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Short-term thinking, both individual and institutional, represents one of China's fundamental challenges. Another issue is simply population. In some ways it's a strength: Of China's 1.3 billion citizens, 72 percent are between the ages of 16 and 64. In modern history the nation has never enjoyed such a large percentage of able workers, and their movement from the countryside has turned China into the world's factory floor. In 1978, when Deng Xiaoping initiated free-market reforms, there were only 172 million urban residents. Now there are 577 million—¯over 40 percent of the population. Social scientists predict that this figure will approach over 60 percent by 2030. Each year roughly ten million rural Chinese move to the cities, providing a constant supply of cheap labor.

But cheap labor isn't always best for long-term development. It's worth comparing with Whittier's century, when American industry and agriculture were revolutionized. Back then the prime motivator was actually a shortage of workers. The U.S. had plenty of land and relatively few people; anyone who saved a few months' wages could move west and farm. Industrialists had to hire unskilled workers, mostly recent immigrants, and they made the most of limited labor. The need for efficiency inspired innovations that changed the world: the cotton gin, the sewing machine, the assembly line, the American system of standardization and interchangeable parts.

China's industrial revolution has followed a different path. There's little incentive to save labor, because of constant migration. Competition is ruthless, but it's not the sort that leads to innovation; most plants simply try to shave down the cost of making low-margin products. Education suffers from a similar low-end approach. Chinese schools have been remarkably successful at basic skills—¯the literacy rate is over 90 percent, compared with 65 percent in 1982, according to the Ministry of Education. But the conservative curriculum depends heavily on rote memorization, and higher education is particularly weak. The next step is to develop a population that can do more than make cheap goods for less.

The people themselves are desperate for better training. In a Chinese factory town, after the early construction is finished and the machines begin to hum, private courses proliferate: English classes, typing classes, technical classes. In Zhe-jiang I met Luo Shouyun, who had been illiterate when he first left his village; sometimes he had spent as much as a quarter of his income on after-hours training. Now he was a master machinist, with a salary that placed him solidly in the middle class. Another young man had learned Arabic in order to translate for Middle Eastern buyers. An assembly-line worker with a seventh-grade education showed me the book he read at night: Harvard MBA Comprehensive Volume of How to Conduct Yourself in Society. "I'm not mature enough," he explained. "Somebody as young as me needs help, and this book can provide it."

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