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Shifting Focus to the East

Adam Smith in Beijing: Lineages of the Twenty-First Century by Giovanni Arrighi;

Shifting Focus to the East

David Ludden

n 2004, China jumped over Japan to become the world’s third largest national economy. Now it is second. Among the biggest five, China’s real growth ranks first at over 10 per cent, with India close behind at over 8 per cent, and the US, Japan, and Germany far behind at 2 per cent to 4 per cent. Giovanni Arrighi saw the rise of Asia coming 20 years ago and got down to work to interpret what it meant for the world history of capitalism. This book is an impressive result; it will have a major impact.

Several monographic themes mingle in the book which could have been separated but make better reading woven together. One forms a sequel to The Long Twentieth Century, published in 1994. That book set out to explain the world economic crisis that began in the 1970s, but ended up describing long-cycles of world accumulation over five centuries, in the vein of Frenand Braudel and Andre Gunder Frank, which led Arrighi, like Frank, to see Asia as the next focal point for an upswing in capital accumulation.

Shift to the East

This new spatial orientation of the world economy poses major interpretive problems, however, because it entails a shift in global power relations – and discursive authority – away from the old pole of western dominance toward the east. Explaining how this shift could happen requires a shift in ways of thinking about the world economy, because this shift is not of the same intra-capitalist core variety that has occurred previously. This new shift is a triumph of the east that is alien to scholarship and theory on the dynamics of the modern world economy, where the explanation of global trends has until now hinged on events in the western core. Andre Gunder Frank prepared the ground for a new explanatory framework with ReOrient: Global Economy in the Asian Age (Berkeley 1998),

Economic & Political Weekly

april 19, 2008

book review

Adam Smith in Beijing: Lineages of the Twenty-First Century by Giovanni Arrighi; New York and London; Verso, 2007; pp xiii + 408, £ 25.

where he argued – anticipating Ken Pomeranz, The Great Divergence: China, Europe, and the Making of the Modern World (Princeton, 2000) – that Europe’s ascent came with its expansive expropriation of overseas resources. Competitive struggles among European states gave business interests increasing power in governments where financiers and lobbyists formed tension-filled, ever-adaptive collaborations with militaristic state expansionists, which defined the art and dynamism of western capitalism, nowhere better described than in P J Cain and A G Hopkins, British Imperialism, 16882000 [Longmans 2001]. Industrialisation and the great divergence thus moved ahead in the embrace of western imperialism.

Arrighi opens Adam Smith in Beijing with quotes from Geoffrey Barrachough, who famously proclaimed in the 1960s that a new era in world history began with the revolt of the east, which brought independence from western imperialism. That revolt did not end officially until April 30, 1975, at 8.35 am, when the last US marines left Saigon. The rise of Asia was then underway, and by the 1980s, it began to feel the growing force of Asia’s giant economies, China and India, whose prominence has since grown steadily.

Political independence laid the groundwork for the rise of Asia. Economic reforms from the 1980s pushed it forward, but the creation of new, strong, national states in control of their own economies established necessary preconditions. The great divergence came to an end: for India and China, over a century’s steady decline in their relative wealth compared to the west stopped dead with national victories in 1947 and 1949.

Explaining the rise of China leads Arrighi along an unexpected but logical path. He must consider a range of theorists and observers of the world economy, who strive to explain how post-1970,

global turbulence undermined major capitalist economies, most of all the US. In this effort, he spends several chapters gra p pling with Robert Brenner and others. His purpose is to show that a relative decline of the US coincided with and fed the rise of China. That decline continues today and into the future, stemming from the bankruptcy of finance capital speculation buttressed by military budgets and expansionism. Asia’s economic dynamism derived from the fact that it was not caught in the trap described by Marx, which hinged on the control of states by capitalists.

Marx did not theorise the kind of market economy that emerged in Asia, where business interests do not control the state, where instead bureaucratic governments oversee and manage markets. Here, the state is the foremost productive investor. It does not seek to expand beyond self-defined traditional borders, but rigorously maintains stability inside its borders. Toward that end, bureaucrats concentrate econo mic policy on agriculture, on local industries, and on investments to enrich constituents. The state does not seek to propagate itself as a model or hegemon overseas, but rather seeks to expand its capacity to control resources by using its power and influence in established institutions. This kind of state is opportunistic, rational, focused on stability, on the long-term, and on using the market to produce wealth for its constituents.

Not Marx but Smith

Such an economy is not bourgeois in the sense the Marx theorised; it is not capitalist in most established senses. But it is a market economy. It is not an Asiatic oddity, and certainly does not derive from Asian values. As a model, it is culturally adaptable. To understand its Asian development, Arrighi explores a range of theories; this is the most theoretically complex and searching of the Arrighi texts that I have seen. Up until now, Marx has tethered his work, and this may still be


true, but now with a serious twist: Arrighi finds that another classical economist, Adam Smith, and not Marx, holds the key to theorising China. Arrighi argues his case in great detail – using an elaborate exegesis of The Wealth of Nations, which will send many readers back to that text in amazement.

The beauty of this theoretical solution is multifaceted. It draws out features of The Wealth of Nations that most readers miss. It reveals the complexity of classical economics and shows how Smith does not support neoliberalism. The central feature of the market economy for Smith was that business did not control government and that states were responsibile in making national economies work effectively for all citizens. In this light, the Chinese revolution can be seen afresh, as a victory for the nation over capitalism. Communists expelled businessmen from power, who flocked overseas and then returned when conditions for profitability were restored, bringing back massive FDI to China. Revolution built a Chinese state that could control and work with markets effectively.

Arrighi endorses Ranajit Guha’s idea of “domination without hegemony” to argue that western capitalist dominance did not generate hegemonic control over the political economy of the market economy in China. In this light, Marx becomes a theorist of a capitalist world system, while Smith provides a blueprint for a world of diverse national market economies.

There is of course much that is not covered by this powerful book. Many questions arise that find no answers. China appears in rather stylised form and seems rather less messy than it is, particularly in realms of political economy where regional and local inequality and power struggles have emerged. Imperial China remains imperial, and deciding whether or not it is expansive beyond its own borders may be a matter of perspective, which may change over time. There are perhaps many Chinas, and the critical role of overseas Chinese, who rightfully appear central here, may be more politically visible in the near future. The Hong Kong factor and attendant internalisation or translation of western capitalism in


dynamic nodes of intersection between spatial domains of the Chinese economy merits more attention, as does the question of whether or not China, like India, neglects agriculture to favour exports, which would violate a Smithian dictum.

Last but not least, how does India fit into this reconceptualisation of the world economy in the “new Asian age”? That is a big question that merits attention by scholars who not only consider India in isolation, but think about it more seriously in its Asian and its Eurasian context, and in comparison with China. In fact, the biggest challenge that Arrighi dodges comes to light when we appreciate how transnational and regionally sub-national economic processes are everywhere today. A theoretical model may thus be required to account for the rise of Asia that goes beyond the assumption that national borders define the geography of economic change. For that, Marx may well work better than Smith, or they might need to collaborate more effectively than they have until now.


april 19, 2008

Economic & Political Weekly

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