"The Chinese Model"

"The Chinese Model"

Capitalism, Chinese Style Pt.2 - Orville Schell -   May 14, 2011
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Orville Schell is the Arthur Ross Director of the Center on U.S.-China Relations at the Asia Society in New York. He is a former professor and Dean at the University of California, Berkeley’s Graduate School of Journalism. Schell is the author of fourteen books, nine of them about China, and a contributor to numerous edited volumes. His most recent books are, Virtual Tibet, The China Reader: The Reform Years, and Mandate of Heaven: The Legacy of Tiananmen Square and the Next Generation of China's Leaders. He is also a contributor to such magazines as The New Yorker, The Atlantic, The New York Times Magazine, The Nation, The Los Angeles Times Magazine, Granta, Wired, Newsweek, Mother Jones, The China Quarterly, and The New York Review of Books.


PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay. We're at Bretton Woods, New Hampshire. We're talking to Orville Schell, one of America's foremost China experts. Orville is the Arthur Ross director of the Center on US-China Relations at the Asia Society in New York. he's a former professor and dean at the University of California Berkeley Graduate School of Journalism, and he's written 14 books, nine of them about China. Thanks for joining us.


JAY: So let's talk a little bit about what's going on inside China. China's still run by the Chinese Communist Party. Do they still say they are moving towards some kind of socialist economy, socialist society? Or is this the model they think it--is this what it is, you have a communist party running a capitalist economy?

SCHELL: Well, it's a very interesting question of what manner of beast is China and its economy now. They call it socialism with Chinese characteristics. Other people call it authoritarian capitalism [snip] you know, Leninist capitalism. There are many monikers for it. But what it is in reality is a kind of a very curious hybrid between certain highly marketized sections of the economy. Big state-owned enterprise is still owned and controlled by the government but operating more or less by market rules, and has the virtue--which we have discovered in the recent economic collapse in America and around the world--of having a great deal more control ability. So we used to think of China five-year plans, you know, centralized economies as very retro, you know, something that grew long since dusty on the shelf and out of date and rigid, brittle. But now, actually, we've come a full circle around after the economic collapse, I think, to look at China through a different lens, mainly that by maintaining certain kinds of almost authoritarian control and by not letting market forces run so free, they've actually come out in much better condition than they went into this crisis, and the US and other more open markets have suffered. So there's a paradox and a shift in thinking about models of development and what works and what doesn't work.

JAY: The--some of the things that were considered achievements of socialist China were things like a health-care system, where pretty well everybody had access to a doctor. That seems to be more or less gone now. When I was in China last, I was told that if you work at a state-owned factory, the real cost of a doctor's appointment might be a month's salary, even though it's not supposed to be. There's just so much under-the-table payments that wind up actually happening. The other thing was educational system that was accessible to everyone. Now you read stories of people who are--life-savings are going in to pay for a kid to go to university, and if they don't make it to university, some kids are committing suicide, because you don't have a future without the education. So some of that characteristic seems to have been lost in all this. What's your sense of--what--or even what does the leadership say? Is this supposed to be some stage of getting to a more equitable society? Or--I guess, or what?

SCHELL: Well, I don't think anybody would describe China now as a more equitable society. In the good old days of Mao it was equitable in the sense everybody was poor but equal. I think the Chinese leadership is extremely worried by the fracture lines that have developed between rich and poor, urban, rural, you know, worker, management class. And you're absolutely right: the old welfare system has vanished. It used to be, when everybody was in a people's commune or a state-owned factory, that you had everything from birth to death--funerals, births, schools, health care, you name it--all provided. Now, of course, all that has been lost and they're trying to reconstruct a new welfare system, something on the line of an open society or a Western, American society. But it's very, very difficult and very, very costly. And so that's an incomplete piece of this reform, which is the market has become more and more open, has left less control in the hands of the government, but still far more than there is in a country like the United States.

JAY: With this enormous amounts of capital China has, which they're investing all over the world, is one would wonder why aren't they putting more money, then, into building up more of this kind of social infrastructure, which would also to some extent increase the internal demand equation, 'cause if people didn't have to spend so much money on doctors and schooling, they'd buy more commodities, which would give them a better domestic market. But they seem very focused on this buying up around the world.

SCHELL: Well, this is a question that China itself is now debating of why aren't they investing more in their own social infrastructure. They have invested in their hard infrastructure very aggressively--ports, airports, highways, trains, bridges, tunnels, things like that--and they've done a pretty extraordinary job. There are some particularly unique characteristics of the Chinese system in that it captures dollars, it kind of turns them into renminbi, the Chinese currency, and then it has to do something with those dollars, 'cause it doesn't have a convertible currency. So then it has to park those dollars someplace, and really the only place to put them is outside the country. That's why you find this exporting of foreign currency. But the economy's done very well, and they do have massive reserves, and they're roaming the world now to find higher-yield investments for them.

JAY: So some of the people we've interviewed previously about China who follow some of the things going on, especially with the strike struggles that have been happening for higher wages, and there's been--and some of the factories, particularly in the bigger cities, trying to move away from the more state-controlled unions, and there's more demand for independent unions. What's happening on that whole front?

SCHELL: Well, [snip] going to be loath--they have one union, the old Chinese Federation of Labor Unions, and they're going to be very loath to allow free unions to arise any time soon, because they do not smile kindly on any independent organization that might challenge the party. That goes for civil society; it goes for political parties. So there was some labor activity over the past year agitating for higher wages, and interestingly, the Chinese government, recognizing that this was a point, a flashpoint that could lead to social instability, did support higher--the increase in wages. But it was interesting that it was initially only for factories owned by Japanese, Taiwanese, and foreigners. They kind of believed the foreigners a little. But, nonetheless, the principle was established that unhappy workers could get some sort of satisfaction. So it remains to be seen how this will come out in the future.

JAY: The potential--we--during the height of the crisis, meaning the Western crisis, there was quite a bit of unemployment in China. We saw stories of whole cities where people were starting to go back to the countryside because there just weren't enough jobs. Is that's change? Or how much have they come out of that?

SCHELL: Well, China's dilemma during the economic crisis, global crisis, was that, of course, they depend heavily on exports for employment. And when the United States became unraveled with the housing bubble and people stopped buying--no more credit--it really did affect China. So you had a lot of these factories, filled with migrant laborers, were laying off, laborers going on half-shift, closing down, and a lot of these people had to go home, back to the countryside. But, in fact, they're redundant there. They're not needed there.

JAY: In the countryside.

SCHELL: So it was a tremendous dislocation. The only beneficial part of it was that a lot of these migrant laborers who'd been to the big city learned more sophisticated ways and something about business, and then start starting businesses back in their rural areas. So there was some modest benefit. But actually it was quite a dislocation.

JAY: The price of food is skyrocketing around the world, and it must be in China as well. The Chinese authorities look at what happened across the Arab world and Northern Africa, and they see, you know, millions of people in the streets demanding not just economic issues but demanding political rights, very much about democracy. What effect has this been having in China?

SCHELL: Well, inflation is quite high, particularly in food in China, and the Party's very, very worried about this, because this is the precursor to everything that ever happens in China by way of social instability. Then to compound matters, they look out at the Middle East at the Jasmine revolutions fed by the internet, and they become triply alarmed, because they see these disturbances and these governments being overthrown, and they think right back to 1989. They've been there, they know what it's like, and it's very alarming to them. But having said that, I don't think in the immediate future there is quite the pressure in China for a Jasmine-like revolution, simply because they have, to date, against all odds, managed to keep the economy growing at 10 percent. By and large, enough people think that they can work their way up if they just keep their nose to the grindstone. So, you know, one has to be very cautious about predicting anything in China. No one's ever been right about it [crosstalk]

JAY: Now, we hear that there are thousands of strikes taking place across the country, and thousands of protests happen in villages in the countryside that we don't really get much media reportage on. What's your sense of the amount of unrest and opposition? Is it perhaps more than we think it is?

SCHELL: I think there's a huge amount of unrest locally in different areas for different reasons--people whose lands have been confiscated by government projects, people whose villages have been polluted, corrupt officials, etc., etc. There are literally thousands of these sort of insurgents or demonstrations or some kind of social unrest. But they're localized, and the media doesn't report them nationally. And so they--never gets to be knit together in any kind of a fabric of a national movement. This is the great anathema and fear of the Party.

JAY: And this is where the internet, if not controlled, could change things.

SCHELL: This is where the internet is terrifying, because you could have people in one part of the country hooking up with others. So that's why the Party has spent literally billions of dollars to manage the internet, to keep weeding it, controlling it, packet-sniffing, /"k@.rIN/ it out, so they can get the benefits of it in business and the Party maintaining connections with the regions and propaganda purposes, but not have the antisocial sort of effect of social media. No Twitter, no Facebook. They're very wary about these kinds of alternative networks of interaction that could rival the parties.

JAY: Thanks for joining us.

SCHELL: A pleasure.

JAY: And thank you for joining us on The Real News Network.

End of Transcript

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