Friday, August 15, 2014

Dialogus de Beijing Consensus -- Pessimo on Ramo's idea of a 'Beijing Consensus'

Question:  Does Ramo's particular vision of a so-called ‘Beijing Consensus’ present a meaningful ‘model’ or blueprint for development?


No, it does not.

As noted in the introduction, the “Beijing Consensus’ was a term initially coined by Joshua Ramo to describe a development model that in many ways contradicted the principal tenants of the Washington Consensus (hence 'Beijing' Consensus -- get it?).  According to Ramo, the Beijing Consensus consists of “three theorems about how to organize the place of a developing country in the world” (see pages 11-12):

Ramo writes: 
“The first theorem repositions the value of innovation. Rather than the “old-physics” argument that developing countries must start development with trailing-edge technology (copper wires), it insists that on the necessity of bleeding-edge innovation (fiber optic) to create change that moves faster than the problems change creates. In physics terms, it is about using innovation to reduce the friction losses of reform.”

This is just silly -- a buzzword salad.  What does it mean to "create change that moves faster than the  problems change creates?" What kind of problems do copper wires cause that immediate transition to fiber optics outruns?  Maybe Ramo means what the rest of the world calls 'leap-frog' technologies.  But leap frog technologies clearly create their own problem.  The fact that one moves directly from walking to automobile might mean that you don't have to deal with the problem of horse manure, but you still have to deal with pollution.  This is, of course, I really, really big problem in China right now, and they are clearly not outrunning it, nor are the going to be able to outrun it, by leapfrogging to fiber optics.

Beyond this, studies show it is almost impossible to sustain consistency in 'bleeding edge' -- I prefer the more conventional term, 'leading edge' -- innovation anywhere but in the most advanced of industrial and post industrial economies. And, contrary to Ramo's assertion, one certainly does not find it in China.  Even today, some 10 years after Ramo's claim, China does not produce anything that is leading-edge, design-competitive (or product competitive) on international markets.  Efforts to introduce centers for leading-edge industrial innovation, most notably those establishing industrial parks modeled after those that have promoted leading-edge innovation in Taiwan and South Korea -- have been unsuccessful:  The industrial parks established in China have invariably devolved simply into sites where foreign firms could source component suppliers.  A similar devolution has accompanied efforts to establish industrial parks in Thailand, Malaysia and the Philippines, so one can't really blame it on China's political system (the way that some are wont to do).

As noted above, studies show that developing and sustaining capacity for leading-edge innovation is virtually impossible in the developing world.  Such innovation requires what Michael Storper has termed agglomeration effects, a synergistic spill-over of knowledge that results when a critical density of highly skilled and educated workers live and work in close proximity with each other.  This requires huge amount of local wealth and very high standards of living to attract and maintain this kind of labor force.  Moreover, agglomeration give the possessing region an absolute rather than simply a comparative advantage in the relevant areas of production.  This means that some other region cannot succeed by simply 'competing' with rival existing centers of agglomeration (absolute advantage means that competition is impossible), and given the huge first mover advantage that the advanced industrial economies have in product competitive industries, one would suspects that it would be highly improbably that there are any areas left for new entrants from developing countries even if some level of agglomeration could be achieved.  Which is why you simple do not see agglomeration emerging in anywhere but the developed world.
Ramo writes:
The second Beijing Consensus theorem is that since chaos is impossible to control from the top you need a whole set of new tools. It looks beyond measures like per-capita GDP and focuses instead of quality-of-life, the only way to manage the massive contradictions of Chinese development. This second theorem demands a development model where sustainability and equality become first considerations, not luxuries. Because Chinese society is an unstable stew of hope, ambition, fear, misinformation and politics only this kind of chaos-theory can provide meaningful organization. China’s new approach to development stresses chaos management. This is one reason why academic disciplines like sociology and crisis management are the vogue of party think tanks at the moment.

Again, the problem here is that sustainability and equality both required highly sophisticated regulatory systems whose costs are such that they generally cannot be supported by anything less than an advanced industrial economy.  These include not simply advanced technologies for regulating and responding to environmental degradation without interrupting the productive activity of the polluting industry, which China does not have, but highly evolved banking systems, auditing systems, and socially pervasive accounting practices to that can effectively collect and redistribute wealth through an efficient the taxation system, which China also does not have.  Again, China provides ample evidence of this.  Contrary to Ramo’s claim, China’s development has in fact resulted in a infamously massive increase in social inequality (as measured by GINI), and infamously staggering levels of environmental degradation.  Nor is China unique in this regard:  the technologies and quality of labor needed to support effective wealth redistribution and sustainable development are simply too expensive for lesser developed countries to develop, attract and maintain.  .

Nor is there no evidence of any meaningful 'crisis management' coming out of the central level in China.  In fact, many attribute the recent political crackdown on civil society (including educational institutions, and including the study of sociology) precisely to political insecurity resulting from a lack of crisis management regulatory technologies.  (Ironically, one of these people is Yu Jianrong, one of China’s most highly respected and internationally visible sociologists).  Like redistribution and environmental sustainability, crisis management is an expensive technology to maintain, both due to monitoring costs and due to the fact that personnel trained in this area are expensive and finicky about where they want to live. 

Finally, Ramo writes:
Finally, the Beijing Consensus contains a theory of self-determination, one that stresses using leverage to move big, hegemonic powers that may be tempted to tread on your toes. This new security doctrine is important enough that I treat it later in a separate chapter.

While there is some truth to this, this is a condition that clearly lies outside the reach of any domestic development ‘model’.  China’s autonomy was and is pure and simply a function of its size.  It is a capacity that simply lies beyond the reach of the vast majority of developing states.  One of the problems that informs this ‘theorum’ is that Ramo seems to think that economic autonomy is simply a problem of domination by international organizations (‘hegemonic powers’).  In fact, the much bigger problem is domination by markets.  The only effective response to this problem that we have found to date is for developing nations to enter into transnational regional financial arrangements like the Chiang Mai Initiative in Asia or the Prado-inspired BRICS Development Bank.  But at best, this only results in a regional autonomy, not in the kind of domestic financial autonomy that Ramo is imagining.  Moreover, they only insulate from large shocks, they do not insulate from the kind of persistent market-driven domination by private actors – as articulated, for example, in threats to relocate production, harassing litigation and lobbying, and intellectual domination of the WTO and other international financial institutions and organizations – that is a much greater threat to economic autonomy than ‘hegemonic powers’. 

In sum, China’s actual developmental trajectory has been almost the polar opposite of that which Ramo’s labels the ‘Beijing Consensus’.  It has not featured any significant ‘bleeding-edge innovation’; and it has been massively anti-egalitarian and massively unsustainable from an environmental perspective.  It has indeed featured a marked degree of economic autonomy, but this is due purely to China’s immense size and is therefore not a meaningful ‘model’ for other developing countries.  The failure of even China to meaningfully conform to the so-called ‘Beijing Consensus’ would appear to confirm that the Ramo’s notion of a Beijing does not represent a meaningful developmental model for “students in places like New Delhi and Brasilia,” or anywhere else in the world.

Finally, one might counter that implementing these theorems would pay for their (immense) administrative  costs by promoting economic growth.  Maybe so (not really), but China gives us no evidence of this.  Even at its very impressive levels of economic growth, China -- like India, Botswana, Indonesia, and other dramatically growing economies -- has shown to be utterly incapable of maintaining the developmental features called for by Ramo's 'Consensus'.

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