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Greenspan says China puts boon at risk
2007-09-18
Former Federal Reserve Chairman Alan Greenspan has great praise in his new book for China's economic boom but warns that Chinese leaders' refusal to loosen their restrictions on political, social and other activities put the success at risk. "The economy remains rigid and I fear would not be able to absorb debilitating shocks as the United States did following 9/11," Greenspan wrote. In "The Age of Turbulence," Greenspan wrote that the Chinese system has produced a line of diminished political power for each successive supreme leader since Mao Zedong. "At the end of this road of ever-lessening power is the democratic welfare state of Western Europe," Greenspan wrote. Along that road, however, are many obstacles that conspire to keep China from the developed economy of most European countries, he wrote: a hidebound old guard; an immense rural population that is largely forbidden to move to where jobs are; clunky Soviet-style economic procedures in many fields; and, above all, lack of political freedom. Political freedom, Greenspan wrote, "may not be needed for markets to function in the short run, but is an important safety valve for public distress about injustice and inequity." He gives as proof the hiatus of several years between the boom that accompanied the 1980s reform years of Deng Xiaoping, Mao's successor, and the reinvigoration that continues today. Greenspan, who as head of the nation's central bank presided over the booming U.S. economy of the 1990s, blamed China's post-Deng slowdown primarily on misguided exchange rate policies and domestic restrictions on movement of people. And he cited potential danger in that. "Bottling up the frustrations imposed on the average person in rural areas, where the majority of the population still resides, is a recipe for insurrection," Greenspan wrote. Without the "safety valve of democracy," he wrote, "aggrieved people who do not have the option to vote officials out of office tend to rebel." Greenspan wrote that China modeled its economic overhaul on the smaller Asian states that became known as the Asian Tigers for the robust economies they built out of the ruin of World War II and the wars in Korea and Vietnam. They "tested and perfected the economic model China has chosen to pursue," Greenspan wrote. He said most instructive to the Chinese were the resurgent economies of Hong Kong, now a special administrative district of China, and Taiwan, South Korea and Singapore. "Their model is simple and effective," he wrote. They began from economies based on almost subsistence levels of per capita gross domestic product, then opened their doors to foreign investors who could tap an inexpensive, often educated work force. By following those examples, China's exports rose from $18 billion in 1980 to $970 billion in 2006. That represents a growth rate of close to 17 percent a year.
China set for 30 years more years of fast growth: World Bank's Lin (2008-03-07)Chinese professor named World Bank chief economist (2008-02-05)Greenspan says China puts boon at risk (2007-09-18)China's leaders tug strings of power in retirement (2007-09-14)China's Hu tests power at Communist congress (2007-09-05)
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