Lessons for Africa from the

Economic Development of China

(Confucius philosophy)
5103170379

ERNEST BONAH | OVERVIEW OF CHINA |

Table of Contents
1. Introduction ...................................................................................................... 2
2. Economic Lessons from Confucius for the New Century ................................... 3
2.1 Growth without greed ........................................................................................ 3
2.2 The quality of your population is more important than the quality of your
armaments; good governance comes before 'economic miracles' ............................. 4
2.3 'It is shameful to make salary your sole object!' (Analects, XIV:1)………………….6

2.4 Management and Technology Matter………………………………………………………………7

3.0 Economic lessons from the Development of China………………………………………8

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1. Introduction
Current discussions on Africa–China relations unsatisfactorily focus mainly on
China’s interests in Africa and its unconditional assistance extended to
undemocratic governments in Africa. Therefore, it is important to discuss bilateral
trade and China’s interests in Africa particularly in terms of the former’s energy
insecurity and its role as the spoiler in African conflicts. It is also important to
criticize the relatively poor quality of Chinese manufactured products and work on
infrastructure in Africa. The issue of Chinese migrants to Africa and their impact
on local labour markets are also useful. Furthermore, there is a need to study how
to improve the transfer of technology and skills from China to Africa. Also, many
Africans are interested in the lessons Africa can take from the unconventional
development growth that China has registered in the last three decades.

In 1978, China initiated a political strategy to build a dynamic economy. There

were three stages to this strategy: doubling gross domestic product (GDP) in ten
years to feed and clothe the population; redoubling GDP in 20 years to achieve
prosperity, and in 70 years making the Chinese economy a global modern
economy. Currently, per capita income has increased five-fold.

China in the 1970s

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2.0 Economic Lessons from Confucius for the New Century

In 1988, 74 Nobel Prize

winners made the
assertion in Paris that if
human beings want to live
in peace and prosperity in
the 21st century, they
must look back 2,500
years and seek the wisdom
of Confucius. Now the 21st
century is upon us, and
the advice of 12 years ago
is more pertinent than
ever. Since 1988, the
Berlin Wall fell, the Cold
War ended, and the world system increasingly became a globalized one, so much
so that by 1997 a number of countries in eastern Asia experienced severe economic
crises and considerable social dislocation due to global forces. With global
financial markets and international economic institutions (notably the IMF, World
Bank and WTO) taking the spotlight on the international stage, the time has truly
come to look for the humane face of economic advancement, and to turn the trend
away from a widening gap between the wealth of the 'haves' in the global system
and the marginalization of the 'have-nots' - while not casting aside the genuine
benefits of economic development. In this light, it is advisable to study Confucius'
thought on the economy.

2.1 Growth without greed

Social production is the material base on

which humans live. Attaching importance
to production is basic to economic

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thought. Confucius was not an empty talker. He advocated an active participation
in business and social activities, and always attached importance to production.
During the Spring and Autumn Period of Chinese history (771-475 BC), social
productive forces developed rapidly and continuously. In order to meet their daily
increasing greed, the rulers ruthlessly exploited the labouring people. Sometimes
they carried out large-scale construction. Sometimes they built roads and city
walls; often they were recruited to fight wars. The common people suffered
considerably. In view of this situation, Confucius advocated that the rulers show
compassion for the people, and use their labour in a sustainable manner.
Sustainability at that time meant using the labour of the peasantry only in the
slack season of the year so that the peasants had enough time for ploughing and
sowing - thus increasing the production of grain (Analects, I:5). Today there
continues to be a need for economic development in many countries, but not at
the price of prestige mega-projects if they detract from the people's welfare or give
rise to corruption. Developing countries still suffer from these failings, though the
pursuit of economic development is not in itself a fault.
Besides removing wherever possible that unwanted companion of growth, greed,
there is also the adding of positive qualities in the form of compassion and
sustainability. These find ready application if the political and social will is
forthcoming. Compassion - or love of the people - comes in many forms, including:
 respect for indigenous and traditional cultures;
 respect for the natural environment on which many of these cultures earn
a living;
 avoidance of military conflict which not only inflicts misery upon the
people but also uproots them (the problem of refugees and displacement is
being aggravated in our current era);
 expansion and adaptation of the education system to retrain people who
are displaced economically by the forces of globalization (education, of
course, was the prime theme of Confucius).

As to sustainability, the above measures of compassion go a long way towards

sustainability in that people, upon finding that their interests are being taken into
account, and not simply that of 'big business', will lend their support to economic
forces with which they can identify. Hence care for culture, the environment,
avoidance of war-inducing instability, and advances in needed education, are all
sustainable measures for our global economic era. This basic formula is further
confirmed in the next section.

2.2 The quality of your population is more important than the quality of
your armaments; good governance comes before 'economic miracles'

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Being 'populous, rich and educated', together with having 'sufficient food,
sufficient military equipment and the confidence of the people in the ruler'
constituted another plank on the economic thought of Confucius. In view of our
current eras of concern about the growth of population levels in relation to limited
resources, as well as this planet's militarization, this aspect of Confucian thought
needs elaboration.
Confucius saw a populous country as being successful if the people were educated
and they trusted their government. This would not be a country with a 'population
problem' but one with productive 'human resources'. In line with today's concerns,
it would also make for an excellent 'market'. That is, a population which is
numerically large, skilled and with sufficient disposable income, provides a large
market for the consumption of goods and services.
As to the military dimension, this largely referred to provision for security against
attack - nomadic raids onto the cultivated regions of China has been an ever-
present threat to the security of the common people in ancient times. Hence the
provision of a people's security from physical attack, like the provision of
conditions conducive to economic development (and the latter includes the
former), constitutes a measure of good governance.
The following dialogue indicates Confucius' thought on the tasks which lay before
a developing country:
When Confucius set off on a journey to the State of Wei, Ran You, his disciple,
drove the carriage for him. When they arrived at Wei, Confucius saw a lot of
people there and exclaimed, 'What a dense population!'
Ran You said, 'Since there are already so many people, what next should be done
for them?'
Confucius replied, 'Enrich them.'
To this, the question came, 'And when they have been enriched, what next should
be done for them?'
Confucius said, 'Educate them.' This is the origin of the idea of being 'populous,
rich and educated'. (Analects, XIII:9)

Indeed, in the Spring and Autumn Period, people with a breadth of vision realized
that human beings were valuable resources and an important factor in the
development of production. If there were more people, more grain could be
produced, and the county would become prosperous and strong. Confucius did not
think it would be enough to just to 'enrich them'. He thought it would be
necessary to develop education and skills for the common people when they
became fairly well off. Confucius believed that raising the cultural level of the
common people was to raise the level of productive force.
Confucius' ideas about having 'sufficient food, sufficient military equipment and
the confidence of the people in the ruler' originated in a conversation between him

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and his disciple Zi Gong. Confucius made the above statement on food, arms and
confidence in the ruler when Zi Gong asked Confucius about government needs:
Zi Gong then asked, 'Suppose you had no choice but to dispense with one of these
three, which would you forego first?'
'The military equipment,' Confucius replied.
'Suppose you were forced to dispense with one of the two that were left, which
would you forego?'
'Food,' Confucius said. 'Death has always been with us since the beginning of time,
but if the people have no confidence in the ruler, when there is no trust, the
common people will have nothing to stand on.' (Analects, XII:7)
Needless to say, in this case, the state would have nothing to stand on either.
'Food' is the most basic material. Without it, both civilians and soldiers cannot live
and the country will die out. A strong army and sufficient military equipment are
the basic guarantees for the country's existence. Without them, there will be no
guarantee for the people's safety and it may prove difficult for the country to
remain independent. The people are the 'root' of the country. Everything of the
country comes from the people. If the people have no confidence in the ruler of
the country, it will collapse from within.
Taking the people as the 'root', food the 'basis', and soldiers the 'pillar', Confucius
combined with integrity the three aspects of state survival - that is, the
development of economic production, the strengthening of military training, and
the improvement of the people's quality of being.

2.3 'It is shameful to make salary your sole object!' (Analects, XIV:1)
The third plank in Confucius' economic thought is that he laid stress on morality
and justice, disparaged personal gains and combined justice with interests (see
Analects, XIV). In other words, the economy does not benefit from the profit
motive alone. If we are to follow Confucius, it benefits from a society which values
morality.
Confucius considered morality and justice a matter of primary importance, as
reflected in his saying: 'A cultivated person aims at truth, not at food.' Confucius
thought morality and justice were the loftiest of pursuits, so that people with lofty
ideas might endure hardship, leave their native places, even sacrifice their lives
(Analects, XIV:12, XIX:1).
However, Confucius did not oppose 'interest' in all circumstances. He said, 'Think
of justice first when thinking of interests or gains.' He also said, 'When it is just,
then take it.' (See also the discussion on morality and self-interest in D.C. Lau's
Introduction to the Analects, pp. 19-20.) Obviously, it is not that Confucius did not
speak of interests, but he advocated thinking of justice first. Confucius encouraged
his disciples to study hard because he thought that a learner might obtain high
rank and salary. Confucius once spoke of himself in the following terms, 'If wealth

PAGE 6
can be obtained without wrong-doing, I would get it even if it means being a
carriage driver.' Clearly, Confucius opposed obtaining wealth in an unrighteous
way, saying: 'Wealth and rank unrighteously obtained seem to me as insubstantial
as floating clouds.'
As for public interest - and, through it, national interest - Confucius expressed no
opposition. On the contrary, he regarded its pursuit as an important aspect of
good government. For example, his disciple Guan Zhong went to help Duke Huan
of Qi, his former enemy, to advance the prosperity of the country. People criticized
him for not being benevolent and just. But Confucius praised him, saying that
Guan Zhong was a man of great benevolence and justice; he was doing big things
(Analects, XIV:16, 17). This shows the virtue of pragmatism when a seemingly
unprincipled act turns out to be for the best. Thus Guan Zhong did not commit
suicide when his enemy became triumphant but helped him 'save the Empire from
collapse' (Analects, XIV:17). 'Had it not been for Guan Zhong,' Confucius said, 'we
might well be wearing our hair down and folding our robes to the left [i.e., in the
fashion of the barbarians]. Surely he was not like the common man or woman
who, in their petty faithfulness, commit suicide in a ditch without anyone taking
any notice' (ibid.).

2.4 Management and Technology Matter

Confucius also drew attention to

appropriate management and means when
developing an economy.
When Confucius was 20, he held the official
position of being in charge of the
warehouse and the livestock. In his 50s, he
was appointed the head of Zhongdu. While
in office, he had taken some managerial
measures to promote production. Among
them were:
 bring the productive initiative of the people into full play by allocating
work which is best suited to the individual's attributes;
 In distributing income from work, Confucius opposed egalitarianism;
 In making and selling products, he opposed practising fraud;
 He advanced knowledge of agricultural soils and conditions;
 He worked out the standards of weights and measures, which played an
important role in stabilizing the market economy.

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 Moreover, Confucius had shown
concern for technological advances,
with his disciples spreading the
knowledge of new methods which
were both efficient and labour-saving.
Once when his disciple Zi Gong visited
the State of Chu, he saw that an old
man was holding a jar, watering the
crops. It was cumbersome and slow to
water crops in this way. Zi Gong
taught him better methods.
By implementing his economic and managerial measures, Confucius' time in office
was well remembered for bringing prosperity to this region. It was a place where:
'At night, people don't need to shut their outer doors; on the road, nobody pockets
anything lost by others.'
Although Confucius live more than two-and-a-half thousand years ago, there is
much that we can learn from him today.

3.0 Economic lessons from the Development of China

There are two factors behind this near-miraculous growth: (1) capital asset
accumulation through high domestic saving, and (2) the high productivity of
China’s workforce through training. Traditionally, the main driving element for
economic growth was considered to be capital and free competition among market
forces. According to conventional economic thinking, productivity was never seen
as the prime force for economic growth.
This increase in productivity is a distinctive feature of China’s economic growth,
and the contribution of productivity to China’s exceptional economic growth is
unparalleled in the history of the growth of the wealth of nations. This is non-
traditional thinking in terms of Adam Smith’s concept of the invisible balancing of
free market forces.

Workforce training in China

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For these reasons, China’s rapid economic growth inspires many Africans. The
next natural question is, therefore, ‘How did the Chinese create this impressive
productivity record?’ Compared to Eastern European and Latin American
countries, China grew very fast while they lagged behind or even went into crisis.
How did China grow this fast? Can Chinese growth serve as a blueprint for other
countries? Broadly speaking, renowned economist such as Jeffery Sachs and Wing
Woo believe it is possible to copy the development roadmap in other countries,
whereas others such as Philip Naughton and Ronald Mckinnon believe the
opposite.

I believe that there are many similarities between the pre-1978 China and many
African countries, including large populations with insufficient food and clothing,
high levels of illiteracy and a largely agrarian population. Zuliu Hu and Mohsin
Khan in their article entitled ‘Why is China growing so fast?’ point out that state-
directed reform began with the formation of rural enterprises, investment in
manufacturing, and highland middle-level training. A series of reforms that were
introduced and directed by the state accelerated the increase in productivity. This
is the first unconventional characteristic of Chinese economic growth. The second
reason for this growth is that it did not come from the forces of the free market, as
conventional theories of economic development dictate, but from state-led
economic reform. Hence, productivity and the role of the state in economic
development are unprecedented in conventional economic growth theory as
prescribed by international institutions of financial governance such as the
International Monetary Fund and the World Bank. The transformation of the
economic base from agriculture to manufacturing and higher prices for
agricultural products have moved many people out of the highly congested
agriculture sector.
The industrial sector has also shown gradual development from a primary
industrial base to an advanced one. To achieve a 12% reduction in primary
industry, 20% of the Chinese workforce shifted from agriculture to industry.
Expanding protection and space for private property, welcoming foreign
investment in areas where Chinese cannot effectively participate, tax waivers for
foreign investment, enhanced job opportunities, and joint ventures enhanced the
competitiveness of the Chinese economy at the global level. While the prices of
agricultural products were freed, prices of others products were in many ways
controlled.
For countries with a large segment of the population underemployed in
agriculture, the Chinese example may be particularly instructive. By encouraging
the growth of rural enterprises and not focusing exclusively on the urban industrial
sector, China has successfully moved millions of workers off farms and into
factories without creating an urban crisis …. As such, they offer an excellent

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jumping-off point for future research on the potential roles for productivity
measures in other developing countries.

In a nutshell, the lessons from China’s economic growth could be summarized as

follows:
(1) Economic growth does not necessarily have to follow one path, that of
unchecked invisible free market forces of the Adam Smith type, and there is
another path, albeit an unconventional one.
(2) Economic growth reduces poverty.

(3) Domestic economic policy choices determine the growth of a country.

(4) Economic growth should not necessarily lead to the marginalization of the role
the state can play, and the state can make an indispensable contribution to
economic growth. For instance, state-directed public-private sector partnerships
for strategic national interest-led investment is important even in areas that are
not profitable. For many economists, the current (2008– 09) global financial and
economic crisis has proved the extremely important role of the state in regulating
and stimulating the economy.
(5) State-led market-friendly incentives, particularly in agriculture, are the basis
for transformation towards a manufacturing and service economy.
(6) The productivity of the workforce can be more important than capital.
(7) For the urgent developmental needs of Africa, such as infrastructure, health
and education, which have quick and visible impacts on the population, the
Chinese development model is as equally useful as the China–Africa partnership.
For Africa, the partnership with China is free of conditionalities. The traditional
Western conditionalities are irrelevant to economic development and thus have
undermined the role of the state in the socio-economic life of African countries. In
order to clearly explain the potential of Chinese lessons for Africa, I shall first give
some information about the economic performance of China, compared to India

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and other countries like the United States. Then I shall describe what kinds of
constraints are affecting China and India and how they have removed these and
could remove the remaining constraints. This, I hope, will help in identifying the
main lessons for Africa from China and India, as many of the constraints faced by
India are similar to those faced by Africa. By looking at data such as levels of credit
in relation to GDP, years of schooling of the labour force, infrastructure indicators,
institutional quality, export dynamism, returns to capital, the cost of capital, credit
rationing, the cost of financial intermediation, returns to human capital, etc. of
China and India, I will try to distil the main lessons from the Chinese and Indian
economies for African countries.
For this purpose, I shall use the Growth Diagnostic Tree methodology developed
by Ricardo Hausmann, Dani Rodrik and Andrés Velasco. This methodology raises
questions as to why growth is constrained. Is it because of the high effective cost of
finance or because of the lack of returns to private investment? Is it because of
insufficient domestic savings or restricted access to foreign savings? Is it because of
poor infrastructure? Is it because of the kinds of exports? Does the country
produce ‘poor’ or ‘rich’ country goods? Or is it because of the institutional and
legal governance of the economy? Is the judicial and legal system functioning
effectively to enforce contracts? These are called binding constraints.
To adapt George Orwell’s famous expression, all constraints are binding, but some
are more binding than others. Most binding constraints are bottlenecks to
economic progress causing the highest degree of distortion. The payoff in
enhancing the performance of the economy is very high if such constraints or
distortions are removed. The higher the return from removing the constraint, the
more binding the constraint is to the economy. Some booming economic activities
such as the software industry in India or unusually high savings in China imply
that these dynamic sectors of the economy are trying to ‘hoop jump’ the binding
constraints. As we will see in the case of India, the most binding constraint is poor
hard infrastructure, whereas, in the case of China, low domestic consumption has
increased saving due to social insecurity. By looking at the most problematic areas
of economic activity, one can diagnose these binding constraints.
Consequently, the kind and priority of reforms a country should take in order to
grow faster could be identified by identifying these most binding constraints. The
analysis and conclusions in this brief paper are supported by tables, graphs and
comparisons.

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REFERENCES

1. "World Bank raises China's 2017 growth forecast, maintains 2018 outlook". South
China Morning Post. 19 December 2017.
2. Mark Melnicoe (5 May 2017). "China: Wage Increases Level Off With Economy".
Bloomberg BNA.
3. James B. Stewart (July 9, 2015). "Why China's Stock Market Bailout Just Might
Work". The New York Times. Retrieved 11 July 2015.
4. Cheng, Fang. "Development of Agricultural Mechanization in China" (PDF). Eurasian
Food Economy Forum 2017. UN Food and Agriculture Organization. Retrieved 26
November 2017.

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