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Interview: Ronald Haddock, Booz & Co.

Interview: Ronald Haddock, Booz & Co.

Zurich-based partner and vice president at Booz & Co., Ronald Haddock, talks about why the future of the global economy might not rest in the East after all.

January 10, 2011 4:15 by

China has no rule of law and its markets have no transparency. It has a miserable human rights record. What can it learn from Western economies and countries as it emerges on the world stage?

China, in fact, has many laws on the books and is increasingly enforcing them. Yet the general observation that there are significant gaps in laws and the enforcement of these is valid.

Every country has a starting point from which advancement and development ultimately get launched. In other words, changes in rule of law and human rights can only happen by understanding the context that led to the status quo, with the view that incremental change is more likely to be successful than sudden, fundamental change. I’m arguing for a gradual approach that ensures stability.

What China can and should learn from countries that are more developed is how to balance the need for stability with the power of its people’s creative capacity. Creativity in multiple dimensions of social and economic life – including the ability to express their hopes, dreams, and desires – should contribute to policy choices made by leaders. In other words, China should actively engage its citizens in creating a more harmonious and balanced society, particularly by addressing the poverty issue and huge imbalances between the haves and have-nots.

In light of where China has come from and where it is today, its progress across multiple dimensions of social and economic life has been remarkable. Yet, as China’s citizens become wealthier, it will be important to strike a suitable balance that allows the citizenry greater participation in non-economic activities (social and political life). If you look at China closely, this is already happening. The official press is more open: It increasingly publishes stories about natural catastrophes, as well as about corruption in the government and the failings of public institutions. In this regard, the China of today is very different from the China of even 10 years ago.

What China can learn from the West is how institutions that support social progress have evolved over time and how these have supported social progress. Media can play a central role in pointing out the failings of government and thereby crystallize debates and policy discussions to address shortcomings, as it has in Western Europe. Although this process may be uncomfortable, given the Chinese government’s current relationship with the media, officials could accelerate it by allowing more media coverage of areas in which the government itself is focusing on reform. For example, how efficient are the back offices of Chinese banks? This is not politically sensitive per se, but shining the spotlight on inefficiencies might spur more activity to address them.

In a similar fashion, China allowed foreign entry into key sectors as a way of stimulating change in state-owned enterprises that either had to change quickly, or were eroded or eliminated by more efficient private companies. Look at what happened in the auto sector: It’s unlikely China would have domestic players today capable of competing on the global stage if they had not learned how to compete in China against world-class companies such as GM and VW.

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