An idea that economies of various countries around the world are tightly interconnected and, to varying extent, interdependent hardly raises any disputes in the contemporary world. However, the global economy, as well as individual economies of separate states has also been interdependent with all kinds of institutions existing within the society, irrespective of whether these institutions are of economic or noneconomic nature. Therefore, the current economic situation relating to China and the slowdown of its economy should be considered not only in terms of economic concepts and processes, but also from the institutional perspective, as Karl Polanyi suggests. The main point of this claim is that one should consider the Chinese economic slowdown not merely from the standpoint of economic impacts that have already affected or will affect the country’s economy in general and its separate sectors in particular. Moreover, one should regard it as having a potential to impact not only the economic domain of the countries and its international counterparts, but practically all other institutions as well. Hence, the current paper aims at discussing issues raised in the Editorial of The Guardian entitled “The Guardian View on the Global Economy: China Sends a Shiver through Davos” from the perspective of Karl Polanyi’s point of view about the institutionalized nature of human economy.
In 1957, Karl Polanyiwrote the following: “The human economy … is embedded and enmeshed in institutions, economic and noneconomic.” (Polanyi, 1957, p. 250) Further, he added that “The inclusion of noneconomic is vital. For religion or government may be as important for the structure and functioning of the economy as monetary institutions or the availability of tools and machines themselves that lighten the toil of labor” (Polanyi, 1957, p. 250). These statements convey an idea that markets do not operate in a complete vacuum but are rather significantly affected by social and cultural processes occurring within the respective institutions. All these institutions impose certain expectations and levies on each country, as well as the society and the world globally. The economic sector has developed in such a way as to give rise to the currently present inequalities both within countries and between countries, as well as cases of particular economies’ spurring growth like the example of China and other economies’ falls into deep crises. In turn, these inequalities promote increased risk taking, which promises high private gains in the short term, but in the long run such activities result in severe crises. Such a pattern is evident in many examples of past and present world economies. As the article under consideration points out, the US experienced a period of rapid economic growth in the second half of the 19th century and afterwards due to industrialization, which also led to profound social and cultural changes. However, this economic development had been accompanied by rather “regular booms and busts that had little lasting impact” on sustainable economic growth, while resulting economic crises left the society devastated for long periods of time (The Guardian). Besides, the pattern of economic development in the USA of the recent one and a half centuries produced a consumerist society that is accustomed to living in the conditions of a capitalist market economy, hence meaning that profound social and cultural changes have occurred alongside with economic changes. This idea is empricial evidence for Polanyi’s claim about institutionalization of the economy and its interdependence with all kinds of institutions.
Authors of the article assert that China “may have more in common with the US than it does with its former communist rival” and that “China’s transition to a more consumer-led economy” is not going to be without problems (The Guardian, 2016). Moreover, current problems with the slowdown of the Chinese economy are a logical result of the social, political, cultural, diplomatic, and economic processes occurring within the country and in the world. The Chinese growth was stimulated by the 1980s reforms in the country, but it was partially artificial as the agriculture-based economy was suddenly encouraged to become industrialized, urbanized, and compliant with the basic principles of a market economy. However, this economic growth has not been accompanied by genuine institutional changes within all the domains of the society’s life. For instance, politics and economy in China are, on the one hand, tightly interconnected, but on the other hand the government has strived towards decentralization to promote growth of SMEs and attract foreign investments. Besides, the China’s government does not provide reliable statistics and “even members of the politburo take them with a large pinch of salt” (The Guardian, 2016). In response to the 2008-2009 global financial crisis, China “went on a colossal binge” that was also promoted by the government rather than being a natural development of social moods (The Guardian, 2016). Thus, “one problem has been solved by blowing up a debt bubble that will eventually collapse and cause an even bigger problem” (The Guardian, 2016). These ineffective and inefficient short-term solutions fail to provide a sustainable long-term solution and to ensure stable economic growth, meanwhile signaling that there are significant problems within all of the country’s institutions. This is consistent with Polanyi’s view about the embedded nature of human economy into all of the societal institutions. It is also important to note that current economic problems of China are deeply enmeshed into its social policies, in particular the ones relating to demographics. For example, China adopted the one-child policy in an attempt to generate an unprecedentedly rapid economic growth in the late 1980s and reach the GDP level of developed countries by 2000. China has arguably managed to reach this goal, yet the policy has had an unexpected outcome that one of the driving factors of today’s economic slowdown of the country, which is the tendency towards population ageing and reduction of the size of workforce. This situation is another piece of evidence that all institutions within a country, including the economic and noneconomic ones, are interdependent.
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With respect to Polanyi’s view, the current and past situations in the world and in individual countries like China prove that all the institutions within a state and the global community are interdependent, as well as being deeply embedded into each other. The economy does not exist in a vacuum, which is why it is subject to profound influence by social, cultural, and other processes within a country. Furthermore, institutions in one country and their ultimate constantly changing nature have a profound impact on institutions in other countries and the global community in general.