19
Jul

By Fareed Zakaria

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Does authoritarian capitalism work? For the past few decades, the Chinese economy’s meteoric rise, faster than any large economy in human history, has dazzled the world. It has made many wonder if China’s model of a pro-growth dictatorship is the best path for developing countries. Some have questioned whether Western democracies — with their dysfunctions and paralysis — can compete with China’s long-range planning. Now, as its growth slows to almost half its pace in 2007, the Chinese system faces its most significant test. The outcome will have huge economic consequences for the world and huge political consequences for China and its ruling Communist Party.

Over three decades, China’s growth has averaged 10 percent a year. Beijing managed that because it systematically opened up its economy to trade and investment while investing massively in infrastructure to facilitate manufacturing and exports. Crucially, China had the ability not to pander to its people to gain votes or approval. Unlike most developing nations, China spends little subsidizing current consumption (fuel and food, for example). It spends its money on export-free zones, highways, rail systems and airports. It is investing in education and soon will turn to health care. No developing democracy has been able to ignore short-term political pressures and execute a disciplined growth strategy with such success.

But the model is no longer working that well. Partly, this is the product of success. China has become the world’s second-largest economy; its per capita income is that of a middle-income country. It cannot grow at the pace it did when it was much poorer.

But growth has dropped faster and deeper than many had predicted. This month, the International Monetary Fund forecast China’s annual growth around 7.75 percent for the next two years. But it could slow further because, the truth is, China’s authoritarian system has made significant mistakes in recent years. Read more…

As published in www.washingtonpost.com on July 18, 2013.

Comments

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change its economic course? | International Relations Blog
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rabaty August 31, 2013 - 4:07 pm

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