Balancing between Free Market and Social

Justice: Lessons from China

By a happy coincidence, Sri Lankas Vision 2025, coincides with Chinas Vision
2025 that the current President, Xi Jinping, has unveiled.

by Laksiri Fernando- Dec 4, 2017

( December 4, 2017, Sydney, Sri Lanka Guardian) Without superficially imitating
other countries, drawing lessons from any country would be useful for a
developing country like Sri Lanka given the common nature of many challenges
that developing or transforming countries are faced with. It is not only because of
the ancient historical links, dating back to Fa Heins visit to the island in the
5th century AD, that China is important to Sri Lanka, in this endeavour, but also
because of the contemporary commonalities or more precisely, Chinas
unequivocal support to the countrys development.
The purpose of this article however is not so much to talk about those
commonalities or the support given, but to draw possible policy lessons from
China for a particular challenge that Sri Lanka is facing at present. That is about
how to balance between the free market policies and the objectives of social
justice, not to speak of socialism. It is not only from the Belt and Road Initiative
(BRI) that Sri Lanka should benefit, but also from Chinas exemplary development
experience.
Background
China and Sri Lanka are two developing countries that opened up their economies
under the new free market and globalization trends in late 1970s. China was a
socialist country and Sri Lanka was a quasi-welfare state, although in its
constitution it became characterized as socialist in 1978. Both countries
apparently realized that without developing the productive forces (capital,
entrepreneurship, labour, technology, land etc.), the economies cannot be
developed or socialism could not be built. The latter was a basic premise of
original Marxism and also contemporarily advocated by the social democracy
movements.
In order to develop the underdeveloped economies, market mechanisms are of
paramount importance whether you do it under the guidance of the state
(socialist and/or nationalist) or without it (neo-liberal orthodoxy). China selected
the first model as a socialist country and Sri Lanka had been quite ambiguous on
the matter, and has faltered in many respects even during 1994 and 2005 (open
economy with a human face).
Since 1980s, China has developed immensely, also admittedly creating internal
contradictions, but Sri Lanka could not achieve much progress although the initial
growth was commendable (1978-82). Of course Chinas success or Sri Lankas
failure cannot purely be explained in terms of state policies. China is a resource
rich big country with a hardworking people and long standing entrepreneur skills,
compared to Sri Lanka. Sri Lanka also faced a protracted civil war between 1983
and 2009 and the wounds are still not healed. Sri Lanka did achieve a significant
progress after the war (2010-2013), primarily through one-sided state
intervention and infrastructure development, but apart from top politicians
eating into the benefits it was mainly on the basis of immense external debt.
This was not at all the case in China.
A Revolution Betrayed?
When a major governmental change was achieved in 2015, dubbed as a
revolution by some, the expectation was not only political, but also economic
and social. That was the meaning of the movement led by Ven. Maduluwawe
Sobitha, the National Movement for Just Society (NMJS), supported by various
organizations and radical trade unionists. That was also the reason, I believe, why
certain sections of the Left supported the government, unless they have
themselves become neo-liberal.
Although there was a misplaced cry for a single issue for the abolition of the
executive presidency, social justice in all respects was the peoples expectation
judging by the election issues and results between January and August 2015.
Because, under the overall free market policies since 1978, the gap between the
rich and the poor as well as the urban and the rural has considerably
widened. Under a parallel form of state capitalism, side by side with the free
market, the politicians had themselves become rich and capitalists without
serving the people and addressing the needs of their economic upliftment.
Therefore, the people directly and indirectly expected a radical policy change
after 2015.
When the government initially declared a policy of a social market economy,
although it was well below the expectations, it nevertheless was considered a
progress because it ostensibly emphasized the social aspect. Similarly, when a
national unity government was formed between the UNP and the SLFP, it was also
a welcome initiative because the people and the observers expected the best of
both parties/polices for the betterment of the people and the country. However,
the Vision 2025 or the Budget 2018 does not fulfil these expectations. Instead of
social market polices, both are tilting towards neo-liberalism equally in words
and deeds. This is why a course correction is necessary for the government or the
unity between the SLFP and the UNP.
Economic Visions
Since the workers and peasants revolution in 1949, China has always been modest
and down to earth, whatever the mistakes or adventures it has made in the
course of its development. The present Chinese President, Xi Jinping, himself was
a victim of the cultural revolution, but he has not made a big issue out of it for
the sake of personal glory or confrontational politics. This modesty or realism is
also characteristic of their future economic vision/s.
Deng Xiaoping was the key figure who opened up the Chinese economy in 1978 to
the world, but he never held a key state position other than within the party or
consultative councils. But he and others of the second generation of leaders
ensured that they walk the talk or their vision, dedicated to the countrys and
peoples development. As a result of this pragmatic opening up, the country has
managed to uplift hundreds of millions out of poverty other than making China a
vibrant economy, the second largest in the world today. He is also the initial
author of the concept socialism with Chinese characteristics. They never gave up
the socialist principles.
The subsequent two leaders, Jiang Zemin (1993-2002) and Hu Jintao (2002-2012),
were the same. They served as Presidents of the country, but never exceeded two
terms. Jiang Zemin was particularly instrumental in broadening the democratic
base of the country, other than strengthening the economy. Hu Jintao while
initiating new moves to equalize the Chinese society, extended assistance to
other developing countries particularly in Africa and Asia. After his two terms, he
resigned from all official positions at the age of 70, except remaining in the party.
By a happy coincidence, Sri Lankas Vision 2025, coincides with Chinas Vision
2025 that the current President, Xi Jinping, has unveiled. However, Sri Lankas
vision suddenly wants to become rich and prosperous by 2025, whether the
actions of the government would match the vision or not. The Chinese vision is to
build a moderately prosperous society. More importantly, it emphasizes that it
would be in all respects to mean balanced and equitable prosperity. It is in this
context that Xi Jinpings Report to the Communist Party congress on 18 October
2017 is important for our scrutiny.
Chinese Vision/Action Plan
What Xi Jinping has unveiled is rather an action plan than just a vision. This is
something lacking in Sri Lanka with so many, rather contradictory, policy
statements. Even the Budget 2018, appears more of a policy statement than a
financial blueprint except in announcing extensive liberalization rather than a
pragmatic policy on liberalization or free market policies.
It is undoubtedly a difficult task to keep a balance between free market polices
and social justice even for China. That is why a critical assessment of the past
five years (2012-2017) had preceded Xi Jinpings vision and plan for the
immediate and foreseeable future in the Report. It was also heartening to note, in
his speech, whenever he was saying the Chinese people he has almost always
added of all ethnic groups.
During that 13th Five Year Plan (2013-2017), the GDP has grown from 54 trillion
to 80 trillion yuan. That is not a mean achievement. China has promoted supply-
side structural reforms, giving priority to infrastructure development and
agricultural modernization. Regional development has become more balanced.
Our Financed Minister could have learned more by reading Xi Jinpings Report
than solely depending on neo-liberal policy advisors in formulating his Budget
to Sri Lanka! Xi Jinping has outlined the advances in the digital economy and
progress in the science and technology.
China has not at all given up economic globalization, open economy or market
modernization. The following is what it says about the role of the market.
We must see that the market plays the decisive role in resource allocation, the
government plays its role better, and new industrialization, IT application,
urbanization, and agricultural modernization go hand in hand. We must actively
participate in and promote economic globalization, develop an open economy of
higher standards, and continue to increase Chinas economic power and
composite strength.
It should however be noted that what it says, at present, is economic
globalization. It says, the market plays a decisive role in resource allocation and
facilitates the role of the government better. All other aspects necessary for
economic development, new industrialization, IT application, urbanization,
and most importantly agricultural modernization go hand in hand, according to
the statement. But this holistic approach is conspicuously absent in many of the
Sri Lankas policy statements or budgets.
Public Private Partnership
In the case of Sri Lanka, what is promoted is a single engine growth, everything
assigned to the private sector. This is not the case in the economically growing
China. Also in Sri Lanka, the private sector is understood in a very narrow sense.
Apart from the private sector being still underdeveloped or limited, it is also
understood or treated within a close circle of family, school friends or party
cohorts.
The private sector in rural areas are called Mudalalis in a derogatory sense. This
narrow perception is also one reason why foreign companies are always
preferred to local ones. It is not a pragmatic policy of inviting FDI, but mostly a
cultural policy in despising always the local or the national. Obviously, there is
the other extreme of patriotism in narrow thinking, even rejecting weather
reports from overseas!
The following is what Xi Jinpings Report states about the PPP.
There must be no irresolution about working to consolidate and develop the
public sector; and there must be no irresolution about working to encourage,
support, and guide the development of the non-public sector.
This is about a determination to develop both engines, the public and the private,
in order to develop the country. In the case of the public sector, it is about
consolidating and developing. In the case of the private sector, which he
termed as the non-public sector to include the growing non-governmental
organizations, it is about encouraging, supporting, and guiding.
China has not reversed its policy of further encouraging FDI or free trade with
other countries in order to achieve both national as well as international
objectives. The Report most often has used the term liberalization, not in the
neo-liberal sense, but in a more progressive and a pragmatic sense. It is in the
same perspective that China has launched its Belt and Road Initiative.
People Centred Development
Most importantly, China talks about a people centred development
incorporating environmental protection and social justice. This is partly because
when an economy is opened up, and when the market is used in resource
allocation, and also when the private sector is given equally a prominent place,
there can emerge considerable imbalances, vast inequalities and regional
unevenness. This is the same in Sri Lanka or in China. Therefore, the following is
what the Report says in ameliorating the situation.
It makes clear that the principal contradiction facing Chinese society in the new
era is that between unbalanced and inadequate development and the peoples
ever-growing needs for a better life. We must therefore continue commitment to
our people-centred philosophy of development, and work to promote well-
rounded human development and common prosperity for everyone.
The main elements of this people-centred philosophy of development are about
(1) a well-rounded human development and (2) common prosperity for
everyone. There are so many other social justice and welfare issues that the
Report has covered.
Conclusion
China is considered a non-democratic country, whether the characterization is
completely correct or not. Sri Lanka is boastfully a democratic country; even
sovereignty is in the people and is inalienable. Therefore in principle, a
democratic country should give more priority to people centred development
than a non-democratic country.
If that is not the case, there should be a major contradiction or paradox that
needs to be addressed and corrected through a joint and a painstaking (not
delayed) effort. Why popularly elected governments cater only for a small rich
class? Is it because of believing in the trickledown effect? For how long that the
poor people have to wait for the trickles to come down?
No one should say, down with the capitalists (danapathiya bhangawewa), like the
old left cried. The role of the private sector should be appreciated and supported.
However, the priority should be given to a people centred development. Perhaps
the national unity government of the two main parties (the UNP and the SLFP),
with apparent different perspectives, might be best placed for resolving this
predicament, through negotiations and compromises with the other progressive
parties and sections within and outside parliament also playing a major role.
Posted by Thavam