China and Poverty Alleviation: The Case for a Strongman

May 8, 2010

On Monday, the Philippines will hold a national election.  It is the first time the country will be using an automatic voting system, and nobody knows what is going to happen.  It seems appropriate to include this post before the election is over.  For more on the candidates, check out this BBC News primer.

Over the last four decades, the economic landscape in Southeast and East Asia has shifted.  After World War II, the Philippines had the second largest economy in Asia (behind Japan).  Years of mismanagement, corruption, and poor government policies dragged the economy down during the 70’s and 80’s.  The policies of Ferdinand Marcos, a strongman who imposed martial law on the country until 1981, depressed economic growth during his years in power.  Isolated incidents, including a severe recession in 1984 and the Asian financial crisis in 1997, put further downward pressure on the economy, hampering progress after reforms in the 1990’s.  Even now, the period of optimistic economic growth which President Gloria Arroyo has attributed to herself is, in reality, a result of remittances from abroad, which account for 11% of GDP.  All of this has led to a national poverty incidence of 40%.

Compare this with China.  In the 1981 the poverty incidence in East Asia was 85%.  Over the last 30 years, China has enacted economic reforms designed to drive the poverty level of the country down.  As of 2005, the poverty incidence in East Asia had fallen to 16%.  This decline of 600 million people is attributable almost exclusively to China.   The chart to the right shows something amazing: when you remove China from the picture, the percentage of people living on $1 and $2 per day has remained essentially flat over the last 20 years.  Since 1990, China has accounted for almost all of all of the poverty alleviation in the world.  Why has China done such a good job of pulling its people out of poverty, while the number of poor seems to stay relatively consistent in the Philippines?  The system of governance espoused by the two countries over the last 30 years is at least part of the answer.

The Philippine government became an American-style democracy, with a bicameral legislature, a Supreme Court, and an executive branch.  The Philippine democracy is rife with corruption.  The government bureaucracies that should be vehicles for development are paralyzed and fraught with graft.   A while back I wrote about the corruption that plagues the education system in particular.  The high-level policy makers spend half of their time stealing, and the other half campaigning for the next election.  So money leaks out of the system, or at least does not reach its intended target, and what is left is underdeveloped infrastructure in the rural areas, a deficiency in public education, and a largely agricultural poor whose votes can be easily bought for a cheap price with no expectations in return.  Serious policy reform is practically impossible because there are so many powerful people with an interest in maintaining the status quo.  A transformational leader could inspire the people and rail against corruption, but the system is too big and entrenched to change.

Corruption, at least in part, results in a massive stratification of wealth.  The per capita GDP of the Philippines is $3,300 USD, yet 44% of the population lives on less than $2 per day, or $800 per year.  The combined net worth of the 10 richest people in the Philippines is $11 billion USD.  The total GDP of the Philippines is $160 billion USD.  Clearly, not much is trickling down to the masses.

China, on the other hand, has a strong authoritarian government that can implement policy on a dime.  In 2008, while the United States was bickering about pork and bailouts, China rammed through a $586 billion stimulus in a day.  Where exactly did that money from the Chinese stimulus package go?

A statement on the government’s website said the State Council had approved a plan to invest 4 trillion yuan in infrastructure and social welfare by the end of 2010.[4][3] This stimulus, equivalent to US$586 billion, represented a pledge comparable to that subsequently announced by the US, but which came from an economy only one third the size.[5] The stimulus package will be invested in key areas such as housing, rural infrastructure, transportation, health and education, environment, industry, disaster rebuilding, income-building, tax cuts, and finance.[6]

Not that kind of strongman.

Chinese spends massively on infrastructure, housing, and education.  The result of its top-down approach to capitalism and ambitious economic development is an average annual growth rate of 10% between 1990 and 2004.   There are obvious downsides to the system.  Dissent is punished with prison sentences, censorship is the norm, and human life is generally a bit cheaper in China than it is in developed countries.   But if you look at the numbers – 600 million people lifted out of poverty over the last 30 years – it highlights the merit of a government that is not paralyzed by bureaucracy.  The ability to enact major policy reform without having to go through all of the red tape that is characteristic of every American-style democracy (including the U.S., re: healthcare, financial reform, etc.) can be a good thing, provided those making the changes have the interests of the people in mind.

Imelda Marcos, aka The Shoe Queen, had an estimated 3,000 pairs of shoes, purchased using money stolen from the Filipino people

That said, there are plenty of counterpoints.  One particularly relevant one comes to mind: the Philippines.  The country was under martial law for 16 years during the reign of President Ferdinand Marcos, effectively a dictator himself.   The decline of the Philippine economy is often attributed to his mismanagement of the country.  But if you ask a lot of Filipinos who was the best of the last five presidents, many will still say Marcos.  He had some positive-minded reforms, despite helping himself and his cronies to the treasury of the country.  And, at the very least, he could get things done, which is more than can be said about the current political system.

There will be an national election here in the Philippines in 5 days.  The leading contender, Noynoy Aquino, is running on a platform of eliminating corruption from the system.   His slogan is “Kung walang corrupt, walang mahirap,” which means “without corruption, there will be no poor.”  That may be true, but it is going to take more than an inspirational president (which Noynoy is not) to purge the system of its corrupt elements.  The second-place presidential contender, Manny Villar, is the 7th richest person in the Philippines and is as crooked as a politician, as the doctor said in Forrest Gump.  A vote for Villar, whose campaign ads would have you believe his commitment to the poor is second to none, is a mandate for the worst elements of the status quo.

The 2009 Corruption Perceptions Index. The darker the shade of red, the more neoconservatives want to invade.

One lesson to take from the experience of some U.S.-patterned democracies in the developing world is that, contrary to what the neoconservative reactionaries would have us believe, spreading the gospel of America is not always the answer (see Afghanistan, Iraq, Vietnam).   To break the logjam of bureaucracy and crippling effects of corruption, some countries need a swift, exacting force that exists outside the system and isn’t compromised by its rules.  Like Omar in The Wire, when you are beholden to no one, you are free to do what is necessary.  I am not saying a repressive dictatorship is the answer.  After all, Zimbabwe has is a basketcase and North Korea is a complete mess.  Burma is the poorest country in Asia by not a small margin, and its repressive military junta – which cares very little about its people – will be holding a rigged election in the Fall.  But while China’s system of government may not be the answer – it certainly has its flaws, and is certainly not free of corruption – its effectiveness in reducing poverty in the country makes for a compelling case, in an ends-justifying-the-means sort of way.

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3 Responses to China and Poverty Alleviation: The Case for a Strongman

  1. Hugh Akston on May 9, 2010 at 7:32 pm

    You are focusing on the system of governance as well as corruption. I would submit that the success of a country in removing poverty and improving the life of its inhabitants is in large part related not to the form of government but the quality of its leaders. For example, in China, when Mao was leading the country, poverty and starvation was rampant. In fact hundreds of millions of people starved during the “great leap forward”. During the “Cultural Revolution” most of the intelligentsia was killed or went into hiding and the universities did not produce any scientists. It was only under the leadership of Deng and his successors that China rapidly advanced. As Deng XioPing said when asked about the form of government-(I paraphrase)-”Black cat-white cat- it doesn’t matter as long as it catches mice”.

    On the other hand, what would have happened in the United States if after Zachary Taylor, Millard Fillmore, Franklin Pierce and James Buchanan, we had one of the losing candidates such as Breckinridge or Douglas, instead of Abraham Lincoln. Or what if Abraham Lincoln had lost in his second term to George Mclellan. Further, more recently what would have happened if after Gerald Ford and Jimmy Carter were presidents and Jimmy Carter were re-elected instead of Ronald Reagan. We might still be dealing with 16-20% inflation. Lastly, in the western hemisphere on the island of Hispanila both the Dominican Republic and Haiti were ruled by dictators who were both repressive (neither one was great to the people). However the Duvaliers in Haiti destroyed all the trees, land and ecology thus rendering the country incapable of growing their own needs, while the Trujillos in Dominican republic at least didn’t destroy the environment and the standard of living is much higher in Dominican Republic.

    There are obviously many other examples. I would therefore say that the most important government is that led by an enlightened leader. The question is which form of government is most likely to do this and I would submit that that is democracy although through the years others have also been successful (modern China as well as some of the most successful previous emperors, some monarchs and even some dictators).

  2. torn on May 16, 2010 at 5:57 am

    I enjoyed your post, which makes some good points. I posted a reply on the strongman point on my blog.

  3. Mel u on May 16, 2010 at 9:15 pm

    To give a simplified example. After WWII Singapore and Manila were both completely destroyed. Singapore was lead (in a dictatorial fashion) by a strong largely non-corrupt government with a single man as the force behind it all. The Philippines has had numerous leaders and none were really in control -there was never a master plan-never a ten week plan that was carried out let alone a ten year plan. Government employees convicted of corruption can and have gotten the death sentences in Singapore. In the Philippines to be caught in an act of corruption at the most means you have to share some of your graft with whoever caught you.

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