China in the World Economy

1
China in the World Economy

• Tim Wright
• University of Sheffield

2
Introduction

• Question
• Was China harmed by its involvement with foreign
  trade and investment in the 19th and early 20th
  Century?

3
Disclaimer

• Emphasise
• Dont deny negative influence of e.g.
  indemnities, such as Boxer indemnity

4
Disclaimer

• Emphasise
• Dont deny negative influence of e.g.
  indemnities, such as Boxer indemnity
• Dont deny some loss of political sovereignty

5
Disclaimer

• Emphasise
• Dont deny negative influence of e.g.
  indemnities, such as Boxer indemnity
• Dont deny some loss of political sovereignty
• But relevant question for today
• Effect of participation in global trade and
  investment flows

6
Possible Harmful Effects

• Destruction of Chinas handicraft industries,
  especially cotton textiles
• Leading to impoverishment of peasantry

7
Possible Harmful Effects

• Destruction of Chinas handicraft industries,
  especially cotton textiles
• Leading to impoverishment of peasantry
• Prevention of emergence of modern industry
• Through unfair competition

8
Raise three issues

• Economics not the same as politics

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Raise three issues

• Economics not the same as politics
• Issue of unit of analysis
• Sectoral and temporal

10
Raise three issues

• Economics not the same as politics
• Issue of unit of analysis
• Sectoral and temporal
• Issue of implied counterfactual hypothesis

11
Economics not the same as politics

• Political loss of sovereignty
• not the same as harmful economic effect, e.g. on
  GDP or living standards

12
Economics not the same as politics

• Political loss of sovereignty
• not the same as harmful economic effect, e.g. on
  GDP or living standards
• Outrageous example

13
Kailuan coal mines

• Illegal, basically criminal, take-over by foreign
  (British and Belgian) interests

14
Kailuan coal mines

• Illegal, basically criminal, take-over by foreign
  (British and Belgian) interests
• BUT
• Was output lower than it would have been under
  Chinese control?

15
Kailuan coal mines

• BUT
• Was output lower than it would have been under
  Chinese control?
• Were wages and conditions worse than they would
  have been under Chinese control?

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Kailuan coal mines

• BUT
• Was output lower than it would have been under
  Chinese control?
• Were workers wages and conditions worse than
  they would have been under Chinese control?
• Not even clear that Chinese shareholders incomes
  lower than they would have been under Chinese
  control

17
Kailuan coal mines

• Not arguing either way, except
• Even outrageous and criminal swindle not
  necessarily, in any quantifiable way, harmful

18
Unit of Analysis

• Fundamentally
• Some lose out in economic change
• But some gain
• Need to look at both sides

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Unit of Analysis

• Fundamentally
• Some lose out in economic change
• But some gain
• Need to look at both sides
• Here look at example of textile industries

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Textile industries

• Losers
• Cotton spinners
• Replaced by factory yarn

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Textile industries

• But winners
• Weavers
• So part of loss of employment in hand spinning
  made up by hand weaving

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Textile industries

• But winners
• Weavers
• So part of loss of employment in hand spinning
  made up by hand weaving
• Consumers
• Enjoy cheaper and (probably) better quality
  textiles

23
Edgar Snow on Japanese Goods

• Many Chinese necessary purchase entirely on a
  price basis, and here few native products can
  compete with the foreign article usually better
  in quality, also. The price margin is decisive
  for the average impoverished Chinese and the
  ingredient of patriotism cannot enter into it at
  all. It is generally a question of buying
  Japaneseor not buying!

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Textile industries

• But winners
• Weavers
• Consumers
• People in other industries who gain from
  international trade

25
Textile industries

• People in other industries who gain from
  international trade
• Alvin Sos calculations
• 58600 jobs lost among Guangdong cotton spinners
  during 1870s

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Textile industries

• People in other industries who gain from
  international trade
• Alvin Sos calculations
• 58600 jobs lost among Guangdong cotton spinners
• BUT 59400 jobs gained by farmers working in silk
  export industry

27
Textile industries

• One final point
• Silk industry
• Need to balance
• Decades of prosperity in Jiangnan and Guangdong
  because of silk exports

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Textile industries

• One final point
• Silk industry
• Need to balance
• Decades of prosperity in Jiangnan and Guangdong
  because of silk exports
• Poverty and misery portrayed by Fei Xiaotong in
  the context of the Great Depression

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Textile industries

• One final point
• Silk industry
• Need to balance
• Decades of prosperity in Jiangnan and Guangdong
  because of silk exports
• Poverty and misery portrayed by Fei Xiaotong in
  the context of the Great Depression
• No single right answer, but need to look at both
  sides

30
Textile industries

• Should not just focus on losers, also look at
  winners

31
Implied Counterfactual Hypothesis?

• If talk about impact e.g. of foreign trade.
• NOT an issue of what happened after growth of
  foreign trade in comparison with what happened
  before

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Implied Counterfactual Hypothesis?

• If talk about impact e.g. of foreign trade.
• NOT an issue of what happened after growth of
  foreign trade in comparison with what happened
  before
• BUT of comparing what happened with foreign trade
  with what would have happened in some situation
  without foreign trade.

33
Implied Counterfactual Hypothesis?

• What that situation would have been is a very
  complex question.
• Just time for one example

34
Implied Counterfactual Hypothesis?

• Pomeranz
• Area along Grand Canal declined because Chinese
  governments attention diverted to coastal areas
  by imperialist aggression

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Implied Counterfactual Hypothesis?

• Pomeranz
• Area along Grand Canal declined because Chinese
  governments attention diverted to coastal areas
  by imperialist aggression
• Therefore decline of those areas the result of
  imperialism

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Implied Counterfactual Hypothesis?

• BUT
• In what situation would what kind of Chinese
  government not have switched their attention to
  the coast?

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Implied Counterfactual Hypothesis?

• Argument
• Any Chinese government involved in articulating
  with world and world economy would inevitably
  focus on the coast at the cost of the interior.
• For example reform government under Deng Xiaoping

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Implied Counterfactual Hypothesis?

• So, what if they had cut themselves off from the
  world economy?

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Implied Counterfactual Hypothesis?

• So, should they have cut themselves off from the
  world economy?
• BUT, this also involves very serious costs

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Implied Counterfactual Hypothesis?

• So, should they have cut themselves off from the
  world economy?
• BUT, this also involves very serious costs
• Costs of Chinas small involvement in foreign
  trade under Mao

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Implied Counterfactual Hypothesis?

• So, should they have cut themselves off from the
  world economy?
• BUT, this also involves very serious costs
• Costs of Chinas small involvement in foreign
  trade under Mao
• Costs of Third Front investment

42
Implied Counterfactual Hypothesis?

• Again, no easy answer.
• But need to examine
• Plausibility of counterfactual hypothesis (could
  China have remained isolated in any
  circumstances)_
• And cost of alternative (costs of isolation)

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Conclusion

• No easy answer either way
• Core argument
• Cannot approach this problem on basis of isolated
  examples of losers (or of winners) from world
  economy
• This as true nowadays with globalisation as in
  the 19th and early 20th centuries