Tuesday, February 10, 2015

The New Silk Road and the Power of Ideas

Much analysis is missing perhaps the most important potential role of China’s Silk Road aspirations.

Three years ago, I took part in a tour of the Grand Bazaar in old town Istanbul. Among various spices, embroideries, artifacts, and foods, silk was in short supply. That surprised me; it was as though I had entered a meat market without seeing any lamb or beef. In this westernmost harbor of the ancient silk road, I was later corrected by my Turkish friend: The Grand Bazaar was by no means the biggest in the world. (In fact the biggest Grand Bazaar is in Urumqi.) Perhaps more surprising, the Silk Road has never been mainly about silk, nor is it a road.

One of the most popular terms for China’s diplomatic achievements in 2014 is arguably its strategy of “One Belt, One Road,” i.e., the New Silk Road Economic Belt, which links China with Europe through Central and Western Asia, and the 21st Century Maritime Silk Road, which connects China with Southeast Asian countries, Africa and Europe. Even though Professor Justin Yifu Lin recently spoke of an extra “One Continent,” the proposal does not exceed the original scope of the Silk Road. However, the strategy is considered to signal a shift in Chinese diplomacy.

Many articles have been written since this strategy first emerged, analyzing each and every possible aspect of the two routes, one land-based, one maritime. The economic, political and diplomatic implications, should this strategy turn into a workable roadmap, have been thoroughly examined. The strategy has been dissected in seminars, workshops, and high-level conferences and forums. Yet there’s an important dimension to the analysis that has been missing: the critical function of the New Silk Road in terms of conveying and spreading ideas.

What we need to know about the Silk Road, old and new, is that it is not just a road, nor is the belt just an economically connected region that spans continents. The Silk Road is more of a network than it is a fixed route that makes it way through the continental hinterland. Ever since the term was coined by Ferdinand von Richtofen, the German geologist, the main stops on the Silk Road have shifted over time. Once prosperous towns became crumbling and deserted relics. Even the most recent of them, Dunhuang, has faded in history, let alone names such as Xuanquan, Niya and Loulan. The marketplace for goods extended across a huge area that was connected by these stops, which are now the landmarks of the archeological Silk Road.

Represented by silk, the ancient Silk Road enabled intercontinental trade in consumer goods, including coins and silk; paper, which came later; and most importantly, ideas. As Professor Susan Whitfield has explained, the Silk Road had three implications for human civilization. Economically speaking, it promoted the division of labor along the Ricardian model of  comparative advantage, along with regional cooperation. From a geological point of view, and on a seemingly negative note, it facilitated the spread of disease, including the notorious Black Death in the Middle Ages. However, as I see it, the most seminal impact of the ancient Silk Road was that it facilitated the communication of ideas. Archaeological findings have shown that the Silk Road helped introduce Buddhism and Islam to China. What should be taken into the calculation of the grand strategy of One Belt, One Road is not only a shifting of excessive domestic capacity, trade, or closer diplomatic ties with neighboring countries, but also the market for ideas.

As one of the greatest liberal thinkers, Fredric von Hayek rightly pointed out in his widely celebrated The Road to Serfdom, “… a change of ideas, and the force of human will, have made the world what it is now, though men did not foresee the results, and that no spontaneous change in the facts obliged us thus to adapt our thought…” Even though he was talking about Englishmen who he felt were so misinformed as to choose a road to totalitarianism, a modified version is very popular in China now: “ It is the change of ideas and the force of human will that have made the world what it is now.” Echoing this, and indeed taking this proposition one step further, was the late Noble Laureate of economics, Professor Ronald Coase. In his milestone essay “The Market For Goods and the Market For Ideas,” Coase came up with the notion of a “market for ideas.” The gist of his argument is that without the proper communication of information – a situation known in economic jargon as “asymmetric information” – the market economy will underperform. A free market for ideas does not guarantee a perfect market economy, but it facilitates the performance of it.

China is a self-proclaimed socialist market economy that needs a much more open market for ideas. The reform and opening up policy of the 1980s was inherently a process of market liberalization underpinned by a somewhat less restricted flow of information and a loosened system for exchanging ideas, at home and abroad. As a cornerstone of a market economy, information has a value that cannot be ignored. Trade in consumer goods will remain relevant for China’s regional strategy and for the One Belt, One Road strategy, but more emphasis should be given to the market for ideas. Some have argued that the Internet has made human communication obsolete. For the foreseeable future, though, the communication of ideas in the traditional form, which consists of information in multifarious forms with multifarious meanings and innumerable nuances, will still be the main agent of change.

The hope here is that with the One Belt, One Road strategy, a much bigger and more complex market for ideas will emerge. The world could do with a little more open-mindedness, and a little less ideology. What Chinese history shows (though some may argue that history seldom teaches us anything) is that isolation led to the failure of the state. Should the One Belt, One Road strategy contribute to a more open China with a freer market for ideas, and further, a freer society, then history need not repeat.

Ma Junjie is a project researcher at Unirule Institute of Economics, a private think-tank renowned for institutional economics. He writes on various topics, ranging from international politics, trade, climate change and emissions trading scheme, to China’s reforms and culture.


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