China Is A Lesson In Taking Control
The Age
Friday February 15, 2008
The economic benefits of a strong government are a lesson for the West, says James Rose.
A GRIMY, plastic bag floats up on the chill winter breeze in Beijing, riding a gust of choking, polluted air. Tracking the future of those plastic bags and of that polluted air may provide an insight into just how "Capitalism with Chinese Characteristics" really works.When Nobel Prize-winning economist Joseph Stiglitz, one of globalisation's most prescient critics, argued in his book The Roaring Nineties for greater balance in the global political economy, he may not have had China front and centre. He posits a structure "which lies somewhere between those who see government having a dominant role in the economy and those who argue for a minimalist role". Of those few countries that can be said to be adhering to this worthy vision, one may well be China.On the one hand, there is the recently announced policy on plastic bags.From June 1, plastic bags with a thickness of 0.025 millimetres or less will be removed from the market. No arguments, no long phase-out to appease shoppers and retailers. They simply cease to exist from that date, and those bucking the new law will face the very real wrath of the State Council, the country's most senior administrative office.This is an appropriate government action in the face of a crisis. China uses some 100 billion bags a year, the vast majority of which are disposed of in landfill or are left to float on the air, eventually landing to become an eyesore and an environmental time bomb.It's worth noting that at the same time, in Australia, the new Rudd Government is dithering over how to remove plastic bags from shops. The Environment Minister says he hopes it might happen by the end of the year. This slow pace of change gives a comparative insight into the difference between a democracy and an authoritarian regime. While the latter can indeed rule by fiat, sometimes, as with a no-brainer like plastic bags, that's a good thing.But freedom and markets also have a role to play. By now, most of the world is waking up to the fact that China is set to become the world's leading alternative energy market. In this industry, Beijing has sought to guide rather than force. The introduction of regulations to encourage the market, such as the target of 8% renewable energy use nationally by 2020 (projections suggest the ratio will be closer to 15% by 2020, and 30% by 2050) has generated an influx of foreign investment.Soon China will overtake the European Union, the US and Japan as the centre of renewable energy production. Last year, about 20% of global investment into the sector, about $11.2 billion, was in China.Here, change must be slower, and must take into account the needs of the energy industry sector. There can be no mass energy base in renewables without the participation of the private sector, and so China's administrators must endear themselves to private equity and other deep-pocketed commercial interests to meet its renewable energy needs.This they are clearly doing, very successfully.While the case of plastic bags is about removal and that of alternative energy is about building capacity, the ability of Beijing to play the strong government card alongside the free market-friendly card as evidenced by these cases presents a valuable lesson in how sustainable globalisation might work.Uber-capitalist George Soros, in his book On Globalisation, complained of the "unwitting alliance between market fundamentalists . . . and anti-globalisation activists" that leads to imbalanced outcomes in the shape of global commerce and environmental sustainability. Like Stiglitz, he is clear about the value of balance. Both would have reason to agree China's unique structure can be a valuable asset in achieving that.James Rose is editor of www.corporategovernance-asia.com
© 2008 The Age