Has China Reached a Turning Point? No. It’s reached four.

I was invited to participate in a symposium hosted at Quinnipiac University on “A Resurgent China.” The suggested topic was “Has China Reached a Tipping Point?” After ensuring that I could slightly edge the discussion away from Malcolm Gladwell, I agreed. For a business school audience, I went a bit broad and tried to bring up plenty of topics for discussion. There was a camera, I signed a release, and Quinnipiac has a YouTUBE channel, so there’s a chance that a video of the presentation will exist online in the future. Below is the text as prepared:

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Has China Reached a Turning Point?

Jeremy Wallace
Quinnipiac University
April 18, 2013

I want to thank everyone for being here and for giving me the opportunity to speak.

The title of my talk is a question: has China reached a turning point? My answer to that question is to say that it appears that China has reached four different turning points. This makes it very hard to predict where China will end up going because if one turns four times one can end up heading in almost any direction.

The four turning points that I have in mind are the following. The first two relate to urbanization, the subject of my own research. First is what I would refer to as the Lewisian Turning Point. The 2010 Census showed that China now is over 50% urbanized. Second, the regime seems to be moving towards the development of larger scale cities as opposed to spreading out urbanization across many different localities. Third, China’s transition from an investment and export based economy to one that is increasingly consumption-based. Fourth, and finally that China’s rapid economic growth seems to finally have run headlong into the environmental consequences of that growth.

I will speak briefly about each of these turning points before coming back to the question of where China is headed.

The Lewisian Turning Point is named for the Nobel-winning Economist Arthur Lewis and his model of surplus labor. To simplify, that model states that as long as a society has extra laborers in the countryside, they can move to much more high productive industrial work, while keeping wages low and not hurting agricultural production. China’s rapid economic growth over the past 30 years has in many ways followed this model. Yet with rapid increases in wages for factory workers and others, it seems clear that China has moved towards a situation in which it no longer has rural surplus labor. In other words, China has reached the Lewisian turning point, which implies that it will have to find growth in other ways.

One possible path could be seen in discussions over changes in the way that China urbanize. The regime has consistently promoted small and medium cities over large ones. Since the beginning of CCP rule in 1949, the regime has worried about urban instability—and from the regime’s perspective rightly so, since nondemocratic regimes with single dominant cities are much more prone to collapse than those facing a number of different cities. This is counter-intuitive for those who know Chairman Mao’s famous saying that a single spark can start a prairie fire. Mao, of course is right, a single spark can start a prairie fire, but it is much more likely that a prairie fire will start when many sparks are concentrated in one space. The regime has dealt with the possibility of urban unrest by biasing its policies in favor of cities, and when this bias led farmers, especially in the 1950s, to “blindly flow” to favored cities, the regime limited the ability of farmers to migrate. These migration restrictions, referred to as the hukou system, have been reformed but remain barriers to those born in the countryside interested in moving to cities. These restrictions have been lowered for smaller cities, but the walls outside of larger cities remain tall.

It has been suggested that the regime believes that it needs to encourage growth in its largest cities now to promote innovation, creativity, and productivity despite the potential dangers of urban unrest that might arise from having so many crammed together so closely to each other and the seats of economic and political power. This debate can be summarized by two different Chinese phrases that translate to the English “urbanize”: chengshihua—urbanization of cities and chengzhenhua—urbanization of towns. It appears possible that China will move away from the latter towards the former.

It is believed that this transition towards developing larger cities will also encourage a shift towards consumption and away from investment and exports as the principal source of Chinese economic growth. It is well-known that the Chinese economy is particularly dependent on selling its goods to others and investing resources for its future to achieve the high rates of growth that have been the dominant economic fact about China for the past decades. Yet this too seems to be changing. The Great Recession or Global Financial Crisis is a study in contrasts on this point. When the Chinese regime was hit by the dramatic drop in export demand it replaced this external demand for Chinese made goods with internal demand through a massive stimulus package. This did two things: first it showed that the world is not enough; that is, China could not depend on the rest of the world’s demand for its goods to continue its growth. Second, by investing incredible amounts of resources in additional infrastructure, the regime realized that it needed to shift its economy away from such investment quickly less even more uneconomical projects, white elephants or bridges to nowhere and the like, were constructed. However, promoting consumption has been difficult and run into its own problems. As millions upon millions of Chinese bought their first appliances and cars, the environmental consequences of such consumption have made themselves known. If the fundamental social contract that the regime operates with is a trade-off of growth for stability, many Chinese are wondering whether growth has anything for them. What good is a car if one is stuck in traffic and unable to drive anywhere; or an apartment in a city with air-quality so pitiful that simply walking around outside is dangerous?

So, it is clear that China has reached a turning point. Indeed, I would argue that it has reached many of them at almost the same time. This makes predicting where China will be headed a very challenging task. Last year, the World Bank, jointly with the Chinese State Council released a very interesting document entitled: China 2030—Building a Modern, Harmonious, and Creative Society. I would argue that it presents a best-case scenario of where the country is headed. The chapter titles of the report make this optimism apparent: Green Development, Increasing Innovation, Strengthening the Fiscal System, Achieving Mutually Beneficial Relations with Other Countries, and so on… What is missing from that document is politics. The Chinese Communist Party is never mentioned as an important actor and social stability is assumed. China faces many turning points in the next few years; the question is whether China will navigate them safely and what paths will the country, party, and people be on at the end of this wild ride.

Thanks.

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The previous speaker, He Mingke of BTBU, had mentioned China’s political difficulties with minorities obliquely during his presentation, which led me to expound a bit on how the Great Recession was part of the spark for the Urumqi riots of 2009.

Sub-national Data in International Relations

We live in a complex world and tell all kinds of different stories about its machinations. Social science can be thought of as attempting to systematize and improve our knowledge of the way that the world works. Sometimes this involves creating new stories or finding connections between events in vastly different times or places. Often, however, social science is attempting to eliminate stories that clutter our understanding rather than add to it, a spring cleaning for our models of the world.

Two recent posts about getting to the micro-foundations of international relations or conflict research make many salient points about the need for better research designs and better data to help avoid the ecological inference problems. I agree with them but want to open the door a bit wider.

Thomas Zietzoff wrote a fine post for the Political Violence @ a Glance blog calling for more field experiments in international relations and conflict studies to identify the micro-foundations of their arguments. Jay Ulfelder wrote on his Dart-Throwing Chimp blog of his skepticism of field experiments on these topics. Instead, he points to big data’s ability to get at the micro-foundations by examining millions of bits of data that come from the digital trail that we leave behind. I would personally enjoy seeing more use of big data and experiments in political science scholarship, but it is not the case that these are the only tools that can make improvements to our understandings of the world.

IR has classically used countries, country-years, country dyads, and the dreaded dyad-year as the preferred units of analysis. Nation-states are big lumpy things and paying attention only to them when the action is actually taking place at below that level can be problematic. Comparative politics as a subfield has moved increasingly to examining sub-national variation. This trend has begun to pick up in international relations as well. As Zietzoff writes:

Acknowledging the limitations in using cross-national data, many recent, cutting-edge conflict studies (randomized artillery strikes in Chechnya, or civilian casualties in Iraq, etc.) make use of sub-national conflict data. However, like the previous cross-national studies, these recent studies have come to mixed conclusions about the effect of violence. Some find that violence leads to support for concessions, or reduction in insurgent attacks, and others show that it leads to an increase desire for retaliation.

Let me throw in my lot with the “cutting edge” here. Sub-national analysis can dramatically expand the amount of data that can be brought to bear on questions of interest to international relations scholars. To me, that these studies come to mixed conclusions speaks less to the problems of working with non-experimental data than of the complexities of violence and strategic interactions in varying contexts.

These ideas are on my mind because I am finishing (with Jessica Chen Weiss) an initial draft of a paper examining sub-national patterns of Chinese anti-Japanese protest to see how and to what extent the various arguments that are put forward fit with the data. From the research design section of the paper:

Using sub-national data, this paper seeks to evaluate different arguments that have been offered that claim to explain anti-foreign demonstrations. This first requires identifying the observable implications of these arguments at the sub-national level. For instance, venting arguments imply that the regime is interested in allowing angry populations the opportunity to release some of their anger at an external opponent rather than direct their ire at the regime itself. At the sub-national level, we make the claim that cities with higher levels of grievances (however measured) thus should be more likely to have such nationalist protests.

We have collected original data on the presence or absence of protests in all Chinese prefectural-level cities during the time period from mid-August to the end of September 2012. …

We do not have individual-level data on all Chinese urban citizens on their participation in protests and we certainly do not have information on why the protesters believed themselves to be protesting. While the lack of such individual-level information leaves us vulnerable to the claim that our analysis exhibits ecological inference problems (if we were to claim support for the idea that college students are more likely to protest based on city-level data showing that cities with more college students per capita are more likely to have protests), we believe that by examining local variation and comparing political, social, and economic patterns with the patterns of protest we improve on prior analyses that remain rooted at the national level.

Survey experiments about attitudes could certainly supplement this analysis. A “big data”-type analysis of the content of print and internet material could shed a lot of light perhaps as well. (A field experiment testing different causes of protests seems unlikely be workable at a number of levels.) But using “bigger” data can be enough to improve on what we know today.  

Chinese Groundhog Day

The joint sessions of the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC), a.k.a. the lianghui (两会), are a key event in the annual Chinese political calendar. They are also a Chinese Groundhog’s day, in the Bill-Murray-movie rather than the six-more-weeks-of-winter sense. For someone interested in China’s urbanization, hukou reform is like a small furry animal that everyone expects to come out around this time of year and look around but never emerges.

When I started work on my book (then dissertation) about China’s management of urbanization and heard word in February and early March that serious reform was in the offing, I was excited by the prospects of observing how a changed policy would affect the growth of China’s cities. Yet in that year, as in every other that has come since, major reform at the national level is always left to the future. Long-range planning calls for the equalization of social services across the rural-urban divide and the end of discrimination against rural migrants in cities, but the prospects of implementation remain hazy.

Kam Wing Chan and Will Buckingham published an article in the China Quarterly entitled “Is China Abolishing the Hukou System?” (ungated version) in 2008. Their answer is no. Yet they demonstrate that both the domestic and foreign media constantly talk about the end of the system as either already having happened or just around the corner.

The most ironic piece we discovered–and perhaps the one most telling of the prognosis for the latest round of hukou reforms–was an announcement by Shenzhen, China’s largest and most famous city of migrants, that called for tightening of admission of migrants’ children to local public schools on the same day the New York Times’ eye-catching story on abolition of the hukou hit the streets.

Given the turnaround time for academic publishers, most of the research is about the 2005 version of ground hog day, but the story in the main is the same today. In 2010, 13 prominent Chinese newspapers jointly published an editorial calling for reform. That is was quickly removed from the websites of these newspapers speaks to the fate of actual reforms.

This isn’t to say that the policies aren’t changing around the edges. Tom Miller’s excellent new book, China’s Urban Billion, talks about serious reforms in experimental regions. Most intriguing are Chongqing and Chengdu where the trading of rural land credits (dipiao) has emerged, allowing even farmers far from growing cities to profit from China’s urbanization. Yet to this day, these remain experiments. The optimist sees that these are steps that must be taken before China exits this endless loop of discussing hukou reform without it ever emerging. A pessimist might see that the Party has a strong interest in keeping that particular animal–and the greater urban concentration that true reform would entail–far underground.

Ideas, Interests, and Iteration

While blinking from the sunlight that enveloped me during one of the rare moments when I allow myself to come up from the “finish-the-book” cave, I happened upon a conversation about the relative importance of ideas and interests in political economy. Dani Rodrik’s column from last year, and then again from last month, sparked the discussion.  He began his earlier piece:

“The most widely held theory of politics is also the simplest: the powerful get what they want.”

Going on to critique the notion, he puts forward that ideas shape interests.

Yet this explanation is far from complete, and often misleading. Interests are not fixed or predetermined. They are themselves shaped by ideas – beliefs about who we are, what we are trying to achieve, and how the world works. Our perceptions of self-interest are always filtered through the lens of ideas.

As Phil Arena pointed out at the Duck of Minerva, Rodrik is setting up a bit of a straw man in arguing that there are those who think that ideas mean nothing.

Here’s what I consider the key point: if you were to ask a room full of undergrads to rank on a scale from 1 to 10 how much room there is for us to change the world through advocacy campaigns, op-eds, blogs, and other expressions of our ideas, the average answer is almost certainly going to lie well above the one political economists would provide.  I strongly suspect it would lie above the one Dani Rodrik would provide, though I confess I have no way of knowing that for sure.  If you repeat the exercise with social science grad students and faculty, you might get responses a bit closer to Rodrik’s (which I suppose may even be the true value, though the fact that he’s transparently engaged in motivated reasoning makes me pretty uncomfortable), but I just don’t see the evidence that the primary task before us is to convince people that they underestimate their ability to transform the world.  There’s a good case to be made that we face the opposite problem.  Sure, if we ever reach a point where most people (or most social scientists at least, who I guess we can count as people) believe that structure is everything, that none of our actions have any meaning, I’ll join Rodrik in calling for a move away from political economy.  But we’re, um, pretty not there.  Like, really really not there.

Where I would take issue with Arena is in the difference between our scholarship and our actual attitudes and beliefs. Political economists likely would respond to questions as he described, but if one looks at the literature, particularly the quantitative literature, there is little to no incorporation of ideas or ideology in the models that we use to account for variation in the political world.

The reason for their lack of incorporation is put forward by Moonhawk Kim:

I’m amenable to the ideas that ideas are a key source of change in political economy. The trouble is how to analyze them. Any ideational theories most likely require some methodological wholism, in which individual actors are not the sole ontological unit. Ideas are collective phenomena and those that are not are not interesting. This is clearly at odds with the predominant although possibly waning focus on experimental methods in political economy. A relevant critique of this methodological approach—although coming from a very different angle—is Oatley’s “The Reductionist Gamble”. Some phenomena and their explanations cannot be reduced to the actors level. Beyond this banal critique, however, I do not have any magical methodological approach for analyzing ideas. But a systematic and rigorous way to studying them will provide the next methodological wave and ameliorate Rodrik’s concerns that political economic analyses do not provide useful policy levers.

After the latter piece went viral, Rodrik posted on his blog:

But what I have found missing in all this literature is an overarching framework that parses out the respective contributions of ideas and interests, without necessarily giving supremacy to one or the other. What is also missing is empirical work (“systematic empirical evidence” as an economist would call it) that takes this approach to the data.

A fascinating research agenda. Stay tuned.

As it so happens, in these fleeting moments when I am not sanding down the rough edges of my book, I think about the ways in which the measures that we use in the study of political economy can fail us (where us can be scholars, investors, leaders, statistical bureaus, future historians, revolutionaries, etc). 

I have a paper on one example of this, the political manipulation of GDP growth estimates by subnational officials in China. Spelling out the logic can, hopefully, show the connection:

1. the CCP regime believes that by improving the lives of the citizenry its rule will be legitimized and they will remain in power,
2. to encourage local government officials to pursue economic growth, the central party makes achieving high levels of GDP growth part of one’s annual assessment which in part determines promotion decisions,
3. local government officials pursue normal political business cycle behavior to boost growth numbers but also perhaps juke the stats to get ahead in the promotion tournament.

The party’s idea that performance legitimacy is the correct political strategy for it to pursue leads it to create metrics that define the interests of subordinate officials in ways that affect their behavior, in ways intended and unintended.

Of course, the central party learns over time that the rules of the game are being broken by the players. Officials like Li Keqiang, the new premier, explicitly refer to the idea that “man-made statistics” like GDP aren’t to be trusted and instead relies on other statistics that are perhaps less likely to be manipulated. Yet if the leadership knows (or suspects) that manipulation is taking place, then why doesn’t it punish the rule-breakers? First, it likes the results that are coming about and sees no real need to go after the cheaters (a.k.a. steroid era baseball). Second, it’s a test of political sophistication. Do local officials know what is and is not permissible? Promotions should go to those who meet the metrics but especially those understand what the metrics are attempting to assess, ability to accomplish tasks set forward by the regime. As the game iterates, smart players take advantage.

Assessing the changing quality of assessment and measurement is the first bite of the whale of the ideas and interests that I hope to devour.

A final thought before I crawl back to the book cave, Rodrik compares the growth-pursuing strategies of East Asian dictators with the kleptocratic and crony-supporting leaders of the Middle East. China under Mao, of course, cared nothing of GDP growth. Only under Deng did the regime’s ideas about the nature of its interests change. This is the big question, and for now, it remains that–a question.

Or, in fact, many questions, such as: What is an acceptable change for a leader? What is the range of the permissible? What is beyond the pale? Does Deng move to highlight the contrast with the Maoist Hua Guofeng, who at the time was his primary elite competition for control of the party? Would Deng have done anything else had he had his druthers? What ideas were percolating in the mind of this Sichuanese who had his political awakening in France under the tutelage of Zhou Enlai? Where did these ideas come from? Would the CCP have moved towards reform or reform-ish policies absent Deng?

On Chinese urbanization – 城市化 vs. 城镇化

Bill Bishop sparked an interesting conversation with something that he caught and passed along in his Sinocism email from earlier this week.

 李克强论城镇化|李克强|城镇化_21世纪网 - should we be paying more attention to fact that li keqiang uses 城镇化 and not 城市化 for “urbanization”?

Following a brief discussion on Twitter, it seems clear that this is an open question in his mind. Li’s choice of words might not actually matter. As someone finishing a book on the nature and politics of Chinese urbanization, I’ll share my perspective.

What is the difference between these two terms? Urbanization of cities (城市化) implies growth of China’s large cities, particularly the famous megacities, Beijing, Shanghai, Guangzhou…. Urbanization of towns (城镇化) implies growth of the small and medium sized cities that proliferate throughout the Chinese coast and interior. For much of the past 30 years, the regime has focused on constraining the growth of large cities while pushing for urbanization in the countryside or small cities.

I argue that this preference for many smaller cities rather than a small number of cities on a mega-scale has fundamentally political roots. Large cities represent areas of concern for dictators. They tend to be impenetrable and can explode into protests at a moment’s notice.  From the founding of the PRC, the CCP regime has evinced a strong concern for urban stability. For non-democratic regimes since WWII, large cities are more likely to be the locations of protests and, even more ominously from a regime perspective, regimes facing large cities survive for shorter periods of time.

The shape of urbanization shapes the politics of dictatorships. Having lots of people live in cities or towns — that is, be urbanized — usually is associated with high levels of economic development. Contrary to the general wisdom emanating from modernization theory, economic development does not bring down dictatorial regimes. On the other hand, having lots of people in one city — that is, to have high levels of what I call urban concentration — is dangerous. As I show in a paper forthcoming from the Journal of Politics:

Is urban concentration hazardous to authoritarian regime survival? For the 237 regimes with urban concentration levels above the mean level in the data, the mean duration is 8.6 years and the annual regime death rate is 9.2%. For the 198 regimes characterized by low levels of urban concentration, the incidence rate is only 5.6% and the mean duration is 12.4 years. Regimes with capital cities that dominate the urban landscape fail nearly four years sooner and face sixty percent greater death rates.

Li Keqiang very well may move the regime away from the pro-small city policies that the regime has been pushing for the decades of the reform era. It is possible that other prerogatives compel such a decision. Certainly, on environmental terms, there exists a possibility of efficient land use in large cities compared to many smaller ones (even if Beijing viewed from space increasingly looks like an amoeba determined to spread ever-outward). The decision of which path to take may be a more consequential one that it appears.

Confidence, Austerity, and the Great Leap Forward

Policies that critically rely on belief in the policy’s effectiveness can lead to disaster.

Those who questioned the Great Leap were attacked not only for attacking the party line but indeed for undermining its success. The energy and spirit involved in moving China forward was supposed to move China forward. Questioning whether it was working cut against everything that the Leap was about.

Paul Krugman writes today about austerity in Italy. What made me make the connection with the Great Leap is an amazing letter that claims that research showing that austerity is failing is undermining the confidence that austerity is supposed to be building.

From Not the Treasury View:

Mr Rehn [European Commission Vice President], in a letter to European Finance Ministers, copied to other international financial luminaries like Christine Lagarde, says: 

“I would like to make a few points about a debate which has not been helpful and which has risked to erode the confidence we have painstakingly built up over the last years in late night meetings. I refer to the debate about fiscal multipliers, ie the marginal impact that a change in fiscal policy has on economic growth.  The debate in general has not brought us much new insight.”

The economic disaster in Europe is not leading to famine, but it is a disaster caused by an unyielding belief in the efficacy of policies that have demonstrably failed.

Defending the job talk

See Dan Nexon on the Duck of Minerva kicking off the discussion and Nate Jensen’s defense of the job talk. This then moved to twitter with interesting nuggets but with too few characters to discuss them, e.g.

Daniel Nexon ‏@dhnexon

@jerometenk @tompepinsky @irfan23 @natemjensen point of post was to get ppl to brainstorm cost/bens of alts. w/o discussant might work?

Job talks need no real defense as they are dominate the process by which junior faculty are hired in political science. Job talks are also frustrating and seem to fail along a number of dimensions–pushing style over substance, the ability to give a job talk over actually producing excellent research, etc. Yet these 30-45 minute presentations of research followed by roughly an hour of questions are the center of the typical campus visit. And I’m unconvinced that there is a better alternative.

The principal alternative to a job talk shaped 2 hours is a pro-seminar format. [While one-on-one meetings could be expanded, it is unclear whether these could really replace a public presentation. Already most of a candidate's time during a visit is spent meeting with faculty or students in one-on-one sessions or with just a few faculty sharing a meal.] I see three difficulties with the pro-seminar format as replacing the job talk.

1. The starting of the conversation. If the candidate herself is not starting the discussion, then the options are to either have a chosen discussant–who has prepared remarks about the research and gets the ball rolling–or to open the floor for questions and discussion without any prepared statements at all. Having a discussant induces potential difficulties for job talk purposes. Is the same discussant going to serve for all candidates for a given position? Should the discussant spend the same amount of time preparing remarks across cases? Having a seminar without a discussant though might be even more problematic. Will the conversation take off at all and even if it were to do so, would it be in a direction that is useful for evaluating the candidate? I’m dubious.
2. Putting the work in context. Specialization is the name of the game in the academy. In particular, job talks happen when a faculty are looking to bring in a colleague that likely fills a gap in their ranks. As such, the discussion is unlikely to go deep into the weeds of a given research project and is more likely to focus on the connections between the candidate’s research and general topics (or more directly, the research topics of the faculty in the room). The job talk format allows for the candidate herself to present the work and make obvious potential connections. In a seminar format such connections might be drawn, but they likely would be from the audience rather than from the candidate, which undermines the purpose of figuring out more information about the candidate.
3. The work. It has been noted that faculty are not the most reliable readers of a candidate’s dossier. Changing that norm would be difficult but desirable. That is not the problem that I see. The seminar format would likely push a single piece of research over a full dissertation or research trajectory as the material under discussion. Asking the faculty to read a paper is one thing, but to read a set of papers or a full dissertation is quite another (especially as usually 3 visits are scheduled per position to be filled). As such, a seminar is likely to focus on a given piece of research that everyone has read rather than the broader research projects of the candidate.

Improvements on the form of these presentations can be made. Mostly, I would like to see them shortened. 30 minutes is plenty of time in a prepared talk to show a research trajectory, some interesting findings, and lead into a fruitful discussion. A 45 minute job talk can sometimes drone on into nearly an hour inevitably followed by an exhausted faculty wondering what just happened. Secondarily, job talks should discuss more than a single research paper. Discussing the connections between the different pieces of a candidate’s work is the first step to connecting to the broader audience in the room and in the discipline.

In the end, academic hiring at the junior level is a difficult problem. A diverse faculty is attempting to fill substantive gaps in their coverage, build to the strengths of the department, and make assessments about the future productivity and citizenship of the candidates as colleagues. All at the same time with limited information and contrasting preferences in a competitive environment.