Wednesday, August 17, 2011

Breaking the Iron Rice Bowl (19 Jan 2011)

I've read several interesting articles about China and not one of them has to do with tiger moms. Many people have noted this Francis Fukuyama op-ed in the FT about China: "Americans have long hoped China might undergo a democratic transition as it got wealthier, and before it became powerful enough to become a strategic and political threat. This seems unlikely, however. The government knows how to cater to the interests of Chinese elites and the emerging middle classes, and builds on their fear of populism. This is why there is little support for genuine multi-party democracy." He argues that China's authoritarianism will thrive as long as it can continue to provide economic growth from the commanding heights, regardless of the inequality its governance seems to be generating. Protests remain local and marginalized, and those who aren't reduced to apathy by their immiseration likely focus on improving their personal lot rather than figuring out how to forge solidarity. A useful by product of the state's having "broken the iron rice bowl" and done away with most of the social safety net.

Ads Without Products offers some thoughts on Chinese workers, inspired by Ai Weiwei's installation featuring 100 million handmade porcelain seeds.
When the visual titanicness of the display meets your recognition that each of the 100,000,000 seeds was painstakingly handpainted by human beings working for a wage, one comes as close as one can – as I ever have – to a painfully concrete yet at the same time marvellously abstract sense of the absurd scales, absurdly tipped scales, that orchestrate our world today.
It is very hard to fathom the scope of the labor whose availability in the global economy we have come to take for granted. What does it mean? For the workers, it means stultifying alienation: AWP cites a BusinessWeek article about Foxconn, the megamanufacturing firm that makes Apple's goods, among many other things.
“Life is meaningless,” said Ah Wei, his fingernails stained black with the dust from the hundreds of mobile phones he has burnished over the course of a 12-hour overnight shift. “Everyday, I repeat the same thing I did yesterday. We get yelled at all the time. It’s very tough around here.”
For us, it means a life more thoroughly saturated with consumerism

Nouriel Roubini has an item in Newsweek about the "Confucian conusmer" that explores those "tipped scales" in macro terms. Roubini covers the longstanding problem of global imbalances: the "Chinese model of economic growth required the U.S. and a few other countries to be consumers of first and last resort, spending more than their income and running ever-larger trade deficits—so that China could be the producer of first and last resort, spending less than its income and building ever-larger trade surpluses." He then speculates as to why the Chinese don't consume more. I always find this question fascinating, because I wonder whether China is hatching an alternative to the consumerism with which we've been inculcated in the West, and if so, whether it is more or less corrosive to personal identity. Roubini lists seven "structural reasons" why the Chinese savings rate is so high, including some of the usual suspects -- the broken iron rice bowl, the demographic troubles brought on by the one-child policy (one grandchild must support four elderly grandparents). This recent VoxEU paper makes the case that much of the savings rate can be explained by "increased income uncertainty" and unfavorable pension reforms.

Neither Roubini nor the VoxEU paper mention the alleged "Confucian character" of the Chinese people that is sometimes presumed to make them less interested in material prosperity and invidious distinction. Presumably the "iron rice bowl" would have facilitated that attitude as well any traditional tenets about social stability. Roubini stresses corporate oversaving, which stems from underdeveloped financial markets: "a whopping 25 percent of savings in China is in the form of the retained earnings of the corporate sector, mostly state-owned enterprises (SOEs). In most private economies, those firms’ profits would become dividends that would increase household income and thus consumption. In China, they become retained profits that go into more capital accumulation and excess capacity." In other words, the profits from all those manufacturing firms making our iPods and the like don't go into wages and they don't go into dividends -- they go into building even more factories, which has the effect of making the global imbalances worse.

That eventually trickles down to the level of ordinary American consumers, who face an even cheaper and more tempting flood of consumer goods, making it that much more difficult to transition out of a wasteful lifestyle and into one that's more austere, self-sufficient, and environmentally responsible. Or into one that revolves less around the consumerist values of novelty and convenience and disposability and isolation and so forth. Thus Chinese economic policy exerts material pressure on the ideology governing our behavior in the West. Even if they were Confucian consumers there, they could not export that approach to consumerism to us -- they actually export our own attitude about consumerism to us, anchoring it, supplying its base. And breaking the iron rice bowl hasn't acclimated Chinese to increased personal choice and consumption in a market society as might be expected; instead it has fomented insecurity and rational miserliness. I wonder if this is what conservatives hope to bring to the U.S. when they fantasize about undoing health care reform -- more insecurity and less consumer spending seems like a great recipe to stop the "job killing."

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