China Is an Example of the East Asian Capitalist Developmental State - Essay Example

China has been hitting the globalheadlines for quite some time now due to the massive economic expansion that the nation experienced since 1972. Primarily, the dramatic growth of China caught the world by storm sending jitters to developed countries over the emergence of a potential economic powerhouse that was to change the status quo. Since 1978, China has experienced a steady growth of its economy maintain a 9.9% annual rate until 2009. Indeed, that was exemplary given the fact that no other major world economy has managed to maintain such an impressing growth rate consistently over thirty years (Hung, 2009). As a result, the economic boom in China elevated the nation to become a major world producer with its output accounting for 15% of the total production of the world. However, the economic growth experienced in China was not something that was attained with ease; the nation has over the past decade undergone various changes in regimes that have affected its economy in different measures. In the past, there have been various styles of leadership that have governed China all founded on different economic philosophies, for instance, there was a dynasty, communism and the current Republic (Liao, 2009). A developmental state is a situation whereby the macroeconomic planning of a given country is led by the government. The government is tasked to formulate all the crucial policies and also give direction of what needs to be done to influence the economy in its desired direction. In this case the state has autonomous power over the country’s economy as it can control it though intervention and regulation to achieve economic growth. A capitalist developmental state on the other hand is a development state that is solely regulated and controlled by the government. The state intervenes at any point to ensure the economy is on track (Weiss, 2000). From the period, Mao came into power China assumed a bipolar approach to the capitalist economic structure whereby it governed its people based on a communist approach while its economy was structured in a capitalist manner. In essence, authoritarian rule continued to thrive even as the markets were open to international players to stimulate the economy of the nation in line with other global actors. The Mao regime came to realize that embracing capitalism was not an option if at all China was to achieve any meaningful economic developments. Relatively, it was the only true way to incorporate China to the global trade and ensure its competitiveness on the global front. Currently, China is among the nations that impact the world immensely both economically and politically through their vast economies, military power and technological advancement (Alon, 2003). Transition from Socialism to Capitalism Between the 1950s and the 1970s, China grew under the state communist or the Maoist model. Maoist China was in no way, shape or form a perfect communist society. Monetary imbalances and bureaucratic benefits kept on existing. The economy experienced inefficiencies and uneven characters. The issues of ecological manageability were inadequately caught on. The emphasis on substantial modern advancement prompted various environmental jitters (Jensen and Weston, 2006). Then again, these issues need to be set against their recorded connection. Pre-revolutionary China was a persecuted, fringe state with a minor cutting edge working people. The new progressive state was gone up against with the threats of active industrialist states and compelled to react to the weights of capital collection, and military rivalry forced by the entrepreneur world framework (Liao, 2009). These target circumstances enormously constrained the authentic capability of Chinese communism. Notwithstanding these chronicled impediments, the experience of Maoist China showed that working individuals life could be significantly enhanced in a financial framework guided by communist standards (Faure, 2006). Conceivably the best the accomplishment of Chinese capitalist developmental state was its achievement in meeting the essential needs of the immense greater part of the populace at low levels of every capita pay and utilization. Somewhere around 1960 and 1980, the Chinese populaces future during childbirth ascended from 36 years to 67 years, an increment of 31 years more than twenty years. By correlation, over the same period, the reasonable projection of all low-wage nations expanded from 44 years to 53 years, an increment of just nine years. Somewhere around 1970 and 1980, the Chinese grown-up populaces absence of education rate dropped from 45 % to 32 %, a 12% deficit. During that period, the usual unskilled salary rates of all low-salary nations decreased from 60% to 49%. By correlation, in the time of business sector situated change, Chinese development state has fallen behind other small and middle income nations in the change of essential wellbeing and policy makers in spite of Chinese capitalist developmental state’s awesome monetary development (Tsai, 2007). In the urban communities and the modern ventures, the method for generation was possessed by "all individuals" or the state. The expression "iron rice dish" was utilized to depict the modern labour framework and its related profits. Wages were low. Be that as it may, specialists delighted in lifetime business, ensured benefits, human services, housing, and training, paid maternity leave, and different profits that made an abnormal state of societal value and security (Alon, 2003). In the country zones, area and different method for generation were claimed by the aggregates or the communities. In spite of various monetary issues and low levels of material utilization, the community framework gave an extensive variety of social advantages (counting essential open medicinal services and training) so that most of the rustic individuals could live with security and poise (Weiss, 2000). Chinese capitalist developmental state’s business designed reforms officially took effect in 1979amid authorization from the government. Amid the initial ten to fifteen years, some notable highlights of the change included: separation of provincial communities, assigning of Special Economic Zones for outside speculation and free market analyses, and presentation of "business sector instruments" into state claimed ventures. Therefore, employee benefits were decreased, and existing social wellbeing net were consistently disintegrated (Huang, 2010). In the 1990s, the Chinese capitalist developmental state administration further grasped financial globalization and liberalization. Towards the end of the 1990s, a large portion of the little and medium-sized state claimed endeavours and almost the greater part of the generally possessed undertakings were privatized. Outside and local capitals are presently urged to mainatin stakes in the staying vast state claimed endeavours (Tsai, 2007). The quantity of Special Economic Zones has blasted, and foreign undertakings have further prospered, exploiting Chinas tremendous shabby workforce, regulation escape clauses, and liberal tax reductions. China subscribed to the World Trade Organization in 2001 to expand its global trade links as well as stimulate its domestic economy. Under the WTO increase terms, Chinese capitalist developmental state is committed to dispense with all import quantities and altogether scale down its duty insurance on modern imports. Outside firms and financial specialists have their rights extraordinarily extended. While the Chinese capitalist developmental state authority keeps on claiming that the objective of the change is to manufacture "communist business economy", the extent that the real monetary and social conditions are concerned, China has turned into a worldwide corporate asylum of moderate social and environmental principles. Chinese development state is presently industrialist in everything except in name (Stubbs, 2009). Economic Reforms The post-Mao regime implemented crucial economic reforms that help shape the distorted economy of China during that particular time. Despite the authoritarian nature that characterized the governance of that time the economy was opened up to steer some growth whose impact are still felt today. Some of the reputable marginal reforms that were implemented included the following; privatization of farming, enhancement of village and township enterprises, creation of special economic zones as well as private businesses in cities across the Chinese capitalist developmental state (Weiss, 2000). However, these reforms were not solely initiated by the authorities but by external forces that were privy to see the economy of China grow. The government came on board to back the reforms once results were being evident to hijack the whole process so as it will imply it was entirely a government initiative (Orcutt and Shen, 2011). Even after endorsing the marginal reform conditions were laid out on the manner in which those changes should be implemented, for instance, the government directed that no activity should be conducted in the name of economic reforms that should pose any threat whether direct or implied to the capitalist party’s power in the Chinese development state. That notwithstanding, operation of private enterprises should not undermine or negatively impact the activities of state-owned corporation. The government entities were shielded from competition through state subsidies and being handed market dominance in crucial sectors such as telecommunication, energy, banking and transport (Jensen and Weston, 2006). Although, the idea of capitalist developmental state is not only isolated for China since it is a common practice among the East Asia nations for instance; Taiwan, Singapore and South Korea. Japan can also be categorized in the capitalist developmental state bracket but the level of government intervention is limited to only critical situation. Notably, the Japanese culture is strongly founded on social norms thus the government cannot over engage itself in economic issues since market forces are given room to prevail (Alon, 2003). Relatively, the capitalist developmental state ideologies in China, South Korea, Taiwan and Singapore tend to differ in various grounds for instance unlike in China whereby the economy is driven through mass production the economy in Singapore depends on the service sector and external trade to steer it. Therefor the degree of government intervention in Singapore is minimal as compared to the Chinese capitalist developmental state. On the other hand South Korea and China employ relatively similar economic policies with massive government interventions on the economic issues on those nations (Stubbs, 2009). It is fair to appreciate the fact that irrespective of the mode of governance that is prevalent in the Chinese capitalist developmental state not being democratic its economy has tried to embrace capitalism in a number of aspects. It is prudent to note that the kind of political ideologies that the West and America implement are difference from those applied in Asia. East Asia for instance is a region that is predominantly possessed with traditional cultural practices as much as they may be trying to catch-up with the modernization of the West they still hold close their cultural practices (Stubbs, 2009). On that note, the government believe they will intervene in any crucial matter to manipulate the direction to according to its interests and those of its people. Conversely, Western societies are more bureaucratic with a high level of openness; they are majorly founded on ideologies whereby they believe free markets can regulate themselves through the forces of demand and supply (Stubbs, 2009). There is barely any government interference on the economies of Europe and America, and that is why they are more vulnerable to risks like the recent global financial rescission that caused an economic crunch across Europe and America. Governments in East Asia will often intervene to salvage the economy since they believe the markets cannot govern themselves, and the interference of the government is of a real intention. Thus, it is worth noting that the economic practices in East Asia and particularly in China despite being capitalist tend to differ from the practices in Europe and America as the two regions have been founded from various perspectives (Zhang, 2006). The restrictions that have marred the capitalist approach of the Chinese economy were merely meant to shield its economy from external influence especially the Western countries that were privy to exploit the vast Chinese market by utilizing their financial muscle to undermine China (Tsai, 2007). The bipolar approach has helped China to stimulate its economic growth by opening its markets but with strict regulations that govern the practice to overcome any uncertainty that would jeopardize its growth ambition. Relatively, if you take a close look at the various economic structures that are being implemented across East Asia you will notice they tend to defer from the Western practice and among themselves (Stubbs, 2009). The following are notable characteristics that distinguish the Chinese capitalist economy from the rest of the world. To begin with the Chinese capitalist developmental state policy makers do not trust the markets to self-regulate themselves thus the government will intervene when need to set the direction in a desired manner through the implementation of industry policies or adjustment of interest and exchange rates. The Chinese government has avoided the extensive welfare programs that are rampant in Western economies (Jensen and Weston, 2006). Rather, the firms develop a bond with their employees through engaging them and motivating them as well as increasing their value within a firm. In Europe and America it is a common practice that whenever a company anticipates a dip in its revenues it will move to make job cuts to prevent it from running into losses this is not the case in China and East Asia in general as the companies will seek alternative means to maintain their workers through the turbulent period and, as a result, the employees became more motivated and attached to the organization thus boosting the overall performance (Hung, 2009). Ultimately, the economic situation in Chinese capitalist developmental state tends to favour industry over the service sector as well as investment activities over local consumption to drive its growth. In a nutshell, China is a capitalist economy that has taken a different approach to solving the inherent issues in a bid to spur its economic growth. With the numerous challenges and economic risks that are facing Western economies it is evident that soon with the threat of China being a global economic giant they are going to resort to restrictions as a technique to mitigate financial risks (Orcutt and Shen, 2011). It is worth noting that China is indeed a capitalist developmental state since all its economic policies are formulated with a close guard and control by the state. The state can arbitrary intervene to solve any economic situation that it deems to be crucial to the overall benefit of China as a nation (Stubbs, 2009). References Alon, I., 2003. Chinese culture, organizational behavior, and international business management. Westport, CT, Quorum Books. http://www.lib.sfu.ca/cgi bin/validate/books24x7.cgi?isbn=1567205461. [Accessed on 27 Mar. 15] Faure, D., 2006. China and capitalism: a history of business enterprise in modern China. Aberdeen, Hong Kong Univ. Press. Huang, Y., 2010. Capitalism with Chinese characteristics: entrepreneurship and the state. Cambridge [etc.], Cambridge University Press. Hung, H. F., 2009. China and the transformation of global capitalism. Baltimore, Johns Hopkins University Press. Jensen, L. M., & Weston, T. B., 2006. Chinas transformations: the stories behind the headlines. Lanham, Rowman & Littlefield Pub. Weiss, L., 2000 Developmental states in transition: adapting, dismantling, innovating, and not ‘normalizing.’ The Pacific Review 13. Liao, C., 2009. The governance structures of Chinese firms innovation, competitiveness, and growth in a dual economy. Dordrecht, Springer. http://public.eblib.com/choice/publicfullrecord.aspx?p=478181[Accessed on 27 Mar. 15] Orcutt, J., & Shen, H., 2011. Shaping Chinas Innovation Future University Technology Transfer in Transition. Cheltenham, Edward Elgar Pub. http://public.eblib.com/choice/publicfullrecord.aspx?p=631208. [Accessed on 27 Mar. 15] Tsai, K. S., 2007. Capitalism without Democracy: the private sector in contemporary China. Ithaca, N.Y., Cornell University Press. Zhang, J., 2006. Technological innovation of Chinese firms [electronic resource]: indigenous R&D, foreign direct investment, and markets. Thesis (Ph. D.)--Public Policy, Georgia Institute of Technology, 2007. http://smartech.gatech.edu/handle/1853/11461. [Accessed on 27 Mar. 15] Stubbs, R., 2009 Whatever happened to the East Asian development states? The unfolding debate. The Pacific Review 22 (1) Read More