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LESS
Hypocrisy Please: China's growth was not built on neoliberal policies
Letter
Published in the FT May 10, 2004 Monday
By SUSANNA MITCHELL at Jubilee research From Ms Susanna Mitchell. Sir, Martin Wolf's misleading article should not be allowed to pass without qualification. He points out that "above all, in China and to a lesser extent, India, both global inequality and poverty have been falling". This much is true. While the numbers of those living in extreme poverty have fallen from 1.219bn in 1990 to 1.101bn in 2001 overall (a decline of 118m), in China the incidence fell by 157m over the same period. What is not mentioned is that elsewhere, in sub-Saharan Africa, Europe and central Asia, Latin America and the Caribbean, poverty has increased by 82m, 14m and 8m respectively. As the United Nations Development Programme's human development report for 2003 points out, the 1990s was a "decade of despair" for many developing nations, with 54 countries becoming even poorer than before. Turning to inequality, by any standards this has now reached obscene proportions, with the most recent available estimates showing that the income of the world's richest 5 per cent is now 114 times that of the poorest 5 per cent. A within-country study conducted by the World Institute for Development Economics Research in 2001 reveals that from the 1960s to the end of the 1990s inequality has risen in 48 of the 73 countries for which sufficient "high quality" data is available on the world income inequality database, and that several more have joined them in the past two to three years. Most critically, however, it is absurd to attribute the extraordinary progress of China, and to a lesser extent of India, to the adoption of neo-liberal globalisation policies, since over the past decades both these countries have been distinguished by their refusal to follow the economic dictates of the west. This is particularly true of China, which instead chose to consolidate its domestic assets, and refused the premature privatisation of its banking system and public industries. The country also retained its equitable system of land distribution and has kept its external debt exceptionally low, financing its investment largely from its domestic savings. Above all, its government has so far resisted all pressure to liberalise the capital account, and has thus protected the economy from the destabilising speculative capital flows that have characterised financial globalisation and brought disaster to so much of the developing world. Unfortunately for China's population, "globalising" measures are now gaining momentum and, as a result, poverty reduction has slowed and unemployment and inequality have substantially increased, though the impressive growth rate continues. If China's achievements were to be omitted, the global poverty figures would look very different, but to write as if its contribution is part of an economic liberalisation success story is inaccurate.
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