World-System (1950-2010) How Does the Economy of China Work?
Continuing Geopolitical tensions between China and the US suggest that the US does not understand how China's System works. Concepts from ECON101 (Socialism, Communism, Command Economy, etc.) make it difficult for Capitalist Politicians to understand what they are dealing with (President Trump seems to like dealing with Authoritarian Leaders because it feels like dealing with the head of a large Conglomerate--until it doesn't). In this post, I'll take the perspective of Systems Theory which is free of prior misconceptions.
The Economy of China is a Malthusian Economy that requires Authoritarian control over birth rates (see the Two Child Policy) to keep the labor force employed without risking high unemployment. The economy also requires control over energy use and Globalization to manage unemployment. Human Development is not a priority in Malthusian Economies.
ChatGPT characterizes the Economy of China as:
In the graphic at the beginning of this post, the CN1 = (Growth - LU) Historical Controller (see below) seems to be approaching a steady state while the CN2 = (LU + Q - L - N) Malthusian Unemployment Controller reached a low point between 1980-2000 and, finally, the CN3 = (KOF + LU - EG) Globalization-Unemployment-Energy controller is collapsing after 2000.
The dynamics of these controllers, in the short run, are driven by the CNL20 BAU Model. In the long run, the East Asia Pacific (EAP) input provides an attractor path that still requires stabilization of the CN3 = (KOF + LU - EG) Globalization-Unemployment-Energy controller.
In words, Regional Alignment helps stabilize the system but Globalization and Energy continue to require reduction in growth rates. Regional Alignment is different from Regional Hegemony (see below) which may not be possible.
For more information on China and the New Economic World Order (based on Spheres of Influence) see Blog Roll: China. For more information about the Data Sources, State Space models and how the models were constructed, see the Boiler Plate.
Notes
Wikipedia
- Asiatic Mode of Production devised by Karl Marx around the early 1850s. The essence of the theory has been described as "[the] suggestion ... that Asiatic societies were held in thrall by a despotic ruling clique, residing in central cities and directly expropriating surplus from largely autarkic and generally undifferentiated village communities".
- China Military Power Report an annual report produced by the United States Department of Defense for the United States Congress that provides estimates, forecasts, and analysis of the People's Republic of China (PRC) military and security developments for the previous year.
- Two Child Policy a government-imposed limit of two children allowed per family or the payment of government subsidies only to the first two children.
- Opium Wars two conflicts waged between the Qing dynasty and the Western powers during the mid 19th century.
- Century of Humiliation a Chinese historiographical concept for a period in history beginning with the end of the First Opium War (1839–1842), and terminating in 1943 when major western Allied nations in WWII, advocated by the United States, agreed to revoke all unequal treaties they signed with the Qing government, officially ending the Treaty System along with foreign extraterritoriality, political and trade privileges, making foreign nationals subject to Chinese laws.
- China officially the People's Republic of China (PRC), is a country in East Asia.
- History of China history of China spans several millennia across a wide geographical area. Each region now considered part of the Chinese world has experienced periods of unity, fracture, prosperity, and strife.
- The Economy of China a developing socialist market economy, incorporating industrial policies and strategic five-year plans.
- Unemployment in China a serious social issue in the People's Republic of China in recent years, regarding both an increase in quantity and an unequal impact on different social regions.
- Human Rights in China Human rights in the People's Republic of China (PRC) are severely curtailed.
- Energy Policy in China The People's Republic of China is both the world's largest energy consumer and the largest industrial country.
- Globalization in China The economic globalization of China has transformed the nature of its national policy preferences, calling into question for the rest of the world what their true intentions might very well be.
CNL20 Measurement Model
Three component state variables explain 99.4% of the variation in the indicators: CN1 is an historical growth controller, meaning that growth is directly controlled in an Authoritarian economy, compared to the USL20W model where overall growth does not have an historical controller. CN2 is a Malthusian-Unemployment Controller. CN3 is a Globalization-Unemployment-Energy controller.
CNL20 AIC Statistics
The best short-term (year-to-year) model is the BAU model [-218 < AIC = -180.1 < -135.1] which is unstable and cyclical (there are instructions in the CNL20 BAU Model for stabilizing the system). The best Attractor Path model is the EAP Input model [-60.98 < AIC = -13.71 < 28.02], the model is unstable due to the Globalization-Unemployment-Energy Controller.
CNL20 BAU Model
CN_L20 EAP Input Model
BAU Shock Decomposition
Video
Differing from the Malthusian-Authoritarian System interpretation, the video above offers another interpretation.
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