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'There are no
non-reformers'
Asia Times
Online's Gary LaMoshi interviews Laurence Brahm, author
of Zhu Rongji and the Transformation of Modern
China (See book review: The mystery
behind Zhu's miracle
)
Gary LaMoshi: Regarding
agricultural reform, why haven't state price supports
and a free market for over-quota production been more
effective to end rural poverty in China? Moreover, how
has a reform program that has left behind 75 percent of
the population been characterized as a "success"?
Laurence Brahm: The Western press makes a
lot of noise about rural poverty, but we have to put
this into perspective. Actually, conditions in the rural
areas, while basic, are not poverty as we would think of
it in relation to Africa, South Asia, or even parts of
Southeast Asia such as Indonesia and Philippines. What
has occurred over the past 10 years is that incomes in
urban areas have risen at a much faster rate than in
rural areas, leaving a growing income gap. As China now
has oversupply of agricultural products, as opposed to a
dearth as was the case in the early 1980s, young farmers
are moving to coastal and urban areas to work in
factories or as contract labor. The purpose of Zhu's
grain circulation reform was to provide subsidies to
keep farmers growing staples so that the nation could
maintain staple reserves of a sufficient amount to ward
off any national, natural or other disaster for a period
of three years. The grain-circulation reform in its
first stage involved subsidized prices for staples,
purchased from farmers through government buying
stations.
One problem that arose was that local
officials would often push farmers to sell to
non-state-run operations [that] paid less for staples,
reselling to the state at higher subsidized prices. Zhu
in turn launched a crackdown on such activities.
However, in the last year of his term as premier, staple
prices have been released to the market.
The
program of subsidies was part of the transitional
process. Efforts to close the income gap between rural
and urban households is being carried out largely
through a program of urbanizing rural areas, that is,
consolidating some 30,000-50,000 townships into new
rural urban townships where infrastructure will be at a
higher standard. Currently, this is a state-funded
effort.
GLaM: The book makes only passing
mention of foreign investment as a driver of China's
economy over the past decade. China has attracted vast
quantities of foreign direct investment [FDI] - more
than US$100 billion over the past three years alone. Why
doesn't your book discuss this phenomenon in greater
detail? What role has Zhu played in encouraging FDI and
directing it to favored sectors?
LB: This
is a good comment, and yes, probably the book deserves a
chapter of foreign-investment promotion and its effect
on China's economy. The reason why I chose not to
address this is that the business communities in Beijing
and Shanghai have swapped stories of how Zhu has stepped
in on one troubled foreign-investment deal after
another, getting results where others could not.
This is why over the past five years it was more
difficult for CEOs [chief executive officers] to get a
meeting with Zhu than any other leader, because there
was always a lineup waiting for an audience. As mayor of
Shanghai, Zhu ordered that all city taxis be Santanas,
effectively saving Volkswagen's then-teetering operation
there. Almost every large multinational has a Zhu story
which has given him an almost folklore aura in the
business community. It is exactly for this reason I
chose to focus on what he has done in transforming the
economy and financial apparatus and the process of
decision making, as I felt this would give deeper
insight into not only the man but the transformation of
China's economy during this critical period.
GLaM: Is Zhu's "managed marketization"
portable? Can other countries that lack the combination
of state control of the economy and political powers of
coercion on par with China's, plus Zhu's understanding
of the Chinese psyche, hope to emulate Zhu's success in
China? Which elements can policymakers in other
countries most readily adopt?
LB: It is
essential that [a new] model be looked at as a serious
alternative to this ideology-driven IMF [International
Monetary Fund]/World Bank cookie-cutter approach coming
out of Washington, DC. The one-mindedness of the
Washington Consensus policies for development are driven
by a refusal to look at local conditions and accept the
differences. They have perpetuated poverty, and even
increased it, created dysfunctional states, and are one
of the sources underlying radicalism emerging throughout
the Third World at this time in its various forms.
Nobody wants to face this question head-on
because of the refusal even to question hardened beliefs
of self-perfection in a system and way of thinking which
does not seem to be shared by the world. The record
stands clear: Russia, Poland, Eastern Europe and Central
Asia, Mongolia, Indonesia, Philippines - wherever you
look, these policies (always the same formula) have
failed, caused political chaos. So why not look at the
example of one nation which has made the transition from
planned to market economy within a decade while
maintaining high growth, zero inflation, increased
standards of living across the board, and broad-based
political stability?
Combining planning with
market tools and keying off the social and ethnic
concerns of the people who make up a nation to achieve
gradual transition while building institutional capacity
seems to make more sense that taking a theory created by
people who have never lived in an underdeveloped country
before and exporting it as theology. One World Bank
economist who was sickened by the poverty and chaos
created by his own institution called the Washington
Consensus "voodoo economics" and the thinking coming out
of there the new "internationale". So why can't
we look at another model, and China's worked.
Also, I do not think that China's state control
over political and economic powers is any greater than,
say, the US federal government's. They are only using
different tools.
GLaM: Finally, what
everybody wants to know, what's the future of Zhu's
reforms after Zhu steps down as premier? Did the CCP
[Chinese Communist Party] Congress in November play out
as expected regarding reformers being elevated to
positions of power? Who are Zhu's acolytes in the new
lineup? What should we be looking for in the forthcoming
new government lineup as hints that reform will
accelerate or slow down?
LB: The media
[are] always trying to pigeonhole China's leaders into
categories of "reformer" and "non-reformer" or
"conservative" and "liberal". This thinking is quite
outdated. China's entire leadership could be considered
reformers if you define the "reforms" as the economic
direction China has taken over the past decade and
especially past five years. So there are no
non-reformers. There may be differences of personalities
and personal alliances between these personalities, as
in any other political system, but none of this
questions or threatens the reforms.
Furthermore,
"reform" in the sense of the word is a term of the
1990s. China's reforms have already taken place. Yes,
there is a lot of fine-tuning to be done and unfinished
work, but the system has now gone off the track of
planning, [and] on to the track of the market, and the
structural transformation to achieve this has taken
place, as evidenced by another round of government
ministry changes which will occur this March to reflect
new functions of government administration under a
market economy. Many of the ministerial bodies which
supervised and monitored the "reforms" will be canceled
because their tasks are now complete.
The
question now is how to fine-tune the new systems and
apparatus which have been set up, and differences in
personalities will be over issues like interest-rate
policy, bank-recapitalization methods, and how to best
regulate the new securities markets and streamline the
taxation system. The issues will not be whether to
reform or not.
(©2003 Asia Times Online Co, Ltd.
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