China aims high

MIT Prof. Ed Steinfeld

Viewed from the West, China’s new Five-Year Plan, the 12th since the Communist Party took power, has an anachronistic feel.  The exercise itself evokes images of a heavy-handed, retrograde state and dour bureaucrats issuing orders from on high.

But beneath the dry, technical language of the document, which the National People’s Congress endorsed this month, is a plan for a socio-political transformation every bit as important and open-ended as the recent economic transformation in China.

Over the past decade, China has turned to exports to drive growth. Leaders have embraced a new kind of global production, in which goods are made of components produced in a variety of places by a variety of companies. For China, this has meant welcoming foreign manufacturers and becoming a global center for export processing.

While the approach has brought remarkable growth, it has been extremely dislocating socially. China-based assemblers earn the narrowest of margins. To supply the Nikes and Apples of the world, companies must be cost competitive and flexible. For Chinese workers this means uncertain employment and few benefits. Shifting from agriculture to industry has boosted incomes, but many citizens now are at the mercy of unfettered markets for labor, housing, healthcare, and education—a far cry from the socialism of yesteryear.

Facing such dislocation, the government could have tried to turn back the clock, either retrenching economically or clamping down politically. Instead, it opted for a very different solution, committing itself in the Five Year Plan – whether cynically or not — to an array of social and political goals and rights for citizens.

If workers feel they are treated unfairly, they can – at least according to the law — sue. If they believe wages are low, they can to turn to their union. If they believe environmental conditions are unmonitored, they can set up civic organizations to do the job. The plan includes new laws to support such rights.

In reality, Chinese citizens cannot effectively sue if the legal system doesn’t work. They can’t go to a union if there isn’t one. They can’t set up a civic organization if local authorities squash it. But by publicly committing itself to these goals, China’s leadership is creating widespread expectations for civic empowerment.

When we see in the Five Year Plan terms like “rebalancing” – shorthand for the shift from export-driven to domestic consumption-driven growth – we might see this as a response to pressure from the United States and other countries. But the plan isn’t about China’s relationship with the outside world. It is about the relationship between government and citizens.

What those citizens will see in rebalancing are commitments by government to close income gaps, upgrade skills, and provide a broader array of public goods—all while cleaning up the environment and opening government to public scrutiny. It is a breathtaking, almost implausible agenda.

For all its brutally and repression, the state in China now aims high, aims publicly, and aims for outcomes it cannot fully control. While it never quite attains all the goals in the time allotted, it attains more than a few of them. Then, in the next round, it proceeds to raise the bar even higher.

Edward Steinfeld is a professor of political economy in the MIT Department of Political Science, former Asst. Prof. of Management, MIT Sloan School of Management, and author of Playing Our Game: Why China’s Rise Doesn’t Threaten the West

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