Tuesday, June 18, 2013


The North American economist Milton Friedman said n 2004 that because China is improving its civil rights, this means that that its political rights will improve. If political rights improve, he argues, then economic growth and success will follow. 

How to define 'economic growth' or 'economic success' in a class on political-economy?
The mainstream way (the way of the mainstream mass media like CBS or CNN) is to define economic growth through GROSS DOMESTIC PRODUCT ,or GDP, and working age population.  GDP growth is what PricewaterhouseCoopers bases its conclusions when it refers to the success of emerging economies.

"The world's largest tax advisory, audit and consultancy services provider, PricewaterhouseCoopers (PwC) has suggested that the emerging markets like India and China is fast becoming the hub of global economic activity with China likely to outpace the US by 2025. " Vietnam is also considered an emerging economy."
 Source: http://www.ibtimes.com/china-likely-outpace-us-2025-217155. 

Will this economic growth be hampered by lack of political freedoms?  On the contrary, there is an argument to be made that a state like China which controls the 'commanding heights' of an economy without a focus on Western style freedoms, is giving it a lead over Western democratic economies. It is noted that China did not suffer as much from the 2008 economic crisis as countries such as US, Iceland, Greece, Italy and Spain -- all Western style democracies.

The report by PricewaterhouseCoopers does not mention political freedoms as a factor of economic growth. This is what the report says:

"The key to achieving the growth potential, indicated by the report titled The World in 2050: beyond the BRICs, will be establishing and maintaining a macroeconomic, legal and public policy environment conducive to trade, investment, increased education levels and hence economic growth." [BRICs=Brazil, Russia, India, China]. 

China's success is down to a strong state sector and strong state-directed investments, according to experts. China owns its own money supply and sets its own interest rates. The US does not. It has to borrow its money supply at interest from the private banks of the Federal Reserve (a set of private banks. The Fed, despite its name, is NOT  a government agency). 

China's annual average GDP growth since launching its economic reforms in 1978 has been 9.9%. By contrast, in the last four years, the US economy has grown by 1.2%.


Who are the winners and losers resulting from China's GDP growth?
Growth by GDP isn't the whole story, as a student pointed out in my INTL 5400 class this week. 

"Gini studies suggests that China may now be one of the most economically unequal countries on Earth, and the most unequal outside of sub-Saharan Africa. Compared to World Bank data, China ranks as the world’s fifth most unequal, tied with Botswana. It performs a little better alongside CIA data, which would rank China as the world’s seventh most unequal, between Haiti and the Central African Republic. These comparisons are imperfect, since the Chinese university study may not have used the same measurements as the World Bank or CIA studies, but a rough way of demonstrating the severity of China’s growing class problem."
Study: Income inequality skyrockets in China, now among world’s highest By Max Fisher, Published: December 11, 2012

Political revolutions are spurred by economic distress more than any other issue.

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