China’s socioeconomic system: challenges ahead

Shahab Sabahi

Energy and Environment for Development – Policy Analysis Research Group

China has managed a complex transition from centralized planned economy to some sort of open and dynamic economy with outstanding competence. China has exhibited an effective managerial style in adopting a series of realistic macroeconomic policies and foreign policies over the course of two decades. China’s governmental system has shown a quality for making quickly complex decisions in the context of globalization and when crises hit socioeconomic structure.

However it may be a question that China’s model a version for capitalism would be reliable and sustainable forever? Can it transplant in other part of the world with hopes to get the same outcomes?

It may be only a suitable model in regions inside East Asia where the Chinese cultural values are dominated. The model is strongly based on the Chinese political philosophy whose principle is embedded in government building and limited the people participation in macro decision making process.

The model cannot be sustainable in the long term. Neither export –driven growth nor the top-down approach to decision making will keep yielding positive and desirable results forever. By blocking open discussion about upcoming public policies, stopping any independent exploration and investigation on the failed public policies, in public, the socioeconomic system would not receive any feedbacks to rearrange itself. It translates that the entire socioeconomic system will lose its consistency and converges to its decay.

For more than 2000 years, China’s political and socioeconomic system has evolved around China’s chronic issue, lineage and kinship preference in social interactions. The Chinese moral philosophy had shaped around the objectives which could build, based upon a just, fair and quality government to address this issue. It was believed that then this government could guarantee a steady state for China’s socioeconomic system.  Now China is rapidly growing. The absence of public debate may be swept under carpet, power abuses committed in the middle and low level of the government’s hierarchy system. It can ignite the public anger which will cost the government. It should be kept in mind that the Communist Party has committed to equality with distribution of wealth over the society.

Economic growth will create middle class. If we assume the Chinese middle class, its number increasing, will behave in the way middle class do in other part of the world, this phenomenon will be another source of internal pressure. Middle class may not compromise social status and political participation with money.       

These arguments suggest that China’s model for socioeconomic system is not sustainable. It works in the time of crises, but not forever. It could survive, IF the export-based growth share lowers and replaced with more domestic consumption growth, however it puts the national security of China at stake (middle class pressure). Also China needs more cultural influences beyond its boarders. Besides being determined in foreign affair, a strong state should appear decisive and tough in collecting tax. In long term people will say “No Tax without participation”.  

Ideology in Modernity and its future

Shahab Sabahi

Energy and Environment for Development – Policy Analysis Research Group

The political scientist Sheri Berman has defined the post world war II order as something historically unusual. He observed “capitalism remained, but it was capitalism of a very different type from that which had existed before the war - one limited by the power of democratic state and often made subservient to the goals of social stability and solidarity rather than the other way around and it was social democracy”

It is general consensus that the rise of capitalism in eighteenth and nineteenth centuries caused erosion to traditional political and economic order in the western societies. The dominance of market relationships produced economic and social dynamism. The former was driven by the notion of material benefits and the latter got its boost from the idea of personal freedoms and a decrease in communal feeling. Liberalism, then, stressed the importance of the rule of law, limited government, and free commercial transactions. (Foreign Affairs volume 91, the basic question of modernity)

Up to the great depression and the world war II, liberalism was considered as a perfect ideology for basing political and economic systems upon it.

However the catastrophes following the two world wars and the great depression questioned the reliability of liberalism as a perfect ideology to guarantee social stability and economic growth.

Jan Muller, Francis Fukuyama and John Ruggie (Alexandre Kojeve, Hegel scholar) believe that ideology reaches its end in its enough perfect shape. This perfect shape includes mixed economics and democracy. Only systems which are organized around this ideology would be altered and modified in order to adapt with conditions and attitudes change.  In other words, policies and institutions go through an evolutionary process as contexts change.

True. Evidence supports what the scholars saw. Human beings put faith in policies and institutions for building better lives (if not saying creating better idea of life). However the international environment has been radically changed since the early 90s. World free trade, markets deregulation, easy money mobility, economy restructure, information revolution, the fast moving forward world, climate change and global competition are few realities which have changed the individual lifestyle, desires and the protocol of international relationships. The events caused changes in the concept of capitalism and democracy. 

Suppose we concede what Berman observed and the position scholars take in respect to ideology maturity, thus in order to deal with today’s problems,

“One should expect competence policymakers at jobs, who subscribe to realism and are able to come up with policies which promise stability and security in societies through economic equality and life quality”

Is it realistic to expect shaping strong global institutions? Can we expect Neo-Capitalism without contemporary bankers and their attitudes?

Scholars do not deny possibilities         

The story of energy system transformation- IF’s

Shahab Sabahi

Energy and Environment for Development – Policy Analysis Research Group

The story of technology and its benefit has been long dominated in the popular mind and to a large extent in reality that technology can transform our lifestyle and solve our problems.  The second half of the 20^th century, technology advancements in health, agriculture, manufacturing, communication, transportation and urban development have appreciably improved the quality and standard of life.   

However human’s mastery of resources, environment and in sum the material world has rather slowly advanced and still young. Energy resources and the ways we extract and use them, are much the same as they were a generation ago.

Perhaps climate change and the fossil energy demands rise cause an energy system transformation. The transformation could boost by the rapidly falling cost of renewable energy generation technologies. We should not be fooled as the cost reduction is not the critical driver and the transformation is influenced and halted with two strong obstacles     

First, the existing fossilized energy system which is politically supported. Fossil fuel producers have both powerful political allies and a powerful propaganda machine that denigrates alternatives. Furthermore the sector with over two trillion dollar in annual sales is the largest on the planet. (CSEinfo Peter Hartley 2010) Thus economic policies that affect the sector have global consequences are manipulated by these interest group. Yet what the sector and its defenders demand is, of course, precisely that it be let off the hook for the damage fossil fuel causes.

Second there is a technical issue with the renewable energy system. Despite the promising cost reduction in the technology development process, currently the renewable energy technologies generate energy only for fifty percent of their operating times. So it requires backup and standby energy generation systems to parallel with renewables make energy available for the whole time. It is translated to excess costs for the entire energy systems. The backup plants need to be fully invested however they are idled when renewable plants run.

To have a transformed and clean energy generation system and complete our mastery of energy resources, we should brush away the IF’s and obstacles.

}        If the downward trend of cost reduction in renewable technology development and its backup system OR energy storage system continues (technology development)

}        If the availability factor of renewable resources increases during operation (technology development and system integration)

}        If we price coal-fired power right, taking into account the huge health and other costs it imposes (global governance and law)

}        If  political and financial class that is deeply invested in energy sector dominated by fossil fuels, does stop subsidising the extraction and use of fossil fuels (directly with taxpayers’ money and indirectly by letting the industry off the hook for environmental costs)

it’s likely that we would have clean air, enough affordable clean energy for all.