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China Sings The Blues

As the blue social model collapses across Europe and the United States and Britain grope to replace it, China is trying to build a blue social model of its own.

That at least is the message of outgoing premier Wen Jiabao in the speech China-watchers compare to the US State of the Nation. As the Washington Post reports, Wen calls for massive increases in China’s social spending, more paid vacation, and higher agricultural subsidies.

The goal is the same goal that shaped US and European social policy after World War Two: to establish a mass consumer society. China’s leaders believe that their economy can no longer grow at ten percent or more per year based on exports, and they fear for the country’s future as public discontent rises. The solution: to promote higher living standards for Chinese consumers as a way of stimulating domestic demand for Chinese goods and to quiet social unrest.

The shift towards a Chinese consumer society and welfare state has been building for some time. The US in particular has been urging China to move toward a consumption based economy at least since the Clinton administration. Americans and others around the world hope that a shift toward internal demand will shrink China’s trade surplus and even increase China’s demands for foreign goods.

Nobody knows if China can execute this shift smoothly and sustainably. There is certainly a massive spending gap: China’s push for export oriented manufacturing growth has ravaged the country’s fragile environment and created huge inequalities. The social safety net is threadbare and services like health care are rudimentary in much of the country.

China will face problems as it tries to make this shift. One is that many factories will be moving to cheaper destinations as China tries to raise wages and working conditions. Countries like Vietnam and Bangladesh are already picking up industries that are being priced out of China. India and Pakistan would both like to horn in on this business as well, and there are signs that countries like Japan are actively seeking alternatives to China for new manufacturing investment.

If rich countries like the US, the UK, France and Italy are cutting back on their welfare states, it will be interesting to see whether China (which, thanks in part to the one child policy faces a demographic transition of unprecedented speed) can move in the other direction.

From a US point of view, we should wish China well with a transition that if nothing else may help ease US-China trade tensions — and step up our search for the next and higher level of social organization.

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  • ErisGuy

    “created huge inequalities.”

    The inequality is huge? Wrong.

    I think the difference between the richest Chinese plutocrat and the most oppressed Tibetan peasant now is less than the difference between the White-Boned Demon (Madame Mao) and most oppressed Tibetan during the Cultural Revolution. So by comparing extremes the inequality is less.

    There more more Chinese enjoying prosperity now than during the Cultural Revolution, so the inequality is less by counting the numbers of poor, middle class, and rich.

  • Luke Lea
  • Eurydice

    I’m not sure why encouraging internal consumption is a bad thing. After all, shouldn’t the Chinese people be able to buy the things that they produce? And the “massive” changes may only seem massive in relation to more developed economies.

    It seems to me that the issue is to not create an overreliance on consumption, and that’s fueled by easy credit, structural inducements to consume (like tax credits) and disincentives for savings.

  • J R Yankovic

    My sentiments exactly. And I must say it is good to find myself AGREEING with Via Meadia again. Meanwhile, at the rate Beijing’s policy directions are humanizing – excuse me, DEVELOPING – I’m even beginning to wonder if it won’t be long before they qualify as partners in (what I hope is) an emerging Trans-Pacific Partnership. And I think I’m second to none in my wariness of the Anti-People’s Republic.

  • Luke Lea

    China: the star to which American plutocrats have so foolishly hitched themselves and “their” country. What were they thinking?

  • WigWag

    “As the blue social model collapses across Europe and the United States and Britain grope to replace it, China is trying to build a blue social model of its own.” (Via Meadia)

    How is it that the old saying goes? Isn’t it something like “when you’re a hammer everything looks like a nail?”

    Professor Mead’s inclination to see almost everything in the world through blue-tinted glasses is becoming stranger by the day. More and more he is coming to remind me of the Marxists who are so convinced that their theory is “scientific” in nature that they can use it to explain just about any social or economic phenomenon that they encounter.

    In my opinion it would be wiser for Professor Mead to temper his enthusiasm for thinking his hypothesis about the “blue model” is somehow akin to the “unified field theory” (theory of everything) that has eluded physicists for generations.

    Trying to ram the square peg of the “blue model” into the round hole that is China just makes turns his entire thesis into a caricature.

  • J R Yankovic

    “China: the star to which American plutocrats have so foolishly hitched themselves and ‘their’ country. What were they thinking?”

    @ Mr Lea:
    Not sure. But they definitely weren’t thinking of “their” country. Speaking of which, many thanks for alerting us – at least
    twice, I believe – to that sordid, heroless story in It was a real eye-opener. Not to mention stomach-turner.

  • Eurydice

    @#6 WigWag – Yes, I wasn’t sure what the blue model had to do with this, either. Keeping a population’s standard of living artificially low so as to attract international business doesn’t seem like a sustainable way to run a country. What’s that trade surplus for, anyway? For what purpose are the people working? If it’s for the state and not for themselves, isn’t that kind of blue already? Or is it red? Or maybe it’s red when the state doesn’t give anything back. I’m so confused.

  • Kris

    Based on our host’s former writings about the blue social model, it seems entirely consistent to describe China’s putative shift as being blue-wards. And I’m not saying that just because I want to tout the headline: “Red China Turns Blue”.

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