The Pakatan Harapan Cabinet

April 9, 2018

The Pakatan Harapan Cabinet

Malaysia will have 2 Deputy Prime Minister if Pakatan Harapan  takes over Putrajaya after GE-14. Malaysians are wondering what will be the fate of Najib Razak and his bunch of Ministers and top civil servants who spent nearly 10 years buttering up their corrupt boss.–Din Merican

Future Prosperity of Greater Mekong Subregion (GMS) through Cooperation

April 9, 2018

Future Prosperity of Greater Mekong Subregion (GMS) through Cooperation

by Takehiko Nakao

The Greater Mekong Subregion (GMS) countries have made stunning progress over the past quarter century. Once plagued by poverty, they are now economic success stories.

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Phnom Penh–The Hub of Greater Mekong Subregion, Cambodia


The GMS Economic Cooperation Program has contributed significantly to this transformation. Since it was established in 1992 as a means to enhance economic relations and promote regional cooperation, its six member countries—Cambodia, the People’s Republic of China, Lao People’s Democratic Republic, Myanmar, Thailand, and Viet Nam—have built a platform for economic cooperation that has mobilized almost $21 billion for high-priority infrastructure projects. Foreign direct investment into the subregion has surged ten-fold and trade between its countries has climbed from $5 billion to over $414 billion.

But the subregion faces challenges to its prosperity. Further reducing poverty, climate change adaptation and mitigation, energy efficiency, food security, and sustainable urbanization remain priorities of the GMS Program. Countries also face new challenges, including growing inequalities, rising levels of cross-border migration, and the potential impact on jobs of the fourth industrial revolution.

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Tsubasa Bridge ( Neak Loeung ),Cambodia

Moreover, GMS countries have agreed to significant commitments under the Sustainable Development Goals and the Paris Agreement on climate change.

There are also emerging opportunities for the region, including incorporating new technologies in various sectors such as education, agriculture, health, and finance. GMS countries are situated at the crossroads of South and Southeast Asia, and hence they can benefit from the increased momentum for growth in South Asia.

As GMS leaders gather this week in Hanoi to chart the future of the program, it’s a good time to consider how a new generation of initiatives can ensure the GMS Program remains relevant and responsive to the subregion’s needs.

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The Hanoi Action Plan and the GMS Regional Investment Framework 2022, both proposed for adoption at the Summit, provide a platform for countries to strengthen their cooperation through continuous innovation. These two documents will have a sharpened focus on the GMS Program’s strategic goals of enhancing connectivity, competitiveness, and community in the subregion.

Connectivity, the first objective, has been dramatically improved. More than 10,000 kilometers of new or upgraded roads and 3,000 kilometers of transmission and distribution lines have been added under the program. These transport networks have been transformed into an interconnected network of transnational economic corridors, building on 25 years of work to extend the benefits of growth to remote areas. The Ha Noi Action Plan calls for the continued expansion of these economic corridors to boost connectivity both between and within countries.

The subregion’s competitiveness is improving through ongoing efforts to facilitate transport and trade flows, enhance agriculture exports, and promote the GMS as a single tourism destination after receiving a record 60 million visitors in 2016. Looking ahead, it will be important to continue cutting red tape and to remove remaining barriers to transport and trade.

Finally, communities are being strengthened through cross-border initiatives to control the spread of communicable diseases, expand educational opportunities, protect the subregion’s rich biodiversity, and mitigate the impacts of climate change.

GMS countries have identified a new pipeline of 227 projects worth about $66 billion under the GMS Regional Investment Framework 2018–2022. These projects will expand economic prosperity by developing cross-border transport and energy infrastructure.

ADB, which has been the program’s secretariat since its inception, expects to provide $7 billion over the next 5 years for a range of projects supporting transport, tourism, energy, climate change mitigation and adaptation, agribusiness value chains, and urban development. This builds on more than $8 billion in financing provided by ADB so far under the program.

To deliver these projects and make headway on other priorities such as infectious disease control and environmental preservation, strong partnerships are vital. The GMS Program depends on the collaboration of many stakeholders, including local administrations and communities, development partners, academia, and the media.

The GMS will benefit from strengthened partnerships with other regional and global cooperation platforms, leading to new opportunities for future development.

Partnerships with the private sector will also be increasingly important, and it is gratifying to see them deepening through the GMS Business Council, the Mekong Business Initiative, the e-Commerce Platform, GMS tourism and agriculture forums, and the recent Finance Sector and Trade Finance Conference.

I am optimistic that the subregion will meet its challenges and capitalize on emerging opportunities. By working together, GMS countries can deliver rapid, sustainable, and inclusive growth for another 25 years and beyond. ADB will continue to be an important and trusted partner in that endeavor.

GE-14: Barisan Nasional Election Manifesto Launched–For a Greater Malaysia

April 8, 2018

GE-14: Barisan Nasional Election Manifesto Launched–For a Greater Malaysia

by Azril Annuar

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Barisan Nasional (BN) has launched its manifesto for the upcoming elections, on the same day that the Parliament was dissolved by its Chairman Datuk Seri Najib Razak yesterday.

The manifesto themed “With BN for a Greater Malaysia” offered 14 major points, with special focus creating three million jobs and developing affordable homes to help Malaysians tackle rising costs of living, and to uplifting women’s rights and role in economy.

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Here are some highlights from the document:

1. Job creation

 Nearly half of the expected job creation shall come from expediting the development of Malaysian Vision Valley where an expected 1.3 million jobs shall be made available, while at the same time reducing the reliance on foreign workers.


The coalition has also promised to create another 10,000 jobs within the social entrepreneurship sector through special funds that will be channeled from government linked companies.

In order to create more high-skilled job opportunities, BN also planned to focus on developing more high tech industries while accelerating the downstream oil and gas sector. At the same time more sustainable industrial zones may be created to provide new investment opportunities.

To counter rising debt among Malaysian youths, financial literacy programmes may be expanded and financial literacy modules may be introduced in secondary schools.

2. Affordable homes

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Under the 1Negaraku Homes segment, BN planned on ensuring that almost all Malaysians can have the opportunity to become homeowners by creating a special bank to manage affordable housing loans and low-cost homes worth RM300,000 and below.

To ensure quality for affordable homes, BN shall make it compulsory for these homes to have a key performance index, while a sole entity to standardise all initiatives for affordable housing may be created.

The coalition also promised to develop more affordable houses on unused Malay reserve lands, land donated for Islamic purposes, and buildings owned by Baitulmal welfare bodies.

Landlords can also rejoice as tax exemptions may be granted for residential units that are rented out.

Barisan Nasional supporters arrive at the Axiata Arena before chairman Datuk Seri Najib Razak launches the party manifesto in Bukit Jalil April 7, 2018. — Picture by Mukhriz Hazim

3. Uplifting women’s rights and economic activities

BN also wanted to expand women’s role in the economy through various means. Chief among them is establishing Women Economic Council — chaired by the prime minister himself — to focus on women’s economic agenda.

It shall also create a Women Entrepreneur Transformation Centre to expand their business network while easing microcredit loans and loan processes for women entrepreneurs, including the creation of a women’s cooperative.

From a legislative perspective, the coalition seeks to protect women at the workplace by drafting a new Sexual Harassment Act, the creation of a Special Marriage, Hadhanah and Nafkah Court beginning with the Federal Territories and the National Shariah Judiciary Council chaired by the prime minister to discuss and standardise Shariah laws.

4. Sabah and Sarawak

Infrastructure development in Sabah and Sarawak shall receive an immense boost should BN come away victorious with a RM2 billion investment in telecommunications to increase coverage.

Another RM2.3 billion may also be channeled to expand electricity coverage while 12,500 km rural roads may be upgraded.

To ease cost of living there, BN wanted to standardise prices in Peninsular Malaysia, Sabah and Sarawak by eliminating price according to territory and implement a “One Nation One Price” scheme.

Security is also a focus as it planned to increase security forces within the East Sabah Security Zone as well as tightening border securities on land.

5. Transportation of the future

Public transportation has taken a priority in BN’s agenda as it planned on introducing an unlimited monthly pass worth RM50 to RM150 called TN50 Public Transportation Pass for students, working youth, senior citizens and the disabled community.

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This pass can also be used on the 42-km Klang Valley Double Track which shall be upgraded. The quality of shuttle bus services shall also be upgraded.

Rural transportation shall be receiving a major boost with planned upgrade works on 422km roads in Felda territories, constructing and upgrade 830km of estate roads and upgrade works on 623-km roads along paddy fields to ease the transportation of rice.

Barisan Nasional chairman Datuk Seri Najib Razak speaks during the launch of Barisan Nasional manifesto at Axiata Arena in Bukit Jalil on April 7, 2018. — Picture by Yusof Mat Isa

6. Improving the digital landscape

To improve Malaysia’s digital landscape, BN planned on among others developing an online application to eradicate corruption within the civil service.

Transparency shall also be strengthened through the introduction of an online public petition coupled with the live telecasts of local council meetings, public viewing of local council audits and scheduled Town Hall meetings between local councils and the public.

Complaints to local authorities can also be lodged through the introduction of the iKepoh app on smart phones, to be investigated by a newly created position of Ombudsman who are also tasked to look into injustices and weaknesses found in ministries, departments and government agencies.

Within the next five years, BN also planned on creating one million digital entrepreneurs to increase the digital economy so it may contribute 25 per cent of the gross domestic product by 2023.

7. Malaysian products

BN has plans to turn the halal economy as a driving force for national economic growth with a RM1 billion allocation into the Halal Development Fund.

Urban poverty is expected to be addressed through the development of business centres, food trucks and urban agriculture.

The creative industry’s potential as a new source of national income shall be realised by expanding the platforms and funds for the industry players.

8. A brand new BR1M

To increase the efficiency of 1Malaysia People’s Aid (BR1M, BN planned to set up a platform bridging all government ministries, departments and agencies to ensure all Bottom-40 registered individuals are not left out.

The children of those currently receiving BR1M, who are in tertiary educational and vocational institutes, shall also receive aid amounting to RM1,500.

BR1M will be improved by ensuring those receiving aid will have immunised their children and must be engaged in vocational and skills training.

9. The people’s wallet

One of the initiatives BN wanted to introduce to assist the public meet the rising cost of living, the coalition has recognised calls from various parties to raise the minimum wage of workers from the current RM1,000 to RM1,500 gradually over the next five years.

For the Felda smallholder, the manifesto aimed to do away with debts owed for replanting efforts, debts accumulated during the replanting process and the purchase of Felda Global Ventures shares, with access to a special grant.

The manifesto also sought to better protect farmers against crop damage resulting from the monsoon season to crops for rubber smallholders and increasing the Rubber Production Incentive.

10. A suitable education for the future

To meet the demands of the industrial revolution, BN planned on training five million students with skills to survive in the Digital Industry Revolution 4.0, while aiming to reduce teachers’ workload by investing in better classroom equipment.

Dormitory capacities for rural students shall also be increased while an allocation of RM12 million would benefit 615,000 students under a special rural education programme.

Islam and the arts shall not be left behind with the establishment of the so-called Quran University and upgrading Akademi Seni Budaya dan Warisan Kebangsaan (Aswara) to University of P. Ramlee, respectively.

11. Healthy lifestyle

To ensure that rural folks will have access to medicine, the manifesto promised to increase the services of Klinik 1Malaysia.

Income tax exemption for parental healthcare shall also be increased. BN also plans on improving health and dental care for senior citizens and bedridden patients through house to house visits by medical professionals.

Healthcare management shall also be made easier through an online system.

12. Creating a peaceful 1Nation

This manifesto shall also see more crime deterrant measures by installing more high-definition CCTVs in crime hotspots and increasing the numbers of Rakan Cop and auxiliary police in residential neighbourhoods while also expanding the role of Rela volunteer corps.

In order to face the seasonal floods plaguing the nation, a total of RM8.57 billion shall be allocated on flood preparation and mitigation programmes which can benefit nearly 1.5 million Malaysians.

Another RM100 million may be allocated to install more street lamps in rural areas while a fund worth RM150 million may be made ready for maintenance, repair and replacement of faulty rural streetlamps.

13. National Transformation 2050 (TN50)

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The manifesto also promised to ensure that Malaysian youths below 30 are employable within six months through appropriate training.

This include the Apprenticeship Malaysia programme to increase graduate employability in five pioneering industries. A three to six months TVET Bootcamp drafted together with potential employers is also expected to create another 50,000 job opportunities.

Orang Asli youths shall also be trained with the skill set to take advantage of the green industry and environmental care.

14. Universal childcare

A Universal Childcare Policy shall be implemented and a curriculum formulated to train professional caretakers. The training may include children’s nutrition.

Acknowledging the recent report of malnourished children among impoverished families, BN has plans to uplift the nutritional status of these children who are between six months to six years old.

Newborns shall also benefit from an increase in free ADAM50 unit trust to ensure that they have a better future.

Inequality in the 21st Century

March 19, 2018

Inequality in the 21st Century

by Kaushik Basu

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As inequality continues to deepen worldwide, we do not have the luxury of sticking to the status quo. Unless we confront the inequality challenge head on – as we have just begun to do with another existential threat, climate change – social cohesion, and especially democracy, will come under growing threat.

At the end of a low and dishonest year, reminiscent of the “low, dishonest decade” about which W.H. Auden wrote in his poem “September 1, 1939,” the world’s “clever hopes” are giving way to recognition that many severe problems must be tackled. And, among the severest, with the gravest long-term and even existential implications, is economic inequality.

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The alarming level of economic inequality globally has been well documented by prominent economists, including Thomas Piketty, François Bourguignon, Branko Milanović, and Joseph E. Stiglitz, and well-known institutions, including OXFAM and the World Bank. And it is obvious even from a casual stroll through the streets of New York, New Delhi, Beijing, or Berlin.

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Voices on the right often claim that this inequality is not only justifiable, but also appropriate: wealth is a just reward for hard work, while poverty is an earned punishment for laziness. This is a myth. The reality is that the poor, more often than not, must work extremely hard, often in difficult conditions, just to survive.

Moreover, if a wealthy person does have a particularly strong work ethic, it is likely attributable not just to their genetic predisposition, but also to their upbringing, including whatever privileges, values, and opportunities their background may have afforded them. So there is no real moral argument for outsize wealth amid widespread poverty.

This is not to say that there is no justification for any amount of inequality. After all, inequality can reflect differences in preferences: some people might consider the pursuit of material wealth more worthwhile than others. Moreover, differential rewards do indeed create incentives for people to learn, work, and innovate, activities that promote overall growth and advance poverty reduction.

But, at a certain point, inequality becomes so severe that it has the opposite effect. And we are far beyond that point.

Plenty of people – including many of the world’s wealthy – recognize how unacceptable severe inequality is, both morally and economically. But if the rich speak out against it, they are often shut down and labeled hypocrites. Apparently, the desire to lessen inequality can be considered credible or genuine only by first sacrificing one’s own wealth.

The truth, of course, is that the decision not to renounce, unilaterally, one’s wealth does not discredit a preference for a more equitable society. To label a wealthy critic of extreme inequality as a hypocrite amounts to an ad hominem attack and a logical fallacy, intended to silence those whose voices could make a difference.

Fortunately, this tactic seems to be losing some of its potency. It is heartening to see wealthy individuals defying these attacks, not only by openly acknowledging the economic and social damage caused by extreme inequality, but also by criticizing a system that, despite enabling them to prosper, has left too many without opportunities.

In particular, some wealthy Americans are condemning the current tax legislation being pushed by Congressional Republicans and President Donald Trump’s administration, which offers outsize cuts to the highest earners – people like them. As Jack Bogle, the founder of Vanguard Group and a certain beneficiary of the proposed cuts, put it, the plan – which is all but guaranteed to exacerbate inequality – is a “moral abomination.”

Yet recognizing the flaws in current structures is just the beginning. The greater challenge is to create a viable blueprint for an equitable society. (It is the absence of such a blueprint that has led so many well-meaning movements in history to end in failure.) In this case, the focus must be on expanding profit-sharing arrangements, without stifling or centralizing market incentives that are crucial to drive growth.

A first step would be to give all of a country’s residents the right to a certain share of the economy’s profits. This idea has been advanced in various forms by Marty Weitzman, Hillel Steiner, Richard Freeman, and, just last month, Matt Bruenig. But it is particularly vital today, as the share of wages in national income declines, and the share of profits and rents rises – a trend that technological progress is accelerating.

There is another dimension to profit-sharing that has received little attention, related to monopolies and competition. With modern digital technology, the returns to scale are so large that it no longer makes sense to demand that, say, 1,000 firms produce versions of the same good, each meeting one-thousandth of total demand.

A more efficient approach would have 1,000 firms each creating one part of that good. So, when it comes to automobiles, for example, one firm would produce all of the gears, another producing all of the brake pads, and so on.

Traditional antitrust and pro-competition legislation – which began in 1890 with the Sherman Act in the US – prevents such an efficient system from taking hold. But a monopoly of production need not mean a monopoly of income, as long as the shares in each company are widely held. It is thus time for a radical change, one that replaces traditional anti-monopoly laws with legislation mandating a wider dispersal of shareholding within each company.

These ideas are largely untested, so much work would need to be done before they could be made operational. But as the world lurches from one crisis to another, and inequality continues to deepen, we do not have the luxury of sticking to the status quo. Unless we confront the inequality challenge head on, social cohesion and democracy itself will come under growing threat.

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*Kaushik Basu, former Chief Economist of the World Bank, is Professor of Economics at Cornell University and Nonresident Senior Fellow at the Brookings Institution.

NY Times Book Review: Steven Pinker’s Latest Book, Enlightenment Now

March 4, 2018

NY Times Book Review: Steven Pinker’s Latest Book, Enlightenment Now

The Case for Reason, Science, Humanism, and Progress
By Steven Pinker
556 pp. Viking. $35.

Optimism is not generally thought cool, and it is often thought foolish. The optimistic philosopher John Stuart Mill wrote in 1828, “I have observed that not the man who hopes when others despair, but the man who despairs when others hope, is admired by a large class of persons as a sage.” In the previous century, Voltaire’s “Candide” had attacked what its author called “optimism”: the Leibnizian idea that all must be for the best in this best of all possible worlds. After suffering through one disaster after another, Candide decides that optimism is merely “a mania for insisting that all is well when things are going badly.”

Yet one might argue (and Steven Pinker does) that the philosophy Voltaire satirizes here is not optimism at all. If you think this world is already as good as it gets, then you just have to accept it. A true optimist would say that, although human life will never be perfect, crucial aspects of it can improve if we work at it, for example by refining building standards and seismological predictions so that fewer people die in earthquakes. It’s not “best,” but it is surely better.

This optimist’s revenge on “Candide” is one of the passing pleasures in “Enlightenment Now,” Pinker’s follow-up to his 2011 book “The Better Angels of Our Nature.” The earlier work assembled banks of data in support of his argument that human life is becoming, not worse as many seem to feel, but globally safer, healthier, longer, less violent, more prosperous, better educated, more tolerant and more fulfilling. His new book makes the same case with updated statistics, and adds two extra elements. First, it takes into account the recent rise of authoritarian populism, especially in the form of Donald Trump — a development that has led some to feel more despairing than ever. Second, it raises the polemical level with a rousing defense of the four big ideas named in the subtitle: progress, reason, science and humanism — the last being defined not mainly in terms of non-theism (though Pinker argues for that, too), but as “the goal of maximizing human flourishing — life, health, happiness, freedom, knowledge, love, richness of experience.” Who could be against any of that? Yet humanism has been seen in some quarters as unfashionable, or unachievable, or both. Pinker wants us to take another look.

Much of the book is taken up with evidence-based philosophizing, with charts showing a worldwide increase in life expectancy, a decline in life-shattering diseases, ever better education and access to information, greater recognition of female equality and L.G.B.T. rights, and so on — even down to data showing that Americans today are 37 times less likely to be killed by lightning than in 1900, thanks to better weather forecasting, electrical engineering and safety awareness. Improvements in health have bettered the human condition enormously, and Pinker tells us that his favorite sentence in the whole English language comes from Wikipedia: “Smallpox was an infectious disease caused by either of two virus variants, Variola major and Variola minor.” The word “wasis what he likes.


Credit Alessandra Montalto/The New York Times

He later adds that he could have ended every chapter by saying, “But all this progress is threatened if Donald Trump gets his way.” Trumpism risks knocking the world backward in almost every department of life, especially by trying to undo the international structures that have made progress possible: peace and trade agreements, health care, climate change accords and the general understanding that nuclear weapons should never be used. All this is now in question. Pinker is particularly sharp on the dangers of ignoring or overriding the systems that make nuclear war unlikely.

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This book will attract some hammering itself: It contains something to upset almost everyone. When not attacking the populist right, Pinker lays into leftist intellectuals. He is especially scathing about newspaper editorialists who, in 2016, fell over themselves in their haste to proclaim the death of Enlightenment values and the advent of “post-truth.” His (rather too broadly painted) targets include humanities professors, postmodernists, the politically correct and anyone who has something nice to say about Friedrich Nietzsche. “Progressive” thinkers seem to consider progress a bad thing, he claims; they reject as crass or naïve “the notion that we should apply our collective reason to enhance flourishing and reduce suffering.”

In fact, there may already be signs of a change in mood, with chirps of optimism being heard from varied directions. The musician David Byrne has just launched a web project entitled “Reasons to Be Cheerful,” celebrating positive initiatives in the realms of culture, science, transportation, civic engagement and so on. Quartz, a business journalism site, ended 2017 with a list of 99 cheerful links to the year’s good news: snow leopards being taken off the endangered species list; a province in Pakistan planting a billion trees over the last two years as a response to the 2015 floods; a dramatic fall in sufferers from the hideous Guinea worm (from 3.5 million in 1986 to just 30 in 2017); and a slow but steady increase in women holding parliamentary seats worldwide, from 12 percent in 1997 to 23 percent now.

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Bertrand Russell once pointed out that maintaining a sense of hope can be hard work. In the closing pages of his autobiography, with its account of his many activist years, he wrote: “To preserve hope in our world makes calls upon our intelligence and our energy. In those who despair it is frequently the energy that is lacking.” Steven Pinker’s book is full of vigor and vim, and it sets out to inspire a similar energy in its readers.

He cites one study of “negativity bias” that says a critic who pans a book “is perceived as more competent than a critic who praises it.” I will just have to take that risk: “Enlightenment Now” strikes me as an excellent book, lucidly written, timely, rich in data and eloquent in its championing of a rational humanism that is — it turns out — really quite cool.

Why There Is No “Beijing Consensus”

March 1, 2018

Why There Is No “Beijing Consensus”

 by Andrew Sheng and Xiao Geng

China observers can’t seem to agree on the underlying logic of the country’s development model. But, with faith in the West’s long-dominant Washington Consensus breaking down, both sides may be in a similar position – a reality that could facilitate cooperation to deliver global public goods.


HONG KONG – Four decades would seem to be plenty of time to identify the underlying logic of China’s development model. Yet, 40 years after Deng Xiaoping initiated the country’s “reform and opening up,” a “Beijing Consensus” – that is, a Chinese rival to the Western neoliberal Washington Consensus – has yet to be articulated.

Over the years, China has worked to transform its closed, planned economy into a more open, market-based system. Industry and, increasingly, services have replaced agriculture as the main drivers of growth, and the country has gone from technological copycat to global innovator. Meanwhile, China has tackled several difficult challenges, from excessive debt and overcapacity to severe pollution and official corruption.

This has been a highly complex process. According to China Academy of Social Sciences economist Cai Fang, it can be understood only in the context of the country’s unique history, demography, and geography, not to mention broader technological and global trends. All of these factors have, after all, helped to shape China’s governance and institutions.

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Yet the veteran China watcher Bill Overholt – one of the first to predict China’s rise – argues in his latest book, China’s Crisis of Success, that the country’s reforms were driven by “fear and simplicity.” The same factors, he asserts, drove East Asia’s post-1945 development.

Other observers – including the World Bank, the OECD, and think tanks like Harvard’s Fairbank Center for China studies – can’t seem to agree on who is right. They are not accustomed to assessing an economy whose primary influences – including historical legacies, values and ideologies, and institutional and governance traditions – differ so profoundly from those of the West.

Consider governance. Western economic dogma holds that the state should intervene in markets as little as possible. Yet, for China’s leaders, it is not clear whether the state can even be separated, conceptually or operationally, from the market.

For thousands of years, state control was China’s default governance strategy, with a strong central government overseeing stability and preventing regional and factional rivalries from causing chaos. So when China wanted to increase its leaders’ accountability, for example, it focused not on creating a market-based, much less democratic, system, but rather on introducing regulations to curb abuses of power and facilitate the flow of products, capital, people, and information.

Within the constraints of this paternalistic approach, the experimentation and adaptation that have been so crucial to China’s growth had to be carried out by local governments, which have enjoyed considerable, albeit uncertain, authority to do so. The idea was that, by using local-government (and market) expertise, China could generate growth without disturbing social cohesion or compromising national integrity.

Yet Chinese governance has not exactly been beyond reproach. When it comes to the quality of market competition, questions about the state sector’s dominance, as well as the effectiveness of regulations and adherence to international laws, standards, and practices, have persisted. And while China’s government has proved adept at providing “hard” infrastructure, such as highways, railroads, and airports, it has far to go in developing soft infrastructure, such as that related to education, health care, energy, the environment, and finance.

So China continues to grapple with the question of how to balance the state and the market, in order to ensure accountability, market competition, and adequate provision of public goods for one-fifth of the world’s population. Compounding the challenge are rapid technological change, globalization (and the backlash against it), and geopolitical considerations.

But it is not as if the West has proved definitively that its free-market approach works. The state’s role – measured according to the public sector’s share of GDP, for example, and the depth and complexity of laws governing private activities – has been expanding in almost every economy since the beginning of the twentieth century.

The United States, in particular, provides a useful benchmark. Like China, it is a continental economy. But it also represents the global gold standard in many fields, including technology, defense, and research and development.

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Contrary to China’s statist legacy, America’s historical experience has instilled in citizens and leaders a devotion to liberty, including free markets, and local autonomy. The US federal government’s size and power grew only very slowly until the 1930s, when the New Deal – which included federal programs, public works projects, and financial reforms and regulations – was implemented in response to the Great Depression.

The US federal government expanded again during and after WWII, reflecting the country’s new global hegemony and the prosperity of its middle class (created in no small part by the New Deal’s support for unionization and home ownership). The government assumed a larger role in areas ranging from defense and foreign policy to health care and social security.

But even as the federal government increased regulation in some areas, the US remained highly reliant on the market, resulting in rising inequality, the deterioration of public infrastructure, and an unsustainable fiscal deficit and debt. The global recession triggered by the 2008 financial crisis intensified growing doubts about the Washington Consensus.

So some of America’s most fundamental challenges – such as reducing inequality, supporting stable fiscal and financial conditions, and ensuring environmental sustainability – are the same as China’s, and neither country has a clear and proven “consensus” to guide it. Against this background, cooperation to deliver global public goods – including peace – should be possible.

The key is for the two sides to work toward common goals, while agreeing to disagree on certain ideological tenets. Here, the US needs to recognize that global cooperation is not a zero-sum game, and that China’s rise need not be viewed as a threat. On the contrary, China – along with other emerging economies, such as India – can contribute to a global rebalancing that actually strengthens economic and geopolitical stability.

Andrew Sheng, Distinguished Fellow of the Asia Global Institute at the University of Hong Kong and a member of the UNEP Advisory Council on Sustainable Finance, is a former chairman of the Hong Kong Securities and Futures Commission, and is currently an Adjunct Professor at Tsinghua University in Beijing. His latest book is From Asian to Global Financial Crisis.

Xiao Geng

Xiao Geng