The Beijing Alternative

Joseph Stiglitz has an interesting piece in the Guardian on China's approach to growth that also reduces poverty and inequality:

China is about to adopt its 11th five-year plan, setting the stage for the continuation of probably the most remarkable economic transformation in history, while improving the wellbeing of almost a quarter of the world's population. Never before has the world seen such sustained growth; never before has there been so much poverty reduction.

Part of the key to China's long-run success has been its almost unique combination of pragmatism and vision. While much of the rest of the developing world, following the Washington consensus, has been directed at a quixotic quest for higher GDP, China has again made clear that it seeks sustainable and more equitable increases in real living standards. China realises that it has entered a phase of economic growth that is imposing enormous - and unsustainable - demands on the environment. Unless there is a change in course, living standards will eventually be compromised. That is why the new plan places great emphasis on the environment.

I found that last part particularly interesting - sustainability has been incorporated into the five-year plan, often in the form of taxes which help moderate energy consumption, according to the article.

Its future growth will have to be based more on domestic demand than on exports, which will require increases in consumption. Indeed, China has a rare problem: excessive savings. People save partly because of weaknesses in government social-insurance programmes. Strengthening social security (pensions) and public health and education will simultaneously reduce social inequalities, increase its citizens' sense of wellbeing, and promote consumption.

Read that again - a stronger social safety net will help spur growth!

Market economies are not self-regulating. They cannot simply be left on autopilot, especially if one wants to ensure that their benefits are shared widely. But managing a market economy is no easy task. It is a balancing act that must constantly respond to economic changes. China's plan provides a road map for that response.

I suppose the question becomes, how do you sell this idea of managing the market economy to an American public that has been raised on the ideology of "free marketeerism," doesn't have an educational system which prepares people for effective citizen involvement, and is prone to voting for the good-looking chap who can promise the best "free lunch"? It seems to me to be something of a Catch-22: the citizenry needs to have the necessary educational tools to be able to decide that they need to invest more into education. Ruh-roh, Raggy.

A very interesting read, at any rate, and I'd be interested to hear what those of you who are more versed in economic policy have to say about this.