding against risks to national economic security.

From the above, it is quite clear that the Chinese model is primarily about China’s national interests. These interests are central to economic planning, investment promotion, etc.

In the case of the Philippines, the original WC guinea pig, asserting national interests and building national capacity are hardly discussed in economic planning workshops. They are not reflected in the IMF-WB’s PAS program, a program that is continually pursued by Neda despite four to five decades of poor development in the Philippines under neoliberalism.

One explanation for the stubborn adherence of our economic planners to the failure of the WC / SAP program is the obsession of some economists with developing growth strategies based on a single factor: the country’s “comparative advantage”. More on this in the last installment of this series on BC vs WC.

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