Discussion of the Chinese economy often centers on the idea that Chinese economic growth is fundamentally unbalanced due to low levels of domestic consumption and a reliance on exports. Yet China seems to have weathered the global financial crisis particularly well. Zacharay Karabell:
China’s path, of course, is hardly without skeptics. The common argument against how China is managing its economy is that it is overly dependent on either state-spending or exports and not sufficiently grounded in domestic consumption. Said one recent Merrill Lynch report: “Let’s start with the obvious: Asia needs to transform its growth model, relying less on exports and more on domestic demand.” As China is the dominant component of the Asian system, it is perceived as the primary culprit of an imbalanced system. Yet critics have been saying this for years, and all the while China has happily been violating every stricture of orthodox macroeconomics and has been doing just fine, thank you. The fact is that if there was an equation for successful, stable, long-term economic growth, everyone would use it. China has been engaged in an infinitely complicated process and making a lot up as it goes along, less concerned about whether the formula matches what Western economists deem balanced and more focused on what works and what doesn’t.
I am reminded of the pre-1914 debate among Marxists about crisis theory (the classic English discussion of this was that of Paul Sweezy in 1942 but see also Howard & King). To simplify enormously it pitted advocates of various forms of underconsumptionism against those who argued that the basic problem with capitalism was rather the absence of planning which led to ‘disproprtioanlities’ and eventual crisis. The later position could inspire revisionist visions of the prospect of a crisis-free planned capitalism. One proponent of the disportionality model was the Ukrainian revisionist Mikhal Tugan-Baranovsky who argued that capitalist economic growth was not dependent on mass consumer demand. His analysis was strongly criticised by Rosa Luxemburg, whilst Lenin’s 1898 article is interesting on the ‘market question’. Micheal Bleaney argued in 1979 that the assumption that capitalist economies ultimately required mass consumption reflected a humanist misreading of capitalist dynamics. Has Chinese guided capitalism vindicated advocates of the disproportionality approach over theorists of underconsumption? Some earlier thoughts of mine here.