Episode 158 – Everything You Heard About China is Wrong with Vincent Huang

Macro N Cheese – Episode 158
Everything You Heard About China Is Wrong with Vincent Huang
February 5, 2022

 

[00:00:04.050] – Vincent Huang [intro/music]

I have students asking me about the massacre of the Uyghur population, and I told them that if you do some simple searches, cite some credible scholars, you realize that Uyghur population in China has doubled in the last ten years. So if the Chinese Communist Party is trying to commit this massacre, they pretty much failed, pretty badly.

[00:00:29.770] – Vincent Huang [intro/music]

I sometimes think that the US is not a real state. It’s a giant corporation disguised as a state. In all of those international trade negotiations, you’ll see corporate interests present.

[00:01:42.110] – Geoff Ginter [intro/music]

Now, let’s see if we can avoid the apocalypse altogether. Here’s another episode of Macro N Cheese with your host, Steve Grumbine.

[00:01:43.090] – Steve Grumbine

All right, everybody, this is Steve with Macro N Cheese. And I have got a new guest for you, someone I haven’t spoken to before that I’m very excited about. Joe Biden has spent the entirety of his presidency trying to leverage Build Back Better, which is predicated on Cold War rhetoric, sadly, targeting China. We pivoted from the Russia story, which a lot of folks tried to use to give air cover to Hillary Clinton’s failed presidential campaign.

And now Biden recognizing that, sadly, most Republicans and many conservative Democrats won’t get behind large, robust spending packages unless there’s a bad guy to point to. We already wore out the Russia story, even though the Ukraine story is still playing out before us. But China is who Joe Biden would like very much to pivot to.

And Cold War rhetoric got Ronald Reagan a huge amount of deficit spending on the military build up that represented the 80s. And I suppose that Joe Biden was hoping to use the same Cold War tactics to position us against China. But what China has done is invested huge amounts of money into its own infrastructure. It has modernized many things overnight.

It’s taken the rhetoric that the US claims at once, which is the greatest country on earth and the best of everything, and China is really putting it into practice. So rather than have a lot of misinformation about China and allow the progressive movement to fall in line with faulty viewpoints and arguments, I decided to dedicate the next few podcasts to exploring China and the social climate, the economic climate, and some of the more sociopolitical angles that are pertinent in discussing China.

And so today I bring on Vincent Huang, who is a research scholar at the Global Institute for Sustainable Prosperity and a teaching assistant professor of economics at the University of Denver. Received his PhD in economics and social sciences at UMKC, and his research and teaching interest include money in banking, green job guarantee, political economy of China, comparative economic systems and trade wars and agreements.

And all of those subjects pertinent to what we’re going to be discussing over the next several weeks. So without further ado, Vincent, thank you so much for joining me today.

[00:04:23.650] – Huang

Well, thank you for having me, Steve. It’s a pleasure to be here.

[00:04:27.850] – Grumbine

Well, the pleasure is all mine, and I got to give special thanks to Fadhel Kaboub for introducing us. I read some of your work, and it became instantly apparent that between you, Yan Liang, and Ruchira [Sen] that I had to get you onto the program to talk about Asia as a larger subject but China as a more specific subject given my introduction to this podcast. So why don’t we first start with a little bit about what you’re doing before we jump into the subject matter?

[00:05:03.250] – Huang

Yeah. For me, when I decided to pursue my PhD in economics and really, UMKC, was the only school that I applied to, I had pretty focused objectives at the time. So they are twofold. One is that I want to bring MMT to China. I see great potential in it. I think, that theoretically could revolutionize macroeconomics. And it also has revolutionary policy implications as well. It solves important problems with China.

Its economic and environmental sustainability contradictions. So that’s one and the other is that I wanted to elaborate a story about China, in my opinion, a more accurate one, a more interesting one and more nuanced one, to the Western audience. So that’s why you can see that in my teaching when I try to do that, I teach money in banking. I also do political economy of China and comparative economic systems. So that’s the value that I see myself bringing in to the discipline.

[00:06:06.190] – Grumbine

Well, it’s important. When we were discussing bringing you on, I told you about how I finished my grad school work with a capstone in international studies, and I got to go to Beijing. Spent a week in Beijing at the University there also talking to various government officials, which was interesting. And all the normal tourist trap stuff, the Forbidden City.

But then we got to do some really cool stuff, and we went to Shanghai. And I think one of the most interesting things was, I felt like I was both in New York City and in a 12th century film, because on one hand, you had the most cutting edge, beautiful, technologically savvy thing happening, and you’re walking in open sewage as a clay pipe from back in the old days bursts open.

And it was the most interesting thing to be surrounded by such a radical dichotomy of old and new. But instead of cars, there was probably 300 yards of distance between one side of the road and the other, and it was wall to wall people walking back and forth.

[00:07:15.410] – Huang

Yeah.

[00:07:16.010] – Grumbine

I’ve never seen anything like it in my life. Flying into the airport, you had people lined up and down the runway with tents. It was like a big day at the parade, going to watch the planes fly in. Really interesting. Had just a blast. It was one of my favorite trips of my life.

[00:07:32.950] – Huang

When was it?

[00:07:34.300] – Grumbine

2008. One of the things that we often hear in the US is that China is a communist or socialist country and also the chief exporter of the world. So describe China to me in terms of its approach to economics and employment, so that we have an understanding that we can base against our understanding in the US. What does it look like in China?

[00:08:04.210] – Huang

Yeah. So I’ve met a lot of people that have been to China and they come back to tell me that, Geez, I feel like China is more capitalistic than the US, in some ways. And I could see where that’s coming from. If you think about the differences between capitalism versus communism, it’s probably what’s your purpose of production.

The idea is that the capitalist market economy is a for-profit economy and hence we have the great struggle between profits and wages, between the capitalists and the laborers, versus a communist country. On paper, China is led by a Communist party, but it is not communist, at least not now. Most importantly, because that it’s production is mostly for profit, it’s undertaken by for profit enterprises.

So in that sense, yes, China is capitalistic. But then on the other hand, there are variations within capitalism. The US capitalism is quite different from, say, Germany’s social democracy type of capitalism with very different labor practices, unions, and just socioeconomic cultural contexts. And it’s further differentiated from, say, Swedish, the Scandinavian type of capitalism.

So to some extent it depends on how you define capitalism. If you simply define capitalism as an economic system in which its production is mostly for profit and that it’s characterized by the capitalist versus labor relationship, production relation and that property rights is important and the majority of the working class don’t own the means of production.

If you define capitalism this way, then, yeah, China is capitalist, but then it’s not very helpful because if you look at all the countries around the world, by definition, most are capitalist, with a few exceptions, perhaps. So I think a more useful way to define capitalism and this is really to define socialism because China considers itself officially as a socialist market economy with Chinese characteristics.

So we wonder where are the socialist elements are coming from? I think it becomes important to think about the variations within capitalism. We just talked about the differences among capitalist economies – US, Germany, Sweden – but also variations within socialism. In my view, the Swedish type socialism is more of a market capitalism with more government intervention, with better social redistribution policies.

Whereas the kind of socialism that I understand China as it is, it is a foundationally different logic as to its economic system in the sense that in China, the understanding is that the state which represents the interests of the majority of the people, sets the vision, and then you have the powerful capitalists in between, in the middle, and then you have the working class.

And this is different from, say, the US capitalist market economy, that corporate interests are on top. The state is the representative, it’s the agent that mediates the conflicts between the corporations and the working class. So that actually is quite important because for China’s socialist market economy, the goal is to elevate the wellbeing of people.

And the means could be marketization, could be liberalization, could be market oriented reforms, but it doesn’t have to be. So that’s why in all these years after China’s economic reform post-1978, people notice so-called back and forth, and some people see it as a disadvantage. But in my view, it’s simply China’s way of trying to figure out what works the best. And sometimes it’s pro market strategies and sometimes it’s not.

For example, China’s reform on it’s health care system has been pushed back because apparently it tried to learn from the US and I guess that wasn’t the best way to go about things. So now people are asking the question, how do we afford to provide universal health care? In the socialist era when we were much poorer versus now it becomes such a burden on the population, on people.

So it’s these pragmatic consequences of reforms that got people thinking, what’s the best way or the other? So I think that’s really important. Socialism doesn’t have to be defined as the collective ownership of the means of production. That’s certainly one way to put it. It doesn’t have to be defined as a market capitalism with more or better redistribution policies. But it could also be the kind of socialism that China is in right now, which is a market economy whose qualitative and quantitative aspects are being shaped by the vision of the state.

[00:13:18.010] – Grumbine

Let me ask you this. The United States media, the propaganda that is used both against policies that would help the people through capitalist ventures, corporate spending, advertising, and lobbying. It seems like so much of what happens in the US is based on a team sport. Which side are you on? It may not even be an ideological thing. It’s really about identity and the political space. And China doesn’t seem to be that way.

They don’t have the same kinds of pressures in terms of the propaganda. It may be state based propaganda, but they don’t seem to have the same resistance to achieving reforms. For as huge as China is, they seem capable of changing if the leadership decides to. Whereas in the United States you’ve got layer upon layer of resistance, factionalization and propaganda to weed through. What is the difference there in terms of making a decision to move forward in a given direction?

[00:14:24.370] – Huang

Yeah. So now this is very interesting because a couple of things here. Number one, in China, the understanding is that there doesn’t need to be any political fights. You’re right. China doesn’t face the pressure of, say, a divided two party fighting for its control and its agenda every four years. But China does have performance pressure. It has to perform. And in a sense, when you are the single party ruling with the other parties providing consultancy, you are responsible for everything going on.

For every good thing, well, you might not take credit for all the good things that happen because people can say that, well, that’s just the Chinese workers working hard. That’s just the Chinese entrepreneurs doing well. But you are responsible for pretty much everything. So in that sense, there is a very strong pragmatic sense of culture within the Chinese government. So that’s important.

You can’t point fingers to others. So, yes, the party is above the country in the sense that it’s always the ruling leading party, but at the same time, the party is also within the people. So all of its party members came from the people. If you look at Xi Jinping, the current Chinese President, well, he spent close to 30 years to climb to the top and starting at the village level.

And that’s one from a more macro cultural sense. If you look at it from a more technical sense, how do you get promoted within the Chinese bureaucracy? Well, performance is the key. Merit is the key. So look at Xi. He governed Shanghai and Zhejiang  provinces before moving on to the top leadership. And Shanghai and Zhejiang grew the most rapidly during his turn.

So merit is the foundation for deciding political careers. So again, this is very cultural. This is very consistent with China’s thousands of years old Mandarin system, which is partly the reason that you see, Asian parents put so much pressure on their children’s examination results and for valid reasons, because in the old days, that’s really the only way for you to get ahead, to change your social status. So I think those are important.

And then for the ordinary people, they actually trust the public system much more. So if you have, say, a public school versus a private school, the understanding is that the public school would be more responsible simply for the reason that it’s not for profit. Its goal is to educate the population. And this is the case in so many different areas. Which house are you going to buy? Which apartment are you going to buy?

Well, you look for the ones that are being built by the state companies, as opposed to, say, certain private names. So this level of trust is something that I only get to appreciate after I came to the US because I was just so foreign to this whole idea of how the state is a necessary evil kind of a thing. It’s necessary, yes, but it’s so evil, in American culture.

Then you go to see some Hollywood films and all it tells you are some stories about how one brave, righteous individual going up against this evil state and somehow came out victorious or against some evil corporation. So you see a lot of that pressure within the US. It’s not very functional, I think, because often you have all of these issues between capitalists and workers, multinational corporations, the issues between profits and environmental sustainability.

 And often the state as a public collective political entity is supposed to take action. It’s supposed to be the guardian. It’s supposed to resolve these conflicts. But when people don’t trust the government, it becomes a huge issue. So sometimes the supposed solution becomes part of the problem. And that’s, I think, really difficult for people to see a way out.

[00:18:41.470] – Grumbine

It’s interesting because the US has kept China as “a human rights violator” and…

[00:18:48.130] – Huang

Oh yes. [laughs]

[00:18:49.870] – Grumbine

What is the look and feel of labor in China? We hear about Nike sweatshops. They used to make China out to be the great demon. But what is the reality? Where there’s smoke, there’s fire, but I think that we are lied to so much we haven’t got a clue what reality is.

[00:19:08.100] – Huang

So here’s the thing. You mentioned that where there’s smoke, there’s fire. But I’ve come to realize now that where there is smoke, there could be just smoke.

[00:19:20.500] – Grumbine

That’s great. I love it.

[00:19:22.390] – Huang

And it’s very sad because when you think about how we are living in this information age, we are familiar with the term of globalization, convergence, integration of political, economic, social, cultural. It’s mind boggling that we could see so much misinformation and disinformation about China. It’s insane. I have students asking me about China’s practices in the Xinjiang region, the massacre of the Uyghur population.

And I told them that if you do some simple searches, cite some credible scholars, you realize that the Uyghur population in China has doubled in the last ten years. So if the Chinese Communist Party is trying to commit this massacre, they pretty much failed, pretty badly. And this is the thing. Sometimes the Chinese media translate Western reports, Western news covering China, and people will see it.

So my mom often sees those translated news pieces and asks me, do they really think that? Are they serious? Is this fake news that the Chinese are making up so that the foreigners will look bad? I said, mom, it’s true. They really think this. They really are accusing the labor practices in Xinjiang. Well my mom knew firsthand because she was supporting the building of Xinjiang many years ago that these were the employment generating programs that were being implemented in Xinjiang, and now calling these people forced labor.

I mean, what is that? And every Chinese student would know this because the most important examination is a College entrance examination in China, which happens once every year. And if you score well, you get into the top schools. Okay, so in China, if you are one of the ethnic minorities and Uyghur population occupies a lot of this, it’s applicable to them.

You get special treatment, your points get arbitrarily elevated by ten to 20 points, which is huge. So there were scandals back then that some Han, which is ethnic majority people, pretending changing their household registration book to be ethnic minorities. Because the whole thing with the Chinese government is that they try to celebrate this multi ethnic diversity and they put it into practice and people see it.

So for these Chinese students and these Chinese people seeing what CNN, what BBC reports to be, say, reeducation camps. They just lost their faith in Western media. Because when I was growing up, I guess that was because the US propaganda was so successful, when I was growing up, I thought, the Western medias are so good, they’re so righteous, they are promoting justice. They are an independent force, alongside with the government, mon-toring the performances of the government.

And they are trying to push for something great. But imagine when the Chinese younger generations growing up and seeing all of these groundless bashing on China, on these so called labor practices, on the so-called massacre, on the so-called reeducation camps, which are, in fact, jails that you would find everywhere else in China, in the world. But then when you call it reeducation camp, that becomes different.

[00:23:11.170] – Grumbine

That’s insane.

[00:23:12.230] – Huang

And yeah, in those jails, there are Han people, there are Uyghur people. And come on. I just can’t believe that I have to talk about these very basic facts in this information age.

[00:23:25.150] – Grumbine

You do, though.

[00:23:26.520] – Huang

That’s the problem with this information age, right? It doesn’t necessarily bring convergence of opinion. The search algorithm by YouTube or by the Internet keep reinforcing people’s biases all the time.

[00:23:39.970] – Grumbine

Yes, it’s so destructive. But the truth is we have an opportunity and hopefully podcasts like the one we’re doing will help people get through some of that propaganda. I’m surrounding myself with as many coherent, sober thinking people with specific knowledge, like yourself, who can help me put together an analysis of both the MMT space, the Chinese space, and the culture space, because you’ve got an entirely different political structure in China.

And this inherent pragmatism coupled with centuries of culture and tradition, very different than the melting pot in the US, where we’ve got a very short history based on capitalist colonized this once proud first nation continent and turn it into a neoliberal project. And so naturally, anything that stands in the way of neoliberalism’s success story has got to be bad and demonized.

And I guess that puts China in the crosshairs. But this brings me to another point, specifically to your work and the white papers that I’ve read that you’ve posted. The US is a huge polluter, has a huge military, a lot of precarity built into it. We want a job guarantee. We want a green New Deal in the United States. China is producing goods and services for the world.

It is the world’s manufacturing plant. Help me understand how a country like China might embrace the MMT perspective, in particular with employment. Contrary to popular opinion, there are unemployed people in China, and a job guarantee would go nicely there. What are the political constraints that might impact an adoption of a job guarantee? From an MMT perspective, what are some of the sociopolitical angles that we might need to look at there?

[00:25:40.630] – Huang

Yeah. So I would answer your second question first, which is what are the political obstacles? I don’t think political obstacles are an issue in China. China is a socialist market economy, meaning that something like a job guarantee, which is a socialist labor policy by its very nature, because it profoundly changes the relationship between the capitalists that you will see in the private sector and the laborers.

So China doesn’t really face any obstacles there. But the obstacle is mainly coming from theoretical and ideological perspective. Neoclassical economics is super powerful because of its political orientation in Marxism/Leninism. Marxian economics is there, but it’s not really thought of as something that explains the macro, the macro economy, the money and banking, all of those things. So China’s main issue is that, I would say.

So in my paper when I was doing this research, I found a top leader in China about five or eight years ago, talked about his perspective on budget deficits, and he was really worried that China would go down the path like Greece, that in his view, the Euro debt crisis was a result of irresponsible government spending. So that was one of the major reasons that I wrote that piece, which is to help clarify that the so called enlarged government deficits was not the cause of the Euro debt crisis for countries like Greece.

And it’s really the result of that. And the allegedly large deficits weren’t even that large to begin with. So, yeah, that’s my take on that. I think most of the challenges come from the theoretical and ideological understanding. Now, the other constraint to implementing a job guarantee is that, in a sense, China has been doing that. They build up the infrastructure, and when they are done with domestic projects, they even started doing international projects.

That’s the One Belt One Road economic idea. We’re exporting our assets, infrastructure, building capacity to the rest of the world, trying to build infrastructure internationally. So they’ve been doing things like that. And more recently, China has also announced new infrastructure. So it’s different from the old infrastructure in the sense that the projects being funded are different.

For example, big data centers, so high tech infrastructure, as such, smart cities, these kind of things. So my take is that all of these projects are great, right, because they are fulfilling some deficiencies. They are addressing some of the issues within the Chinese economy. But because of automation and as you mentioned before, even though it produces for the rest of the world, it still has mass unemployment.

So the issue is this is automation, that it’s always going to persist. And so long as we continue to live in the world in which employment is the only way for one to reproduce his or her family and you must come up with jobs, then the economic growth and job creation linkage can be broken in the face of automation. And this is where I think something like a green job guarantee can complement the various projects that China has already been doing.

So the logic is different. Those projects, like the new infrastructure, is to build industries first and then create jobs. And we don’t know how many jobs that will be created, and most likely not that many because of automation. But the job guarantees logic is different. It’s to create jobs first, and then economic growth from increased consumption would happen naturally.

So that’s the biggest difference I see between a job guarantee versus what China has already been doing. So, in a sense, the obstacle for China to implement a job guarantee also depends on how successful its already established projects are in absorbing excess labor. So those are the two obstacles that I see. And frankly, if they do a good job already and there is no need for a job guarantee anymore, then that’s perfectly fine.

Although I think the job guarantee also has this charm that you are maintaining a full employment economy for all the time. So that provides a lot of stability to the people. And then to your first question, what would a Chinese green job guarantee be like? Well, I think here I’m in agreement with many of my colleagues and my own mentors that have done work in job guarantee for the US.

So you’ll be funded by the central government. It will be administered by the local governments in China. And I think for China, there is the added benefit that the local governments are actually quite competent in China.

[00:30:44.410] – Grumbine

Very different.

[00:30:45.850] – Huang

Yeah. So I think they would actually be able to come up with good training programs, good administering of the programs. The governance capability is there for sure. And we also see it when China tackles the Covid pandemic. There’s a lot of local experimentation and implementation. So I think that’s certainly viable. And the type of jobs that I thought about for China would be environmental clean up jobs.

I think that’s a huge part cleanup and reforestation to deal with desertification. So basically, whatever the Chinese market economy is not addressing, those are the types of public jobs can be designed to accomplish. It doesn’t yield the most profit, but it uses the most social environmental benefits. So I think that would be good.

[00:31:36.610] – Grumbine

That’s great insight. One of the things that jumps out at me is China had become the world’s computer recycling country.

[00:31:46.210] – Huang

Oh, yeah.

[00:31:47.430] – Grumbine

And there was a lot of health concerns, people trying to reclaim the gold off of pieces of these computers and other electronics and the rest of the world just ships it to China to go through. And so a lot of the things, employment wise, there have caught up with the world and surpassed the world. And there’s things that are so antiquated that the protections haven’t caught up.

Can you talk about the environment of labor in China versus the US, in the sense that China being a market driven socialist country, how these roles are weighed out against the public purpose because there’s always a trade off of risk versus reward. How does China assess those things?

[00:32:36.910] – Huang

Yeah. So I can’t speak for how the Chinese government or people in general view these things necessarily, but I can bring in some facts, and I think that would help.

[00:32:47.910] – Grumbine

Sure.

[00:32:48.600] – Huang

One is that a lot of the pollution that you see the US and the Western countries are accusing China of are precisely the heavy polluting industries that migrate out of these early industrialized countries into developing countries like China. So in a sense, when you shifted production, you also shifted pollution. As long as you are still enjoying the products made in China by this economy. But at the same time, you are criticizing China’s environmental practices.

That is a bit hypocritical, to say the least, because if you look at CO2 emission by production, yes, it’s China. But if you look at CO2 emissions by consumption, the US and Europe and the developed world still consumes much, much more. It’s disproportionate. So production is produced domestically and shipped globally, but environmental degradation is produced domestically and cannot be exported.

So, yes, China has had to deal with it. The other aspect is that things have changed. Around 2005, China passes renewable energy law that mandated closures of many of the most heavily polluting industries. Now, where did those industries go? A lot of them went to India, went to Vietnam. So is that a net gain? I don’t know. But from the Chinese perspective, to borrow a mainstream neoclassical economics change, its preferences have changed.

So now they feel that it’s no longer worth it to do certain things. So a few years ago, I think it was the New York Times that published a piece called ‘China Stopped Taking Our Trash.’ And then that created a unpleasant view at the time. Well, because for many years, China has been taking the US trash. It got shipped back to China and then recycled. We sort through things, and now we stopped doing that.

So for a while, the US had no idea what to do with the trash. So, yeah, we’re seeing all these adjustments. And from my research, and this is really a chapter in my dissertation which was to look at the evolution of China’s environmental practices and policies. And my argument is that we did have that contradiction. We did have that trade off prior to 2005.

But since then, we’ve seen more consistent and synthesized industrial environmental policies. So in other words, we can develop renewable energies to stabilize employment. So that’s seen as a new driver of economic growth that you don’t have to rely on those low value added, high polluting manufacturing activities to sustain employment and economic growth.

So that’s something that has changed a lot, but something that most haven’t really thought about because in their mind, China is still doing this textile toy manufacturing, whereas in reality a lot of that has moved overseas now. So that’s sort of a newer development, I would say.

[00:36:33.230] – Intermission

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[00:36:59.520] – Grumbine

The reason why I brought up the recycling of the computers is so many in the US think it would be great if we brought the jobs back to the US.

[00:37:07.040] – Huang

Yes, that’s a good point.

[00:37:08.280] – Grumbine

And they don’t realize that it’s not just the jobs, it’s the pollution, it’s the waste. It’s all the other costs of production that come back to the country. And maybe that’s good. We have to do that so that we understand in order to curb emissions, we’ve got to look at our own trash instead of thinking, oh, it’s over there in China. We don’t see it.

Well, this Earth has one atmosphere. In the US, we take our medical waste and dump it into poor Latino communities in Texas. And so instead of just having a proper environmental answer that would keep us all living in prosperous conditions, we instead invent environmental racism. So we’re either exporting it to China or we just end up burying it in poor people’s backyards. It’s ridiculous.

[00:37:57.500] – Huang

I completely agree.

[00:38:00.070] – Grumbine

But I guess this comes back to the other aspect of this, and that is that in China, they’ve had a socialist background, they’ve had a socialist understanding. In the US, a job guarantee would be seen as welfare. The way our propaganda machine spins things, how does a socialist country view a government sponsored program like a job guarantee? If you’re a socialist and you’re looking for the means of production as one version of socialism, how do you think a job guarantee would be seen in that framework?

[00:38:39.670] – Huang

Yeah, that’s an excellent question. So first of all, I think I will elaborate a little bit more on what I mean by this Chinese socialism. I think it’s the ability for the state to shape the direction and the pace of its economic reform. Reforms are always happening in China. But if the state has the ability to shape a market economy in accordance to its vision, I consider that socialist market economy, assuming that the state is representing the people’s interests.

So, for example, not too long ago, if you are a follower of Chinese stocks listed in US markets, you probably heard about how the Chinese government mandated the biggest video game producer operator in China Tencent that now it has a new rule that kids under the age of 18 would only be allowed to play video games no more than, I think, 4 hours in a week.

[00:39:42.070] – Grumbine

That’s one day for US kids.

[00:39:44.830] – Huang

So obviously this is not a free market practice because you are violating the preferences and the interests of the children under 18 years old. It’s definitely hurting the profit line of that very influential, important company in China. But that’s being done, and there’s no backlash about it because people within the country understand that, yes, companies are important, they do a lot of good things.

But fundamentally, there are many areas of conflict between corporate interest and the well being of the people. So when the government takes actions as such, it’s seen as a natural and normal thing in the eyes of the Chinese people. Now when it’s reported in Western media, it becomes China now has a new target. It’s intending to bring down another business after imposing antitrust regulations on Alibaba.

So these interpretations are very different. What matters the most are how the Chinese people view it and what are the real practical effects that this policy produces on the Chinese teenagers and Chinese families. So this is a good example. I think if a job guarantee program were to be implemented in China, the reaction would be similar. It’s designed to solve a major problem in society.

It’s to hire those that were being left behind by the market economy, often due to insufficient aggregate demand. I would imagine that the types of jobs would be also different, primarily because the concern is not on profit. So that might be more of a debating point within the US, but within China, if you say that while the goal is to clean up the environment, the goal is to improve social environmental efficiency, I don’t think people would have any problem with that.

It’s also not something too foreign to a lot of the Chinese people, because if you think about it, before 1978, China had a socialist system that once you graduate from College or from schooling, you get placed into a state-owned enterprise. So people are not having this intense ideological debate between this is something to do with central planning versus this is a job that you can obtain in the private sector marketplace.

[00:42:13.810] – Grumbine

The United States chief export is neoliberalism and the ideological work of people like Milton Friedman, probably the number one villain that hasn’t been deemed a villain.

[00:42:27.190] – Huang

Look at the central bankers around the world. So many of them are Milton followers.

[00:42:32.410] – Grumbine

And they’ve exported that to the Chinese central bank as well. So the ideological bend of monetarism is alive and well in China, the way we see things in the US with balanced budgets, not understanding sectoral balances. This is something you covered in your paper. I was very impressed with your coverage of this, but understanding why monetarism is bad and it’s hurt millions of people.

You made mention how important it was to you that you saw a real opportunity to bring an understanding of MMT to China. Let’s take a minute and discuss monetarism in China and how MMT might impact their ability to do truly great things.

[00:43:17.710] – Huang

So first of all, in the grand scheme of things, it’s not a close fight at all. There are probably five to ten people, if I’m being generous in China, that really understands MMT as what it is, I’ve read some critiques of MMT, but then when you read the material, you quickly realize that, well, this is not what MMT is even saying.

So, yes, it’s not a close fight at all. We see central bankers all around the world following Milton Friedman’s principles. I talked before about how a top level Chinese leader talked about his understanding of deficit, which is basically a position of the deficit hawks. So it’s difficult. Now, the only true fighting force in China is because of its politically leftist orientation.

Its economic policies are affected by that. So even though, yes, theoretically they all talk in Friedman, in practice, they are still conducting policies that would not be advocated by Friedman, by monitoring such as the 40 trillion RMB new infrastructure plan. So that’s the savior at this point, because this economically rightist position is sort of balanced out by this politically leftist position.

So that’s interesting. And really policymakers know, for practical purposes, local governments would be much better served and obtain better performance results if they were to increase their local government deficit spending. They knew it. They knew from practices, even though on paper they worry about deficits. So that’s an interesting disconnect, in my opinion, between theories and practices in China, which is a fortunate one, I think.

[00:45:22.580] – Grumbine

In China, we’re still dealing in a fiat modern money economy, whether they acknowledge the realities of it or not. What is the difference between money creation and expenditures in China? Understanding the central bank and how endogenous and exogenous money creation goes versus how we see it in the United States today? Is MMT very similar there? What is the difference?

[00:45:50.470] – Huang

I think the basic fundamentals are the same in the sense that China, like the US, issues its own currency, collects taxes denominated in its own currency, issues government debt denominated in that currency. So in that sense, yes, the Chinese central government cannot be forced to default on debt denominated in its own currency. So that principle is the same. There are some differences. For example, in the US you mentioned endogenous money.

And the position of endogenous money is that it’s the emergence of real economic activities within the economy that ultimately leads to loans, create deposits and deposits create reserves. So the Federal Reserve accounting is accommodating. It’s not discretionary. So money supply is endogenous in that sense, for China, the story is a bit different because sometimes the Chinese central bank can also set up a so called ideal loan size.

So it could be the case that the commercial banks actually tells his customers that we really can’t lend anymore because we’ve reached that limit. So this is a Chinese way to sort of target a desirable loan portfolio for the macro economy. Now, is that a good thing? Is that a bad thing? I don’t know. Some would say that. Well, it prevents overheating.

But is it really necessary if it’s organic economic activities that needs to be financed? And sometimes the Chinese central bank could also mandate loans not to be given or expanded or renewed for certain industries, for example, the real estate industry. And that’s part of the goal to control real estate prices in China. The famous phrase here is that houses are for the living, not for speculating.

So again, depending on your vision for your market economy, it’s still a market economy. Yeah, but it should be qualitatively desirable. So depending on your vision of the market economy, you could come up with policies and complimentary sub policies to support that. So the central bank’s guidance on loans is one example, which in principle seems to violate endogenous money. But it’s not necessarily violating it, in my opinion, but it’s modified depending on demands of the central bankers and the policy makers.

[00:48:16.570] – Grumbine

If you looked at leftists in the US that don’t understand MMT, they’re fighting for the same causes that we support as MMTers, but they get the money story wrong, and by extension, they end up eliminating their ability to get their own programs done and envision a better tomorrow. It doesn’t seem like that’s the case in China.

So as you curtail credit creation based on the needs and desires of the state as a whole, I imagine that also eliminates a lot of bankruptcies because the state itself sets the conditions and creates the norms that ultimately keep everyone between the guardrails, so to speak. That’s not the way it is in the US. Is GDP a driver for China, or are they driven by more social equity?

[00:49:10.570] – Huang

It used to be. So China conducts a five-year plan every so often. And there’s a joke that China completes a five-year plan every five years, the US changes a plan every four years. So you can see that in most of the previous five-year plans that have already been implemented, there were explicit mentionings of GDP target, but not anymore in the most recent five-year plan. So the vision right now is very clear.

China wants to be a high tech,  a green, and a humanist economy going forward. Very ambitious, but so far it seems to be hitting every benchmark environmental goals. It’s either 2050 or 2060. China would achieve carbon neutral part of the reason that we’ve seen this huge development for China’s renewable energy sectors. So GDP is not really the only concern anymore. This growth mindset is meaningless if you’re not elevating the quality of life for people.

[00:50:16.250] – Grumbine

See, that’s just an amazing thing. This is exactly the kinds of stuff that I would want. The American in me screams out some of those curtailing mandates from the state would be difficult just simply because I’m used to not having them. But what happened during the Pandemic, the fundamentally different reaction to things like mask mandates and vaccines. The Chinese people respect their government. They trust their government. And I think the US propaganda would say differently, though.

[00:50:48.620] – Huang

Yeah, I would clarify a little bit. It’s not that the Chinese people necessarily respecting the government because Chinese people criticize the government also a lot.

[00:50:59.100] – Grumbine

Sure.

[00:50:59.630] – Huang

But it’s that the Chinese people respect this idea of collective order, a lot, dating all the way back to this Confucianist ethics that this collective order is important. It’s not necessarily inhibiting your individual freedom. And in fact, your individual freedom can only be viable and real when a collective order is in place.

So the Chinese people are much more willing to sacrifice so-called individual freedom for the greater good. So that’s certainly true. My friends and certainly my family will never understand this whole chaos about mask mandates in the US, and they just couldn’t understand it. They said, well, why don’t everyone just wear the mask, eliminate the source of the virus, and then we can enjoy our individual freedom.

How long has it taken them to do this? And they couldn’t understand. So I would say what the Chinese people respect the most is this concept called public, which is very much connected to accountability and meritocracy. And these are the things that are missing in the US society today. And then people don’t have much faith in the governance capabilities, and sometimes I can’t blame them. It’s true. And so I sometimes think that the US is not a real state, it’s a giant corporation disguised as a state.

[00:52:25.270] – Grumbine

Yep.

[00:52:25.270] – Huang

In all of those international trade negotiations, you see the corporate interest present. You see the CEO of JPMorgan being involved in trade talks when we had the US China trade deal. It’s unimaginable in China. You will never see Jack Ma, the founder of Alibaba, to represent China or to be part of a state negotiation. And so that’s very different.

[00:52:51.730] – Grumbine

I love every time you correct me because I want to learn along with the audience. I’m hoping that I develop a good analysis of these things so that when I speak, I’m speaking in the correct way. One of the big things for me is you just mentioned there’s an ideal in the public purpose. There’s a belief in collective wellbeing.

In the United States, it’s all based on the individual, and the meritocracy is there in name only. But there’s a lot of Balkanization based in class in the United States. What is class like in China? Because in the United States, there are a lot of people that are born on third base and think they hit a triple. And there’s a lot of things in the United States that make a meritocracy, while it sounds good on paper, absolutely terrifying.

It seems like some of those things are not really there in China. The ability to have a meritocracy maybe is not quite as damning, although it sounds very tense and very stressful at times. Can you describe that for me, please?

[00:54:03.550] – Huang

Yeah, absolutely. So the meritocracy I was referring to before was referring to the meritocracy within the governance. So it’s only those who demonstrated a superior track record that can go on and be promoted. But this meritocracy actually started from way earlier. Now, if you look at the current or even the previous Chinese administration, the top leadership, the top say 100 people bureau, most of them come from peasant family backgrounds, completely ordinary backgrounds.

Now, it has a lot to do with the Chinese examination systems. So in China, we have this one exam that determines your college, which indirectly determines your starting point in society, in your jobs, and ultimately where you could land. And this examination system is a rigorous, comprehensive exam that includes many subjects. And there is no such thing as college admission interviews.

There’s no such thing as personal essays. There is no recommendation letters. So in that sense, every single Chinese student is on a level playing field when preparing for the exams. Obviously, there is still a class dimension to it. As you said, in the US, you could be studying in a calm house versus hearing bullets flying all over in the middle of the night in your neighborhood.

Now, Chinese students probably don’t have that issue. Part of it is the gun control, right? You are not going to hear that, simply. But also part of it is that Chinese parents make every effort to allow their kids to have a chance in school. So yes, there could still be resource imbalances, but a lot of the outcome is still determined mostly by the students individual hard work and the educational resources in the public schooling system.

 So because China invests a lot in the public schooling system, and I think I mentioned this before that people actually prefer public schools than private schools because the resources are actually better. So when you have those educational resources that are more equitable and then you have the domestic support, this cultural factors that are also leveling out the playing field a little bit, you might not be able to get the best tutor, the most expensive tutor, but if you just pay attention in schools and work hard, you still can get to the top universities.

So I think that’s a big part determining China’s classes. Right. So are there different economic classes in China? Yes, but the perception is quite different from the US. The perception in China is actually that if you just work hard, you do have a chance because people see the upward class mobility. So I think that’s very important. Whereas in the US, it is one of the countries that have the least amount of social aboard mobility. So that’s an issue where merit becomes almost symbolic in the US but actually matters – has a real meaning – in China. The people actually believe in it because the evidence supports it.

[00:57:27.190] – Grumbine

I was the first person in my family to have a degree.

[00:57:31.570] – Huang

Oh, wow.

[00:57:32.790] – Grumbine

When I got that, my parents were absolutely blown over. But the point I’m making is, I was going to the adult education school, University of Maryland University College. That was where we could get to. But ultimately you could still feel all the glass ceiling because the kids, this was just naturally expected of. You grow up in a family where everybody’s got education.

In my house, I had achieved something truly momentous, but the people I was hanging around with at work, this was just basically expected of them. That glass ceiling has hit me many times because I didn’t come up with a silver spoon in my mouth. So this is a very different mindset. How does that look in China? The scenario I just play out, would that even be anything in China? Would that even exist in China?

[00:58:24.670] – Huang

Well, I think my first reaction to when you describe the happiness your family exhibited when you got the degree was that I was thinking if it’s a Chinese family or parents, they will be happy. But it wouldn’t be that much of a surprise in many ways, because the thinking is that if you work hard and then there’s also talent involved, you’re going to make it.

And then to the point about growing up with a silver spoon, I think the competition amount in Chinese, we call them “fù èr dài” which means rich second generation. Their parents made it and then they grew up well. The competition among these people are much more intense, so much so that they invented a new term to describe the fierce competition among the Chinese newer generation now, which is called involution, meaning the same job, the same position now requires ever higher level of qualification and degrees to make it.

While it was hiring a janitor position and the requirement was that you must have a bachelor’s degree. And now some middle schools in China are starting to require at least Masters or even PhDs are preferred in order for them to teach in these public middle schools. So China today used to have a population surplus, population edge. Now it’s an engineer surplus, engineer edge, that everyone has that degree and the competition is fierce.

[01:00:00.250] – Grumbine

Wow. That is a little terrifying to me because there’s only so many hours in the day and the balance of what matters to individuals and what you do with your spare time. There’s a real sociological aspect to this that I think probably really needs to be more deeply understood.

[01:00:18.830] – Huang

Absolutely.

[01:00:19.620] – Grumbine

What I’m taking away from this is that so much of how we view what is good and bad, what makes for a good policy, what makes for a strategic advantage is very much different based upon culture, based on social structures in each nation. And it sounds to me, quite frankly, like China is largely on a more correct path than the United States.

[01:00:46.520] – Huang

It’s different for sure.

[01:00:49.090] – Grumbine

Well, it’s different, but I hear things that you’re saying is going on there, and those are things that I want to see happen here.

[01:00:55.960] – Huang

Yeah, I think so.

[01:00:57.360] – Grumbine

I just think there’s an opportunity for us to learn from China as opposed to hate China is kind of where I’m coming from. I’m hoping people that listen to this understand that there’s value here. I don’t want anyone to buy into Biden’s rhetoric of this US versus China thing. I really want us to be more of a cooperative country, not an Empire.

[01:01:17.710] – Huang

Yeah. Here’s the thing. When the US media bashes China groundlessly, China doesn’t really get hurt in this process. It’s people looking at the Western media reporting, and they re-examine their previous utopian understanding of the Western civilization, and they said, wow, this is not what we thought it’s supposed to be.

And they actually became more confident in their system, in their path, in their culture, in their theory. And so the only disservice that all of this misinformation and disinformation does is to take away the socioeconomic imaginations that the US could have had by looking at others and try to figure out whether there could be a lesson. So I think in the long run, this really hurts the US itself the most.

[01:02:13.690] – Grumbine

Yes.

[01:02:14.620] – Huang

And if you talk about international relations, really, it’s only the US and its allies that are bashing China. China has a pretty good reputation among the developing countries because they never intervene in other countries domestic affairs, they let you do your thing. They respect the different systems, and they just want to do business with you.

And if you don’t like it, they don’t sanction you either. They don’t send militaries to conquer you. Yet the US is playing this human rights advocate card, and it’s insane. And people see it, people understand it. And ultimately, I think it’s the US that gets hurt. The politicians get their win because they created an enemy. And anti China is now what unifies the two parties in the US.

It’s a very effective card to play, but it really does the US no good, I think. Plus you still have this very concerning international tension, even military conflicts between two large and important countries in the world. And that’s really bad. It doesn’t help when the US views its relationship with China in the Cold War context. It’s either you live or I die kind of thing.

Whereas China has been trying to push for this common destiny for humankind kind of thinking. So it’s a completely different approach to international relations, to domestic economic affairs, to its domestic economic and political reforms. We’re seeing two very different systems competing. And I think the answer would be much more clear maybe 10 – 20 years from now.

[01:03:58.270] – Grumbine

Yes. One of the things is the Republicans versus Democrats angle in the United States. The Republicans naturally believe that people are moochers and the Democrats believe that we’ve got to raise taxes to pay for programs. So they’re both wrong. But it doesn’t matter because no one is looking empirically and pragmatically and understanding the crux.

They have an us versus them mentality domestically, and then they export that perspective to the outside world. That is the same thing as it is with China. Watching them build incredibly robust things. How we can make that bad instead of just saying, maybe we could bring some consultants over to tell us how we could do that. No, our pride won’t allow us to do that. They’ve got to be the bad guy. And that means no matter what idea they come up with, it’s got to be bad.

[01:04:55.330] – Huang

This reminded me of a New York Times piece, actually, two pieces I read when Covid was happening and the lockdown was happening. So that day on the front page of The New York Times, I think on the left hand side, it was talking about China. And basically it says China is locking down. It seems effective, but at what price? The implication is that human rights, people don’t get to go out, people have to wear masks.

Now, so China was locking down, but at what price? That’s approximately the title. And really, if you look at any reports about China, it’s always that, “but at what price?” Okay, now what’s interesting is that that day, it also reported, just side by side, another piece on Italy. And it also said, well, Italy is locking down Milan. Right. And instead, this time it didn’t ask at what price.

It just says Italy is locking down Milan to save Europe. All right, so blatantly, obviously, I showed that piece to my students in my Trade Wars and Agreement class, and they saw it. But I’m sure a lot of the people, when they read it, they feel like, yeah, nothing wrong. There’s nothing wrong going on. Yeah. People associating words with certain things and bad things with certain words.

So China is associated with words like human rights violation, dictatorship, maybe sometimes central planning, communism, those kind of things. And then the US is associated with technology, progress, growth, freedom. I mean, it’s a terrifying reality that we live in. People have these very simple, dichotomous understanding of the reality that are oftentimes factually wrong.

But when lies are repeated enough times, it becomes the truth. And it really frustrates me to read so many reports on the alleged massacre of the Uyghur population in Xinjiang, China. And what’s funny is that a couple of years ago, when the US China trade war was happening, I told my students, Just wait till the US play the Xinjiang card. It’s going to come and also wait for it to play the Tibetan card. It’s going to come, and then it happened. So it’s pretty predictable if you think about it. It’s sad, it’s sad.

[01:07:22.620] – Grumbine

It is sad. But this was very enlightening for me and I’m hoping that I can really bring out more and more about China. It is such an important subject right now. I think that as we move forward into the future, it’s going to become more important. So with that, let me leave you with a parting word. What would you tell a person listening to this podcast? What would be the key takeaway for them about how they should view China?

[01:07:51.650] – Huang

Well, just keep an open mind and when you have the opportunity to visit the country, it’s quite different. And if you cannot visit the country, look up the YouTubers on YouTube that actually live in China and tell you what China is like.

[01:08:06.710] – Grumbine

Very good. And with that, my name is Steve Grumbine and this is my new friend Vincent Huang. With Macro N Cheese. We’re out of here.

[01:08:40.870] – End credits

Macro N Cheese is produced by Andy Kennedy, descriptive writing by Virginia Cotts, and promotional artwork by Andy Kennedy. Macro N Cheese is publicly funded by our Real Progressives Patreon account. If you would like to donate to Macro N Cheese, please visit patreon.com/realprogressives.