James Fallows calls it 'the never-ending big question about China': where is this high-speed juggernaut headed?
In Line Behind a Billion People is a new book that attempts an answer, and the book's tagline (How Scarcity will Define China's Ascent in the Next Decade) gives you a hint at the direction co-authors Damien Ma and William Adams take. Ma and Adams are both highly experienced and knowledgable China experts, and over the next few days, I'll publish the email exchange I'm conducting with them about their book. Here's question 1:
SR: I’d like to begin with a question about the theme of the book, which you argue will define the China’s next decade: scarcity. In your book, that theme has political and social dimensions, but let’s start with the economic aspects.
Did your argument receive any sceptical glances from economists, many of whom will have been schooled in cautionary tales about previous predictions of resource scarcity? There’s Malthus, who you mention in the book, and in the 1970s we had the Club of Rome’s claims about the limits of growth, and of course the famous Julian Simon-Paul Ehrlich wager.
So can you briefly explain why scarcity will be such a prominent theme for China in the next decade, and why China’s leaders ought to be worried about it?
DM: First, we want to be clear that the book was never intended to be predictive in the Malthusian sense nor to reinforce the Cassandras who have predicted dire consequences from depletion of natural resources. There is a tendency to quickly focus on the natural resources aspect, but the first third of the book actually is a more comprehensive look at economic scarcity, of which natural resources is an important part.
The concept is really a way to examine how many of the inputs that China has relied on to power its spectacular growth are becoming scarcer. Some of the scarcities are longstanding, like energy and water, but others are new, like labour and food.
But we don't think anyone has a clear sense of the true extent and ramifications of how China's extraordinarily resource-intensive growth model has exacerbated existing scarcities and created new ones in its wake. And so, that's essentially what we try to grapple with in the first part of the book. [fold]
It's useful for foreign analysts like us to step back and acknowledge here that the Chinese Government has for at least 30 years been making fools of us and our predictions for their country's future. So without falling into what we view as largely futile predictions about China's resource fate, we took a more realistic and nuanced approach to describe how we think these pieces of economic scarcity will not only constrain China's development but also implicate global markets and prices.
Of course, China's ingenuity and pragmatism have gotten the country out of many a jam before. It's easy to point to technologies that could transform the balance of resource supply and demand: for energy, fracking; for water, desalinisation; for food, genetically modified crops and cloning. Any one of these technologies could prove transformational. They also could prove to be cold fusion redux, perpetually 15 years away from commercial viability.
WA: Scarcity will be central to China's future because it's central to its present, it's just that we haven't noticed yet, or noticed enough. The China model's very successes, paradoxically, are imposing constraints on the country, its economy, and its government that are visible today if we look.
Why is China an ever larger importer of foreign agricultural commodities? Insufficient land and water to produce them domestically and rising household incomes fueling more and more consumption of meat. Why is water quality, judged by the Chinese Government's own standards, terrible? Lax environmental controls, certainly, but also more and more factories, farms, and households drawing and recycling water to the same overstretched river systems.
Why are China's healthcare and retirement systems a mess? A development strategy that prioritised investment in industrial capital and infrastructure at the expense of social spending during China's demographic dividend, leaving the country with a flimsy social safety net and rapidly growing ranks of frail retirees now that the demographic dividend has been spent.
It's hard to see an easy way around these economic and social bottlenecks, and that's why we expect scarcity to feature prominently in China's next decade.