China and Economic Growth: Hoisted from the Archives (What I Am Thinking About Right Now Department)
Hoisted from the archives: http://delong.typepad.com/sdj/2006/01/china_and_econo.html:
A somewhat different take on Ben Friedman's Moral Consequences of Economic Growth than the review I wrote for Harvard Magazine. Written for Caijing http://caijing.hexun.com/english/home.aspx:
Up until 8000 or so years ago, it was crystal-clear why humans should pursue greater wealth--understood as better spearheads, more knowledge of the local environment, and occupation and control of regions where game was abundant and nourishing plants plentiful. Back when our ancestors were hunter gatherers life was short--high infant mortality plus all the attendant risks of the hunting-and-gathering ecological niche--and quite brutish: low technological levels and being always on the move meant that levels of comfort were low, and the absence of literacy meant that the cultural depth and historical memory of the band could not grow very deep. Life before agriculture was not especially nasty: our hunter-gatherer ancestors were for the most part healthy, well-nourished, alert, and engaged for their short lives. But greater wealth for the band and the individual had very clear benefits: fewer of your babies died, you had a greater chance of living through the next winter, and you had a greater share of what comfort was attainable.
For all of the past 8000 years since the invention of agriculture, the benefits of pursuing greater wealth have been much, much greater than back in the hunter-gatherer days. For the vast majority of the human race, agriculture has been a poisoned cup. Malthusian population pressures have--until the last century or so--kept our numbers high enough relative to our technological expertise that the overwhelmingly large majority of humans have been close to the edge of starvation and well over the edge of malnutrition. If the typical adult male hunter-gatherer human grew to be 5'8", the typical adult male peasant-farmer human over the past several millennia has only grown to be 5'2"--or less. Here too the benefits of increasing wealth for the individual and the group are obvious: richer people have more food and a better diet; their children aren't as protein-deprived and so grow taller, stronger, and smarter; their ability to engage in conspicuous consumption via something as simple as having meat on the table gives them status and social power; plus they have access to the amazing depth of riches of human culture. The rich have enough food that they aren't hungry (and good-enough quality food that their brains and bodies can grow, and their immune systems remain strong), enough clothing that they aren't cold even in the winter, enough shelter that they are not wet, and enough literacy and access to culture that they are not bored.
We are still in the agricultural age, or, rather, many of us are still in the agricultural age, or--perhaps and we hope--we are about to exit from the agricultural age. Perhaps one billion humans today have lives that are effectively equivalent to those of our pre-industrial ancestors. Perhaps two billion have lives better than those of our pre-industrial ancestors, but not better enough: they are still, sometimes, hungry and malnourished; they are still, sometimes, cold; they are still, sometimes, wet; and they are often bored. But there are three billion of us whose children have life expectancies greater than seventy or more years, who are well-fed, who are warm, who are dry, and who if we are bored it is largely our own fault. We three billion vary enormously in wealth, from Bill Gates down to farmers growing watermelons under plastic sheets outside of Shanghai. We are all able to do the important things: live a healthy life, fall in love, make plans for the future, watch our children grow, and play status games with each other--status games in which everyone (except Bill Gates) is both a winner and a loser, for as one journalist who covers Silicon Valley's "post-economic" says, they quickly find that the problem with owning a Gulfstream 4 as your personal jet is that you start meeting people who own a Gulfstream 5.
Why then are we still focusing so much on economic growth--on making more and more things, and becoming richer and richer--when at least the most prosperous three billion of us have what we need? More than two centuries ago Adam Smith--in his first book, The Theory of Moral Sentiments--mused on the puzzle of the prosperous merchant who drives himself mercilessly and ruins his eyesight pouring over his accounts all so that he can sit in the sun at leisure in his old age. John Maynard Keynes thought that at least the most prosperous of countries were on the verge of a cultural transformation: he thought that his peers' great-grandchildren would pursue not wealth and accumulation but rather human excellence and the cultivation of mental and aesthetic faculties. Yet the pursuit of wealth continues.
One reason that we still pursue wealth is that we are, collectively, not yet wealthy enough. Half the human race is still desperately poor. But give it another century, and the whole world may well be rich enough to strike any of our agricultural-age ancestors as being a total material utopia. Will we still accumulate and strive to be richer then? The answer is that we will because we will be playing the relative-status games of conspicuous consumption: I am richer than you. But should we?
My old Harvard professor Benjamin Friedman has just written a book, The Moral Consequences of Economic Growth (New York: Knopf), which implies that we should still strive for economic growth and increasing wealth. He argues that the wiring of our brains is such that the process of becoming richer relative to the reference point provided by our parents and their peers has a large number of beneficial moral as well as material effects. First, there is the effect of wealth on whatever upper class a society happens to develop. It was John Maynard Keynes who wrote that it is a much better idea for somebody to tyrannize over his bank balance than over his neighbors. Adam Smith wrote in the Wealth of Nations about how the growing wealth of London made it attractive for the British aristocracy to abandon their feudal armies and private wars and move to London to take up positions in society and at court. A society that is growing richer will have an upper class that focuses on gaining stutus by demonstrating its wealth as power-over-nature, rather than demonstrating its power as power-over-people). Adam Smith wrote about how wealth. The senior cadres in the days of Mao Zedong's dotage struggled not to display their wealth and cultivation to each other but rather to display their power to move people around as if they were counters on some giant game board, to China's immense cost.
Friedman makes a powerful argument that—-politically and sociologically-—modern societies are like bicycles. As we all know, the laws of physics (specifically the conservation of angular momentum) make a bicycle extremely stable as long as its wheels are spinning fast and it is moving forward rapidly, but extremely unstable as it slows to a halt. Friedman argues that whenever the wheels of economic growth stop—-in the sense not even of a depression but just of stagnation--political democracy, individual liberty, and social tolerance are greatly at risk even in countries where they are well established, and even in countries where by any standard the absolute level of material prosperity remains high. If you want all kinds of non-economic good things, Friedman says--like openness of opportunity, tolerance, economic and social mobility, fairness, and political democracy--rapid economic growth makes it much, much easier to get them.
Consider, for example the case of Japan during the Great Depression in the 1930s. Rising unemployment and declining incomes in Japan in the 1930s certainly played a major role in the assassinations and coups by which that country, which was a functioning constitutional monarchy with representative institutions and a government focused on economic development in 1930, to a fascist military dictatorship by 1937--a dictatorship that could be dragged into a major attack on China by the initiative of relatively low-ranking military officers in the region of China that they had occupied and called the puppet state of Manchukuo. In western Europe the calculus is equally simple: had there been no Great Depression in Germany in the 1930s, there would have been no Adolf Hitler in power, no Nazi dictatorship, and forty million fewer Europeans would have murdered in the 1940s. The saddest book on my shelf is a 1928 volume called Republican Germany: An Economic and Political Survey, the thesis of which is that after a decade of post-World War I political turmoil, Germany had finally become a stable, legitimate, democratic republic. And only the fact that the Great Depression came and offered Hitler his opportunity made it wrong.
We are all very fortunate that we live in a world in which the great powers of 1940 took action--even if their action was much too long delayed and much to hesistant--to destroy the German Nazi and Japanese Fascist-Militarist regimes. Winston Churchill's pushing British Prime Minister Neville Chamberlain and French Premier Edouard Daladier to declare war on Nazi Germany in 1939, and Franklin Delano Roosevelt's ultimatum to Japan to withdraw its military from China or face a complete embargo on exports of oil from the United States, the Middle East, and Indonesia were acts of great statesmanship in pursuit of world peace. But would World War II have taken place in the absence of the Great Depression? Probably not?
Even in the United States--where we Americans believe that our political democracy and obedience to the order of law are unshakeable--the 1930s were a politically tumultuous decade. The story of Huey Long in Louisiana (fictionalized in Robert Penn Warren's brilliant novel All the Kings Men, crypto-fascist radio broadcasters like Father Coughlin over the airwaves, California's treatment of Depression-era migrants from other states that we read about today only in The Grapes of Wrath, and the white-hot hatred for Roosevelt as a class traitor--up until his dying day, my grandfather who lived to be 98 would still say the country was lucky to have survived Roosevelt.
And, of course, I draw powerful lessons from Friedman's argument. I consider that there are some today in Washington who look forward to a future in which China is in some sense America's "enemy" and that "national greatness" requires that the United States fight a new Cold War in Asia. There are those who work for Vice President Cheney's office who think that trade with China is a bad idea: it creates a pro-China lobby that will stop any attempts by the United States to slow down China's growth and acquisition of technology. Better, they think, to try to keep China as poor and barefoot as possible for as long as possible.
From my perspective, this is totally insane. In all likelihood, China a century from now will be a full-fledged post-industrial superpower whatever the policies of the United States. The national interest of the United Staets is to maximize the likelihood that that superpower will have a representative government presiding over a prosperous, open, and free society? The China policy of the Clinton administration was to try to do whatever we could to speed China's growth in the expectation that rapid economic growth would have greatly beneficial moral, sociological, and political consequences for the evolution of China. As sociologist Barrington Moore wrote two generations ago, those countries that crossed the bridge from agrarian to industrial civilization most easily and peaceully were those with a rapidly growing, prosperous middle class will be interested in liberty and opportunity. Such a rapidly-growing Chinese middle class would be a much more powerful force for prosperity, opportunity, freedom of thought, and representative government in China than a battalion of lecturing neoconservative think-tankers in Washington D.C. or a host of remotely-guided cruise missiles on U.S. warships based in Pearl Harbor.
Let's all try to keep the bicycle that is modern China moving forward as fast as we can.