DEBATE: WILL CHINA GRADUATE FROM AN EXPORTING PERIPHERY TO A CENTER OF INNOVATION AND GROWTH?
Is this a relevant debate? How would if affect the world economy and international relations?
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Documents & ideas: wages, consumption

[1] China’s currency regime: a tax on consumption? “The currency regime is a tax on consumption, which accounts for a mere 36 per cent of gross domestic product and represents a considerable subsidy to exports” (George Magnus, UBS economist: “A stronger yuan is just a start for China”, Financial Times, March 23, 2010).

[2] Suicides at Foxconn. Foxconn is the world’s largest electronics manufacturer; it employs 540.000 workers. It has been described as “the workshop of the world” and as “the backbone of world’s electronic manufacturing system. Its clients include Apple, Dell, HP, Nokia. Twelve workers committed suicide in early 2005 in Shenzhen. Then the company announced a 20% pay rise, from an average of €113/month. Yang Lixiong of Renmin Univeristy in Beijing: “Our country is on a race to the botton because our only advantage is cheap labor, and therefore our development is built on a mountain of sweatshops”. (Kathrin Hille: “Showing the strain”, Financial Times, May 29, 2010) [VIDEO].

[3] Strike at Honda factories in Guandong, May-June 2010 [VIDEO]. “The killer fact was that the share of wages and salaries in GDP dropped to a mere 37 per cent of GDP in 2005, from 57 per cent in 1983, and remained static since then. Low pay, long working hours and poor working conditions for millions of workers are triggering conflicts and mass incidents, which pose a grave challenge to social stability. The remarkable low share of wages and salaries in GDP makes China the most ‘capitalist’ large economy in history. Until this is reversed, the much-desired shift to a consumption-driven economy cannot occur. Over time, a better balanced economy with higher wages and standards of living, will emerge. The rise in pay announced by Foxconn and Honda looks like an entirely natural consequence of the country’s development and of the operation of labor markets, such as they are allowed to function. Productivity has risen over the decades, partly because of more capital per employee but also as a result of higher skill among workers.” (“Chinese workers are now in open revolt”, Financial Times, June 4, 2010; “Why China’s pay unrest is healthy”, June 12, 2010).

[3] Institutional aspects: the welfare state. How does the one-child policy affect saving-and consumption patterns? [A student in Santo Domingo] [The Sichuan earthquake] From UBS economist George Magnus: “Imbalances will not go away so long as China has an entrenched savings excess – the product of an unreformed rural sector, inmature social security and financial systems, and the one-child-policy” (“We need more from China than a flexible yuan”, Financial Times, 22 June 2010)

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Documents & ideas: the role of education

[1] The PISA tests. [2009 RESULTS]. Many people in the West were shocked by the results! Shanghai comes on top. (Don’t even look at Argentina).

[2] Amy Chua. Battle Hymn of the Tiger Mother. New York: Penguin, 2011 [VIDEO] [VIDEO] [Interview] (*).

(*) Dr. Chua is also the author of Day of Empire: How Hyperpowers Rise to Global Dominance--and Why They Fall. New York: Anchor, 2009.

[3] Google & China. “Google has accused the Chinese authorities of disrupting its e-mail service inside the country, adding a new twist to the standoff over censorship that has bedeviled the US company’s attempts to push into the world’s most populous internet market” (Richard Waters: “Google claims Beijing is disrupting e-mail service”, Financial Times, March 22, 2011). [DEBATE: Knowledge & freedom].

[4] Education and economic performance. The brain drain problem. Does France subsidy the US? South Korea vs. the Philippines. Iranian doctors in medicine in Canada. Venezuelan oil engineers in the US.

[5] Education and economic performance. The silence of Mr. Fukuyama.

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Documents & ideas: the rule of law and the cost of capital (back to Montesquieu and Smith!)

[1] Patti Waldmeir: “Things improve, but judiciary still lacks independence”, Financial Times. Waldmeir quotes Australian lawyer Doug Clark: “The perception that the legal playing field is not level is a larger impediment to Shanghai's ambition to become a global financial centre by 2020 than any number of potholed streets or immature trading mechanisms. Without an independent legal system that resolves disputes fairly no one will bring real money to Shanghai. No one is going to park $1bn in Shanghai to pick up a bit of margin unless they have confidence that they can call a judge at 2am and get an injunction against behaviour that could damage them ... In a country without an independent judiciary, laws are only as good as the politicians allow them to be enforced. Being a global financial center means your neighbour puts money in your pocket. At the moment, the confidence is not there for that”.

This brings us back to old, yet powerful ideas of Montesquieu and Adam Smith. No judicial independence, no credit. No credit, no entrepreneurship. No entrepreneurship, no prosperity.

 [2] Ai Weiwei. [DOCUMENT: “Who is afraid of Ai Weiwei?”]

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Concluding remarks. Will China ‘graduate’ from periphery to center? Ai Weiwei & Francis Fukuyama

. Why is there no ‘Chinese De Gaulle’? (The 1968 dollar crisis and the ‘addiction’ to exports; the invasion of Czechoslovakia and the flight-to-safety that undoes De Gaulle).

. Ai Weiwei’s diagnosis : CHINA IS A COLOURFUL COUNTRY AND THERE IS A LOT OF FREEDOM. YET THE LACK OF AN INDEPENDENT JUDICIARY AND STATE LIMITS ON FREE SPEECH ARE FATAL FLAWS. CHINA IS LIKE A RUNNER SPRINTING VERY FAST BUT WITH A HEART CONDITION (“Lunch with the FT: Ai Weiwei”, Financial Times, April 23, 2010) [info]. If he is accused of economic or sexual crimes, that would be the best illustration of the lack of judicial independence.

Francis Fukuyama: (1) “Can China push back the frontiers of science and technology without Western-style property rights or personal freedom?; (2) The welfare state: no taxation without representation, a key element of political accountability; (3) Connectivity. “Darwinian” evolution takes place at the level of human institutions! Given the connected nature of today’s world, that process of evolution may take place a lot faster than in the past. And that’s where Ai Weiwei joins Fukuyama: social network sites are very active in mobilizing support for the artist. See @Change; #freeaiweiwei; #aiweiwei; Lee Ambrozi. Ai Weiwei’s blog. Writing, Interviews and Digital Rants by Ai Weiwei. MIT Press, 2011; “Chinese Hackers Attack Change.org Platform in Reaction to Ai Weiwei Campaign”.