The Battle for Asia - Essay Example

?Introduction According to Christian (1991), the redistribution project is simply his term for socialism and the growth project is his term for capitalism. He states that both cannot exist, simultaneously, in a society, as each exists on a completely different platform from the other. For instance, capitalistic societies, termed growth projects by Christian, are, basically, built on the “haves” and “have nots,” at least according to Karl Marx, who understood that, in a capitalistic society, the wealth was controlled by a small number of people, and that the vast majority of people in these capitalistic societies have no wealth at all. The market is what mediated the exchanges between the capitalists and the proletariat, which were Marx’ terms for the individuals who controlled the wealth and the property-less class, respectively. In the socialistic society, the wealth is more evenly distributed amongst the classes. Everybody has access to everything society has to offer. In the growth project, Marx saw that this type of society relied upon inequality. That is, the best way to make substantial profits is for companies to be more efficient than their rivals. This would mean that the companies who can slash their labour costs would have the edge over companies who could not. This, in turn, exacerbates the income inequality between the capitalists and the proletariat (Christian, 1999). Moreover, the growth project also relies upon mass consumption (Rostow, 1960). In the redistribution project, which is present in a socialist society, there is economic equality, and everybody has equal access to the resources of society. Socialism is seen from the point of view of people who have no property, and the resources are redistributed (Christian, 1999). That said, not every society which is capitalistic is going to experience growth. For instance, according to Frank (1966), Latin America has suffered because it has been participating in the capitalist system for centuries. Their problem is that countries like Chile and Brazil have been treated like satellite developments for richer countries. This paper will examine some regimes who have undertaken redistribution or growth projects, examining if these two concepts can peacefully co-exist. Soviet Union Christian used the example of the Soviet Union to illustrate his thesis that the redistributive project could not exist simultaneously with the growth project. He states that, at least initially, socialism needs a platform, in that socialism cannot exist unless the Soviet economy was already strong. This was because there needed to be material abundance that created the wealth that would be shared, and, also because the state itself had to be strong to ward of outsiders. However, Christian (1999) states that the redistribution project failed in the Soviet Union because there was a basic conflict between the platforms of each vision, that being the redistribution project and the growth project. Competition is necessary to make a market grow, argues Christian (1999), and the Soviet Union was no experiencing this kind of competition. Therefore, in the Perestroika era, there were decentralising reforms in which the government eased its grips on the means of production, which actually led to a collapse of the Soviet economic system. Christian (1999) argues that a capitalist system assumes that the market is a natural institution, which would grow if not stunted by forces which are non-market. On the other hand, the socialist system is not natural. Thus, the growth cannot be realized in a redistributive society, and the Soviet Union is a perfect example of this, according to Christian (1999). In a redistributive society, peasants and landlords, and, by extension, workers and capitalists, would be inefficient. The workers knew that, even if they worked inefficiently, they would get paid the same. The capitalists knew that, no matter how inefficiently they ran their businesses, they were guaranteed income as well. Therefore, there was not the requisite insecurity that is necessary for economic growth. This was the reason why the Soviet Union’s emphasis upon the redistributive project failed, according to Christian (1999). It is also why the two could not exist simultaneously – the basic premises for growth were fundamentally different than the basic premises for redistribution in the Soviet Union. The Soviety policy of perestroika was in response to pressures by the United States, because the Soviet Union’s power was on the wane, so they had to reform (Petersen, 1993, p. 473). Wohlworth theorized that the relative power structure between the Soviet Union and the United States caused the collapse of the Soviet Union, in that, in a nutshell, Gorbachev saw the handwriting on the wall, so to speak, and had to make a major change due to the pressure of the United States. In contrast, Crozier states that the Soviet Union collapsed because of the inherent failure of communism. At any rate, it is clear that perestroika’s failure and the fact that it essentially led to the end of communism in the Soviet Union shows that growth is fundamentally at odds with redistribution of wealth. Sandinismo Movement In order to understand the Sandinismo Movement, one must understand the Latin American region itself. According to Arias (2011), Latin America has a number of failings, one of which that it has failed to develop innovators and creators, which are the backbone of a capitalistic society. Moreover, Arias (2011) indicates that businesses are taken without justification in Latin America, and that political pressure causes permits to be revoked. This is reminiscent of the Soviet Union, as Christian (1999) explained that, in that country, there was very little political freedom because the state controlled so much. This is also shown for the region’s penchant for authoritariasm. Arias (2011) therefore describes a region which is much like the Soviet Union, in that its colleges are not turning out science majors, but ideas people with no practical skills, and the government is so powerful that it can, and does, crush businesses. It appears that businesses try to grow in the Latin America region, but without an educated work force and with government having such a heavy hand, growth is almost impossible. Therefore, it appears that, like in the Soviet Union, the redistribution ethic is strong in Latin America, but growth is not as strong, which enhances Christian’s (1999) thesis that the two cannot coexist. In the case of the Sandinismo movement in Nicaragua, it was an example of a country that has economic capitalism, but a strong state which suppresses this capitalism. That said, Ross and Levy (1989) state that the revolution which took place there was not led by an organised working class, but that it was supported by all of society, including the Catholic Church and the national bourgeoisie, so it did not have the hallmarks of a Marxist revolution. That said, the first guerillas who formed the Frente Sandinista de Liberacion Nacional (FSLN) group had the idea that socialism was the only way to overcome the social injustice and tyranny which were experienced by the Nicaraguan people during this time. While the Sandinistas were successful in overthrowing the government, the Reagan Administration in the 1980s, opposed the movement because it was seen as being communistic and Marxist, and, despite the fact that the Contra party, which challenged the Sandinistas, terrorized the citizenry and the Sandinistas themselves instituted widespread literacy, health care and gender equality, the Reagan Administration aided the Contras in their effort to overthrow the Sandinistas. Nevertheless, the Sandinistas remained in power until 1990, when they lost in a democratic election (Flores, 2010). The Sandinistas regime was largely a failure. The country suffered runaway inflation and food shortages, plus an on-going war. (Flores, 2010). However, the United States policies is what led to these problems, according to Pyle (1990). Specifically, the United States backed the Contras in the on-going war, and led a trade embargo and choked off credit to the Sandinista party through the World Bank and the International Money Fund. Because the United States was supporting, monetarily, the Contras, the country was spending enormous sums fighting off this opposition party. Moreover, the war left the country in tatters – bridges were wrecked and farms were destroyed (Pyle, 1990). Therefore, it cannot necessarily be said, with any confidence, that the redistribution ethos of the Sandinista party was the reason why this country could not grow. It would be impossible to tell how the country might have grown absent United States intervention in the country’s monetary policy and the on-going war. This country is not necessarily a good illustration of Christian’s (1999) theory because of this. The country might have experienced growth, because the Sandinista party had emphasized gender equality, health care for all and education, which could have been an underpinning for growth, as it was for Mauritius, explained below. Nowadays, the country still has some socialist policies, which includes government intervention in wages, and the intervention in wages has had a mixed effect on employment. Alaniz et al. (2011) states that the currently high minimum wage in Nicaragua has led to higher unemployment, but also has led to poor workers moving out of poverty. This is therefore some evidence that the redistribution project in Nicaragua has had some positive benefits. Mauritius Mauritius is, according to Frankel (2010), the top performing country in Africa. Its growth rate has been 5.4% during the period of 1970-2010, while Africa, as a whole, only had a growth rate of 1% during this same period. Frankel (2010) outlined some of the reasons why Mauritius has been successful. What is evident is that Mauritius has not engaged in the redistribution project to any great extent. For instance, as indicated above, the Soviet Union, who was the model for Christian’s (1999) theory regarding the success of the redistribution project verses the growth project states that one of the hallmarks of the Soviet Union was political inequality. The state had control of the economy, and it also had control over the people. The people did not have democratic rights in the Soviet Union. On the other hand, according to Frankel (2010), Mauritius does have democratic rights. They rank among the highest of African countries, in terms of governance, having high standards of political participation, rule of law and control of corruption. Frankel (2010) indicates that this type of governance, and the quality of a state’s institution, including respect for property rights and the rule of law, is the main reason why a country might experience good performance, while others do not. This implies that Mauritius good governance would be the main reason for its healthy growth. This is not to say that Mauritius does not also show some signs of socialism, if a major part of socialism is that there is state intervention in the economy. Frankel (2010) states that, while the overall structure of Maritius’ economy is capitalistic, as the economy is based upon sugar exports and an open trade policy. Moreover, Mauritius also sets lax labor standard for certain zones, which allows for a lower minimum wage. However, the trade policy is not laissez-faire. The government does intervene with protectionist policies, in that there are high returns in the export sector, but the import-competing sector is protected by the Export Processing Zone (EPZ), which was established in 1970. Moreover, government intervention in the EPZ is also evident in that the firms established in the EPZ are given tax incentive, which encourages them to invest in the EPZ (Frankel, 2010). The countries government is also socialist in the areas of education and health care, both of which are free in the country. Frankel (2010) indicates that Mauritius’ investment in education and health care has led to an 87% literacy rate, which has contributed to the country’s growth as well. This is what sets it apart from other African countries, who Teal (1999) describes as “unskilled.” In other words, Mauritius does show some signs that the government intervenes in the mechanism of some of Mauritius’ trade zones, and that the government intervenes in the areas of health care and education. However, as indicated by the fact that the government does not control the means of production, Mauritius cannot be said to be engaging in full-blown redistribution. Moreover, the governance policies of the country are incompatible with the Soviet model of the redistribution project. Asian Tigers The Asian tigers consist of Japan, South Korea, Taiwan, Hong an Singapore, as well as Thailand, Malaysia, Indonesia and China (Berger, 2003). This portion of the paper will focus on China, who has emerged as the dominant Asian Tiger, despite the fact that it has substantial interventionist policies. China definitively shows that the redistribution project can co-exist with the growth project, as China recovered quickly from the global recession, in part because of government intervention. Contributing to the Chinese recover are the frugality of the Chinese people (Warner), the fact that China is still a developing country with a large rural population that are migrating to the cities, which caused a boom in infrastructure spending (Hexter & Woetzel), a massive increase in overseas investments (Ford), and the fact that Chinese banks are controlled by the Chinese government, which eases the flow of lending (“China Economy Hums Along as U.S. Remains Mired in Recession”). However, one of the most important factors that sets China apart is its economic stimulus plan (Reyes), that was more successful than the U.S.'s similar stimulus plan, in large part because China did not have the existing debt that the United States did prior to enacting the stimulus plan (Lau). At any rate, China seems poised to bring the rest of the world out of recession, when, in prior recessions, the United States has led the way (Schwartz). This is not to say that China has not faced challenges along the way. Whereas China's growth was white-hot in the first half of 2007, 11.5% (Pandey), it contracted substantially in 2008, posting a growth rate of 9%, the first single-digit growth rate in five years (Reyes) . The fourth quarter of 2008 had growth of just 5%, a decade low (Sherwood). Thousands of factories employing millions of workers closed in 2008, which led to over 100 million migrant workers returning to their native villages (Pandey). Many top companies applied for liquidation (Pandey). Despite rosy predictions that the global recession would be a boon to Chinese exports, as the recession would presumably spur consumption of cheap goods (Xinyu), China's export sector plummeted when the United States economy collapsed (Reyes). Foreign direct investment declined significantly, from a high of $9.6 billion in June 2008, to $6.7 billion in November, 2008, a 30.2% decline (Pandey). The income disparity between the cities and countryside shot up to 3.36 to 1, a factor that led to a great deal of social unrest (Reyes). That said, China has experienced substantial growth, even though there is also substantial government intervention in the economy, therefore the growth project coincides with the redistribution project in China. Conclusion Whether or not redistribution can coincide with growth is a matter which is open to interpretation. Perhaps the problem is that Christian (1999) defined his terms in an either-or proposition, when the reality is that most, if not all, countries have some level of economic intervention, which is the engine for redistribution projects. For instance, Mauritius has some level of economic intervention, which actually has helped its economic growth. As for Nicaragua, the Marxist Sandistas failed in the economic realm, but this could be due to the United States policy of intervention on behalf of the opposition party. Therefore, it is difficult to state definitively, with regards to these countries, if the redistribution project coincides with the growth project. Therefore, one must look to two countries which have more powerful state intervention in the economic engine to look at how these countries grow. The Soviet Union failed, but this could also be due to detrimental United States policies. China, however, which has powerful government interventionist policies, including a takeover of the central bank and an infusion of substantial cash into the economy, and they experienced white hot growth. Nevertheless, it seems that it is important that the state intervene on some level, including investing in education and health care, because this seems to lead to positive growth. Bibliography Alaniz, E., Gindling, T. & Terrell, K. 2011. “The impact of minimum wages on wages, work and poverty in Nicaragua.” 10 September 2012. < http://ftp.iza.org/dp5702.pdf> Arias, O. 2011. “The real obstacles to Latin American Development.” Foreign Affairs, vol. 90, no. 3, pp. 2-6. Berger, M. 2003. The Battle for Asia. MacMillan, New York. “China Economy Hums Along as U.S. Remain Mired in Recession” 25 July 2009. 25 August 2012 Ford, Peter. “China, Taking Advantage of Global Recession, Goes on a Buying Spree.” Christian Science Monitor 21 February 2009. 25 August 2012. 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