Engaging With Chinese Cities and Civil Society

In “Why the Industrial Revolution didn’t happen in China,” (The Washington Post, October 28, 2016), economic historian Joel Moykr notes the role of political decentralization and political competition across Europe compared to China:

China and Europe are different in many ways, but one is that after the Mongol conquest in the 12th century, China remains a unified empire run by a single Mandarin bureaucracy. There is nothing that competes with or threatens China. China does get invaded by Manchu tribes in 1644, but they don’t change the structure of the state. …

In Europe, no one ever succeeds in unifying it, and you have continuous competition. The French are worried about the English, the English are worried about the Spanish, the Spanish are worried about the Turks. That keeps everybody on their toes, which is something economists immediately recognize as the competitive model. To have progress, you want a system that is competitive, not one that is dominated by a single power.

Stable centralized state bureaucracies resist innovative ideas and industries say Moykr:

Europe creates a competitive world that encourages intellectual innovation. There’s the Reformation, which says the religion you had until now is wrong. The same happens in astronomy, chemistry, medicine, mathematics and philosophy. Eventually, it filters down to how we make textiles and shoes, and how we grow corn.

Chinese elites memorized Chinese classics, much as Europe’s elites studied Western classics. But Moykr argues that scholars in the West had more room to reflect and disagree with the wisdom of the past:

In Europe, something different happens. People study classical knowledge, Ptolemy and Hippocrates and Archimedes, and they begin to say, “Most of this stuff is wrong.” You couldn’t do that in China. If you said “This stuff is wrong,” you failed your exam. But in Europe, the ability to challenge received wisdom is irrepressible.

And when elites and political authorities objected and tried to repress challenging writing or industry, entrepreneurs could float their ideas and assets downstream or along the coast toward more welcoming western cities and kingdoms:

The reason precisely is because Europe was fragmented, and so when somebody says something very novel and radical, if the government decides they are a heretic and threatens to prosecute them, they pack their suitcase and go across the border.

Europe was a convoluted political mess, with complex and onerous trade restrictions, but the lack of central political and ideological authority combined with vibrant universities enabeled astonishing intellectual progress.  This page, “The Ambiguities of Sovereignty in Early Modern Central Europe,” recommends, with some reservations, online mapping of Europe’s pre-modern political diversity:

Most current-day mapping of central Europe during the early modern period (1500-1800) emphasizes the division of the so-called Holy Roman Empire into its constituent states. Detailed maps, readily available online, delineate every kingdom, duchy, principality, imperial city, and politically independent archbishopric and bishopric within the empire… 

Historian Stephen Davies, in “China’s Forgotten Industrial Revolution,” (The Freeman, June 1, 2003) explains how China’s had its own Industrial Revolution crushed by a jealous centralized state:

Actually, it did start in China before it did in Europe. As Eric Jones has pointed out in Growth Recurring: Economic Change in World History, China had an “industrial revolution” comparable to that of eighteenth-century Europe—some 800 to 900 years ago. It happened under perhaps the most maligned yet fascinating of China’s imperial dynasties, the Song.

Davies notes that economic prosperity in the Song dynasty turned on property rights and tax reform:

The Song … introduced a number of important changes in the economic policy and organization of the Empire. One was a measure that gave peasant farmers true property rights in their land, above all the right to sell it. The result was the emergence of a market in land, which led to the consolidation of smaller farms and the appearance of commercial agriculture. Even more important was their fiscal policy. Traditionally the Chinese state had depended on taxes levied on the peasantry, most often paid in kind. Song Taizu laid down the principle, “Agrarian taxes must not be increased.” Consequently, the Song came to depend increasingly on taxes on trade and so systematically encouraged it.

Population, agriculture, and trade expanded through the Song period and so did manufacturing:

In 1078, China produced 125,000 tons of cast iron, more than the rest of the planet put together. This would not be surpassed until the 1790s, in Britain. A whole range of technological breakthroughs and improvements were made. These included movable type printing (1000), the blast furnace (1050), mechanical water clocks (1090), paddlewheel ships (1130), the magnetic compass (1150), water-powered textile machinery (1200), and most dramatically, huge oceangoing junks with watertight bulkheads, a carrying capacity of 200 to 600 tons, and a crew of about 1,000 (1200).

Harvard historian David Landes argues the labor-saving focus of European monasteries played a major role in economic development. (Landes, David S. 2006. “Why Europe and the West? Why Not China?” Journal of Economic Perspectives, 20: 2 (Spring): pp. 3-22. Excerpts in this unsettling economics post). Landes notes that compared to Europe China through most of its history lacked secure property rights:

“…Those that I find most persuasive are the following. First, China lacked a free market and institutionalized property rights. The Chinese state was always stepping in to interfere with private enterprise — to take over certain activities, to prohibit and inhibit others, to manipulate prices, to exact bribes.”

And then Landes explains the how monasteries, enjoying secure property rights themselves, focused on labor-saving technologies:

Important in all this was the role of the Christian church in Europe as custodian of knowledge and school for technicians. One might have expected otherwise: that organized spirituality, with its emphasis on prayer and contemplation, would have had little interest in technology; and that with its view of labor as penalty for original sin, it would have had no concern to save labor. And yet everything seems to have worked in the opposite direction: The desire to free clerics from time-consuming earthly tasks led to the introduction and diffusion of power machinery and, beginning with the Cistercians in the twelfth century, to the hiring of lay brothers (conversi) to do the dirty work, which led in turn to an awareness of and attention to time and productivity. All of this gave rise on monastic estates to remarkable assemblages of powered machinery-complex sequences designed to make the most of the water power available and distribute it through a series of industrial operations.

Back to the Present…

Okay, Song dynasty China and medieval Europe may seem far from modern U.S./China policy for students researching the current NSDA and NCFCA debate topics. Yet in modern China President Xi Jinping since 2010 has been centralizing political and ideological authority. Will economic decentralization and business innovation flourish alongside a clampdown on diversity of ideas in Chinese universities and media?

Chinese government investment decisions on infrastructure, energy, steelmaking, and shipping are also a problem, but it’s hard to tell what roles  local governments or central governments play in malinvestment and overinvestment. In a market economy, businesses make investment decisions with their own capital (retained earnings), or with bank loans, bond, or stock offerings. China’s local and central government play an outsized role in bank ownership and loan priorities. (Though U.S., E.U. and Japanese authorities also monitor, regulate, penalize and occasionally bailout their private-sector banks.)

Looking just at Chinese energy policy and investments, consider 2015 wind power investment, “China Is on an Epic Solar Power Binge,” (MIT Technology Review, March 22, 2016)

In 2015, the country added more than 15 gigawatts of new solar capacity, surpassing Germany as the world’s largest solar power market. China now has 43.2 gigawatts of solar capacity, compared with 38.4 gigawatts in Germany and 27.8 in the United States. … Under its 13th Five Year Plan, China will nearly triple solar capacity by 2020, adding 15 to 20 gigawatts of solar capacity each year for the next five years…

But, the article notes, solar power installations are can be difficult and expensive to connect to regional power grids:

What’s more, capacity does not always equate to generation: the National Energy Administration estimates that nearly one-third of solar capacity in Gansu province, and more than one-quarter in Xinjiang, was idle last year.

See also “China’s Solar Binge Is Turning Into a Hangover,” MIT Technology Review, August 9, 2016):

Much of the new solar generation, particularly in the desert provinces of western China, is not even hooked up to the grid. That means much of the power is going to waste—39 percent in Gansu Province and more than half in Xinjiang, according to the Photovoltaic Industry Association. It’s part of a long-term supply glut that plagues China in the coal, steel, and concrete industries as well.

And this BBC News September 20, 2016 update on China solar spending: “China embarked on wind power frenzy, says IEA“:

But the IEA warns China has built so much coal-fired generating capacity that it is turning off wind turbines for 15% of the time…

The problem is that coal-fired power stations are given priority access to the grid. …

“China has now a clear over-supply. In the province of Gansu, 39% of wind energy had to be curtailed (turned off because there is not enough capacity on the grid).

The average European wind farm is forced to stop generating between 1-2% of the year.

Over-investment seems large across China. How large? Well, “ineffective investment” was estimated at $6.8 trillion between 2009 and 2013:

This has a more immediate and powerful effect on GDP growth and job creation, but it comes at a high cost: overinvestment in local projects and the misallocation of capital. China’s landscape is littered with unused highways and airports, redundant steel and cement plants, unnecessary municipal office buildings and “ghost cities” filled with empty high-rises and deserted shopping malls.

From 2009-13, “ineffective investment” amounted to a stunning 41.8 trillion yuan ($6.8 trillion), according to research published in 2014 by Xu Ce of China’s National Development and Reform Commission and Wang Yuan of the Academy of Macroeconomic Research. “Why China Will Still Reach Its Target Growth Rate,” (WSJ, July 30, 2015)

No easy answers, but European and Chinese history suggests decentralization of economic, political, and diplomatic engagement is a better path.

“Forget the nation-state: cities will transform the way we conduct foreign affairs,” (World Economic Forum,  October 4, 2016) calls for city and regional diplomatic engagement:

Cities are economic and political powerhouses. The GDP of the state of New York is larger than that of Spain or South Korea. In Latin America, São Paulo state alone is richer than Argentina, Uruguay, Paraguay and Bolivia combined. Guangdong in China is wealthier than Russia or Mexico.

More than a deliberate choice, paradiplomacy is becoming an inevitable move. And although the phenomenon is not new (the first appointed representative of a subnational government abroad dates back to 1857 when Hugh Childers represented the Australian province of Victoria in England), the trend is more solid than ever.

One paradiplomatic example in the article is China and California:

…state and local governments rely greatly on the private sector, nonprofit institutions, and civic organizations to help promote and protect state and local interests in the international arena. California’s official office in China, opened in 2013, is a public-private programme operated by the Bay Area Council – a business-sponsored organization.

Washington State has the WSCRC, the Washington State China Relations Council, with this description on its About page:

The Washington State China Relations Council, founded in 1979 following the normalization of diplomatic relations between the United States and China, is the leading organization engaged in China-related activity in Washington state. A private and non-profit business association dedicated to promoting stronger commercial, educational, and cultural relations between the state of Washington and the People’s Republic of China, the Council is the oldest non-governmental statewide trade association in the United States dealing specifically with China. Its more than 100 members include leading companies, ports, banks, universities, cities and international organizations.