China at the End of History


The end of history
Francis Fukuyama’s The End of History thesis famously argued that liberal democracy is the final form of government. Its key premise: successful industrialization will inevitably create an large educated middle class that demands democracy. An indicator of how far along industrialization will liberal democracy emerges, as noted by Francis Fukuyama, is when the country have around USD6,000 purchasing power (in 1992 PPP USD). This premise has largely been correct since its pronouncement, with the exception of Singapore and a handful of resources-rich states where purchasing power could raise without creating a large educated middle class.

China democratizing?
Since China enter WTO in 2001, China’s purchasing power has ballooned to USD4,700, after adjusting inflation and purchasing power parity, closing in on the USD6,000 milestone. However the size of its educated middle class is far from the average of countries considered free fry Freedom House.

Average population tritiary enrollment rate (1)

While China is not a free country by any standard, there is some low-level movement towards democracy. Freedom house gave China the exactly the same score in 2002 and 2010: political rights 7 and civil liberty 6 (7 being least free, 1 most free). Some have suggested (as have Fukuyama) instead of democracy, Chinese communist party (CCP) might push towards a soft-authoritarian political system akin to Singapore, the only industrialized exception to the stated premise. Continue reading


China, India and their culture of Hope

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Giridharadas’ point about the culture of hope among Chinese and Indian is an important observation. The two countries prop up by their swelling labor pool and sound government management are lifting millions out of poverty, consistent economic growth, accumulating wealth, raising eye brawl and garnering national prestige. They are rightly bath in a culture of hope.

This culture of hope means China and India are more likely: to be optimistic about their future then pessimistic; to quit and find better job instead of jealously guarding a job they don’t even like; to invest their profit instead of hording cash; to embrace change instead of fearing reform; to attract oversea capital and talent instead losing them; to study and work hard instead of asking for government hand-outs, to collaborated instead of pulling each other down.

They are in a positive feedback loop. Optimistic economic prospect encourages investment, which creates jobs, thereby increase consumption, demand goes up, investment to boost supply soon follows, and so on and so on. Diminishing return wont come into play just yet because every round of investment is likely to be made with increasing sophisticated technologically either imported from overseas or developed domestically by growing pool of educated talent. This economic growth will eventually slow down as the China and India close-in on the technology front tier and supply catches up to demand. Considering the state of development and population of China and India, it will be a while (China: 15 years; India: 25 years?) for that to happen.

This is not a economic miracle nor a new phenomenon, it has happen before to Japan, the East Asian tigers (South Korea, Hong Kong, Singapore and Taiwan), and United States during the 19 century.

The likely continue success of China and India raises three issues: First, China may become the first major country to not democratize after significant economic modernization, contrary to what the likes of Francis Fukuyama suggest; Second, India’s development model may also represent an alternative model to proponent of Developmental State thesis, where a strong state guide economic development; Lastly, China and India represent the first non-western region hegemon, since the end of 15 century. Theses are issues for me to ponder in future posts.

PS. I initially intended this to be a single short paragraph commentary on the interview. Things got a little out of hand.

PPS. This is my first post written with Windows Liver Writer and I love it. It’s the best full blogging experience by far. Another reason to dump my Mac and jump back on Windows’ bandwagon.

Aligned interest of Wall Street and the economics profession

“Wall Street seduced the economics profession not through overt corruption, but by aligning the incentives of economists with its own. It was very easy for academic economists to move from universities to central banks to hedge funds—a tightly knit world in which everyone shared the same views about the self-regulating and beneficial effects of open capital markets. The alliance was enormously profitable for everyone: The academics got big consulting fees, and Wall Street got legitimacy. And it has kept the system going despite the enormous policy failures it has generated, not to exclude the recent crisis.”

Francis Fukuyama explaining the dominance of efficient market hypothesis” and market fundamentalism in general. Read the whole article.

Good read if you are new to American political economy, if not the best part is quoted.