Abstract
This essay examines the content of the “Beijing consensus” approach to development and explores whether the emerging markets and developing countries should embrace it as a model that they should adopt.
Although China has been successful in its development approach, the West should not endorse the Chinese approach as a model for development because:
- China’s advocacy of gradualism is only sometimes, not always, worth adopting.
- Though often effective, China’s emphasis on innovation can be costly not only to multinational companies but also to those who have to pay for reinvention of the wheel.
- Chinese reliance on foreign demand as a supplement to domestic demand, by accumulating foreign assets with a likely negative yield, deprives the domestic economy of resources that it could be using to much greater effect.
- While state capitalism does have the underappreciated advantage of assisting the government in achieving rapid recovery from a negative demand shock, it was the increasing role of the market in China’s economy that served as the foundation of China’s rapid growth.
- Authoritarianism may appeal to other third-world leaders, but the espousal of national sovereignty irrespective of the merits of the regime or the policies defended may not appeal to the people.
Policy Implications:
The West should modify the advice it gives regarding the proper strategies for development to accomplish the following:
- Supplement export-led growth with a reserve build-up rather than replace it by inward-looking strategies.
- Accept that the world crisis has reinforced the case for prudential inflow controls on capital.
- Support activist use of fiscal policy for contra-cyclical purposes, while acknowledging that one cannot start a contra-cyclical policy in the recession.
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