I recently discovered a long essay by Jean Fan on progress in China. Here is a small excerpt, but I’d encourage you to read the entire piece:
As soon as I walked out of Shanghai’s Pudong International Airport last March, something felt different. The cleanliness of the airport had always given way to the messiness of Chinese cities. But although I braced myself for the unavoidable chaos, it never came. The cities I visited that year—Shanghai, Wuhan, and Xiangyang—were unrecognizably clean. The cars were orderly. Even the people were quieter. . . .
China is changing in a deep and visceral way, and it is changing fast , in a way that is almost incomprehensible without seeing it in person. In contrast to America’s stagnation, China’s culture, self-concept, and morale are being transformed at a rapid pace—mostly for the better. . . .
China today feels unrecognizable compared to the China of ten years ago.
The China I visited growing up was not a nice place to be. It was dirty, poor, and desperate. I remember walking by peasant women and their children begging for food. I remember seeing wrinkled, exhausted-looking men lugging carts of coal around cities that never saw the sun—gray on gray on gray. I remember how sharply people treated each other, and how terrible it made me feel: how fiercely we had to haggle for things, how rude people were to strangers, and how cutthroat everyone was about their children doing well at gāokǎo (高考), the college entrance exam that still largely seals your fate, unless you’re well-off.
I had the same sort of impression when I visited China last August, although the changes didn’t seem quite so dramatic to me. I suspect that the cultural changes in China are occurring because of the greatly increased used of private markets. Economists from Adam Smith to Deirdre McCloskey have explored the various ways that markets encourage virtuous behavior.
Of course the state still plays a major role in China, and the Chinese state is far from virtuous. But at least for most ordinary people in China, life is much better than a few decades ago. In the early reform era, more real income often meant the difference between life and death. More recently, the improved quality of life probably has more to do with people treating each other better than with having more material goods.
Some Chinese people have nostalgia for the Mao era, when (it is said) “everyone was poor but at least we were all equal, and there was less corruption.” In fact, there was lots of inequality during the Mao era (the cities were much richer than the countryside), and also lots of corruption. China is a textbook examples of markets making people more virtuous.
READER COMMENTS
Matthias Görgens
Jan 25 2020 at 4:31am
You said a lot about how people are richer and morally better. But you didn’t say much about happier?
Scott Sumner
Jan 25 2020 at 1:40pm
Probably happier, but that’s hard to measure.
Phil H
Jan 25 2020 at 10:46am
About 15 years ago, Amazon was taking off in the USA, and it tried to get a foothold in China. It failed, and the received wisdom at that point was because Taobao offered a model that is more suited to the Chinese psyche: it put you in direct touch with the vendor, and you had a conversation before you bought. On the side of consumers, this felt necessary at the time, because there was a real fear of being given fake/broken/no goods.
Today, you go on Taobao, and treat it exactly like Amazon. Click, click, order and forget. We don’t need to talk to the vendors any more, because the bad actors get weeded out by complaints very quickly. And on the occasions you do talk to them, the interactions are highly professional, quite unlike the arguments and haggling that used to surround e-commerce transactions.
Scott Sumner
Jan 25 2020 at 1:41pm
Thanks. Very revealing story.
Joseph McDevitt
Jan 25 2020 at 11:02am
I was just reading a few pages from Origins of the American Revolution and found this economic theory developed in the 16th to 18th centuries that says that a government should control the economy and that a nation should increase its wealth by selling more than it buy’s from other nations. China is a textbook examples of markets making people more virtuous. Sounds more like Mercantilism?
Scott Sumner
Jan 25 2020 at 1:42pm
China’s current account surplus has gone from 10% of GDP to near zero. So according to mercantilists they should be much worse off than 10 years ago.
Felix
Jan 25 2020 at 9:56pm
How exactly is every country going to sell more than it buys?
Kevin erdmann
Jan 25 2020 at 11:11am
I lived in Sofia, Bulgaria for about 4 months in 1992. It felt very much like I had moved into a black and white city, and each month, another block or two of commercial space downtown would be turned to color.
Scott Sumner
Jan 25 2020 at 1:44pm
Very similar to Beijing.
P Burgos
Jan 25 2020 at 11:12am
Urban living benefits greatly from strong, capable government due to the existence of a lot externalities derived from population density?
Scott Sumner
Jan 25 2020 at 1:44pm
Well, they certainly had a “strong” government in the 1960s. So I’d just say “capable”.
Dylan
Jan 25 2020 at 2:54pm
I was in China for the first time about a year ago, and had much the same impression. But, it is pretty natural to make the comparison with India, which I’ve visited several times, and does not appear to be making those kinds of changes at nearly the rate that China has, despite being democratic and (arguably) more capitalist for a longer period of time than China.
Robinhood's Antithesis
Jan 28 2020 at 12:54pm
India has been very slow – totally, wholeheartedly agree.
India is officially socialist even today. The (notorious) 42nd amendment to the Indian constitution still lives.
Indian political class has been super socialist since 1920s and 1930s (i.e. even before India became an independent country in 1947). The towering personalities of Indian polity always frowned upon markets, and rich. Hatred of rich and upper classes is literally rampant in every sphere of life – social, cultural, political, economic etc.
1991 was the first time transition to markets began. 2014 was when the planning commission was abolished. The nationalization of banking and insurance sector is still intact.
Why India remains slow –
(1) 100% of Indian politicians are variants of Bernie Sanders. There is literally NO Indian politician, alive today, who will take a pro-market (forget pro-business) position. It is worth noting that these politicians are a product of the past over-emphasis on Socialism (and resultant collectivist mindset). Admittedly – That emphasis has dwindled today. ( Hayek once said somewhere that – Socialism alters the very character of the Individual.). Even Raghuram Rajan, who wrote the book – “Saving capitalism from capitalists”, took multiple left turns in the last few years.
(2) Poor people in India are world-class free-riders and constitute 70% of total population. You will hardly find more efficient and effective free riders anywhere in the world.
(3) Most Indian journalists, analysts, pundits, and intellectuals love to unconditionally absolve Indian poor of all their faults. There is almost an oversupply of people who will attack the rich (businessmen, industrialists, merchants) for anything and everything and absolve the poor of all their ills.
The goal of my post is NOT to provide a balanced view. There is already an oversupply of people, who will take such a position.
Nodnarb the Nasty
Jan 28 2020 at 10:49pm
I think, in India, liberalism will be synonymous with the British occupation for at least another generation.
Mark Brady
Jan 25 2020 at 5:35pm
Those are interesting observations that suggest a profound and welcome change in the People’s Republic of China.
Then you write, “Of course the state still plays a major role in China, and the Chinese state is far from virtuous.” But that summary describes every nation in the world, and thus strikes me as missing a crucial difference between the People’s Republic of China and, say, the U.S., the United Kingdom, Switzerland, and Taiwan, to name but four prosperous and open commercial societies.
Scott Sumner
Jan 26 2020 at 2:43pm
Yes, much further from virtuous than those four governments.
P Burgos
Jan 26 2020 at 11:18am
I suspect that one of the lessons from China that liberal democracies should be learning are that elections are that elections aren’t the end all be all at delivering accountability of public officials, and that too many veto points in a system also greatly hinder accountability.
Todd Kreider
Jan 26 2020 at 8:01pm
Income inequality was much less under Mao than today, with a much lower GDP per capita. In 1950, about 90% of Chinese lived in the country side, which had risen to 15% by 1975, a year before he died. Today 55% of Chinese live in urban areas. The Gini Index is now about 45, whereas in the 1960s and 1970s it was closer to 30.
Scott Sumner
Jan 28 2020 at 12:46pm
A given level of monetary inequality is more consequential at lower levels of income. Going from $50,000 to $100,000 is less important than going from 1/2 of subsistence to subsistence.
Oleg
Jan 27 2020 at 10:00am
“Of course the state still plays a major role in China, and the Chinese state is far from virtuous.”
Is there any evidence of greater prosperity leading the Chinese people to want to do something about this? Seems like this is by far the greatest obstacle to harmonious relations between China and rest of the (free) world.
P Burgos
Jan 27 2020 at 2:26pm
Why would there that kind of desire at this moment in time? The track record of the party over the past three decades or so has been pretty good. Chinese people are optimistic, with good reason, that their families will be wealthier in the future than they are now. The Chinese state doesn’t really make ordinary people suffer through indignities such as petty corruption or pervasive crime or mass unemployment; the closest thing to that is the air pollution, which people expect will become better as time goes on and old power plants are replaced with new ones (it is a lot cheaper to install scrubbers on new power plants than on old ones). The Chinese state is making impressive PR displays by doing things like building the world’s largest high speed rail network and sending vehicles to the dark side of the moon. They are working to expand the number of seats available at the high school and college level so that young folks in China can have some confidence that their children might have better occupational opportunities than they themselves had. They are building more and more subway lines and stops in major cities to ease congestion, make more land and housing accessible, and ease commutes.
That is to say, the party is working and making progress on almost all of the major concerns of ordinary Chinese folks. When you have a reasonable expectation of a better future for yourself and your children, and are not subject to regular humiliation due to the government, why would you risk that for an unpredictable revolution?
Todd Kreider
Jan 27 2020 at 2:57pm
Are they optimistic? The Chinese ranked 93rd in last year’s World Happiness Report, which is behind the Philippines, Libya and Guatemala. That may not be exactly correlated with optimism, but I think close.
Oleg
Jan 27 2020 at 7:10pm
“When you have a reasonable expectation of a better future for yourself and your children, and are not subject to regular humiliation due to the government, why would you risk that for an unpredictable revolution?”
Because you recognize, notwithstanding your relative comfort, that there is something profoundly wrong with being subject to imprisonment – or worse – for wearing a Winnie the Pooh t-shirt in public, such that no amount of wealth would make it right. There is much that I have now that I would be prepared to risk losing for such a seemingly trivial freedom.
Phil H
Jan 27 2020 at 11:50pm
This isn’t how Chinese censorship works at all. If that were happening, you’re right, protests would be massive. But no-one gets imprisoned for wearing internet memes.
It’s all about redirection and substitution – watch the happy singing show rather than worry about Xinjiang!
(They noticed how well that works in the USA, I suppose…)
Oleg
Jan 28 2020 at 10:27am
“But no-one gets imprisoned for wearing internet memes.”
So they find other ways of making the lives of regime critics miserable. Are people “merely” fired from their jobs, or perhaps simply disciplined? Make it clear that the reason you’re wearing a Winnie-the-Pooh t-shirt is not simply because you’re a big fan of Pooh Bear, and I doubt that there would be no consequences.
Todd Kreider
Jan 27 2020 at 2:52pm
I meant to write that 90% of Chinese lived in rural areas in 1950 and that had dropped to 85% by 1975, the year before Mao died.
Pajser
Jan 28 2020 at 1:13am
A good method to check whether people are better is to look at crime trends. The crime is “revealed preference”; and trends in China are not good. Of course, there are lots of things to think about here … but it is some solid point at which one can start his reasoning.
Scott Sumner
Jan 28 2020 at 12:49pm
Chinese who studied overseas used to stay overseas. Now they usually return to China.
Spence
Jan 28 2020 at 4:50pm
I had a 40-year career developing capital-intensive private-sector projects (generating plants, telecomm systems, pipelines …) in developing countries (including China in the aftermath of the Cultural Revolution). I always advised clients to build to OECD environmental standards, even if they could save a lot of money by building to lower standards.
Why?
If your project succeeds, it will raise the standard of living. Once people stop worrying where their next meal will come from, or where they will sleep tonight, they start wanting a better life for their children. And they want air and water they can see through.
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