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Does China’s Growth mean Communism works?

Yesterday I lead you through a crash course in Economics, and showed you that China’s GDP doesn’t mean that it’s a developed country, I would suggest reading that first.

I think for many American’s (and probably many Europeans) China’s rise is met with mixed feelings. On my recent trip to the States something felt different this time when I told people I lived in China. It seems that China has moved from being seen as the place where people carry little red books, make our cheap socks, and fawn over baby pandas, to being the country that is on track to unseat us as number one.

For my Chinese readers, just so it’s clear, this scares the heck out of practically every American born before 1980.

The question that seems to be on the tip of everyone’s tongue is:

Does China’s GDP mean that Communism works?

Quick Note: Here Communism refers to China’s version of rule, not the economic system

I’m going to answer this question in two short parts, since “kind of” isn’t a very satisfying answer.

Communism works at some stages of development.

China’s impressive growth is definitely a result of their strict government system, and no one is denying the fact that China’s communist gov’t has lifted more people out of poverty in such a short time than any other in the world.

I have heard development described as climbing a ladder, and that the poorest countries are struggling to reach the first rung. I think in some ways China’s version of gov’t provides a model for dictatorships for reaching that first rung (this isn’t a good model for democracies to switch to).

China’s system is essentially a dictatorship that rules at the consent of the people, which is more or less unseen in the rest of the world. The Chinese model provides the stability needed to develop the infrastructure to support an active economy. For example: imagine if Gadhafi had spent less time designing his snappy outfits, and more time building freeways, factories and schools that move people out of poverty.

 

He's his own favorite economic model

With that being said, I don’t think it is a system that will let China (or any other country) reach the top rung of the development ladder.

Communism still leads to wasteful production

Like I mentioned in yesterday’s post, GDP measures all economic transactions in a country, but it doesn’t measure whether or not those transactions are useful.

One of the major problems now facing China is that gov’t positions are based on growing GDP, which has led to some incredibly wasteful practices.

A common trick for “creating” GDP is (note: each step is GDP): 1. Buy land from farmers 2. Sell land to developers 3.Tear down old houses 4. Build new condos 5. Sell condos to investors.

The issue here is nobody even has to need a condo for it to create impressive statistics for the local bureaucrats.

This is something I have seen first hand when I was living in Longzhou, a farming town of 50,000. In this backwater, there were literally hundreds of apartments being built, that no one was able to afford.

 

"GDP"

These tactics have led to the creation of China’s “Ghost Cities” (here and here, a must), which symbolize the tip of the iceberg when it comes to China’s useless GDP.


17 Comments

  1. Anna says:

    Tom
    I am really enjoying your blog – very to the point, thank you so much. In the example of your Longzhou (and many other towns) who are these investors? Apartments are expensive and out of reach of farmers?

    • Tom says:

      The investors tend to come from the cities. In China people consider it safer to buy real estate than stock, so that is the primary investment for many people. In many cities prices have gone up over 400% in the last decade. However it is widely thought that up to half of these new developments are uninhabited.

  2. Casey says:

    One of the funniest parts of this growing bubble of illusion was that on slide 8 the Ordos slideshow. Nobody’s around (literally), yet she still needs protection from germs?

    As an environmentalist, I would love to see these sorts of construction projects slowed and though it’s a weird thing for which to ask, provide a purpose. This goes on enough when developers in the US think they have people to occupy space. In Chengdu, I can remember some skyscrapers without clothes hanging from the windows and relatively far out from the city unserving of anyone. It would be great to see these ghost towns built by local governments halted in the hopes of conserving fuel, materials, man-hours, and, knowing the health risks of construction sites, lives.

  3. […] Yesterday I lead you through a crash course in Economics, and showed you that China’s GDP doesn’t mean that it’s a developed country, I would suggest reading that first. I think for many American’s (and probably many Europeans) China’s rise … Continue reading → […]

  4. […] This post was mentioned on Twitter by Jon R. Taylor, Ph.D., chinalyst. chinalyst said: Does China’s Growth mean Communism works? :: Seeing Red in China http://bit.ly/eiyBUB […]

  5. Bill Rich says:

    Of course. Communism works. CPC has successfully stayed in power for 6 decades without any sign of weakening. CPC has successfully killed tens of millions of Chinese without inciting any serious opposition. CPC has used tanks against its own youth and has no significant consequence. Even Gadafi is following its example and will become extremely successful in perpetuating his reign. Communism, or at least Communism with Chinese characteristics, is the most successful political system in keeping CPC in power.

    • Tom says:

      Your view is accurate, but I was focused more on the last 30 years instead of the last 60. The big difference being that had China not changed course after Mao it would already be out of power.
      I’m not saying that their use of force is what should be emulated either. My point was that in the last few years they have become incredibly sensitive to the public, where as many other dictatorships charge blindly ahead without any concern for what their people want.

    • joshuareiss says:

      “Kill” might be a strong word. The femine in late 50’s and early 60’s is a result of misguided policy. Executions were relatively uncommon. None of Mao’s major political opponents were executed. In fact, you may argue that Bush caused similar number of violent deaths as Mao did.

  6. Pelo says:

    Another great post, Tom. Thanks for breaking things down in way that’s understandable.

  7. […] This includes road projects, which are key for bringing goods to market, as well as making goods available for export. It also includes the construction of several coal and hydro power plants throughout the region. While these things come at a price, they ultimately serve Africans and will hopefully help the more desperate nations reach that first rung of the development ladder (read about the development ladder here). […]

  8. Someone thinks this story is fantastic…

    This story was submitted to Hao Hao Report – a collection of China’s best stories and blog posts. If you like this story, be sure to go vote for it….

  9. Wow those ghost towns are astonishing. Thanks for sharing.

  10. […] also recommend reading my posts: China’s GDP doesn’t mean what you think it does, and Does China’s growth mean Communism works?) 2010 Nominal […]

  11. xxx123 says:

    Horrible post..
    “Quick Note: Here Communism refers to China’s version of rule, not the economic system”
    This shows that you did not understand the concept of communism at all. Communism cannot be reduced to the version of rule, it is first and foremost an economic concept (classless society, central planning, common ownership).
    In fact China is the best example that Communism does not work because China only started to boom (and abolished starvation) once Deng Xiaoping had abolished the central planning system and common ownership and had opened Chinas markets.
    If you want to refer to China´s version of rule, you should call it “authoritan regime” and not communism…

    • Tom says:

      The big problem is that in the US they still refer to “Communist” China, that is why I used the term in the piece, even though China is clearly no longer communist in any sense that relates to the economic definition of the word. I know communism refers to an economic system, and not the autocratic system, perhaps you should be arguing this with the government.

  12. Alyssa S. says:

    Thanks! that was really helpful! i had to do a report on Communism for English, believe it or not, and this really helped me with my paragraph on Communism in China ^^ THANK YOU! YOU ARE A LIFE SAVER!!! 😉

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