[Illustration from China Daily]
As one of his last acts as president of the World Bank, Robert Zoellick traveled to Beijing to present the Bank's vision of China in 2030. The crux of his message was a call for widespread privatization.
In a rare event for China, a lone protestor, the independent socialist Du Jianguo, briefly disrupted Zoellick's press conference. Chinese liberals, on the other hand, welcomed the proposals. Caixin editor Hu Shuli wrote a pointed comment on 'state capitalism', saying China's economy had gone as far as it could in its present form. Western pundits queued up to repeat the message that China had reached a crossroads and had no choice but to follow the Bank's directions.
Zoellick claimed his vision was shared by key figures in China's leadership. Indeed the report was jointly produced by the World Bank and the Development Research Center - a think tank affiliated to China's State Council. But SASAC, the government body in charge of state assets, had earlier written to the report's authors to complain it undermined the "economic system of socialism".
Six months on, Zoellick has resurfaced as a key advisor to Republican presidential candidate Mitt Romney and is tipped to become Secretary of State if Romney beats Obama in November.
In other words, fresh from offering supposedly disinterested economic advice to Beijing, Zoellick is campaigning for the man who says he will declare China a currency manipulator the day he takes office.
In truth, Zoellick was peddling the same failed theories and policies that have helped plunge the world into the worst economic crisis since the Great Depression. Two decades ago, free market shock therapy caused catastrophe in the former Soviet Union. In China the best one can say of the Bank's proposals is that they are solution in search of a problem.
Remember, no mainstream economist foresaw the current global crisis. It was simply not supposed to happen in the era of the "Great Moderation" that had abolished the cycle of boom and bust. But despite the comprehensive refutation of its theories by events, the commentariat has not revised its ideas. The Washington Consensus of privatization and deregulation is more entrenched today than five years ago. The solution to the capitalist crisis is … more capitalism. In the U.S. and Europe both right- and left-of-center politicians have seized the opportunity to push through welfare 'reform' and fire sales of state assets.
And although much ink has been spilt on an alternative Beijing Consensus, there is really no such thing. The term was coined by a foreigner and Chinese leaders are dismissive. They have shied away from proposing China as a model, partly to distance themselves from earlier efforts to export revolution, but also because there is no agreed definition of what the Chinese system is. Economic reform has largely been a matter of trial and error - 'crossing the river by feeling the stones'. The key question is what is on the other side. China says it is in 'the early stages of socialism', but the West sees it as a society in transition from socialism to capitalism.
Comparing China's 40 percent growth over four years with Western recession and stagnation, one would expect economists to be eagerly studying China's success story. Instead the traffic is overwhelmingly in the opposite direction - endless lectures from the World Bank, IMF and corporate-funded 'independent' think tanks. And we should not overlook the soft power of Chinese graduates who return from overseas with business studies degrees in their briefcases and market fundamentalism in their heads.
Let us recall that the neoliberal orthodoxy in economics dates back at most 30 years, to the era of Margaret Thatcher and Ronald Reagan. In the postwar decades, Keynesianism ruled both economics departments and government policy. Western countries had mixed economies as China does today. Keynes would have scorned the current obsession with deficit cutting and supported China's 2008 stimulus package. Today's certainties are tomorrow's heresies.
In the Eighteenth Brumaire of Louis Napoleon, Karl Marx pointed out how ideas lag behind social development. It would be ironic if ideological inertia undermined China's economic miracle. Western policy advice should be examined very carefully, for it is far from disinterested. China should explain to the world the reasons for its long-term growth and its relative immunity to the crisis. There is no need to apologize for success.