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Monday, May 6, 2013

Quality Versus Quantity

Minxin Pei writes at the Diplomat that the true way to gauge China's economic strength is not by how fast or large its GDP has grown, but by looking at the quality of life its growth had delivered--or failed to deliver, in this case. He makes the following observations:

The real issue today is not the size of the Chinese economy and the rate of its growth, but its inner strength and quality.
 
Without a deeper appreciation of the reality and consequences of China’s low-quality growth, gullible observers will likely be as impressed with China’s rise as Empress Catherine the Great was with Potemkin Village. 
The most evident sign that China has sacrificed quality for speed in its economic growth is its catastrophic environmental degradation. This year’s air pollution crisis is just one reminder that Beijing’s single-minded pursuit of GDP growth has been an unmitigated disaster. It is not an exaggeration to argue that China’s long-term survival as a civilized nation is now at risk because of water pollution (two thirds of Chinese rivers are severely polluted) and contamination of soil by heavy metals (studies show at least 10 percent of the arable land was tainted with heavy metal in the late 1990s; a government-sponsored national survey of soil conditions conducted a few years ago yielded such alarming data that they are now classified as state secret).

Another measurement of China’s low-quality growth is the deterioration of social cohesion. Instead of producing a “harmonious society,” low-quality growth has spawned high levels of inequality and official corruption. Social mobility has declined. Trust has practically evaporated. The government has lost its credibility. The most worrisome evidence of deterioration of China’s social fabrics is the spread of corruption from the officialdom to the rest of society. Today, ordinary citizens often have to bribe doctors and teachers if they want high-quality care and schooling. Unscrupulous vendors peddle tainted or fake food (the latest scandal is the sale of rat meat as mutton in Shanghai). Food safety has become a crisis.
 
A third piece of evidence that low-quality growth has undermined the wellbeing of average Chinese citizens is the lack of a social safety net. The ultimate mark of a modern civilization and successful economic development is not measured in aggregate GDP data, but in the extent to which the state protects its citizens against unemployment, sickness, and old age. Compared with the more developed parts of the world, China’s social safety net remains threadbare. The majority of the Chinese population (mainly rural residents and migrants) has no pensions or meaningful healthcare insurance. Even for those lucky enough to have such protections, the rapid ageing of the Chinese population as a whole means that their benefits are unlikely to be guaranteed since the Chinese state will not have the resources to finance them.
 One could argue that these very deficiencies are what have given China its competitive advantage over other industrial nations. Basically, China has, so far, successfully externalized many of the costs which are built into production in other nations. Can it last? No. No more than it was able to do so in Britain in the 19th Century, or the United States in the 20th.

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