Now that Pessimo and I have engaged a far bit on the first theorem, it is time to do what I have been promising to do for two weeks: present some comments on the second theorem.
It is has been a while since Pessimo presented Ramo’s ideas, so here is a memory refresher:
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.
Pessimo has criticized Ramo for presenting a circular argument regarding the first theorem (see here) and he criticizes Ramo for doing this again regarding the second theorem. Pessimo believes that Ramo is basically arguing that to develop you need to be developed. Or, as he writes: “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.”
I do not share Pessimo's reservations regarding this second theorem, for three reasons:
First, whether China has achieved the development objectives stated by the model does not strike me as particularly relevant. At the end of the day, what we are looking for is whether the model holds some internal coherence, is grounded on some form of credible knowledge (theoretical or empirical), and can be implemented. So, looking at China and saying it has not achieved the goals prescribed by the model is similar to dismissing the Washington Consensus by saying that the United States does not have the touted free market economy advocated by the model. The concrete experience of one country does not invalidate the model. Indeed, as Ramo himself acknowledge in the paper, China should not be considered an example:
“China's market dynamism has brought all sorts of problems. On the macro level these problems include pollution, social instability, corruption, mistrust of the government and unemployment. On a personal level, all but the youngest Chinese find themselves at least somewhat disoriented by the rapid change in their lives (...) In the last 25 years, China's economy has moved from one of the most equitable in the world in terms of income distribution to one of the most inequitable (p. 24)”
So, the question is not whether China is indeed successfully following this model or not. The question is whether the model can provide guidance for action for developing countries.
Pessimo will argue that the model cannot possibly provide guidance to other countries because there is a circularity in the argument. Pessimo says: to achieve the goals set up by this model, a country needs to be developed already. Unlike Pessimo, I do not see a circularity problem here. The theorem only seems to require countries to focus on achieving these goals. Thus, I interpret the paragraph as an aspirational statement. It invites developing countries to focus on other goals, rather than focusing exclusively on economic growth. Whether and how these countries will succeed in achieving sustainability and equality is a different question entirely.
Second, Pessimo seems to read too much into the words sustainability and equality. I am not fully sure if they refer to environmental sustainability. They may be referring to policy sustainability, i.e. the capacity to maintain in place the policy decisions taken at a certain point in time. Similarly, Pessimo seems to assume that equality refers to income or wealth equality, when it may be an expression that refers to something entirely different, such as not intentionally producing significant winners and losers out of reforms.
I am not sure if this is what Ramo meant by the words sustainable and equitable, so this is entirely speculative on my part. But if we were to interpret his use of the these words in the way I propose, I think the dual track reforms implemented during the Chinese transition from a centralized economy to a market economy perfectly exemplify the concerns with sustainability (of the reform) and equality (in the gains that were produced by the transition). For a full explanation and analysis see here.
Third, Pessimo seems to zoom in on the idea of managing chaos, while ignoring the fact that Ramo is inviting countries to adopt a plurality of objectives. This seems like a healthy shift in development thinking (and seems especially refreshing if contrasted with the economically centered discourse of the Washington Consensus).
Indeed, in his clarification to some of the comments I had offered earlier, Pessimo stated that: “there are other ways of conceptualizing ‘development’ -- such as Sen’s development as freedom, or improvements in general quality of life, or simply development as alleviation of the brutality of material poverty (my preference). When conceptualized in this terms, I am much less a determinist – probably no more so than most people.” This seems to be in line with Ramo’s opening statement about focusing on quality of life instead of GDP. This takes us back to the discussion about the concept of development that should be embedded in a model for development, which is something that both Pessimo and I have commented on earlier and we seem to be somewhat in agreement regarding this point. Therefore, it take me by surprise that Pessimo has not simply embraced Ramo's invitation to focus on "quality of life", instead of GDP.
In sum, for the three reasons present above, I do no share Pessimo’s reservations regarding the second theorem.
Let me finish with a question for Pessimo. China seems to be a great example of a country in which millions of people have been lifted out of poverty and have had their lives improved in the last decades. If nothing else, we could perhaps say that at the very least the country has effectively adopt strategies to reduce "the brutality of material poverty", to use Pessimo's expression. So, if we do not want to ask China to behave like a developed countries before becoming one, isn’t this enough to show that they have some sort of promising strategy in place?