S 185DG Part Two: China Transitions & Globalization PDF

**S 185DG Part two** 11/12 China Transitions & ongoing 11/14 Belt and Road Initiative: Global competition 11/19 Capitalism, which? Varieties of market economies 11/21 Emerging economies BRICS 11/26 Institutions rule? Governance and development 12/3 Globalization update Deglobalizati...

**S 185DG Part two** 11/12 China Transitions & ongoing 11/14 Belt and Road Initiative: Global competition 11/19 Capitalism, which? Varieties of market economies 11/21 Emerging economies BRICS 11/26 Institutions rule? Governance and development 12/3 Globalization update Deglobalization or reorganization? **CHINA TRANSITIONS** **Pragmatism**, don't rush, incremental change *Crossing the river by feeling the stones:* Experiment & scale up only if successful Country-driven development & bottom up development 1949-78 Chinese CP **Mao**, Great Leap Forward, Cultural Revolution ----------- --------------------- ----------------------------------------------------------- 1978 Four modernizations **Deng Xiao Ping** 1989-2002 Shanghai model **Jiang Zemin**, rapid growth, foreign investment, uneven 2003 Harmonious society **Hu Jintao**, rebalance urban-rural 2012 Transitions **Xi Jinping**, China dream, AIIB, BRI **Different market economies in China** State-owned enterprises **1 State capitalism** Federal state, SOEs ----------------------------- -------------------------- ----------------------------------- Public-private partnerships **2 'Clan capitalism'** Local states Private sector **3 Private** Large, e.g. Jack Ma, Alibaba, ANT **4 SME** Small and medium **5 Foreign investment** MNC, TNC **China's changing model of development** - **From production power to consumer power** - **Investment-led growth---**infrastructure, industry, science, education, high tech - **Consumption-driven growth** best embodies equitable and sustainable growth 2 **Internationalization of RMB**, better chances following US crisis 3 **Rise of emerging societies is advantage to China's strategy of trade pluralism** - Advanced countries' trade barriers (deglobalization) threaten growth - Establish **circular** trade flows independent of developed countries - Cooperation among BRICS, regional coop with ASEAN, NE Asia, Central Asia, Sino-Indian - Boao Asian Forum launched 2001 -- -- -- -- **Belt and Road Initiative** 'Bringing half the world together' **Size** - Invest \$3-8tr in world economy - Compare Greater Asian Co-Prosperity Sphere, Japan - Compare Marshall Plan, pales to insignificance **Depth of historical field** - BRI refers to 10C Tang Dynasty, Xian capital, main station of Silk Road - Maritime Silk Road refers to 14C Zheng He voyages - World oldest continuous state, 3k, largest country steps onto the world stage - Rise of Asia---Japan 1868, rise 1910-1945 & postwar economic miracle - Asian Tigers 1990s economic miracle. China is the parent civilization to all these **Silence** - Past empires loud objectives. Spain, conversion of heathens. Netherlands, freedom of the seas - Britain, law and railroads. France, civilization, Enlightenment - US, democracy and free markets - China, just infrastructure - **Co-dependence** If China is okay, we're okay - China, fifth of humanity, knows its prosperity is co-dependent on that of all nations **Weaknesses** - Projects---too difficult to monitor, scale up, replicate - Surveillance: but state has different meaning than in US, Atlantic world - Uighurs; Marxists in China; Muslims - Shift from investment led to consumption led economy---real estate, Evergrande, debt **Pushback in China** - More is needed inside, go outside and imponderable political and security risks multiply - Overinvestment inside, risk of failure increases outside **Pushback outside** - Failures Venezuela, Zimbabwe, Sudan and in BRI Sri Lanka, Pakistan - Criticisms in Pakistan, Malaysia, African countries, Balkans - Malaysia Mahathir renegotiated East coast railway 30%, \$5b discount - **China needs pushback**, is part of coming out, coordination among many actors, standard setting - Beijing BRI Forum 2019 committed to international standards **Advantages for China** - **Externalize** investment-led growth **Redeploy overcapacity** (steel, construction, rail, banks) - **Development of West and SW China**---Xinjiang, Yunnan as rail/trade/info hubs - **Boost trade** with Southeast Asia, Central and West Asia, Mediterranean and beyond - **Markets** for manufacture exports---prolong export growth phase - **Boost services**---regional logistics, finance, Information Silk Roads - **Maybe** this way China can achieve high-income level, in 10 years, Chinese Dream BRI comes with **historical memory, financial depth, patience and a long-time horizon**---all of which the US lacks. Proportionally the financial outlays and investments of BRI are **far larger than the Marshall Plan** (\$130 billion in today's dollars). **Disadvantages of BRI for China** - Consists of projects. Numerous, diverse, difficult to evaluate and monitor (cf. UNDP); project cooperation was abandoned in OECD foreign aid/cooperation in 1990s, shift to program cooperation - Many of China's projects failed in the past, domestic (overinvestment) and international - Now dimensions range from environment, labor rights to gender and security - BRI investments involve new political and security problems, many of which are imponderable **CAPITALISMS, VARIETIES OF MARKET ECONOMIES** Is neoliberalism dominant or sole form of capitalism? 'Neoliberalism everywhere'? Or are there multiple forms of capitalism? Why is this important? Clash of capitalisms **Overview varieties of market economies** Type Brief character Sample ------ ----------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------ CME Roundtable governance with stakeholders--- government, corporations, workers, consumers, experts, institutions, communities **Europe, UK, Japan, Northeast, Southeast, South and West Asia, Middle East, Turkey, Brazil, Argentina, Mexico, etc.** LME Corporate led economies **US, Australia, New Zealand, UK** SME Character of state---development; security; monarchy-military; religious/ethnic elites; wealthy families **Singapore, China, Vietnam, Laos, N Korea, Russia, Cuba, Venezuela, Iran, Saudi Arabia, Emirates** **Table 2 Varieties of market economies** *Synonyms* *Social formations* *Sample* ----------------- ------------- -------------------------------------------- ------------------------------------------------------------------------------------------- **Coordinated** Stakeholder **Post feudal** **Europe, Japan, ROK, East, South Asia, Middle East, Brazil, Argentina, Mexico etc.** Liberal Shareholder **Settler colonial** **US, UK, Australia, New Zealand, Canada** **State-led** **Post-revolution, post war, post crisis** **China, Russia, Cuba, Emirates, Iran, Laos, Saudi Arabia, Singapore, Turkey, Venezuela** **Table 3 State-led market economies---types** Types Anchors Sample --------------------------- ----------------------------------- ------------------------------------------------------------------------ *Developmental* Development, socialism, communism China, Vietnam, Laos, Cuba, Singapore, Rwanda (Ethiopia) *National security state* Deep state (cold war) USA, Israel, Russia, Belarus, N Korea, Pakistan, Guatemala (Indonesia) \+ Kleptocracy Egypt, Syria, Myanmar, Angola (Honduras) Monarchy-military Thailand, Morocco, Jordan *Conservative* Religious/ethnic elites Brunei, Iran, Pakistan, Saudi, Emirates Families Wealthy families Mexico, Salvador, Brazil, Philippines, Hong Kong Post-Soviet Belarus, Turkmenistan, Kazakhstan Post-communist Vietnam, Laos *Authoritarian* New Turkey AKP; India BJP - Dollar is key to American hegemony =\> cheap borrowing - Oil-dollar system US-Saudi 1970s OPEC - End of petrodollar after 50 yrs, 2024 - Dollar as reserve currency 2023 58% \[was 65,70\], then euro, yen, RMB - Credit rating agencies, New York, private - Crises =\> interest rates up =\> IMF, cut gov =\> US companies buy cheap **Classic stages theory of capitalism** **Time** **Stages** **Features** ----------- ------------------- ----------------------------------------------- 1300\> *Merchant* Commerce (towns, trade routes, trade nodes) 1800\> *Competitive* Industrial (national firms, national economy) 1870\> *Monopoly* Cartels, trusts 1890-1929 *Finance* Banks lead, no longer industrial capital 1970\> *Late capitalism* Neo-Fordism, Post-Fordism **Most countries are CME. LME are a minority. LME predominate in settler immigrant societies. Crossover countries, such as the UK, are both LME and CME.** **Table 2 Varieties of capitalism & social formations** +-----------------------------------+-----------------------------------+ | ***Varieties*** | ***Social formations*** | +===================================+===================================+ | **CME** | **Post feudal societies** | +-----------------------------------+-----------------------------------+ | **LME** | **Settler colonial societies** | +-----------------------------------+-----------------------------------+ | **SME** | **Post-revolutionary societies, | | | postwar and crisis** | | | | | | **National security states, | | | dynastic monarchies** | +-----------------------------------+-----------------------------------+ **EMERGING ECONOMIES** In 21C growth in EE outstripped growth in developed economies and became drivers of the world economy **Origins of rise EE** - EM (developing countries with sustained growth over 5%): 24 (MSCIK Em index US 2024) - Advanced economies: 41 (IMF) - \[highly developed, usually high per cap income, diverse export base, and well-integrated financial system within the global market\] - Developing countries: 125 (UN), 152 (IMF, 2024) - EMDC share of global GDP: 33.7% 1980, 43.4% 2010, 50% 2013, 60% 2024 **Why are EE important?** - Widening international division of labor 1970s: industries in advanced economies relocate basic operations in low wage zones - Rise of Asia: Japan (1868), then East Asia, India and China - 'East Asian miracle' of the 1990s (Asian tigers) - 'Return of the East', resumption of oriental globalization - Reconfiguration of world economy - Growing trade between Asia, Latin America, Middle East and Africa - 'Asian drivers' of growth in developing countries - Development role models, markets, loans, investments, security - China as leading force, part of Asia - Growing middle class & urbanization - Growing markets of goods and services; travel, tourism - US and advanced economies do protectionism - EM defend free trade - World of 'big powers' is no more: from G8 to **G20** (after 2008 crisis) - EE lead **new institutions**---Shanghai Cooperation Org 2001, BRICS New Dev Bank, Contingency Reserve Arrangement, Asian Infrastructure Investment Bank and - Lead new initiatives---**Belt and Road** \$3tr investment in regional and world economy - Investment funds, Sovereign wealth funds give credit on world scale - North-South relations dominant 1800-2000 - Turnaround of 200-year North-South domination (colonialism, imperialism & American hegemony) - Now East-South turn - **Decentering/recentering of globalization: multicentrism** - Work in progress! - China and India will overtake GDP of leading economies in coming decades - China passed GDP Japan 2015, will pass GDP US 2025 - China surpassed US as Japan's biggest trading partner, surpassed Canada as the biggest trading partner of the US, surpassed US as top choice of foreign direct investment - Has become biggest trade partner of practically every nation - By 2025 combined GDP BRIC---Brazil, Russia, India, China---would be one-half the combined GDP of G6 (US, Japan, Germany, France, Italy, Britain) - Global trade volatile---EE export dependent - Industrialization---more competitive than in 20C - FDI---less - Representation---how? - Is the rise of East Asia, China, India just another episode in the rise and decline of nations, another reshuffling of capitalism, a relocation of accumulation centers without affecting the logics of accumulation? - Does it advance, sustain, deviate from or halt neoliberalism? - What is relationship between zones of growth & regimes of growth? - What are the ramifications for social inequality? - 2002-2012 High growth of EM and commodities boom - 2008 crash, recession US and Europe, then slowdown in EM - 2011 recovery US and repositioning of EM, especially China - 2016 Brexit & election Trump: in champions of trade liberalization, majorities now reject trade liberalization - 2018 Hegemonic and tech clashes US-China, Huawei 5G, Taiwan - 2020 Covid: East Asia ok; US, UK, Brazil chaotic. Review supply lines - Demand for commodities---industrialization and urbanization in Asia; commodities supercycle of 2003-2009 - Industrialization---industry more globalized and dynamic, manufactured goods cheaper, climb higher on productivity ladder, or else 'premature deindustrialization'. Niche industries? - Trade with advanced economies---protectionism; volatile US tariffs - Institutions---EM establish institutions of accountability and responsive governance? - Ecological sustainability - War **Key variables overview** - **Growth**---developing countries have been growing much faster than developed countries (continues now at slower pace) - Demand for **commodities** in China and other EM---continues? - Fast-growing **middle classes**---new purchasing power, innovation - **Convergence**---of per capita incomes (is now far off) - Global **East-South turn**---developing countries no longer rely on western institutions but on markets, loans, investment from Asia and other EM - **New institutions**---e.g. BRICS New Development Bank; the Asian Infrastructure Investment Bank; China's Belt and Road Initiative; new Asian trade pacts **Variables 2024** - Military spending is up---also in EU - Interest rates are up---risk for EMDC - Concentration of wealth---increasing since 1980, 2014 - Food security is down---since 2014 - Poverty is increasing---since Covid - Climate change---rising water levels **INSTITUTIONS** **Distinguish between politics, policies & institutions** **Distinguish between the game, the outcome, and the rules of the game** **Governance gaps** - **New technologies =\> billionaire world & Inequality** - **Democracy---declining performance US; weak traditions; rightwing populism** - **Financialization, private equity, corporate taxes, big pharma, Big tech** - **Global public goods, environment, climate change** **Are deliberately the largest in LME**, by design: - 'Get government off our backs' = Get corporations, lobbies and cronies on our backs - Business leads ('market forces'), not government. Translation: Big corp lead; they can buy Congress, i.e. campaign finance - Sack federal government inspector generals (4 in US 2020) Institutional buffers against the onslaught that has been ongoing since the 1980s. **What should institutions do** for dev in developing countries and also developed countries - Facilitate inclusive, quality growth - Block elite capture - Enable accountability to stakeholders, to majority of population Priorities: **Rein in finance, progressive taxes, including wealth tax, measures against tax evasion and curbing crony capitalism** Institutional reform developing countries: **land reform, tax reform, proactive accountable states** **How do institutions change?** **Crisis, tech change, loss in war or revolution, PE structures** **From feudalism to monarchy to democracy etc.** **1929 Wall Street crash \>\> New Deal** **1970s profit squeeze \> neoliberalism, Chicago school economics, Dixie capitalism \> back to before** **Structural backdrop had NOT changed** **Big Money rule is not sustainable---health care, inequality, wellbeing** **1933 Hitler Germany, loss in war, postnational Germany** **How to manage industrial decline?** a. National economic strategy not possible for LME b. Industrial policy ditto c. Provisions for the losers ditto **Liberal economies & industrial decline** a. Corporations dominate b. Corporations buy politics (money buys deregulation) c. Corporations buy media (discourse) d. Decline of public sphere (defunding education since 80s) e. US inequality is highest among advanced economies, Gini.45 → LME cannot handle industrial decline... hence, Trump **Europe & Japan** - Outward investment **balanced** with inward investment - Incremental innovation - Deindustrialization & industrial policy - Social investment, social protection floor - Problem: immigration **USA, deindustrialization a la LME** - Erosion of 'countervailing powers': unions, urban associations, etc. - Commercial media colonize the public sphere - Dixie capitalism (neoliberalism): redistribution-in-reverse - Wealth concentrated in finance seeks high returns (in EM, hedges) - FIRE \[Finance, Insurance, Real Estate\] absorbs the cream - Services don't pick up the slack (McJobs) - Neoliberalism hampers recovery & furthers rise of EM - US becomes an emerging economy **Globalization** a. Globalization is increasing connectivity b. Issue isn't globalization but how globalization is organized c. LME---corporations lead d. CME---multiple stakeholders e. SME---depends on caliber & quality of states Key model---East Asian developmental state (EADS) **Sequence** 1980 Return to lead of finance capital & deregulation 2007 *financial crisis* (subprime mortgages) 2008 *economic crisis*, spreads to UK, EU 2009 spreads to Asia, China, emerging economies\> G20 2016 *political crisis*: Brexit, election of Trump 2017 *governance crisis* 2024 ditto, major turn (fantasy & revanche economics) **Goldilocks globalization** 1950-2000 US, Europe, Japan 'own globalization' 21C China, Asia, emerging economies drive globalization **21C globalization** 2001 China joins WTO 2003-2009 High growth EMDC; commodities supercycle; BRICS 2011 Stagnation AE, mixed trends EMDC 2015 New institutions: New Dev Bank, CRA; AIIB, Silk Road Fund **Deglobalization?** - Rise of protectionism, trade barriers in EU, US - Since early 21C **Responses Asia** - Shift in development model, China since 2003 - From export to investment to consumption-led growth - Regional turn---Asian trade pacts; OBOR, MSR, AIIB - If trade war, US loses - Reorganization of globalization with Asia, China in the lead - China is de facto leader of global trade - AIIB 2015, 57 members, 2019, 100, 2024 109 - BRI 'bringing half the world together' - China invests \$3-4 tr in regional and global development - China's governance seeks to follow intern norms: - China needs developing countries as counterparts in strategy - BRICS seek de-dollarization. Trump threatens 100% tariff on trade US - Tariffs on China, Mexico, Canada, EU trade---cf. Brexit - But many US companies export from China, Mexico etc. to US - China leads in EV, batteries, new energy - Discuss policies, politics not sufficient - Can old elites be strategic counterparts to new China? - Achieve inclusive development without inclusive institutions? - Matrix change, institutional transformation---tall order - Identify nodal points---different in each country