The Tiananman Square Protests Weren't Liberal

One of my favorite blogs is Echoes, subtitle "Dispatches from Economic History", at Bloomberg. There isn't a unifying theme other than contextualizing current events by looking to past episodes. The authors are experts on each topic -- i.e. there aren't just one or several folks writing every day -- and I almost always learn something from the post.

For example, that the Tiananman Square protests weren't exactly liberal. The author of the piece is a sociologist as Kansas State who has studied Chinese development since 1949, and he says that the protesters were "radical reactionaries". This atypical conjunction means that they were anti-authoritarian but also anti-capitalism.

The story goes like so. The early reforms economic reforms in China benefited rural farmers and initially urban consumers as well, but after awhile industrialization efforts and a plateau in farm production increased price inflation. At the same time corruption increased. This hit urbanites particularly hard. They demanded more political access, but mostly so that they could reverse economic reforms. Thus, they urbanites were "radical reactionaries". I guess that means the rural farmers were "conservative revolutionaries".

Deng refused to yield, but had the protests been successful China might've ended up with the opposite of what they've had over the past generation: political reform without economic reform. Ironically this would have hurt urban dwellers in the long run, since the economic reforms Deng undertook eventually benefited them the most.

Anyway, it's certainly not the textbook version of the story. But elements of this still resonate, as this Dissent article about the contemporary anti-reform movement in China illustrates.

The Importance of Learning from Crisis

MR points to this piece describing how Sweden has come through the recent financial crisis relatively well. The five reasons given really sum to two:

1. Have a terrible financial crisis fairly recently in your past, and learn from it.

2. Don't join the EMU, and ask the US Fed for help.

After the Swedish financial crisis in the 1990s, they passed a rule that balanced the budget and built up a surplus, and they stuck with it. They left them with plenty of cash to fund "automatic stabilizers" in the welfare state. The central bank also slashed interest rates to zero and pursued quantitative easing more aggressively than the US Fed. The central bank was able to do this, and adjust through the exchange rate rather than wage and price cuts, because it refused to adopt the euro. Meanwhile, the Fed opened up swap lines with the Riksbank that provided enough liquidity to keep the Swedish banking sector afloat. (Another data point that Bernanke has been the world's central banker, just as Kindleberger would've wanted.)

The above two points can lead to hope. Financial crises are painful events, but because of that they can lead to positive medium-run reforms that put the economy back on a proper path. The US political economy has frustrated a lot of folks lately, but we've come through worse crises in the past, as have other countries, and have usually been better for it.