Social Externalities: Economy and Urbanism in China

Wang Hui, Professor in the Department of Chinese Language and Literature, Tsinghua University, Beijing spoke on 'How to Interpret "China" and Its "Modern": Rethinking The Rise of Modern Chinese Thought'.

Workshop Studio X, 8-9 October 2010.  Beijing, China

The emergence of the so-called "Rising Powers" – including but not limited to China, India, Brazil and Russia - represents one of the key drivers of global economic and social change. Given the enormity of their potential impact on the global economy, they represent a priority challenge to social scientific understanding with outcomes likely to be of importance to government, business and citizens.

This workshop formed part of the ESRC's programme designed to deepen our understanding of the regional and global impacts of the Rising Powers and the economic, political and social implications for the UK.

It was the first event in the development of an international research network of scholars sponsored by the ESRC. The network shared contemporary research and develop collaboratively new perspectives on the emergent growth models of China, India and some parts of Africa in a context where some economic analysts and financial journalists are asking if the 'Washington Consensus' is increasingly displaced by a 'Beijing consensus'.

In three workshops over 12 months the network addressed issues of urban change, south-south flows and new models of financial governance. It adopted an interdisciplinary focus on the conceptualisation of 'externalities' to provide a lens through which we might frame these emergent trends.

This first workshop will look at the economy and the city through this lens.  We want to open up a debate about the city and urban space as often the consequences, sometimes the unintended consequences of economic exchange, particularly the constructed and variable nature of metropolitan markets. So the workshop will look at finance and its externalities, at its consequences, often unintended for configurations of global geo-politics. It wants to look at both the public goods – like pervasive information and highly skilled labour forces and the 'public bads' – negative externalities of ecological degradation and challenges to sustainability.

The market that is involved here. It is the national and local state.  And the attempt to create public goods. This not strictly an externality. But also a production of urban space. The admixture of public and private goods produces particular types of urban space, of private and public goods and bads. A very characteristically Chinese mode here is through infrastructure spending. Indeed this is largely China's way out of our financial crisis. China as the infrastructure society. Even build infrastructure in Africa.

Similarly China's recent growth has been based on a model of rapid growth of breakneck speed urbanization and migration but how do we figure the externalities as concomitant? The welfare solutions to the negative externalities occurring with the decline of the danwei (work-unit) system and rise of markets. But in a very broad sense all of the above and the below deal one way or another with what might be in the broadest sense understood as social externalities.

The present juncture has been characterised by sustained and renewed growth in the economies of China and India. One of the consequences or externalities of this are the metropolitan property bubble that burst spectacularly in the USA and northern Europe but continues to worry analysts in China and India. The financial crisis of 2008 has evolved into the sovereign debt crisis of 2010 with major fiscal implications for the economies of the 'north' and a sustained debate about the consequences of 'balances' in global trade.

The Workshop

Doren Heng Liu (Harvard University and NODE Architecture practice)
Jiang Jun (Guangzhou University and Urban China)
You-Tien Hsing (Berkeley University)

The first 'Rising Powers' research workshop took place in Beijing on October 8-9 at Columbia University's Studio X.  It drew together practitioners and academics from the fields of economics, sociology, cultural theory, architecture, planning and anthropology. The six themes were addressed in the individual sessions of the workshop over two days in Beijing, and were accompanied by visits and opportunities to develop links with local Beijing initiatives.

1. Finance: the negative externalities of the 2008 crash.  From bankrupt banks to sovereign debt crises in the context of the European response to pressures on the euro prompted by possible Greek debt default.

2. Environment.  The urban consequences and negative externalities of breakneck growth. The new green role of the state in China.  City solutions – the question of urban density, environmental economics and the 'ecocity'.

3. Infrastructure, infrastructure building as a solution to the crisis. After 2008 and Chinese focus on infrastructure deficit spending. As an egalitarian public sector economic strategy.  China and African infrastructure.  Types of infrastructure. Infrastructure economics and urban infrastructure. The Beijing Olympics and the Shanghai Expo.

4. The private and the public.  Washington consensus and Beijing Consensus.  Public sector cuts as crisis solution.  New publics, new urbanism, neo-Keynesianism. The question of property in state socialism and market bubbles.

5. Urbanization and migration.  ‘Slum clearance’ and informalities of the city.  Migrants and the question of the hukou.  Middle class migrants and the knowledge city.

6. Global geo-politics.  China in Africa. The problem of primary materials.  Sovereign debt default/sovereign wealth funds.  Decline of global finance? W(h)ither Europe?  BRICs and the rest

Full Workshop Schedule

Abstracts for each session are below:


Session 1: Rising powers; the new global geo-political economy

Prof. Chovanec, Anglo-American "laissez faire" economic model versus China's "market socialism" model

Professor Chovanec will consider the pros and cons of the Anglo-American "laissez faire" economic model versus China's "market socialism" model, in light of the recent financial crisis.  I particular, he will examine the role that market corrections and crises played in U.S. economic development, by fostering a dynamic environment of "creative destruction," and will consider what impact the absence of such factors plays in China's development.  In this light, he will offer some observations and diagnoses of China's challenges going forward, especially inflation and housing.

Sandeep Kapur, Birkbeck College, The (Re)-Emergence of China and India

This talk will assess the economic and social aspects of the recent resurgence of China and India as global players.  It will evaluate the impact of the growth both internally (for the vast populations of these countries), and externally (for the shifting locus of global economic legitimacy). We will also make some inferences about the nature of state in these two countries, the forms of evolving capitalism and the the interplay between forms of governance (democratic or otherwise) and the resolution of competing claims. In particular, this affects investment in phyiscal and social infrastructure, which are likely to be key to maintaining sustained growth

John Driffill, Birkbeck College, University of London, Competing growth models

The concentration of growth in regions in China (Shanghai, Beijing, Shenzen, Chonqing, etc), India (Dehli, Bangalore, etc), and other emerging economies suggests the importance of regional economies of scale. The growth of production exceeds the appropriately weighted average of the growth of inputs of factors of production. Alternatively put, if you double the inputs you more than double the outputs.  The purpose of our planned research will be to investigate how substantial these regional economies of scale are, and what are their sources.  How long can rapid growth be sustained by exploiting regional economies?  Moving from the regional to the national level, many accounts of the Chinese phenomenon appeal to other factors: moving towards the technological frontier; increasing the physical and human capital that each worker works with; financial markets that enable profitable enterprises to raise external finance for investment (see, for example, Zilibotti, Song and Storesletten, “Growing like China”).  Questions have been raised about the sustainability of growth when it involves investing around half of GDP, and the ‘incremental capital output ratio’ is around 5. This paper will review issues surrounding regional economies of scale within the context of alternative accounts of rapid growth in China and other emerging economies.

Session 2: China’s modernity: culture and economy

Wang Hui, How to Interpret "China" and Its "Modern": Rethinking The Rise of Modern Chinese Thought

The four-volume The Rise of Modern Chinese Thought was published in 2004 and sold out very quickly.  In the three years since I have read a number of reviews published by colleagues in China, Japan, the United States and Europe, and have also participated in four conferences called specifically to discuss the work in Shanghai, Beijing and Tokyo.  On the occasion of the work’s reprinting I would like to try to summarize and reflect upon the train of thought running through the study, as well as to discuss certain issues that are raised and offer some preliminary responses.

Scott Lash, Goldsmith University, London, China: Morality, Relational Economy, Politics

This intervention looks at the cultural logic of Chinese economic life. We see this to be relational, based on assumptions that are a prolongation of Confucianism of a natural solidarity between human beings.  We look at the moral and ethical bases of such relationality. Western politics and economics begins from the assumptions of an isolated individual: either in a state of nature, or as the subject of the moral will and by extension economic action.  In China all of the above are based on a notion of virtue that is itself grounded in a sort of solidary and original and natural intersubjectivity in which agents are already implicated with one another in a relation of concern and responsibility. The Chinese morality is oriented to the other, to people while Western morality is a question of the act, or the consequences of the act or the rules that regulate the moral agent.  Further, while individualist moral conduct in the West is regulated by transcendental rules, this relational moral conduct in China is not regulated but motivated, energized by a sort of immaterial energy (tianqi) that is generated from the connectivity of the relation itself.  These assumptions in regard to moral action extend to the action or conduct of social agents more generally, in particular to economic activity.  Thus relational economic activity is situation specific, based on long-term relations of economic exchange and is open ended.  Individualist economic activity on the other hand is based more on abstract rules (of the market), on the short-termism of contract and has beginning and end.  Relational economic activity may be functional for contemporary capitalism in the way that the sort of individualism that Max Weber addressed in The Protestant Ethic was functional for earlier capitalism.  Individualist assumptions make possible the market and legal and other institutions that give stability to economic activity and in particular enable investment.  But there is a certain more integrally cultural stability that relational processes lend to economic activity in China.  Also making investment possible.  Especially the relations between private firms and high-level local government officials.  But what might be functional for economic growth could well be dysfunctional for political democracy.  Confucius for example saw the state in terms of the extension of such solidary virtue and its practices.  Thus unlike the social contractuality of Western states and their constitutions that are individually based, in China there are no such institutions, including the rule of law. This means in china there may be solidarity but there is no civil society.  The political question then is how can such solidary and relational social connections be a basis for more democratic institutions and civil society and democracy in more Chinese colours. This will entail a different politics and a different set of social and institutional mediations.

CHEN Xian, Shanghai Jiao Tong University, Analysis of the Income Distribution in China's Rapid Economic Growth

With the rocketing economic development, China has been experiencing a severe widening gap in its income distribution like most of other countries. The gap is not only a vital factor in causing the imbalance of its internal economy, which in turn brings forth the imbalance of the external economy, but also poses a great threat to its social equality.

A hypothesis can be made that if equality of opportunity do exists, disparity in income distribution counts reasonable; however, the truth is people are endowed with unequal opportunities, which is one of the main reasons for the income distribution gap. There are many factors that may cause the inequality of opportunities, such as differences among urban and suburb, regions, and industries. Privilege, capital and power make the situation even worse.

Income distribution disparity has become one of the critical factors that will in the long term influence the sustainable development of China’s economy and the stability of its society. Eliminating or reducing the widening gap is an urgent and tricky issue China must face for its future development.

Session 3: Urbanism and public space

You-tien Hsing Department of Geography, UC Berkeley, Space Production in China: Industrialism, Urbanism and Culturalism

In my new book "The Great Urban Transformation: Politics of Land and Property in China", I have talked about the interwoven politics of urban expansion and power consolidation of the local state. I called it "urbanization of the state", as a contrast to the thesis of "state-led urbanization" in China. I propose that instead of being "led", urban processes actively shape the dynamics of local state building, which, in turn, shapes the territorial logic of the state, and has produced a new territorial order in China.

In this presentation, I will develop this thesis further, and examine the shifting ideological and material basis of local state's modernization and power consolidation projects in post-Mao China: from Industrialism (featuring small- and medium-sized rural industries; and cadre performance is measured by industrial outputs) in the 1980s, to urbanism (featuring commercial and residential development in the urban fringe and inner city renewal, and cadre performance is measured by property value) from the 1990s to mid-2000s, to culturalism (featuring reconstruction of histories, cultures and "green" environment, and cadre performance is measured by place promotion) since the mid 2000s. The local state is not only urbanized, but also culturalized.

LIU Heng, Doreen, Make-The-Most-Of-It Urbanism: Moment of Design Practice in "Public-ness"

When urban forms and conditions are determined by a unidirectional-'top-down' process rapidly; it will always encounter an opposition that attempts to resist it slowly but firmly. This opposition survives through multiple adaptations and in many forms, and even strives to make-the-most-of-it, boldly and openly. This has been an urban reality in the Pearl River Delta, and perhaps throughout the rest of China in the past 30 years. Its urbanization grows out from both processes in juxtaposition, which continue to interweave and thrive, perhaps not yet in balance and harmony. Ultimately, as architects, we have to learn from these conditions, and use design as a tool to exploit, weigh and re-configure them as a viable and vital inter-counterpoint urbanism in totality.

Design of Public-ness, we consider on the one hand, is a means of counter-collision and a key counter-balance to complement the two processes; on the other hand, is an attitude and core value of our design practice. As a participating effort to bridge (or harmonize) the gap between top-down and bottom-up, for sure it will offer alternative urban scenarios for the PRD and China in another round of urbanization of the forthcoming 30 years.

Session 4: The commons and nature

Li Shiqiao, Surrogating Nature

The environmental damage is among the most excessive negative externalities in the Chinese urbanization process. One constituent of a greater cultural embeddedness in economic activities in China may be a distinct cultural production of "surrogated nature" and "non-nature"; both surrogated nature and non-nature present obvious advantages to efficient commerce. The key strategy in this cultural production lies in the idea of a protected and figurated "nature" – an exquisite artificiality replacing its infinitely more expansive and dangerous original, reducing it into a non entity – which seems to be apparent in the private gardens in Suzhou and in the imperial gardens in Beijing. Increasingly, this nature is reproduced in China, with additional features emanating from gardening traditions in other parts of the world, in gated communities whose grounds are covered with lavish and gratuitous landscape designs. This traditional cultural practice simultaneously intensifies the cultivation and extravagance of surrogated nature, and allows careless discharges into non-nature.

Wang Min'an, Professor, City & Rubbish

Previously the boundary of the city was usually the city wall or the moat; nowadays the boundary of the city takes the form of an indistinct rubbish patch. The characteristic of modern society is the spectacular expansion of commodity, and the ultimate destiny of commodity is rubbish. Therefore, rubbish expands in modern cities together with commodity. Modern shopping centers and rubbish mountains echo each other inside and outside the city. Things assume the forms of commodity and rubbish in time sequence, and go through shopping malls and rubbish mountains in spatial scope accordingly. The transforming process from commodity to rubbish is both the consumed process of things and the quietly transported process of rubbish from inside to outside the city. All of the rubbish is disposed secretly and covered by the city. Therefore, in some sense city is also a set of machine that unceasingly produces and buries rubbish.

Session 5: Inter-disciplinarity – sociology, economics, urbanism

Jakob Arnoldi, Professor, Vice Dean, Aarhus School of Business, Aarhus University, Denmark, Local or central state capitalism?

The importance of social ties is much emphasized in literature on China, both in anthropological accounts of a culture rooted in Confucianism, in accounts of the system of patronage in the communist party and government, and in economic accounts of how networks reduce the uncertainties of a weak economic institutional framework.  The presentation will sketch out these accounts of networks with the aim of demonstrating how accounts of the importance of networks for economic activities are split between accounts emphasizing the importance of ties to local government and ties to central government respectively. The presentation will close with some preliminary results of an analysis of the performance of approx. 1700 Chinese companies, focusing specifically on possible correlations between economic performance and government ties of the two mentioned sorts.