by Brian Hioe
Photo Credit: CNN
IF RECENT WARNINGS that China may be caught in a Japan-style liquidity trap are any indication of anything, with China’s economic slowdown and the failure of state stimulus to generate new returns, such developments such not really be so surprising. Did economists think that China could generate unlimited growth forever?
It is the generally the mistake of bourgeois economics to somehow think that market growth can be unlimited, without growth eventually running into limits. But the Japan comparison is apt, with Japan before China having been hailed by economists as having developed a new economic model in which growth seemed to be unlimited. This was the so-called “Japanese economic miracle”.
With the seemingly unlimited potentials for growth by the Japanese post-war economy, economists, political scientists, and others resorted to culturalist explanations for the means by which Japan seemed to have cracked the economic riddle. Theories of Japanese cultural particularity, for example, in the so-called quintessentially Japanese cultural work ethic, were used to explain the Japanese economic miracle.
1971 Time Magazine cover. Photo credit: Time
In the wake of the Japanese economic miracle, with the rise of the “Four Asian Tigers” as similar economic powerhouses, this culturalist explanation of economic development was expanded to include East Asian countries as Hong Kong, Singapore, South Korea, and Taiwan. This was crystallized in the notion of the “Asian developmental model” and “Asian values” as the hidden motor of East Asian economic development.
One can point to similarities between Japan and the “Four Asian Tigers”, with the strong role of the developmental state in all of these contexts as a stimulus for developing growth, and that the rapid industrialization these countries were going through was a spur for growth. In this sense, one can speak of “Asian developmental model” with qualifications. However, growth could not prove unlimited in any of these contexts. Thus, eventually financial crisis would rear its head.
In both the cases of Japan and the “Four Asian Tigers,” a contributing factor to eventual economic crisis was the bursting of asset bubbles, abrupt loss of investor faith, and hoarding of inactive capital. In the case of Japan, this was through the bursting of asset price bubble in 1991 and in the case of the “Four Asian Tigers”, this came as a product of the 1997 Asian financial crisis. Both were aggravated by liquidity traps, though the term is used less often to describe the 1997 Asian financial crisis.
Countries most affected by the 1997 Asian economic crisis. Photo credit: WikiCommons
Should it be any real surprise that we would see the same phenomenon with China, then? With the economic rise of China in recent years, one similarly sees culturalist theories concocted to explain how exactly China has cracked the riddle of unlimited capitalist growth? In the case of China, culturalist explanations sometimes resorted to the same tropes of “Asian values,” or a “Confucian work ethic” that were used to explain the Japanese economic miracle.
At other points, China’s “communist” past was used as the explanation for contemporary Chinese economic growth, with the notion that the continued strong role of the state had allow China to tame the contradictions of the capitalist economy in order to engender unlimited growth. Terms coined to give a name to this apparent particularity of China include “socialism from afar,” “market Leninism,” and others, but the notion of China’s particularity as accountable to its socialist past was one advanced in ultimately culturalist terms, with “communism” thought of as a part of China’s historical culture.
Such culturalist theories were not helped by Chinese economists and political scientists themselves, who were in the spirit of nationalism sometimes quite happy to attribute some cultural particularity to China which allowed it to seemingly achieve something the West never had—in cracking the secret of the unlimited market growth. This was a phenomenon which was also previously seen in Japan during the period of the Japanese economic miracle, with theories of Japanese cultural particularity as nihonjinron developed to explain the Japanese cultural attributes that allowed for Japan’s unprecedented economic growth and such theorists advanced by Japanese nationalists in service of their own political agendas. Likewise, in the case of the Four Asian Tigers, it does well to remember that the notion of “Asian values” was not coined by western observers from without, but by Lee Kuan Yew of Singapore.
But if recent trends indicate that China may be going down the path of Japan, with the failure of the Chinese government to prop up economic growth and a consequent economic slowdown, this should not be surprising. Recent trends perhaps represents that China is more and more visibly conforming to the capitalist trends of the East Asian region at large.
Photo credit: Haha169/WikiCommons
Of East Asian countries, Chinese history skews from that of Japan or the Four Asian Tigers because of the socialist experiment of the Chinese Communist Party, where Japan and the Four Asian Tigers never claimed to be anything other than capitalist—even if almost none of them conformed very well to the ideal type of laissez faire capitalism. To begin with, many were just too blinded by the supposedly “Communist” nature of government in China to consider this did not necessarily differ from the developmentalist state seen in other East Asian countries of the “Asian developmental model”, failing to situate China after Deng era market reforms in the same comparative framework as other East Asian countries.
Indeed, it is not only economic trends, but also sociological ones which suggest that China is further conforming to the trends of East Asian capitalism. The declining birthrate and increasing elderly population in China is something also shared with other East Asian countries, for example.
China differs from other East Asian countries because of large demographic skews as a product of One Child Policy and the Great Leap, a product of the CCP’s ability to carry out grand projects of social engineering because of its centralized rule—something that was not present in other East Asian contexts, despite that out of East Asian countries, a history of authoritarian or one party rule is unique to China. In the present, we see continued differences between China and other East Asian countries through that the CCP continues to be able to mandate wide sweeping social dictates which would not be possible in other countries, as in the change last year from “One Child Policy” to “Two Child Policy”.
But if in recent decades, China similarly faces issues of a declining birthrate and increasing elderly population also seen in Taiwan, Hong Kong, South Korea, Singapore, and Japan, this is probably not coincidental as coinciding with China’s period of economic growth and its integration into the world capitalist economy. That is another example of China’s conformity to broader regional trends, after a period in which it did not appear to regional trends.
Photo credit: Forbes
As such, we will see as to the future of the Chinese economy. We may note that if for apologists of capitalism, the 1991 collapse of the Soviet Union was an occasion to celebrate the triumph of free market capitalism as the “end of history,” no such moment came for China.
Of course, this sort of celebration of the “end of history” presumes that the Soviet Union or China were quantitatively something outside of capitalism rather than some loosely defined “state capitalism”. As such, we can reinterpret the celebration of the fall of the Soviet Union as the “end of history” as merely the celebration of a capitalist nation-states for the collapse of its rival bloc of capitalist nation-state, or perhaps more generously, the celebration of one form of capitalism by its adherents for finally displacing another form of capitalism and replacing it. After all, few would deny that the countries of the former Soviet Union are now capitalist countries, no different from the capitalism present in America and its allies.
Yet the reason why there was no such “end of history” moment for China was because in the Chinese context, the Chinese Communist Party undertook free market reforms on its own initiative in order for China to avoid the fate of the Soviet Union. So then, was there never a decisive “end of history” moment for China, seeing as there has been no cataclysmic disintegration of China to date. But the broader conformity of China to the broader trends of East Asian capitalism probably mark something like a similar “end of history” moment for China in slow motion, whereby differences between Chinese capitalism and other East Asian capitalisms increasing fade.