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The Beijing Consensus
Alex Steffen, 26 May 05

China's future is one of the big worldchanging wildcards, and so, not suprisingly, we've talked a lot about it.

We've also written our share of posts about the Brasilia Consensus, the new model of development which emphasizes collaborative technologies, fair trade and South-South collaboration.

So I'm not quite sure how we let the buzz-phrase the Beijing Consensus slip by us unnoticed, but we did. The phrase is Joshua Cooper Ramo's, coined to describe what he believes is yet a third model challenging the Washington Consensus as the blueprint for building the future.

Ramo's paper, The Beijing Consensus is well worth the read:

To measure Chinese power based on the tired rules of how many aircraft carriers she has or on per-capita GDP leads to devastating mis-measurement. ... To the degree China’s development is changing China it is important; but what is far more important is that China’s new ideas are having a gigantic effect outside of China. China is marking a path for other nations around the world who are trying to figure out not simply how to develop their countries, but also how to fit into the international order in a way that allows them to be truly independent, to protect their way of life and political choices in a world with a single massively powerful centre of gravity. I call this new physics of power and development the Beijing Consensus.

The center of the Beijing Consensus, Ramo argues, is constant, massive, sustained innovation:

“Innovation sustains the progress of a nation,” Jiang observed. ... China’s problems are so massive that only exponential improvements in health care, economics and governance can hold China together. This is the old, deadly conundrum of reform: how do you introduce solutions into a society that is shredding itself with hope and growth. The only solution is innovation... In China, Moore’s law isn’t seen as a threat but as a salvation. The conventional wisdom is that Chinese growth is an example of what happens when you let loose lots of cheap labour. In fact, innovation-led productivity growth has sustained the Chinese economy and helped to offset disastrous internal imbalances.

I've excerpted a couple other choice bits below, but I encourage you to download the paper for yourself. He may or may not be right, but Ramo will tweak your thinking about China.

Quotes:

When Intel first began operating in China in the early 1990s, it did so with the belief that the China market would be a perfect place to unload out-of-date chips. But the Chinese only wanted Intel’s newest, fastest technology. ...

[T]he single thing that is most characteristic of China at this moment is simply that it is changing so fast that it is almost impossible to keep track of what is underway. ...

Since opening and reform in 1979, the World Bank estimates China has lifted 300 million people out of poverty, a historical accomplishment.

What is the Beijing Consensus? It is simply three theorems about how to organise the place of a developing country in the world, along with a couple of axioms about why the physics is attracting students in places like New Delhi and Brasilia. 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.

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.

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. ...

Intel’s Andy Grove has described a not-too distant future where China will have more software programmers working than anyplace on earth, and suggested the result of such a cluster will not only be competitive Chinese dominance but also masses of new innovation

This Beijing Consensus model of innovation-led growth, which has been echoed to some extent by India’s economic awakening, turns old-style development ideas upside down. It suggests that creating high-growth economic hubs is more important than building sequentially from fundamentals. It is better, in this worldview, to wire some of the country with fiber-optics instead of patiently waiting to wire everything with copper first. An innovative society... allows for a climate in which experimentation and failure are acceptable. This leads to a productive dynamism that allows crucial economic sectors to morph, change and survive the shocks of development. ...

Without a change to a more sustainable growth model, China’s economy is likely to sputter out, choked off by a shortage of resources and hampered by corruption and pollution. “If our growth mode is not changed,” Ma Kai said this spring, “our growth cannot be sustained.”

This new view is apparent in the way Chinese thinkers are starting to measure growth. Tsinghua economist Hu Angang, among others, now disdainfully labels GDP growth, the sine qua non of Washington Consensus physics, “black GDP growth.” He takes China’s impressive black GDP numbers and subtracts off the terrific costs of environmental destruction to measure “green GDP growth”. Then Hu nets out China’s corruption costs to measure “clean GDP.” This, he says, is how China should measure progress. “It doesn’t matter if the cat is black or white,” Deng Xiaoing famously observed in one of his early speeches on economic reform. “All that matters is that it catches mice.” But Hu’s GDP tools, which I’ve heard leaders all over the country begin to talk about, reflects the government’s new belief: the color of the cat doesmatter. The goal now is to find a cat that is green, a cat that is transparent.

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Comments

Thanks Alex - somehow I missed this too. Two thoughts come to mind. First, I've been reading Thomas Friedman's latest book, "The World is Flat" and throughout, Friedman says that Indian and Chinese innovation will drive a totally new growth model and economic model worldwide. The wildcard, of course, is political and environmental stability (which Friedman pays lip service to). Hu's study of "green GDP" and "clean GDP" is something Friedman should catch on to. Second thought is the body of literature out there about innovation/creativity clusters and the relationship to economic growth. Richard Florida's 2002 "Rise of the Creative Class" is a particularly readable review. Zoltan Acs of the University of Baltimore has done some cool research on this as well. Regardless, thanks for the post - and thanks for doing the heavy lifting reading the report.


Posted by: Rob Katz on 27 May 05

Of course innovation is wildly important - that's why the US Constitution specifically empowers Congress to grant patents and copyright.

I have a question though - how can you "protect" China's political freedom when it doesn't have any? How can you claim that China both promotes equality, and stomps all over the freedoms of speech, religion, and political participation?

Good: Chinese entrepreneurs (not the government), finally freed from the government's determination to ruin the economy, have lifted 300 million people from poverty.

Bad: China's government remains Fascist.

Don't forget both sides of the coin.


Posted by: Cardozo Bozo on 27 May 05

http://www.msnbc.msn.com/id/7693580/site/newsweek/

fareed zakaria mentioned it in his cover story for newsweek a few weeks ago; he also has a new tv show btw :D

http://foreignexchange.tv/

cheers!


Posted by: glory on 30 May 05



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