Posts Tagged ‘development’
“A creditor is worse than a slave-owner; for the master owns only your person, but a creditor owns your dignity, and can command it.”*…
Developing countries around the world are deeply in hock. According to UNCTAD (UN Trade and Development), global public debt reached a record high of $102 trillion in 2024. Although public debt in developing countries accounted for less than one third of the total – $31 trillion – it has grown twice as fast as in developed economies since 2010. Those developing nations had debt service on that external public debt of $487 billion in 2023– which meant, for half of them, paying at least 6.5% of export revenues to service external public debt. More practically, that means that 3.4 billion people are living in countries that spend more on interest than on healthcare or education. [See the UNCTAD fact sheet here.]
Not surprisingly, developing countries sometimes fall sufficiently behind to call their loans into question. When that happens, an under-the-radar “informal group” of creditors– the Paris Club– gets together to negotiate a way forward…
The Paris Club is an informal group of official creditors whose role is to find coordinated and sustainable solutions to the payment difficulties experienced by debtor countries. As debtor countries undertake reforms to stabilize and restore their macroeconomic and financial situation, Paris Club creditors provide an appropriate debt treatment. Paris Club creditors provide debt treatments to debtor countries in the form of rescheduling, which is debt relief by postponement or, in the case of concessional rescheduling, reduction in debt service obligations during a defined period (flow treatment) or as of a set date (stock treatment).
The origin of the Paris Club dates back to 1956 when Argentina agreed to meet its public creditors in Paris. Since then, the Paris Club has reached 484 agreements with 102 different debtor countries. Since 1956, the debt treated in the framework of Paris Club agreements amounts to $616 billion.
The 22 members of the Paris Club are mostly the larger OECD members, plus Russia. South Africa is a prospective member, and China and India are Ad Hoc members. Organizations like the IMF, the World Bank, the African Development Bank, the Asian Development Bank, the Inter-American Development Bank, and the OECD are “observers.” Participants representing members are government officials. The U.S., for instance is represented by a State Department official (relying on positions formulated by the Treasury Department).
Sven van Mourik puts all of this into context…
In today’s world, finance is dominated not by states, but by private actors. The market capitalization of a company like Apple in December 2023 reached $3 trillion, exceeding the combined GDP of at least 140 countries. Last year, global private financial assets reached a record $291 trillion, of which some 50 percent is concentrated in North America. By contrast, the world’s nations together owed a global public debt of a record $102 trillion in 2024, of which so-called “developing” countries owe $31 trillion. While there’s a playbook for private debt and corporate bankruptcy, it’s a different story for the official debt owed by nation states. What happens when a state can no longer repay its foreign creditors?
Following a deep global debt crisis in the early 1980s, the world’s poorest states struggled to service impossible debts to foreign capital, leading to widespread revolts and humanitarian crises across the formerly colonized, developing countries of the Global South. Following the COVID-19 pandemic of 2020, the burden of this public debt is once again immense…
[van Mourik reviews some of the startling statistics cited above…]
… It is puzzling to see states prioritize the servicing of foreign debt, even when it directly harms their populations. Why not default? Experts at the International Monetary Fund and World Bank in Washington, D.C. claim that “there is no alternative” to what has become an ossified response to sovereign debt crises: cut the government budget, facilitate the private sector and grow your economy to repay your foreign debt. But what about when a state, fully cooperative with the policy measures prescribed by these institutions, still cannot repay its debts?
As a financial historian, this question led me to investigate a creditor that routinely takes center stage as countries attempt to navigate sovereign default, an institution so secretive that it has largely escaped the public eye. The Paris Club, an informal forum of representatives from creditor countries largely in the Global North, has steered the destinies of nations in financial peril, restructuring over half a trillion dollars in sovereign debt since its first meeting in 1956. Without its approval, countries face default and can effectively be prevented from accessing long- and short-term trade credit — credit that facilitates the uninterrupted flow of goods across borders, and can be compared to a country’s life blood. Without it, states are unable to access vital imports like food, fuel and medicine.
The Paris Club convenes to set up a new payment schedule for a country at risk of defaulting on its “official” debt owed to other countries. It is unique in that despite its pivotal role, it remains an informal institution. It comprises 22 major creditor countries, including the United States, Germany and France, and occasional ad hoc participants like India and China, which together coordinate reduced or rescheduled debt payments for a country facing default.
The Paris Club itself doesn’t lend new money. Instead, it “treats” a country’s debt payment schedule, either through rescheduling interest payments or, since the late 1980s, by offering the poorest countries a “haircut” and partially restructuring the debt. In its 70-year history, including the recent Debt Service Suspension Initiative, the Paris Club has treated a total of $863 billion of debt for 102 countries through 543 agreements; this amounts to around two-thirds of the world’s sovereign debt restructurings through 2010. A staggering legacy for a group that lacks any public oversight. With some pride, former chairmen of the Paris Club’s secretariat have called the Club a “non-institution” and “totally discreet if not secretive.”…
[van Mourik unpacks the operations of the Club and explains its symbiotic relationship with the IMF and its “structural adjustment” programs– AKA “austerity,” the reduction of debtor government expenses, often on social welfare, education, and healthcare (and often to painful effect)
… While the Paris Club rescheduled debt payments, the IMF designed programs that served to optimize a country’s ability to pay back interest and principal; the arrangement has over the years evolved into a debt restructuring routine in which debtor countries have little say.
The IMF today remains an institution in which the countries of the Global North have nine times more voting power than the countries of the Global South, as voting rights are tied to economic weight. In the Paris Club, a similar power differential is reflected in the spatial and temporal arrangement of the procedures, which borders on the theatrical. A debtor country’s delegation only ever confronts its creditors alone and is required to leave the room when they deliberate to set the terms of a deal…
[van Mourik explores the consequences of these deals, concluding…]
… creditor-dominated organizations like the IMF and the Paris Club allow rich countries to remain at the helm of a sinking ship. After all, as economist Daniel Munevar concluded following the COVID-19 pandemic, continuing within our current framework of debt servicing would “sound the death knell” for the world’s climate ambitions, as it prevents debtor countries from implementing the costly policies needed to meet ambitious climate targets. Others conclude that a serious degrowth strategy, one that prioritized ecological sustainability and social well-being over growth for its own sake, would require the countries of the Global South to default.
Various formations of countries across the Global South have proposed debt restructuring regimes, like the UN Framework Convention on Debt, that would “improve the fairness and transparency of debt resolution mechanisms.” Gabor, the economist, has called this new UN framework “a bid to wrest deliberative control away from the closed-door clubs where Northern financial might prevails.”The question is under what circumstances such strategies might be successful. Despite the Paris Club’s inclusion of non-Western members like Korea and Brazil, or the IMF and the Paris Club’s recent collaboration with China and the G20, the deck remains stacked against low-income borrowing countries, who “have little voice in any of these fora.”
The deeper challenge for all states is to reform a global financial architecture that evolved based on the interests of a handful of Western creditor states, at the cost of austerity and social destruction elsewhere. Debtor countries that wish to retain access to global markets — even for the most vital imports — must participate, and service their debt within regulatory frameworks over which they have no control and which have proven to be defective…
Who really controls international debt? “The Quiet Powerbroker,” from @thedialmag.bsky.social.
All this said, it’s important to note that in fact an alternative is emerging, but not one that’s in the spirit of the UN Framework. Even before the Trump Administration took the U.S. off the field, China had become the world’s largest development lender.
“How China Lends: A Rare Look into 100 Debt Contracts with Foreign Governments“:
We collect and analyze 100 contracts between Chinese state-owned entities and government borrowers in 24 developing countries in Africa, Asia, Eastern Europe, Latin America, and Oceania, and compare them with those of other bilateral, multilateral, and commercial creditors. Three main insights emerge. First, the Chinese contracts contain unusual confidentiality clauses that bar borrowers from revealing the terms or even the existence of the debt. Second, Chinese lenders seek advantage over other creditors, using collateral arrangements such as lender-controlled revenue accounts and promises to keep the debt out of collective restructuring (“no Paris Club” clauses). Third, cancellation, acceleration, and stabilization clauses in Chinese contracts potentially allow the lenders to influence debtors’ domestic and foreign policies. Even if these terms were unenforceable in court, the mix of confidentiality, seniority, and policy influence could limit the sovereign debtor’s crisis management options and complicate debt renegotiation. Overall, the contracts use creative design to manage credit risks and overcome enforcement hurdles, presenting China as a muscular and commercially-savvy lender to the developing world.
For a fascinating and illuminating on-the-ground consideration of these issues, see/hear Mary Kay Magistad‘s On China’s New Silk Road.
* Victor Hugo
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As we redesign debt, we might send thoughtful birthday greetings to Jean-Jacques Laffont; he was born on this date in 1947. An economist, he made pioneering contributions in public economics, development economics, and the theory of imperfect information, incentives, and regulation. Over the course of his career, he wrote 17 books and more than 200 articles. His 1993 book A Theory of Incentives in Procurement and Regulation, written with Jean Tirole, is a fundamental reference in the economics of the public sector and the theory of regulation. Laffont died in 2004; had he lived, he might well have shared the 2014 Nobel Prize for Economics awarded to his colleague and collaborator Jean Tirole for the work they did together.
He was uninvolved in the Paris Club; indeed, his last book, Regulation and Development, discussed policies for improving the economies of less developed countries in ways more consistent with the UN’s new framework than the IMF’s old-but-still-dominant playbook.
“One does not inhabit a country; one inhabits a language”*…
Our language is constantly evolving. Colin Gorrie offers a nifty illustration of the development of English…
A man takes a train from London to the coast. He’s visiting a town called Wulfleet. It’s small and old, the kind of place with a pub that’s been pouring pints since the Battle of Bosworth Field. He’s going to write about it for his blog. He’s excited.
He arrives, he checks in. He walks to the cute B&B he’d picked out online. And he writes it all up like any good travel blogger would: in that breezy LiveJournal style from 25 years ago, perhaps, in his case, trying a little too hard.
But as his post goes on, his language gets older. A hundred years older with each jump. The spelling changes. The grammar changes. Words you know are replaced by unfamiliar words, and his attitude gets older too, as the blogger’s voice is replaced by that of a Georgian diarist, an Elizabethan pamphleteer, a medieval chronicler.
By the middle of his post, he’s writing in what might as well be a foreign language.
But it’s not a foreign language. It’s all English.
None of the story is real: not the blogger, not the town. But the languageis real, or at least realistic. I constructed the passages myself, working from what we know about how English was written in each period.
It’s a thousand years of the English language, compressed into a single blog post.
Read it and notice where you start to struggle. Notice where you give up entirely. Then meet me on the other side and I’ll tell you what happened to the language (and the blogger)…
Read it and reap: “How far back in time can you understand English?” from @colingorrie.bsky.social.
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As we travel through time, we might note that not every new emergence becomes sedimented into the evolutionary path, as we recall that on this date in 1980 that the National Academy of Recording Arts and Sciences awarded the first– and last– Grammy for Best Disco Recording. By the time that the Academy got around to it, disco was pretty much dead.
“I Will Survive” by Gloria Gaynor was the big winner that night. The other nominees were: Earth, Wind & Fire for “Boogie Wonderland,” Michael Jackson for “Don’t Stop Till You Get Enough,” Donna Summer for “Bad Girls,” and Rod Stewart for “Do Ya Think I’m Sexy?” (In January 2020, Gaynor won her second Grammy Award in her career for her gospel album Testimony.)
“There are things done today in electrical science which would have been deemed unholy by the very men who discovered electricity, who would themselves not so long before have been burned as wizards”*…
Climate change continues. There is broad evidence (and consensus) that our environment, thus our ways of life, our livelihoods— indeed, our lives— are threatened. On the heels of a call from Trump to world leaders to abandon the climate fight, followed by a disappointing COP30 conference, it’s easy to be discouraged. But that, of course, is no answer.
Rather, we have to find ways to mitigate the damage that we’ve already locked in, even as we acclerate a transition to clean energy… which begins by (re-)framing and (re-)focusing the challenge. Ember, a clean energy think tank, suggests a candidate that, while it speaks to the moral obligations addressed by one of the models it means to augment/replace, has a more positive orientation…
Humanity is graduating from burning fossil commodities to harnessing manufactured technologies—from hunting scarce fossils to farming the inexhaustible sun, from consuming Earth’s resources to
merely borrowing them.This isn’t a marginal climate substitution. It’s an energy revolution.
The magnetic centre is the electron: we are revolutionising how we generate, use, and connect
electrons. Solar and wind are conquering electricity supply. EVs, heat pumps, and AI are electrifying major new uses. Batteries and digitalisation are connecting supply and demand.Three reinforcing shifts. One energy revolution. The electrotech revolution.
At its core, this revolution is driven by physics, economics, and geopolitics. After all, the arc of energy
history bends towards solutions that are leaner, cheaper and more secure.Short-terms setbacks matter, but fundamentals matter more. And the fundamentals are stacked in electrotech’s favour.
Physics. Electrotech makes a mockery of setting fossils on fire and losing two-thirds of the energy to heat. Electrotech is three times as efficient.
Economics. Technologies get cheaper with scale. Commodities get more expensive the deeper you dig.
Geopolitics. Three quarters of the world is dependent on fossil imports. 92% of countries have renewables potential over 10x their current demand.
Electrotech has grown exponentially for decades. The difference today is that it’s too cheap to contain and too big to ignore. If current exponentials hold for five more years, global fossil demand will fall off its plateau.
Welcome to the Age of Electrotech…
A long and meaty presentation: “The Electrotech Revolution- the shape of things to come,” from @ember-energy.org.
One notes that the electrification that Ember pushes has other advocates, many of whom have been vocal for years; c.f., e.g., Saul Griffin. Still, another voice in the chorus is welcome.
* Bram Stoker
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As we plug in, we might send charged birthday greetings to Franz Aepinus; he was born on this date in 1724. A mathematician, scientist, and natural philosopher, he is best known for his research, both theoretical and experimental, into electricity and magnetism. Aepinus’ Tentamen theoriae electricitatis et magnetismi (1759; “An Attempt at a Theory of Electricity and Magnetism”) was the first work to apply mathematics to the theory of electricity and magnetism. And his experiments led to the design of the parallel-plate capacitor, a device used to store energy in an electric field.
“Leadership of a world-economy is an experience of power which may blind the victor to the march of history”*…
Benjamin Braun and Cédric Durand on the citical tension between “factions of capital” in the second Trump administration…
Hegemonic decline, according to the historian Fernand Braudel [see here and here], has historically come with financialization. Amid declining profitability in production and trade, capital owners increasingly shift their assets into finance. This, according to Braudel, is a “sign of autumn,” when empires “transform into a society of rentier-investors on the look-out for anything that would guarantee a quiet and privileged life.”
This specter of Braudelian decline haunts key figures in the second Trump administration. “Tell me what all the former reserve currencies have in common,” Scott Bessent, now Treasury Secretary, mused during the campaign. “Portugal, Spain, Holland, France, UK … How did they lose reserve currency status?” The answer: “They got highly leveraged and could no longer support their military.” While Bessent, a former hedge fund manager, officially denies a program of dollar depreciation, speculators have been driving down the US exchange rate since Trump took office in January. Secretary of State Marco Rubio is the author of a 2019 report on “American investment in the 21st century,” in which he lambasts Wall Street for its shareholder value regime that “tilts business decision-making towards returning money quickly and predictably to investors rather than building long-term corporate capabilities.” His views on finance are shared by self-styled Republican “populists” such as Josh Hawley.
This residual hostility toward Wall Street has marked an ideological rupture in the first months of Trump’s second administration; on the one hand, the President’s “Liberation Day” tariffs have roiled financial markets; on the other, Wall Street has retaliated with financial panics, working to discipline the White House. Whether a coalition of self-styled MAGA populists and Trump’s electoral base—which expects rising living standards and secure jobs delivered via a tariff-led revival of US manufacturing and a deportation-led tightening of the labor market—is sustainable remains a central question of the second Trump administration. Fossil fuel firms and defense-oriented tech companies such as Palantir and Anduril find much to like in militarized nativism. But Trump’s trade policy clearly harms private finance and big tech, two sectors that have consistently supported Trump and expect to be rewarded. Attacking those sectors threatens to alienate the very factions of US capital that have heaved him back into office.
For these capital factions, US decline is relative and can—cue Japan—be managed in a gracious manner. As Giovanni Arrighi observed in 1994, finance has always intermediated, and thus benefited from, hegemonic transitions. Today, asset management titans profit both from re-balancing US portfolios away from the declining hegemon and from offering fast-growing capital pools from China and other rising Asian economies access to US assets. Big tech, meanwhile, aims at general control over knowledge and economic coordination. It has much to lose from geoeconomic fragmentation that could cut it off from access to data, reduce its network effects, increase the cost of its material infrastructure, and push non-aligned polities to pursue digital sovereignty.
In its efforts to revive the American Empire, the Trump administration will thus have to delicately balance the interests of both manufacturing-oriented nativists and capital factions whose interests span the globe. Navigating these competing agendas will pose an enormous challenge to the longevity of the Trumpian coalition—and the stability of the global financial system as a whole…
Eminently worth reading in full: “America’s Braudelian Autumn,” from @phenomenalworld.bsky.social.
* Fernand Braudel
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As we debate development, we might recall that it was on this day in 1940 that Government of Vichy France, the collaborationist ruling regime/government in Nazi-occupied France during World War II, was established.
Of contested legitimacy, it took shape in Bordeaux under Marshal Philippe Pétain as the successor to the French Third Republic and was finally settled in the town of Vichy. The government remained in Vichy for four years, but was escorted to Germany in September, 1944 after the Allied invasion of France. I t then operated as a government-in-exile until April 1945, when the Sigmaringen enclave was taken by Free French forces. Pétain was permitted to travel back to France (through Switzerland), by then under control of the Provisional French Republic, and subsequently put on trial for treason.
“Stand firmly in the present and focus on the future”*…
In a widely-cited article from May, Gillian Tett marks a fundamental shift– accelerated by the Trump administration, but underway beforehand:
… in the 20th century free-market intellectual framework — which is the one in which most western professionals built their careers — it was generally assumed that rational economic self interest ruled the roost, not grubby politics. Politics seemed to be derivative of economics — not the other way around.
No longer. The trade war unleashed by US President Donald Trump has shocked many investors, since it seems so irrational by the standards of neoliberal economics. But “rational” or not, it reflects a shift to a world where economics has taken second place to political games, not just in America, but many other places too…
…this phenomenon is not simply about one man (Trump), but rather marks a much bigger turning point in the intellectual zeitgeist — of a sort we have seen a few times before.
One such shift occurred just over a century ago, when the globalist, Imperialist vision of capitalism that reigned before the first world war was displaced by nationalist, protectionist policies. Another came after the second world war, when Keynesian economics took hold. Then, in the 1980s, free-market neoliberal ideas displaced Keynesianism.
The fact that the intellectual pendulum is now swinging again, towards more nationalist protectionism (with a dose of military Keynesianism), thus fits a historical pattern — although few predicted that the swing would take quite this form…
… one important facet of this zeitgeist shift is that governments are no longer “just” focused on their country’s absolute wellbeing, but on their relative positions too. This distinction might sound subtle. But it matters deeply, as a paper co-authored by Aaditya Mattoo, a World Bank economist, along with Michele Ruta and Robert Staige, spells out.
That is because an “absolute welfare” mentality supports trade co-operation, but unravels “if rivalry eclipses any consideration of own- country wellbeing,” the authors say. Trump’s angry rhetoric about America being “ripped off” by competitors, in other words, reflects a bigger mental shift… an (obvious) factor behind this rivalry is that China is now challenging America’s incumbent dominance…
It’s worth reading Tett’s piece in full (gift link)– and noting that the real-world evidence supporting her thesis is clear. Here, let us look more closely at China. Adam Tooze offers a primer– all-too-appropriate to Tett’s argument– on how to see China’s historic development through the veil of macroeconomics…
In the global economic conjuncture there are few if any factors more important than the state and future prospects of China’s economy. In purchasing power parity terms, it is the largest economy in the world, with a 20 percent share of global GDP. Measured in terms of current exchange rates, China comes second to the US.
China impacts the world economy as a huge market for exports from other countries. China’s imports range from raw materials, to Europe’s luxury brands. The share price of LVMH, Europe’s largest company by stock market valuation, bobs up and down in response to the spending patterns of Chinese women, the world’s most rapidly growing segment of luxury consumers.
China’s exports are a huge part of global markets. And when China’s domestic demand is less buoyant, there is a surge of anxiety about “excess capacity”, the pressure of exports increases and we start talking about “China shocks”.
In the macroeconomic balance, as discussed in World Economy Now of May, China’s huge surplus is the counterpart to the huge deficit of the USA.
China’s currency is pegged against a basket of other world currencies. This is backed up by some of the more effective capital account regulation in the world economy today. Funds cannot easily be transferred out of China on a large scale. So, there is structural uncertainty about what the exchange rate of the RMB should be. The trade account would suggest stronger. The scenario of mass capital flight in the event of a loosening of capital controls would suggest a much weaker currency, as happened during the crisis episode of 2015. A sudden adjustment in the Chinese exchange rate has the potential to destabilize the world economy as severely as Trump’s trade wars.
For all of these reasons, China is at the heart of global macroeconomics.
And there are a lot of news to be concerned about…
[Tooze reviews the decline in China’s growth rate…]
… But as useful as it is, this macroeconomic approach also minimizes the drama of history and qualitative transformation. China’s economy is huge because it encompasses the material destiny of one sixth of humanity. In the 1970s, China’s national income per head was less than that of Sudan and Zambia. It was not just the most populous country in the world but also one of the poorest. China’s ascent during the age of globalization is not just one economic story amongst many. It is the single most dramatic development in world economic history, bar none…
… Today, with a per capita GDP in purchasing power parity terms of $24,569, China is officially classed as an “upper middle-income” economy. It has far outstripped India (which in 1990 was still ahead of China). It has overtaken Indonesia. It has surpassed Brazil and caught up with Mexico. China is now on the cusp of being promoted to the ranks of the “high-income” countries…
… So here we have two images of China: One, as a big part of global macroeconomics, the other as a world historic development story. The trick is not to play these two accounts against each other, but to figure out how they interrelate and condition each other.
If we can sensibly discuss China today as just another big economy, rather than a country struggling with basic development issues, it is because it has actually undergone something truly exceptional, namely, utterly radical economic development in the space of less than two generations.
Pause for a second to consider this twist.
Dialectics offers us a way of imagining the process through which quantitative change turns into qualitative transformation. And there is plenty of that going on in the Chinese case. For example, it is one thing to be a big player in electric vehicles, it is quite another to entirely dominate every facet of the global supply chain. At that point market share measured in percentage points, a quantitative metric, turns into power, a statement of qualitative distinction.
But China also spectacularly illustrates the opposite process, through which qualitative change on a huge scale – “opening up” and “market reform” – transform a society’s entire mode of being so much that it becomes discussable as “just another really big piece of the world economy”, no different in macroeconomic terms than the Eurozone or the US economy. A history of radical qualitative change gives way to bland quantitative metrication.
Social theorists and market practitioners both use the same word to capture this dialectic of quality into quantity – commodification. When your distinctive, branded product with its specific qualities and associated narrative becomes commoditized, it widens the market, but also erases distinctions. In intellectual terms, rendering China’s utterly radical, world-changing development story as a question of “global growth”, is something akin to “commodification”.
Of course, quantitative comparison enabled by commodification has many uses. No less than commoditized goods. But both accept as a cost the erasure of specific qualities. In narrative terms, it involves a kind of blindness to history – how we got here – but also to the wider social and political meaning of current trends and the network of social, political, cultural and material forces that may drive future development. We do macroeconomics no injustice, if we call it heuristic and algorithmic in its approach. Its metier is not the in-depth search for historical meaning.
If we are to have both we need to learn to shuttle back and forth in our economic analysis from quality to quantity to quality to quantity etc.
Of course, you might object that all I am describing in rather highfalutin terms, are the methods of any good economic journalist. A good economics story weaves back and forth between the particular and the general, the experiential and the GDP numbers. That is true. It is a familiar narrative style. But there is a difference between an anecdote that merely serves as a “hook” and the effort to actually find a keyhole or opening that allows us to enter into the complexity of historical reality. As Stuart Hall once put it, the challenge is to find ways of “breaking in” to the historical conjuncture we are trying to decipher…
… How does the quality-quantity dialectic help us to better understand China’s economic situation and its relationship to the world economy in the summer of 2025?…
[Tooze uses that dialectic to unpack four key issues for China: real estate/urbanization, youth unemployment/generational shock, trade surplus/manufacturing power, and deflation (the “accumulation regime”)…]
… This essay had been a forced march, the aim of which is to connect four points of common concern about China’s macroeconomic situation – real estate, youth unemployment, the trade balance and deflation – with broader questions of China’s recent history and development. Doing justice to any of these themes would require far more space and far more expertise than I have my disposal. My aim here is simply to demonstrate the value of this kind of approach. My aim is to alert us to the moments when quality flattens into quantity – when “world-changing hundred-millionfold urbanization” is recharacterized as nothing more than a real estate boom – and to suggest the possibility of different narratives. The aim is to allow us to see through the bare bones of the macroeconomic schema, to the more historically specific and ultimately more powerful forces that are at play.
I’m not original in suggesting this. This is just what good history and good critical social analysis ought to do when it wrestles with the limitations of familiar macroeconomic concepts. In this particular case I am indebted to the work of Lan Xiaohuan of Fudan university, whose book How China Works: An Introduction to China’s State-led Economic Development offers a fascinating developmentalist perspective on recent Chinese economic history.
But not the least attraction of this approach is that it actually allows us to hear – as in really hear – how the Chinese describe their own situation. China insists on referring to itself as “developing” and “development” as the key objective of policy. The phrase 发展 (fāzhǎn) recurs in the titles of the National Development and Reform Commission, the de facto center of Chinese planning, and the Development Research Council of the State Council.
All too often the question of whether China should be counted as a “developing economy” is treated as a matter of cheap gamesmanship. Western critics, allege that China shirks its responsibilities by insisting on its status as a developing country. But triviality aside, as I have argued here, the question is actually a fundamental one. China is a huge and complex society with a powerful regime undergoing the most dramatic process of socio-economic change in world history. To describe this ongoing process as one of development is, if anything, an understatement.
Indeed, the question is why we don’t learn from the Chinese. Would it not behoove Western advanced economies to consider themselves, as well, as “developing”. Or does the difficulty of doing so betoken a telling blindspot? Development as a conception of economic change embodies a notion of comprehensiveness, qualitative change and deliberate purpose that is a challenge to policy in rich countries. In the US the bold vision of the Green New Deal was reduced to the Inflation Reduction Act. Trump’s tariffs and Big Beautiful Bill are a parody of economic nationalism. The best that the EU could manage was NextGen EU in 2020.
As Wang Yiwei of the Academy of Xi Jinping Thought at Renmin University remarked to The Economist:
Development is a permanent “political identity” … The party’s legitimacy depends in part on the riches yet to come. “Once you are ‘advanced’,” says Mr Wang, “you are declining.
The frankness is disarming. But does the West really have an answer?
Eminently worth reading in full: “Whither China? – World Economy Now, June 2025 Edition” from @adamtooze.bsky.social.
Pair with: “The Two Chinas.”
And for context, “Structure and Interpretation of the Chinese Economy.”
(Image above: source)
* ancient Chinese adage
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As we synthesize, we might recall that it was on this date in 626 that Li Shimin ambushed and killed his rival brothers Li Yuanji and Li Jiancheng in the Xuanwu Gate Incident. Li Shimin went on to become Emperor Taizong of Tang– the second emperor of the Tang dynasty of China, ruling from 626 to 649. He is traditionally regarded as a co-founder of the dynasty for his role in encouraging his father Li Yuan (Emperor Gaozu) to rebel against the Sui dynasty in 617. Taizong subsequently played a pivotal role in defeating several of the dynasty’s most dangerous opponents and solidifying its rule over China proper.
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