Chinese factory workers 390.
(photo credit: REUTERS/Stringer China)
Economists who suggest Chinese-style state capitalism provides the solution to
global economic troubles are mistaken, Harvard economic historian Niall Ferguson
said Wednesday at the Herzliya Conference.
Speaking at a discussion on
the future of the global economy, he said: “State capitalism is not China’s
solution to the problem; it is China’s problem. The future of the global
balance between the West and the rest will depend on whether China solves that
problem... and whether or not the West solves its problem of deteriorating
Ferguson said he was surprised by how many economists
attending last week’s World Economic Forum meeting in Davos, Switzerland, bought
the argument that we were witnessing the emergence of the Beijing consensus, in
which state capitalism is the answer.
In actual fact, he said, the role
of the state in the Chinese economy has gradually declined since the late 1970s,
to the point where China has fallen far behind European economies when measuring
total government expenditure as a percentage of GDP.
Instead, the key to
economic success is competitiveness, Ferguson said, presenting WEF-compiled data
from 2004-2011 showing the decline in the economic competitiveness of the United
States and the increase in the competitiveness of China.
“It would be a
fatal mistake to attribute this to the role of state capitalism,” he said. “In
fact, the opposite is true; it is the diminishing role of the state in China,
which explains increased competitiveness, and vice versa, the increasing role of
the state [in developed economies] helps to explain declining
Dr. Zhu Min, deputy managing director of the
International Monetary Fund and former deputy governor of the People’s Bank of
China, addressed concerns the world’s second-largest economy could suffer a hard
Poor January data was the result of the coinciding of the
Chinese and Gregorian calendar new years, he said.
The Chinese people
worked only 15 days in January, which explains the low purchasing managers’
index score, Zhu said, and it will cause weak export and growth
“You will see lots of concerning figures about Chinese growth in
the next few weeks,” he said, “but that’s fine, because everything will pick up
Zhu also addressed the deteriorating economic situation in
Europe, saying that EU leaders were moving “in the right direction” in efforts
to solve the deteriorating economic situation, but “they must act much faster
and more decisively.”
He said Europe has three immediate issues to deal
with: putting a 2-trillioneuro firewall on the table to boost market confidence;
implementing structural reform to ensure competitiveness and growth; and
integrating labor markets to support the common currency.
chairman of JPMorgan Chase International and a former governor of the Bank of
Israel, said European leaders must learn from their previous mistakes, when they
focused too much on economic union and not enough on monetary union.
do we ensure that the new policies are not just about stability but also about
growth, and not just about monetary union but also economic union?” he asked.
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