Lessons from the dragon<\/p>\n
B. Nicodemus
\nBrussels<\/p>\n
\"Get the knowledge, even from China\". The question is, \"What
\ncan we learn from China?\". As China is becoming a major player in
\nthe world economy, the question can be slightly rephrased: \"What
\ndoes China teach in economy?\"<\/p>\n
One of my colleagues argues that Indonesia should learn a lot
\nfrom China, from their economic textbooks if necessary. He might
\nbe right. Unlike other developing countries, such as Chile with
\nits Chicago Boys or Indonesia with its Berkeley Mafia, we've
\nnever heard about some technocrat graduating from China and
\nlearning about its remarkable economic performance.<\/p>\n
China is indeed a phenomenon. The dragon enjoyed economic
\ngrowth at an average of 9 percent per year from 1980 to 2003.
\nIncome per capita increased three-fold during that time. In 2003,
\nChina was the world's fourth-largest exporter of merchandise and
\nthe ninth-largest of commercial services. (Martin Wolf, Financial
\nTimes, Feb. 23, 2005).<\/p>\n
Based on these facts, China is too important to be ignored.
\nThe fact that Indonesia has made new and more vigorous
\ncooperation agreements with China is unsurprising. A move that is
\nvery strategic according to the Post in its editorial column.
\n(Indonesia-China partnership, The Jakarta Post, April 27).<\/p>\n
However, a closer look into China's experience will give some
\ninsight that could also benefit Indonesian development.<\/p>\n
Firstly, the role of government is very important in the
\nChinese economy. It was Deng Xiaoping who started economic reform
\nin 1978. The most significant step was to open the Chinese
\neconomy. Foreign investment was invited to push the
\nindustrialization process. Infrastructure was built at breakneck
\npace. As the economy was more open to the world, China started
\nadopting modern management methods.<\/p>\n
China's experience has challenged conventional wisdom on the
\nrole of government in the economy. From Adam Smith with his
\ninvisible hand to the famous Washington Consensus, all are
\npreaching a minimalist role for government.<\/p>\n
In economic textbooks, the role of government is very limited.
\nThey will be needed normally to fix the so-called market failures
\nas we have in public goods case or externalities problem.<\/p>\n
However, the Asian Tigers as well as China now, have confirmed
\nthat the real world is not always a mirror of the textbooks. As
\nthe World Bank says in The East Asian Miracle, the government
\nplays a significant role behind the remarkable economic
\nperformance across East Asian countries. It is very surprising
\nsince the World Bank is a Washington Consensus loyalist.<\/p>\n
Secondly, China is growing under an authoritarian regime. In
\nChina, there is only one big, powerful party, The Communist Party
\nand there is no general election. It seems that, whether we like
\nit or not, democracy is not the one and only way to foster
\neconomic development.<\/p>\n
Theoretically, as proposed by Ersson and Lane (1996), there
\nare two models made about democracy and its impact on economic
\ndevelopment namely the Compability Model and the Conflict Model.
\nThe first one says that economic development will take place
\nunder a system respecting civil liberties. The system then is
\nmore familiar under the name democracy.<\/p>\n
On the other side, the Conflict Model says the opposite.
\nDemocratic countries, newly established ones in particular, will
\nhave difficulties in building a stable government. As a result,
\nthe country will be engulfed in political instability and
\ninconsistent policies, which will eventually hamper the process
\nof economic development.<\/p>\n
The Conflict Model has been justified again by East Asian
\ncountries and indeed by China recently. It is widely known that
\ncountries across the region, such as Indonesia and Singapore,
\nenjoyed high economic growth under undemocratic governments.<\/p>\n
Despite being undemocratic, China is very successful in
\nproviding political stability. The succession in Chinese
\nleadership, from Chairman Mao to Deng Xiaoping, then to Jiang
\nZhemin and now Hu Jintao, has been very smooth without political
\nturmoil.<\/p>\n
Does China have any problems at all? The answer is very clear,
\nno. China is still facing pressure due to human rights violations
\nin Tiananmen Square, a tragedy that led to an arms embargo by the
\nEuropean Union.<\/p>\n
In 2004, Transparency International ranked China 71st in the
\nworld for corruption. It means the country is still having big
\nproblems with their institutions.<\/p>\n
Despite these facts, China is increasingly attractive to
\ninvestors. Foreign companies continue to pour money into Shanghai
\nand Beijing. A booming economy and a competitive business climate
\nare more important all those other problems to most investors.<\/p>\n
Indonesia could learn a lesson here. Bad perceptions due to
\npolicy in the past as well as corruption should not prevent the
\ncountry from moving forward.<\/p>\n
Moreover, concerning the market or investors, we can also see
\nthat their primary concern is profit. As long as a country can
\nprovide a high rate of return, no matter if it is democratic or
\nnot, they will go there.<\/p>\n
In this case, the government and also the people should be
\nabove the market. What we have in Indonesia is the opposite. We
\nhave all heard this over-repeated mantra, particularly prior to
\nelections: \"The next president must be a market-friendly person\"
\nor \"The Cabinet should be accepted by the market\". Why not the
\nopposite? It is the market that follows the government, as is the
\ncase in China. The market is very opportunistic. Why should the
\ngovernment live under its command?<\/p>\n
Compared to China, Indonesia is one step ahead. We are already
\na democratic country, but we still can not provide political
\nstability, rule of law or consistent policies. As the first
\ndirectly elected president, President Susilo Bambang Yudhoyono
\nhas more than enough legitimacy to provide all of them. Like
\nChina, those three things are also very crucial for Indonesia.
\nWithout them, there is no chance to reap the benefits of
\ndemocracy.<\/p>\n
The writer is a postgraduate student in social science at
\nKatholieke Universiteit Brussels. He can be reached at
\nBarlevNicodemus.Marh@student.kubrussel.ac.be<\/p>",
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