Sundry Comments

Thomas Greenes had suggested that: "I agree that there are important issues beyond trade and investment between China and the U.S. However, one important feature of voluntary trade and investment is that both parties can gain even if they disagree on political, military, religious, and other issues. On the alleged persistence of neo-Confucian principles employed by Chinese leaders, how can one explain the enormous differences in economic policies and economic results carried out by Mao Zedong versus later reformers from Deng to Xi Jinping? The persistence is in the one-party state, but how can one ignore policy innovations that have taken millions of Chinese out of poverty? "

CPDS Reply: One problem with voluntary trade and investment without considering the differences in the way these are domestically organised is that significant overall distortions can emerge. For example, the neo-Confucian systems of socio-political-economy that are deployed in countries such as Japan and China involve allocating national savings to nationalistically-motivated activities without taking a lot of notice of return on capital (see evidence). This has: (a) constituted a hidden form of industrial protectionism; and (b) seriously distorted the international financial system in ways that could now prove catastrophic (see also Fasten Seat Belts: Rough Weather Ahead ).

Another problem is that those who engage in voluntary trade and investment without understanding the nature of the ‘market’ economies they are dealing with are likely to be confronted with much more than they are ever aware of (see Babes in the Asian Woods).

I would not suggest that there has been any persistence of neo-Confucian influences in China. Mao’s Cultural Revolution was specifically targeted at eliminating Confucianism because he saw it as the way in which Chinese people had been oppressed. And recognition that China’s economic miracles were orchestrated by the secret reintroduction of a modified form of Confucianism is the basis for much of the political instability in China today – because China’s people still value the social equality of the Mao era (eg consider Bo Xilia’s efforts to build an alternative power base on that dissatisfaction).

Fingleton has suggested plausibly that Japan introduced the methods that had been the basis of its post-war economic miracles to China in the late 1970s. Those methods were neo-Confucian (which is somewhat different to‘Confucian’), though what is going on is anything but easy for outsiders to understand (see Why Understanding is Difficult).

I have been able to understand to some extent because of: a background in senior-level bureaucracy; practical experience in the use of methods of strategic management (which involve accelerating system-wide learning / development) in both organizational and a market contexts; an opportunity to study both international debates about economic strategy and the intellectual basis of Japan’s economic miracles in depth; and close association with a former DFAT China specialist who was arguable the first Western analyst to predict China’s rapid economic advancement (in Beijing in 1976) – and who continues to lecture me about the supposed superiority of Confucian intellectual traditions (eg along the lines outlined in Competing Thought Cultures ).