Representational image: iStock
Representational image: iStock

The “Beijing Consensus” was coined by American journalist Joshua Cooper Ramo, who thought the Chinese development model could be a template for other developing economies. Over 90 developing countries appear to agree with him, sending economic planners to China to study its model because Anglo-American neoliberalism has failed to improve their economic plight.

It should be pointed out, however, that as far as China is concerned, there is no “Beijing Consensus,” but rather a development theory popularly known as “socialism with Chinese characteristics.”

Why ‘socialism with Chinese characteristics’ works in China

During the 150-year “period of infamy” between 1840 and 1949, China was carved up by warlords, European imperialist powers and the Japanese. Chaos, poverty, starvation, official corruption, economic and social injustices, and a host of other ills were the norm. Many were forced to emigrate to other lands and those who stayed were exploited and marginalized.

The Communists won the civil war in 1949, promising to  eradicate corruption, promote economic and social injustices, rid China of imperialists, and eliminate poverty and starvation. In doing so, the leadership set ambitious goals: modernizing agriculture, industry, national defense, science and technology. Rapid economic growth was seen as the key to achieving those goals.

The Soviet Five-Year Plan (FYP) model became the template because the leadership was impressed by how it transformed the Soviet Union from an agricultural to an industrial economy in a short time.  China’s first FYP (1953-1957) focused on industrialization but produced mixed results. It did establish an industrial foundation but failed to produce enough food and exports, culminating in starvation and insufficient foreign exchange earnings  (required to buy foreign technology and machinery).

The leadership quickly “shifted gear,” revising the FYP to suit China’s circumstances and fulfill the promise of eradicating starvation. The second FYP was referred to as “walking on two legs,” allocating resources equally to industrialization and agriculture.

The quickness in policy change demonstrated: i) the first generation of leaders recognized the need for a development model reflecting China’s institutions, and ii)  pragmatic, resilient and strong leaders, willing to experiment with new ideas. For example, Mao Zedong was sidelined after his Great Leap Forward Movement (1958 – 62) failed, quickly replaced by “material incentive” programs (articulated by Liu Shaoqi and Deng Xiaoping), appointing officials on the basis of ability and compensation by value of work. The experiment of ideas alien to socialism worked wonders, pulling the economy from the brink of disaster.

The Five-Year Plan (FYP) model: China style

China’s FYP architecture is referred to as the “birdcage” model first articulated by Chen Yun, the country’s self-taught chief economic planner. The analogy likened management of the economy to raising a bird: “If the bird can fly freely, it will fly away but if it is held too tightly, it will suffocate and die.” That is, the economy was to be  market-driven but under the guidance and supervision of the state. What’s more, the plan was to be flexible or expansive to accommodate a growing economy.

Since 1953, China has implemented 13 FYPs whose guidelines and targets were set by the state. The targets set in each FYP were met or exceeded expectation. The reasons include:

  1. Allowing farmers to lease land from farm collectives to grow and sell their produce and urban dwellers to start businesses in the 1980s is said to be a major reason for China’s “economic miracle.” According to Massachusetts Institute of Technology economist Yasheng Huang and author of Capitalism with Chinese Characteristics, poverty reduction was the greatest during the 1980s.
  2. The guidelines are not rigid and leaders have considerable latitude in making adjustments. Then premier Wen Jiabo saw that export/investment-led growth was unstable, uncoordinated, unbalanced, and therefore unsustainable in 2008. They quickly replaced the policy with domestic demand as the country’s engine of growth in the 12th FYP (2011-2016). The policy shift has put the economy on a more sustainable path in that it minimizes external volatility and scarce resources waste.
  3. Chen Yun was well aware that transforming the economy from central planning to a market-driven one is complicated and wrought with dangers and uncertainties. He thus cautioned that reforms should be carried out gradually and cautiously, “groping every stone when crossing the river.” The gradual expansion of the residential registration system, hukou, was to protect cities from financial collapse.
  4. Leaders have the authority and resources to implement timely and effective policies. In the aftermath of the 2007 financial crisis, which decreased GDP growth from over 10% to 6.5% in 2008, the government introduced a huge stimulus package of over US$580 billion, reversing the economy’s downward trajectory to a 9.2% growth rate in 2009.

China succeeded because of a strong government with the power to do (literally) whatever it wants. In the early stages, the government issued as much money as needed to finance infrastructure construction and other economic enhancement projects. It was able to do so because the currency was not convertible and accepted within its borders. To stave off inflation, the government imposed price controls on “strategic” goods (i.e. electricity, food, etc.). In doing so, the government managed to accelerate economic growth, maintain social stability, and gain popular support.

Critics both within and outside China denounce its government as repressive, but over 80% of the population (according t0 Pew and Gallup Polls) support Bejing’s adminisrative architecture and policies. One reason might be that the people are so desperate to escape poverty that they are willing to forgo personal rights.

Another reason might that the vast majority of Chinese are apolitical or being fed is more important than acquiring democratic ideals. The British government understood that, explaining why authoritarian colonial rule was sustained for over 150 years in Hong Kong and likely would have been for longer had it not been reunified with the mainland.

Should the Beijing Consensus be emulated in other developing economies?

The answer depends on which is more important: right to eat or right to speak/vote. The “right to eat” proponents would ague that the poor need to be fed, sheltered and clothed today, not tomorrow. However, the “right to talk” crowd takes the view that “a well-fed robot is no substitute for democracy,” quoting a British official on Tibet being “united” or “annexed” (depending on whom one talks to) by China in the 1950s.

To its credit, the Chinese government has managed to secure a remarkable balance:  limiting individual freedom and making  advancements in the economy, creativity and innovation. To prolong its rule, however, the Communist Party must continue to reform the economy and polity, allowing freedom of expression as well as improving the standard of living.

Ken Moak taught economic theory, public policy and globalization at university level for 33 years. He co-authored a book titled China's Economic Rise and Its Global Impact in 2015. His second book, Developed Nations and the Economic Impact of Globalization, was published by Palgrave McMillan Springer.

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