Geopolitical Myths by Adnan Khan

Japan historically is advocated as a success story by the liberal movement, who adopted free markets, reduced trade barriers and entered the global economy and has in less than half a century become one of the largest economies in the world. Similar tales are also made about China’s recent rise to fame. However, the reality is very much different.

Japan’s development has evolved from policies which are the complete opposite to liberalism and globalisation. The Japanese government required key sectors to develop and protected them from foreign competition. The government retained the right to allocate foreign exchange, and by this it was able to restrict inward investment, manage the acquisition of foreign technology by Japanese firms and to influence the composition of foreign trade. The export bank of Japan and Japan development bank were setup to become the main vehicles for expanding the flow of finance to government targeted industries.

Central to the development of Japan was the role of the Ministry of International Trade and Industry (MITI) which was a ministerial department. This central government department regulated production and the distribution of goods and services. It developed plans concerning the structure of Japanese industry, controlled Japan’s foreign trade, ensured the smooth flow of goods in the national economy, promoted the development of manufacturing, mining, and distribution industries; and supervised the procurement of a reliable supply of raw materials and energy resources. Hence Japanese development was centrally driven and not through the free market.

China has evolved from its decades of long, narrow and reactive approach to global affairs. China is abandoning its long-held victim mentality of 150 years of shame and humiliation and adopting instead a great power mentality (daguo xintai). The natural extension of this is the increasing role of China in global affairs. With the abandoning of the victim mentality and the adoption of a great power mentality, China is increasingly seeing itself more akin to the world’s major powers. This represents a shift from the 1990’s and China is now openly speaking about the need to share global responsibilities and this is the lens through which China’s strategists view the world.

China represents an interesting conundrum for orthodox economics experts and for all those who believe the adoption of liberal values equals economic success. China firstly undermines the belief that progress is exclusive to the Western formula of free markets, democracy and liberal values and demonstrates how much of the wider world remains unconvinced of such a formula.

China has managed to achieve phenomenal economic growth and industrialisation by not adopting democracy or joining the globalisation elite but by remaining deeply authoritarian, where liberal values have not featured remotely in China’s economic rise. China’s President Hu Jintao said in 2004: ‘We will never blindly copy the mode of other countries’ political system. History indicates that indiscriminately copying western political systems is a blind alley for China.’40 This shows there is very little likelihood that China will adopt liberal values in the near future and is secure in the knowledge that it has achieved success without the Western model of development. Economically China has utilised and retained its centrally driven and interventionist approach similar to Japan and Germany. China has extensive levels of government involvement across all market sectors. By being centrally driven China has been able to direct its resources in one direction which has propelled it into a regional power and the largest economy in the world after the US.

China has received little assistance from the Western world mainly due to its historic communist credentials and has shown that an independent, nation first, centrally driven policy can attain economic success.