Whose interpretation?The backgrounds of the two authors help to explain what's at the root of the two camps' divergent viewpoints: to a great degree "nationalism" guides the reasoning on both sides.
Justin Yifu Lin, the author of Reading China's Economy, was born in Taiwan's Ilan and served as an officer in the ROC military. In 1979, a year after Deng Xiaoping announced his reforms, Lin defected to mainland China, where he quickly advanced in his career, becoming a professor at Peking University and even a delegate to the National Committee of the Chinese People's Political Consultative Conference. In 2008, he became the World Bank's chief economist and senior vice president responsible for developing economies. His appointment was viewed as a confirmation of China's economic might.
Lin's nationalistic sensibility is clear. In his introduction for Taiwan's readers, he minces no words in saying that the RMB4-trillion domestic stimulus that China has just launched is not only reinventing China but also establishing a new economic world order that will be supported by the three pillars of China, the US and Europe. "It is a realization of the 100-year dream of the Chinese people for a renaissance," he says. The book's cover also confidently predicts that high growth in China "will continue for 20 or 30 years, or even longer."
Will Hutton, author of The Writing on the Wall: China and the West in the 21st Century, is editor-in-chief of the British Observer newspaper. Hutton has taught at the London School of Economics and elsewhere.
It is worth noting that the title "The Writing on the Wall" is taken from a story in the Book of Daniel. In ancient Babylon King Belshazzar holds a feast, merrily drinking out of sacred gold and silver vessels that were part of King Solomon's treasure from Jerusalem. Suddenly, a hand appears from nowhere and starts to write on the wall. The king calls Daniel, who is Jewish, to decipher the text. It turns out to read: "God has numbered the days of your reign and brought it to an end." That very night the king is killed. Thenceforth, "writing on the wall" has meant "an ill omen."
The Writing on the Wall focuses its discussion principally on the process of economic development in China and current reforms there, but Hutton also spills a lot of ink arguing that the US and Britain are in crisis, having deviated from enlightenment values and core elements of modernism, such as pluralism and the structures of civil society. Hence, "the writing on the wall" is a warning both for China and the West (especially the US).
Catch-up strategy? Equality?There is a great deal of overlap between the two books. They both describe the rise and fall of the ancient civilization of China. They explore the poverty experienced under communist rule from 1949 to 1976, as well as various difficulties experienced on the mainland after the reforms of 1978. In several places there are illuminating contrasts.
For instance, Lin believes that the Chinese Communists moved toward collective production after taking over in 1949 because of a nationalistic "catch up and surpass" strategy that aimed to turn a poor agricultural nation into a rich, powerful country via heavy industry and a strong military. Although China was taking cues from its "elder brother" the Soviet Union, the move toward heavy industry was not restricted to communist nations. Several non-communist countries that had experienced imperialism and colonization, such as India, Indonesia and Egypt, also took that path.
In sharp contrast to the slow and steady approach of the four East Asian tigers, which moved first to light industry and only then to heavy industry, China's impatient push toward heavy industrialization was counterproductive. By necessity, the state needed to control resources, which led to great distortions in their allocation. There was total state control over purchasing and marketing and complete dismantlement of the private sector. The government took complete control over every aspect of national enterprises-from personnel, financing and materials, to production, supply chains and marketing. Although China was able to carry out atomic tests in the 1960s and send satellites into space in the 1970s, those economic distortions cost the nation dearly. Even now, some 30 years since the launch of the reforms, the toxic effects of those earlier policies are still being felt.
When examining the same period, Hutton describes Mao Zedong's "radical egalitarianism" and collectivism as the driving forces. He holds that Mao truly believed in the idea of a communist utopia. Hutton praises Mao's government for raising China's industrial capacity, expanding the rail network and agricultural waterworks, reducing illiteracy, and raising the status of women. He believes that Western critics overlook how much disorder and suffering is created by the transition from an agricultural to an industrial society. He also believes that Mao's policy of decentralization laid the groundwork for a quick turn around after the reforms of 1978.
Regardless of why communist China squandered the previous 30 years, in 1978 Deng Xiaoping turned to a pragmatic and gradual approach of "crossing the river by feeling the stones." And both books characterize the new way as being driven from the bottom up.
For example, the "household responsibility system" has its origins in local tragedy: In the fall of 1978 the infertile Fengyang area of Anhui Province experienced yet another drought. The people of Xiaogang Village had long been accustomed to leaving their village to beg for three to five months of the year. Deciding they could no longer bear to do so, secretly and without authority they split up the communal land into household parcels. They even divided up the commune's capital reserves and grain stores. The moves clearly constituted counter-revolutionary behavior, so they all signed a pact stating that if the head of the production brigade was caught and executed, the village's other 17 families would take responsibility for raising his child!
With everything on the line, Xiaogang Village was able to increase production by 30% even during a year of drought. This caught the county government's attention. Fortunately, the production brigade leader didn't end up getting executed. Instead, his example ended up saving Chinese agriculture!
China's rise vs. Western fearsIn just 30 years since the reforms were introduced, China has become the world's third largest economy, thus realizing nationalist dreams of greatness. Of course, the reforms aren't yet complete, and the Chinese economy is still full of major contradictions. Lin and Hutton find sticking points in the same places. They agree (1) that national enterprises pose a bottleneck, (2) that the financial system is weak, and (3) that there is a large gap between the cities and the countryside and that consumer power is lacking. These three underlying weaknesses create chronic, intractable problems.
Yet Lin maintains his customary pragmatism, believing that the all-in-one-go "shock therapy" route taken by the Soviet Union and Eastern Europe wouldn't work for China, and that the West still hasn't produced theories sufficient to guide the economic and social transformation of developing countries. He argues that blindly following mainstream Western academic opinion-say, by implementing the aforementioned "shock therapy"-would be like trying to cultivate an exotic plant ill-suited to the local environment.
Long in touch with popular sentiment, Lin proposes very practical measures. He suggests four ways to mobilize latent demand. Raising consumer demand in farming villages is particularly important, since it would help to bring about greater efficiency and greater fairness. Along these lines, the Chinese Communists have introduced policies to stimulate domestic demand, such as providing subsidies for the purchase of home appliances in rural areas.
Hutton's book conveys a sense of Western superiority. He argues that China ought to learn from the spirit of the European enlightenment, and establish rule of law, pluralism and press and academic freedom. Ultimately, he says, you can't get to the essence of capitalism merely by focusing on its outward economic forms. Without various "soft structures" in place, reform will be unsustainable and will end in crisis.
Isn't economics supposed to be a science that is based on rational deduction? When you compare these two books, it seems as if they are engaged in an argument with each other. By turn, they seem to offer lines of analysis in response to the other. It's like watching two martial arts masters sparring-a feast for the eyes. Who would have guessed that macroeconomics could be so much like literature and hold so many complex emotional elements?