Tuesday, January 2, 2018

The ‘China Model’ of Development

Mao and Nixon in 1972.
It’s an incontrovertible fact that the British colonizers built roads and railways in India, they established missionary schools, colleges and universities, they enforced the English common law, and the goal of exploiting the natural resources and four hundred million strong Indian manpower at the time of independence in 1947, and trading raw materials for pennies and exporting finished goods with huge profits to the Indian consumer market never crossed the ‘altruistic minds’ of the British imperialists.

Puns aside, there is an essential precondition in the European Union’s charter of union, according to which the developing economies of Europe that joined the EU allowed free movement of goods (free trade) only on the reciprocal condition that the developed countries would allow the free movement of labor. What’s obvious in this stipulation is the fact that the free movement of goods, services and capital only benefits the countries that have a strong manufacturing base, and the free movement of workers only favors the developing economies where labor is cheap.

Now, when international financial institutions, like the IMF and WTO, promote free trade by exhorting the developing countries all over the world to reduce tariffs and subsidies without the reciprocal free movement of labor, whose interests do such institutions try to protect? Obviously, they try to protect the interests of their biggest donors by shares, the developed countries.

Some market fundamentalists, who irrationally believe in the laissez-faire capitalism, try to justify this unfair practice by positing Schumpeter’s theory of ‘Creative Destruction’: that the free trade between unequal trading partners leads to the destruction of host country’s existing economic order and a subsequent reconfiguration gives rise to a better economic order. Whenever one comes up with gross absurdities such proportions, they should always make it contingent on the principle of reciprocity: that if free trade is beneficial for the nascent industrial base of developing economies, then the free movement of labor is equally beneficial for the workforce of developed countries.

The policymakers of developing countries must not allow themselves to be hoodwinked by such deceptive arguments; instead, they should devise prudent national policies which suit the interests of their underprivileged masses. But the trouble is that the governments of the Third World countries are dependent on foreign investment, that’s why they cannot adopt independent economic and trade policies.

The so-called ‘multinational’ corporations based in the Western financial districts make profits from the consumer markets all over the world and pay a share of those profits to their respective governments as bribes in the form of taxes. Every balance of trade deficit due to the lack of strong manufacturing base makes the developing nations poorer, and every balance of trade surplus further adds to the already immense fortune of the developed world.

A single, large multinational corporation based in the Wall Street and other financial districts of the Western world generates revenues to the tune of hundreds of billions of dollars, which is more than the total GDP of many developing economies. Examples of such behemoth business conglomerates include: Investment banks - JP Morgan, Goldman Sachs, Barclays, HSBC and BNP Paribas; Oil majors - Exxon Mobil, Chevron, British Petroleum, Royal Dutch Shell and Total; Manufacturers - Apple, Boeing and Lockheed Martin.

Pakistan’s total GDP is $300 billion and with a population of 210 million, its per capita income amounts to a paltry $1450; similarly, India’s per capita income is also only $1850. While the GDP of the US is $18 trillion and per capita income is well in excess of $50,000. Likewise, the per capita incomes of most countries in the Western Europe are also around $40,000.

That's a difference of more than twenty times between the incomes of the Third World countries and the beneficiaries of neocolonialism, North America and Western Europe. Only the defense budget of the Pentagon is $700 billion, which is more than twice the size of Pakistan's total economy. Without this neocolonial system of exploitation, the whole edifice of supposedly ‘meritocratic’ capitalism will fall flat on its face and the myth of individual incentive will get busted beyond repair, because it only means incentive for the pike and not for the minnows.

Regarding the contribution of British colonizers to India, the countries that don’t have a history of colonization, like China and Russia for instance, have better roads, railways and industries built by natives themselves than the ones that have been through centuries of foreign occupation and colonization, such as the subcontinent. The worst thing the British colonizers did to the subcontinent was that they put in place an exploitative governance and administrative system that catered to the needs of the colonizers without being accountable to the colonized masses over whom it was imposed.

It’s regrettable that despite having the trappings of freedom and democracy, India and Pakistan are still continuing with the same exploitative, traditional power structure that was bequeathed to the subcontinent by the British colonizers. The society is stratified along the class lines, most of South Asia’s ruling elites still have the attitude of foreign colonizers and the top-down bureaucratic system, ‘Afsar Shahi Nizam,’ is one of the most corrupt and inefficient in the world.

Finally, China is an interesting case study in regard to its history. First, although it did fight a couple of Opium Wars with the British in the middle of the nineteenth century, but the influence of Western imperialism generally remained confined to its coastal cities and it did not make inroads into inland areas. Second, China is ethno-linguistically and culturally homogeneous: more than 90% Chinese belong to the Han ethnic group and they speak various dialects of Mandarin, thus reducing the chances of discord and dissension in the Chinese society.

And third, behind the ‘Iron Curtain’ of international isolation beginning from the Maoist revolution in 1949 to China’s accession to the World Trade Organization (WTO) in 2001, China successfully built its manufacturing base by imparting vocational and technical education to its disciplined workforce and by building an industrial and transport infrastructure.

It didn’t allow any imports until 2001, but after joining the WTO, it opened up its import-export policy on a reciprocal basis; and since labor is much cheaper in China than in the Western countries, therefore it now has a comparative advantage over the Western capitalist bloc which China has exploited in its national interest. These three factors, along with the visionary leadership of Chairman Mao, Zhou Enlai and China’s vanguard socialist party collectively, have placed China on the path to progress and prosperity in the twenty-first century.