China’s economic model catching on in the world

China’s economic model catching on in the world April 24, 2009

The old way of global domination was through military conquest. Now a country can take over the world by just buying it. This article, China Uses Global Crisis to Assert Its Influence – washingtonpost.com, shows how that country is widening its sphere of influence by loaning money to developing nations around the world that are hurting from the current economic collapse.

It also shows how the ideological tide seems to be turning against the “Washington Consensus,” with its combination of free markets and democracy–that developing countries used to want to emulate to the “Beijing Consensus,” which allows for limited free markets under the control of an authoritarian state:

Coined by British economist John Williamson 20 years ago, the term “Washington Consensus” refers to a standard set of policies — including privatization of state enterprises, free trade, deregulation and restraint in public spending — that the International Monetary Fund, the World Bank and the U.S. Treasury Department have long urged on debt-ridden nations, particularly in Latin America. . . .

“It is very possible that the Beijing Consensus can replace the Washington Consensus,” said Cui Zhiyuan, a professor of public policy at Tsinghua University who edited a recent book on the subject. “Since the crisis, the world doesn’t have as much confidence in the U.S. economic model as before.” . . .

Cheng Enfu, an economics researcher at the Chinese Academy of Social Sciences, a government-affiliated think tank, said he defines the Beijing Consensus as promotion of economies in which public ownership remains dominant; gradual reform is preferred to “shock therapy”; the country is open to foreign trade but remains largely self-reliant; and large-scale market reform takes place first, followed later by political and cultural change.

The global economic crisis, Cheng said, “displays the advantages of the Chinese model” and has already expanded China’s influence. “Some mainstream economists are saying that India should learn from China; Latin American countries are trying to learn from China. When foreign countries send delegations to China, they show interest in the Chinese way of developing,” Cheng said.

Then again, maybe the new Washington consensus is to adopt the Beijing consensus.

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  • fws

    “Washington Consensus” refers to a standard set of policies… that the International Monetary Fund….have long urged on debt-ridden nations, particularly in Latin America. . . "

    A fact untold by any media is that the financial sector has grown , starting with the reagan era, to over 30% of the GNP. non-productive "national product". "national product" in the form of rent paid on the use of someone else´s money. Up until the Reagan era, that percentage was always lower than 8%. THIS is what will need to change for a sustained economic recovery. It will be painful, and I am not sure Obama or anyone has the political will or capital to change this situation. For those who are thinking "this is just a result of the market system at work, to change this fact would mean wrongful govt involvement, I say: not ALL govt regulation is wrong. usury laws are not wrong for example. Even in capitalism there should be no such thing as absolute freedom from regulation. The best regulations enforce transparency, less fine print.

  • fws

    “Washington Consensus” refers to a standard set of policies… that the International Monetary Fund….have long urged on debt-ridden nations, particularly in Latin America. . . "

    A fact untold by any media is that the financial sector has grown , starting with the reagan era, to over 30% of the GNP. non-productive "national product". "national product" in the form of rent paid on the use of someone else´s money. Up until the Reagan era, that percentage was always lower than 8%. THIS is what will need to change for a sustained economic recovery. It will be painful, and I am not sure Obama or anyone has the political will or capital to change this situation. For those who are thinking "this is just a result of the market system at work, to change this fact would mean wrongful govt involvement, I say: not ALL govt regulation is wrong. usury laws are not wrong for example. Even in capitalism there should be no such thing as absolute freedom from regulation. The best regulations enforce transparency, less fine print.

  • fws

    Alot of conservatives here are leery of international law as being an infringement on our sovreignty, and don´t seem to mind that we are in the "nationbuilding" business now. another double standard.

    I would suggest that any law that is good and adds structure and the rule of law is an international law that the usa could and should freely bind itself to. the geneva conventions are a great example of this.

    we may need to embrace such international laws in the financial markets now that globalization is an increasingly important fact.

  • fws

    Alot of conservatives here are leery of international law as being an infringement on our sovreignty, and don´t seem to mind that we are in the "nationbuilding" business now. another double standard.

    I would suggest that any law that is good and adds structure and the rule of law is an international law that the usa could and should freely bind itself to. the geneva conventions are a great example of this.

    we may need to embrace such international laws in the financial markets now that globalization is an increasingly important fact.

  • fws

    What would the IMF tell the USA currently? We seem,as a nation to be moving in the direction of not living up to the standards we have historically urged on other nations (eg "torture IF it works…").

    Simon Johnson, a professor at MIT’s Sloan School of Management, was the chief economist at the International Monetary Fund during 2007 and 2008.

    and he says:

    http://www.theatlantic.com/doc/200905/imf-advice/

  • fws

    What would the IMF tell the USA currently? We seem,as a nation to be moving in the direction of not living up to the standards we have historically urged on other nations (eg "torture IF it works…").

    Simon Johnson, a professor at MIT’s Sloan School of Management, was the chief economist at the International Monetary Fund during 2007 and 2008.

    and he says:

    http://www.theatlantic.com/doc/200905/imf-advice/

  • John C

    Wall St is creative but hardly efficient Peter. Remember Wall St collapsed under Bush's watch and it is a bit too early to assess the Obama presidency.
    And as China,Singapore and Malaysia demonstrate, I am not certain that capitalism requires a democratic ethos. But I do know this: if the US has too many Presidents like George W, the US will fail.

  • John C

    Wall St is creative but hardly efficient Peter. Remember Wall St collapsed under Bush's watch and it is a bit too early to assess the Obama presidency.
    And as China,Singapore and Malaysia demonstrate, I am not certain that capitalism requires a democratic ethos. But I do know this: if the US has too many Presidents like George W, the US will fail.

  • Over the long run China, having freed its economy, will, also, free its political system. China already has a strong underground movement for democracy. It is simply impossible over time to combine economic freedom with political authoritarianism.

    The real strength of China comes from the work ethic and discipline of its people, including in the fields of education and high culture. Sixty-million of its young people are learning serious Western music; 40 million study classical piano and another 15 million learn to play stringed instruments. Small opera groups have risen in East Asia that select the best of the young voices. The Asians don't delude themselves with such ephemera as American Idol and Susan Boyle. 300 million young Chinese are assiduously studying English. The savings rate of the Chinese is on the order of 40%.

    As to Wall Street, it has gone through yet another cycle of a mania, panic, and crash due to the inevitable animal spirits of investors. As in the past it will correct its excesses until the next inevitable cycle. With all of its problems, Wall Street is regarded by serious financiers
    as the most efficient and creative center of finance in the world. Obama and the feckless leftists in Congress are trying to lead a populist revolt against Wall Street, though like a similar effort by Roosevelt in the Thirties, this too will fail. Many people are waking up to Obama's ubiquitous incompetence.

    The West will fail due to its serious moral, educational, and cultural decline, not as a result of its excellent system of democratic capitalism.

  • Over the long run China, having freed its economy, will, also, free its political system. China already has a strong underground movement for democracy. It is simply impossible over time to combine economic freedom with political authoritarianism.

    The real strength of China comes from the work ethic and discipline of its people, including in the fields of education and high culture. Sixty-million of its young people are learning serious Western music; 40 million study classical piano and another 15 million learn to play stringed instruments. Small opera groups have risen in East Asia that select the best of the young voices. The Asians don't delude themselves with such ephemera as American Idol and Susan Boyle. 300 million young Chinese are assiduously studying English. The savings rate of the Chinese is on the order of 40%.

    As to Wall Street, it has gone through yet another cycle of a mania, panic, and crash due to the inevitable animal spirits of investors. As in the past it will correct its excesses until the next inevitable cycle. With all of its problems, Wall Street is regarded by serious financiers
    as the most efficient and creative center of finance in the world. Obama and the feckless leftists in Congress are trying to lead a populist revolt against Wall Street, though like a similar effort by Roosevelt in the Thirties, this too will fail. Many people are waking up to Obama's ubiquitous incompetence.

    The West will fail due to its serious moral, educational, and cultural decline, not as a result of its excellent system of democratic capitalism.

  • Wall St., unlike the ephemeral Obama, has hardly collapsed. Your story of the joint Bush Wall Street collapse is a pleasant illusion of the Left. Wall Street has been a hard reality in American life since the Eighteenth Century. St. Obama is a colossal empty suit with little experience and less accomplishment. The American people are rather astutely catching on to him.

  • Wall St., unlike the ephemeral Obama, has hardly collapsed. Your story of the joint Bush Wall Street collapse is a pleasant illusion of the Left. Wall Street has been a hard reality in American life since the Eighteenth Century. St. Obama is a colossal empty suit with little experience and less accomplishment. The American people are rather astutely catching on to him.

  • Wall Street is efficient, Peter, but only in the short term. I'm not sure I'm disagreeing with on you this, because reading between the lines it appears as though we're singing the same tune. Ultimately, short-term capital gains, with a focus on nothing else (of which Wall Street is indeed efficient) will reap only long-term foundational deterioration, morally, physically, economically, and politically. One could hardly disagree with your analysis of the Chinese strength, and I agree that economic liberalisation (yes, I used the standardised spelling) will develop into political liberalisation as well.

    That being said, a substantial element of Chinese "development" has been Washington spinelessness to enforce trade agreements. I had to chuckle at the comment in the quoted article about Latin American countries attempting to copy Chinese "development." You want 12% annual GDP growth? Stubbornly fix your currency to the dollar (thereby virtually eliminating imports) and maintain tough labor price controls. Then hope the "Washington people" don't call you out on it. It doesn't hurt to be friendly with a wack-job with nuclear weapons…just so the DC folk need to be nice to you.

  • Wall Street is efficient, Peter, but only in the short term. I'm not sure I'm disagreeing with on you this, because reading between the lines it appears as though we're singing the same tune. Ultimately, short-term capital gains, with a focus on nothing else (of which Wall Street is indeed efficient) will reap only long-term foundational deterioration, morally, physically, economically, and politically. One could hardly disagree with your analysis of the Chinese strength, and I agree that economic liberalisation (yes, I used the standardised spelling) will develop into political liberalisation as well.

    That being said, a substantial element of Chinese "development" has been Washington spinelessness to enforce trade agreements. I had to chuckle at the comment in the quoted article about Latin American countries attempting to copy Chinese "development." You want 12% annual GDP growth? Stubbornly fix your currency to the dollar (thereby virtually eliminating imports) and maintain tough labor price controls. Then hope the "Washington people" don't call you out on it. It doesn't hurt to be friendly with a wack-job with nuclear weapons…just so the DC folk need to be nice to you.

  • I am not an economist, but isn't all this taking a remarkably short-sighted view of things? The "Washington Consensus" has worked, and worked fairly well, for a long time. And yes, there have been eras where it worked less well. But it has, thus far, usually been able to turn things around eventually. But all of a sudden this time it is hopeless and we should panic and throw out the whole free market thing? And give up democracy for an authoritarian state? (Honestly, the second part os more worrisome to me than the first.)

  • I am not an economist, but isn't all this taking a remarkably short-sighted view of things? The "Washington Consensus" has worked, and worked fairly well, for a long time. And yes, there have been eras where it worked less well. But it has, thus far, usually been able to turn things around eventually. But all of a sudden this time it is hopeless and we should panic and throw out the whole free market thing? And give up democracy for an authoritarian state? (Honestly, the second part os more worrisome to me than the first.)

  • Stephanie, one doesn't need to be an economist or a rocket scientist to figure this out. You actually hit the nail on its head. The Washington consensus (i.e. democratic capitalism) has indeed been around a long time. China's hybrid authoritarian government and free economy is a new kid on the block that most probably won't last. When people are given economic freedom, they in the long run will insist on political freedom.

    One of the rather interesting ironies of all this is that even the future of Christianity may well rest with the Chinese, Korean, and some other East Asian Christians who are religiously as well as economically and culturally astute. Liberal Christians in the West titillate themselves with gay rights and multi-culturalism, while Asian Christians pay attention to the Son of God and His Cross. Sic transit gloria mundi for the West.

  • Stephanie, one doesn't need to be an economist or a rocket scientist to figure this out. You actually hit the nail on its head. The Washington consensus (i.e. democratic capitalism) has indeed been around a long time. China's hybrid authoritarian government and free economy is a new kid on the block that most probably won't last. When people are given economic freedom, they in the long run will insist on political freedom.

    One of the rather interesting ironies of all this is that even the future of Christianity may well rest with the Chinese, Korean, and some other East Asian Christians who are religiously as well as economically and culturally astute. Liberal Christians in the West titillate themselves with gay rights and multi-culturalism, while Asian Christians pay attention to the Son of God and His Cross. Sic transit gloria mundi for the West.

  • John C

    Most major economies are in recession; unemployment is rising; banks are failing and governments around the world are are propping up economies with trillions of taxpayers dollars and you say Wall St has not collapsed and is not responsible.
    No-one is responsible for this mess it seems — least of all Wall St and the Republican administation.

  • John C

    Most major economies are in recession; unemployment is rising; banks are failing and governments around the world are are propping up economies with trillions of taxpayers dollars and you say Wall St has not collapsed and is not responsible.
    No-one is responsible for this mess it seems — least of all Wall St and the Republican administation.

  • Cincinnatus

    Furthermore, the idea that a free economy inevitably births a free society is a fallacy.

  • Cincinnatus

    Furthermore, the idea that a free economy inevitably births a free society is a fallacy.