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JAMES GALBRAITH Chinese Mirrors The Economic Sideshows Seen Byrn Afar SICHUAN IS A GIGANTIC garden, four-fifths the size of Texas with six times the people, and every inch so far as I could see covered, up slope and down, by black soil spring green in January with oranges, chilies, vegetables and rice. From this misty remove, the details of the American budget battles were a little hard to make out. But the vast damage done to our national reputation was very clear. Time and again, I was asked to explain how the government of a democratic superpower could actually shut down over such a petty matter. The answer I gave was that there was a power struggle on among three men, Clinton, Dole and Gingrich, with the subtle variation that Dole and Gingrich were allied by party but rivals within it. This met, I’m sorry to say, with instant understanding. Three issues dominate economic policy discussions in China. The first is how to maintain real economic growth at the annual rate of ten percent, or bet ter, which the Chinese have enjoyed since reforms began fifteen years ago. Second, how to manage inflation, China’s major economic problem. And third, ‘how to make sure that economic growth is widely shared across the population and the country, so that the broad egalitarianism on which Chinese social stability rests is not compromised as development continues. Can you imagine? Conversations on economics about things that really matter? Conversations that are not about savings, investment, productivity and balancingthe-budget-in-seven-years, but about growth, inflation and equality? For a professional in the field, it was refreshing. My new year’s resolution was to spend less time protesting our national obsession with the budget, but I can’t resist doing it one more time. Since when and on what authority did Newt Gingrich, a fourth-rate history professor, become an economic expert? For that matter, how did Bill Clinton achieve his new-found wisdom on this James Galbraith teaches at the Lyndon B. Johnson School of Public Affairs, the University of Texas at Austin. highly technical matter? What exactly is the objective, and the benefit, toward which balancing the budget is supposed to lead? Where are the distinguished economists, the technical professionals, the research reports, the comparative studies, the historical analyses, on this subject? Doesn’t their absence say something about the hollow, disreputable character of this issue? It would be nice, for example, if advocates of a balanced budget could tell us that it would raise the real economic growth rate from 2.5 to, say, four percentstill less than half of China’sbut they don’t say that. Or if they told us that it would re duce unemployment to five or four percentbut it wouldn’t. Or that it is needed to fight inflationexcept that we have no inflation to fight. Or even that we could get lower interest rates out of the deal. But they tried that line in 1993 and it didn’t work: Congress cut the budget and Greenspan raised interest rates instead! The lack of pretense surrounding this discussion is one of its peculiar features. We don’t see any trace of supply-siderism, monetarism, or the other mumbo-jumbo that surrounded the last wave of reactionary economic policy in the early 1980s. When Speaker Gingrich, the driving force on this issue, was pressed on the economic reasons for his seven-year budget itch, he had the candor to say that the timetable was “instinct.” And even the New York Times, in an editorial on January 14, described the drive to balance the budget and cut taxes as “economic sideshows.” Why the Times then went on to endorse a “compromise” that would force huge spending cuts and accept large tax cuts excapes me. So what are we doing this for? The answer of course is politics, politics, politics. Budgets and taxes are “political hotwires that the parties use to inflame the voters” as the Times again correctly observed. Economics has nothing to do with it. And the only blessing is that politics may save us in the end. So long as Bill Clinton continues to stand firm against the major details of the Republican budget, his insincere concession on broad principles may get him and the rest of us through to fight another day. Coming back from China, of course, I discovered the uproar in the American press over the Shanghai Child Welfare Institute, an undoubted tragedy and scandal. The deaths of many children is an awful thing, whether “deliberate,” as alleged but not proven, or not. But in either case did it really demonstrate, as the Times editorialized, “Beijing’s indifference to human life, true to the Leninist tradition that any and all means of repression are justified by the historic end of retaining power”? Beg your pardon? The discovery by the end-of-history crowd that one-quarter of the world still lives under a Communist Party is interesting, to be sure. But how exactly does “Leninism” \(whatever that is, and frankly don’t ask a ChiThen I realized. The real message from Shanghai is surely that orphanages in any country are dreadful social policy. Chronically underfunded, under-regulated, undersupervised, they are inherently prone to abuse. Surely the message is that it is much better to pay young mothers a decent stipend so they can afford to raise their childrenespecially disabled, handicapped and retarded childrenat home. Surely the message is that all residential institutions, whether orphanages, nursing homes, or mental hospitals, need solid and steady funding and equally strong and uniform oversight of their conditions. Last year, our yapping classes were loudly touting orphanages for a comeback in this country. They are today loud advocates of cuts in welfare, SSI and nursing home regulationall bulwarks against tragedies like Shanghai’s. They are vulnerable on this one. And Clinton’s veto of their welfare bill, a sure sign of gathering nerve, was a rousing final act on a political year that began dreadfully but was certainly looking up by the end. The real message from Shanghai is surely that orphanages in any country are dreadful social policy…it is much better to pay young mothers a decent stipend so they can afford to raise their children. 10 JANUARY 26, 1996