The ISRF has been partnering with Gresham College to run an annual lecture series in London. Last year, our topic was Migration, which was also one of three themes at our 2024 Conference in Warsaw. This month, we’re starting a new series on Decolonisation. ISRF Fellows Martin Thomas, Julia Laite and Adam Hanieh will be speaking over the next few weeks. You can find the details here.

If you haven’t visited Gresham’s Barnard’s Inn Hall in Holborn near the Chancery Lane tube stop, do consider coming. It’s one of England’s unique educational places—a free adult education college founded during the reign of Queen Elizabeth I.

We’ve also just started the fourth set in our series of seminars on political economy. This one is called “Redesigning Finance for Climate Justice” and is oriented around a research project led by Daniela Gabor, who recently moved to SOAS, University of London. Our first meeting discussed a paper titled “Financing Technological Innovation in China”, a surprising, illuminating piece of research by Cornel Ban (Copenhagen Business School) and Xuan Li (Zhejiang University of Technology). The paper analyses the innovation system that has allowed China not merely to play catch-up with the West but, in many domains, particularly green tech, to leapfrog it. The paper also made me think about decolonisation as an economic as well as a political process.

When Daniela and I were first talking about the research project, our shorthand was the “Big Green State”. Our metaphor for its international foundation was “green Bandung”. Bandung is the Indonesian city that hosted the legendary Bandung Conference in 1955 that gathered 29 “emerging nations” of what we now call the global South.

Organised largely by the heads of two recently decolonised nations, Indonesian President Sukarno and Indian Prime Minister Jawaharlal Nehru, the 29 represented countries wanted to avoid entrapment in the binary US vs. USSR Cold War system.

They were also resisting racism-based economic neo-colonialism, in which the West or global North maintained control of the global South’s national assets and most of their revenues, either through direct ownership or, increasingly, through finance and debt. The conference started with this first issue, about which there was consensus. The 10 principles of the Bandung Declaration focus on racial equality, mutual respect among nations, and avoidance of military intervention, particularly in the service of the “big powers”.

Yet in his address, Sukarno also raised the economic issue. He noted, “Colonialism has also its modern dress, in the form of economic control, intellectual control, actual physical control by a small but alien community within a nation. . . . It does not give up its loot easily.” In this view, racial and cultural equality and political independence depended in large part on economic self-determination. The one could not be realised without the other.

Economics became a core focus of decolonisation movements. One of the Bandung Conference’s direct legacies appeared in 1974, when the United Nations General Assembly adopted the “Declaration for the Establishment of a New International Economic Order”. Its second principle was “Full sovereignty of each State over its natural resources and other economic activities necessary for development, as well as regulation of transnational corporations.”

Another organiser of the Bandung Conference had been China’s Premier, Chou Enlai. Of all the Bandung attendees, China came most completely to decide its own economic fate. Not coincidentally, it also produced an economic revolution, resulting in modern history’s most remarkable reduction of poverty, the creation of hypermodern national infrastructure, and the country’s repositioning as the planet’s dominant manufacturing power—particularly in advanced and green technology.

How did this happen? The standard Western explanation has been market liberalisation. A 1997 report by the International Monetary Fund (IMF) credited the 1978 reforms on the grounds that they gave new “room for private ownership of production”, allowed greater freedom of production goals and pricing, and encouraged foreign capital investment. Western economists have downplayed the role of China’s powerful yet intricate planning system, public capital investment, and a multi-layered national system of “government guidance funds” (GGFs) that American economist Barry Naughton (2021) summarised as “grand steerage”.

Ban and Li’s paper is a systematic corrective. They offer detailed empirical evidence that China succeeded by rejecting the IMF and World Bank and their underlying Washington Consensus and developing a radically different system. They call this system dirigiste (as opposed to liberal) neo-developmentalism. It operates through GGFs, which are “hybrid institutions combining a primary VC function with secondary support investments”. The overall innovation system has some key features that I found particularly important for Europeans to consider—and to adapt in a post-U.S. centered world.

First, China’s system is dirigiste or directive in that tech investment is steered towards five- or 15-year goals as set out by the top level of the ruling party in Beijing. This means that tech directions are not decided by mega corporations and private venture capital firms as they are in the West. China has been running cumulative industrial policy during the decades when the West looked to a competitive and conflictual assembly of private corporations and financing, presumed to be coordinated efficiently by market forces.

Second, most of China’s innovation capital is also public—in the sense that it comes in large part from the enormous revenues generated by state-owned enterprises (SOEs) that continue to control 60 percent of all assets in China. Even in sectors dominated by private firms (electric vehicles, bio tech, electronics), major SOEs or state-connected firms are “critical leverage points for executing state plans”.

Third, this public capital exerts partnership control over firms as they specify and fund their particular contributions to the larger technology plans. It addresses a weakness American economist J.W. Mason has noted with Western industrial policies that prioritise general technology areas (advanced chips, renewable energy) but do not help set detailed goals or make direct investments. China’s government guidance funds do both.

Fourth, most of the investment as well as the tech research and development is regional and local, not centralised. State and municipal funds invest in start-up and early-stage companies. This helps get Beijing off the hook for the many, many failed companies that any large innovation system will produce. But the more important effect of these “strong geographical conditionalities” is to spread at least some tech development and advanced firms across the provinces. It’s a Chinese cousin of the “levelling up” that never actually happens in Britain.

Fifth, China’s system has a size that complements its localism and multi-layered complexity. “On a per capita basis, the EU GGFs have approximately US$375 per EU citizen while the Korea Venture Investment Corporation (KVIC) manages about US$164 per South Korean resident. Chinese GGFs have US$1061 per citizen.” China’s 2126 GGFs seem to have invested about US$900 billion in 2022, while “128 European GVC agencies operating 392 GVC-like initiatives invested barely 38 billion [dollars] over the entire 2007–2021 time period”. China can leapfrog the West in part because it is willing to spend state funds on a scale that neoliberal societies no longer imagine.

A sixth element is cultural. Residents of the EU and UK see themselves as living in democratic societies while our Chinese counterparts suffer an authoritarian one. There are certainly important differences, and yet the Chinese innovation system is marked by a rivalrous experimentalism that presumes much local independence of decisionmaking and, crucially, some kind of equality and mutual respect between firms and governments.

In contrast, Western firms operate on a quasi-religious faith in the superior intelligence and technical judgment of their market-driven decisions over those of public sector bureaucrats, even as they pursue public subsidies. This dogma limits industrial policy to derisking and is turning out to be an Achilles’ Heel. China appears to have made the opposite decision—that intelligence must be distributed geographically as well as across private and public sectors if development is to be as rapid (and globally powerful) as they want it to be.

To imitate this part of the Chinese model, the UK government in Westminster would need to identify an ambitious regional authority, say the Liverpool City Region, that wants to spend five percent of its budget on innovation, send funds to raise that amount to 10-15 percent, and then cede control over the investment decisions to a future Liverpool Government Guidance Fund as it works with local and national firms and investment partners. Westminster would then do this with all ten of the UK’s Combined Authorities, who would support local expertise and imagination to develop technologies that would address Westminster’s general goals.

Our seminar discussion with Cornel Ban raised a number of problems and limits with China’s model. We are all aware of Chinese government limits on democracy, information, expression, and human rights, particularly of ethnic and cultural minorities, and none of us want to compromise on these, especially when Western countries are faltering on these same issues.      

But my sense is that the group generally accepted that China practices what Ban and Li call “financial statecraft” that is lacking in the West. We would probably argue about the share of China’s transformation that comes directly from the GGF-based innovation system (as opposed to mass volumes of low-wage rural labor and the other usual suspects). I would cast doubt on claims that China’s technology universities have squared the circle of funding basic research that leads to nearly immediate breakthrough commercialisation.

But Ban and Li’s account is the most convincing explanation I’ve seen of China’s economic achievement, which is unprecedented in modern world history: 800 million people taken out of poverty; a GDP that has grown by an average of nine percent a year for nearly 50 years; a labour productivity growth rate of 7.34 percent since 1953 (more than three times that of the United States), and advanced technology and manufacturing that does not simply follow that of the West but now often leads it. China has also shown that clean energy development can generate the growth of an entire, enormous economy.

You’d think Europe and the UK would be engaged in a frenzy of imitation. But the West went through a cultural revolution of its own around the same time as Mao Zedong’s in China. We now call it neoliberalism and it promised efficiency, fairness, and general prosperity. It envisioned growth, abundance and an ever more affluent middle class. Its deregulated markets and financial genius would co-opt the entire world into a unified system run by the United States and its sidekick Europe.

It has not worked out that way. Neoliberalism exposed metropolitan countries to an explosion of economic inequality, political oligarchy, and economic monopoly. It stoked social polarisation and anger by disparaging and downgrading those it labelled non-producers, particularly its racialised or immigrant working classes.

In 2024 and 2025, its executive class has gone into full retreat from legitimising commitments to the public good such as addressing climate change and supporting democratic norms of freedom of expression and due process. Ongoing adherence to the Wall Street Consensus has underwritten the radical divergence between the economies of the vast majority of the global South foreshadowed by the Bandung Conference and that of China, which rejected it. Since 1960, Africa’s GDP has fallen from one-half that of the world’s average to one-quarter.

In addition, neoliberalism helped damage or destroy state capacity by convincing the business sector that public service intelligence is not needed. A British system of GGFs would require another cultural revolution. This one would put public knowledge and state capacity at the center of rebuilding Britain “brick by brick”.

The Can and Li paper will be out shortly and as you can tell, I recommend it. And join us at Barnards Inn Hall this month to discuss the past and future of decolonisation more broadly.