May 7th, 2015
in Op Ed
by Jing Jin
Appeared originally at mises.org 02 May 2015
Mises Institute: How did you first learn about Austrian economics and the Mises Institute?
Jing Jin: I will give you a little background of myself to provide some context of my answers. I earned my undergrad degree in China where I majored in economics. Then I earned my masters of Public Policy at Georgetown University, plus a PhD. of East Asian Studies and International Economics at Johns Hopkins (SAIS).
I also worked at the World Bank Research Group in Washington D.C. as a consultant for two and half years. I came back to Asia in 2004 and worked in UBS, Lehman Brothers, and J.P.Morgan. All were based in Hong Kong. I worked in the banking industry in Hong Kong until late last year.
Several months after I had gone over to J.P. Morgan from Lehman Brothers, came the 2008 financial crisis. Obviously anyone with some degree of intellectual curiosity was curious about the true cause (you may be surprised how many sell-side analysts simply wrote it off as part of natural order of the world), and all sorts of analyzes in media and academics did not seem satisfying. I had a hunch that the cause of this crisis had more to do with the government policies rather than the reactionary behavior of the economic agents in the society.
Then I came across two research papers, which directed my attention to the term "Austrian school of economics." The first paper discussed why the interest rate level was so much lower than real GDP growth rate in emerging markets than that in the developed ones, in particularly the case with China. Applying the Austrian theory of capital and interest appropriately, the paper provided a sensibly simple answer - higher savings rate drove down real interest rate and therefore drove up investment and capital deepening (in China household savings rate ranges from 25 to 35 percent since the start of the economic reforms). The second academic paper discussed the heterogeneous nature of capital in the Austrian school framework. all of these made total sense to me and was intuitive as well as logical.
While I no longer work for J.P. Morgan, somehow the entrepreneurial spirit inside me has been activated (I like to think this also has something to do with Austrian economics). I am currently planning to launch a business to direct international investors to invest in Chinese firms via Hong Kong, sticking to the Austrian teaching that the private sector realizes its greatest potential where the market is least hampered.
MI: Do students in China learn about Austrian economics at the universities?
JJ: The answer to this question is not as simple as it seems and certainly not a yes or no one. Also, universities by far are not representative enough in terms of the Chinese people's exposure to Austrian economics. I therefore take the liberty to answer this question by not limiting it to university teaching.
I have the impression that Chinese readers overall are not completely unfamiliar with some of the literature of the Austrian school, but their knowledge is of an ad hoc and non-systematic fashion. The Road to Serfdom by Hayek has been widely read by several generations of Chinese students, and with the exception of the Cultural Revolution period from 1966 to 1976, it was commonly read by those who went to high school and university in the 50s, early 60s, late 70s, and 80s.
The use of Austrian economics in class varies case-by-case depending on personal preferences of the professors. I heard from a friend that some of her professors openly discussed Austrian economics in class. But I don't recall this happened to me when I was in college. Personally, I feel that Chinese bureaucracies and mainstream teaching methods treat the Austrian school either as just a type of institutional economics, and some go as far as to understand the Austrian school as just a subset of "western economics."
In university curricula from the 1950s to the 1990s, "Western economics" is a classification along ideological lines whereas all those non-Marxist approaches ranging from Keynes to Milton Friedman are included. I know, oddly enough, Karl Marx was a Western guy too.
The neo-classical framework has dominated Chinese universities since the first decade of this millennium, and the discussion of Austrian school thoughts seemed to subside on campus.
However, an interesting phenomenon is that works by Murray Rothbard and Mises are quite popular in discussions by young people on the Internet in China. After I got into the literature of Austrian economics, I traveled to Beijing only to find that quite a few people around me had already read The Ethics of Liberty years ago, and there are so many books already translated into Chinese. My salsa tutor told me about Internet groups that publish articles and books on just about any topic using the Austrian economics framework. He himself is an active writer for these Internet sources as well. The online articles are similar to the publications on Mises Daily. There are also book clubs dedicated to translating the works by Rothbard, Mises, Hoppe, and others.
MI: Are Chinese readers able to easily access Austrian books and articles in China or is the language barrier still a major concern?
JJ: I would say the accessibility is pretty good. Quite a list of books by Mises, Rothbard and Hayek are already translated and anyone can find them on the biggest online bookstore in China. Some of their books have been reprinted many times and always sell out. There are also books by others such as Menger, Huerta de Soto, etc. More e-books are available online as well. In the academic circle, many can read English directly and use the website of the Mises Institute.
While searching for the availability of the Chinese translations, I sensed there is a group of passionate translators for Rothbard's works. What I want to share with you here is that one of the translators of The Ethics of Liberty posted the following message on his blog after finishing the work that night. [This is my own translation from the Chinese]:
Rothbard and Vodka are my companions throughout the final nights of 2007. Rothbard's work made me think of the nature of human beings and ethics from time to time all through the year, and tonight this episode came to an end. ... I have this rare opportunity to look at the vicissitudes in history from the eyes of a young scholar in such a special day. But, to be honest, proof reading of other's work can sometime be more depressing than translating. The half empty Vodka bottle is the proof. When I do translations, I can do nothing but to make the music in super high volume and read the sentences out loud for over several dozen times. ... Rothbard is classic, and I was at awe to know that the second half of the twentieth century could still encounter such a classic. He has faith in The Truth and spares no efforts, using formal logic, to prove its eternal existence and power ..."
Having said this, I feel that Chinese is a difficult language and translation is not easy. The language barrier is an issue. To allow more people's access, more translation work is definitely needed for the spread of Austrian economics, especially for those classic short essays and academic papers of Rothbard's and others.
MI: Overall, whether focused on Austrian economics or not, is there much discussion of free markets in China?
JJ: In China the term "market economy" is used instead of "free markets." The discussion about the role of the market is extensive and exists at all levels. At the top, to let markets play a "decisive role" in the economy is written into the resolution of the third global session of the eighteenth Communist Party Congress (2013). Considering China's experience of decades of a highly centrally planned economic system, it is fortunate that today, even among top Chinese leaders there is a firm belief in the free market's power to create economic growth and in the sure demise of interventionist policies. The central government urges deregulation in many areas and is pushing to reduce the power of various regulatory agencies and the sub-national governments that are making the regulatory process complicated and slower than expected due to the misaligned incentives of the parties involved.
After decades of economic reform, the state's role in the economy decreased substantially. This round of reform is targeting the remaining monopolized state-owned sectors. Inviting the private sector to purchase the shares previously owned by the state in these sectors is also a major market-leaning measure currently implemented by the central government.
At the grassroots level, people don't talk but just act by opening their own businesses as a direct response to the contracting state sector. This is also encouraged by the government as these relative smaller businesses provide employment opportunities for hundreds of millions of Chinese people. The number of new start-up companies reached a historical high in China and almost everyone wants to have their own business nowadays. This is confirmed by many personal stories of friends and acquaintances. In the financial sector where I belong, many started their own investment funds or consulting businesses as well.
When I was in banking, our team covered large Chinese institutions (mostly major Chinese banks) and later focused on their overseas financing activities. We had to monitor the overseas media coverage as well as academic research on China because these analyzes affect investors' sentiment. Our experience with Chinese clients and markets have taught us that today's China, despite still claiming to be a "socialist" country in name, is becoming incredibly business friendly and filled with entrepreneurial spirit.
However, the western mainstream media's portrayal of China is entirely different. Comparisons of apples and oranges are commonplace, groundless generalization is ample, pure fantasies are not unusual and some comments simply take your breath away. ... It's almost like the mainstream media's judgment of China had been pre-made before any evidence was collected. Their negative comments on China are simply several worlds' away from what we see on the ground.
MI: How would you describe thinking about market economies within the business community in China?
JJ: The business community is not an easily defined group in China. In my view, businesses can be broadly pooled into two distinctive groups. The first group is composed of those who make money by allying with the government and its bureaucrats, or rather becoming their agents. The second group is all those smaller businesses which, like weeds, survive and even thrive wherever and whenever the government didn't take away all the soil, water, and air. This pattern has its deep historical roots that can be traced back to more than two thousand years ago when the then-dynastic regime successfully transformed the aristocracy into a bureaucracy. Since then, Chinese history had been a drama of the emperors and the bureaucrats striving for supremacy over the other with the bulk of society struggling to survive in between them. So the economic theory talked and preferred by these two groups of business communities, I gather, are surely different.
In today's context, the first group is less hindered by Keynesianism as long as they can find ways to benefit themselves given their bond with the government and its agents. At the same time, however, they are also trying to legalize and crystalize the private ownership of the property they acquired through their government connections. This is the target of the stormy anti-corruption campaign that is sweeping China today.
But it's the second group I see more and more people joining, and clearly that's where the majority is. Austrian economics should be intuitive to them, as demonstrated by so many online publications using the Austrian framework and these discussions go beyond economics.
Macroeconomics is discussed in the mainstream media within the neo-classical framework, and monetary policy is obviously the most talked about topic. This is a global trend rather than China's. My observation is that the Chinese people are very sensitive to money printing. Indeed, over two thousand years of the vicissitudes of dynasties and debasement cycles is more than long enough to build such sensitivity. This can also explain the long tradition of the Chinese people's love for gold.
Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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