China-politics of economic take off

THE POLITICS OF ECONOMIC TAKE OFF

"When you open the window, flies and mosquitoes come in"

DENG XIAOPING, speaking of the political problems caused by an open economy.

Why in China the reforms worked, why competition leads to efficiency, why the "iron rice bowl" of guaranteed wages regardless of productivity leads to inefficiency, and why market prices are better than controlled prices.

In China, ideological commitments to Marxism-Leninism is about as dead among the Chinese as it was in Poland in the early 1980s. Today, China's leaders still make determined efforts to inculcate Marxist ideology, but for the most part these efforts fail. Today harsh punishment still awaits anyone who overtly organizes political dissidence, or publishes views that deviate too far from what is officially acceptable. The range of the acceptable has widened, however, and the range of what one can get away with in practice has widened to a degree that makes old Chinese totalitarianism seem like a different world.

The Chinese political strategy behind Deng Xiaoping's economic reform has been to use the fruits of economic productivity to ally with the major strata of the population, those primarily concerned about income and growth (farmers, workers, bankers, managers, the middle class).

First priority has been to generate income gains for Chinese farmers and workers. This priority has been achieved, farmers and urban workers enjoyed a spectacular income takeoff, then lost some of it in the inflation and austerity of the late 1980s, then resumed the climb. All Chinese social groups appear to have gained real income rises, and at these income levels even small increases make an overwhelming difference to quality of life. Many tens of millions of people in China have climbed a ladder that began with hunger, ascended to adequate food but barely enough clothing, then old brown-looking clothing that was once blue, then the universal blue with blotted out all individuality for decades, then a bit of color and now stylish clothing with a little logo for prestige.

The economic reform has benefited all major social groups in China, and benefited most the groups who most needed improvement. This is typical of Pacific Asian takeoffs, especially those of Japan, South Korea and Taiwan, which, unlike their western counterparts, have had relatively egalitarian consequences. China is not likely to face upheavals because of inequality between rich and poor classes. Even though millions are still poor, growth on the scale that China has experienced creates a Horatio Alger psycology, a belief that with hard work and luck anyone can get rich. Fairness becomes defined as everyone having a fair chance to get rich, rather than everyone having the same attainments. Such a psychology is the central reason for Hong Kong's stability despite tremendous inequality. So long as growth in the 6-10% range continues the psychology of ambition, and the memory of the privations of the radical years, should limit class conflict. The principal risk could be a return of severe privation, caused perhaps by particularly harsh US economic sanctions combined with a downturn with the world economy. But even that is not likely to be fatal: for all its export success, China's huge economy grows primarily because of domestic demand, and it can expand through domestic productivity growth generated by the investment of its huge domestic savings.

Successions

Hua Guofeng briefly succeeded Mao Zedong until Deng Xiaoping swept him aside. Deng continued to designate Jiang Zemin as his successor, but Jiang Zeming seemed to most observers to be a weak transitional figure.

Li Peng, the government head, was widely respected as the man who managed the stability of China's economy after the inflation of 1988/9 and restored China's diplomatic prestige after TianAnMen Square. But Li Peng had powerful enemy everywhere (society, party and army leadership).

Zhu Rongji was a rising star. But his decisiveness also made him enemies and his popularity among foreigners harmed him in Beijing. In short, Brzezinski's counsel sixteen years earlier remained equally valid.

Radical upheaval? "Socialist market economy"

The cultural revolution, the last and greatest outpouring of radicalism, destroyed radicalism by alienating virtually every political significant group in China. The Cultural Revolution was above all an attack on the leadership of the Communist party, and it decimated that leadership. The experience of Deng Xiaoping's son, who was thrown by Red Guards from upper storey of a building and paralyzed for life, is an appropriate metaphor for what happened to Party leadership. They, and the government bureaucrats, are determined never to let the radicals threaten them again.

The Chinese army, whose central responsibility is order, eventually became appalled by the Cultural Revolution. Chinese farmers, workers and managers found their lives disrupted and their incomes destroyed by the strange alliance of Mao Zedong, the propaganda élite and the rampaging youth. Subsequently the youth, now frequently called the lost generation, found that they had been used and that the loss of their opportunity for education doomed most of them to lifelong poverty. Thus nobody, in China, wants another Cultural Revolution.

Youthful and intellectual dissidents, like all asian opposition, use the slogan of democracy as a blanket term for the right to oppose the evils of inflation, corruption, nepotism, and specific infringements of personal freedom. Most are infinitely more concerned about enlarging the scope of personal freedom than about electoral democracy. This is a central point almost universally misunderstood in the West. These groups are terribly serious about reforms, but not necessarily about "democracy" in the western form. A comparable situation occurred in South Korea in 1960. Students and others demonstrated against Syngman Rhee under the banner of democracy until their demonstrations provoked the military to topple him. The successor regime of Chang Myon was a true democracy, but the students kept on demonstrating until they toppled him too. When General Park Chung Hee came to power by military coup in 1961, the demonstrations diminished voluntarily for a number of years because the Korean students thought General Park was capable of dealing with what they saw as the primary evils: corruption and national weakness. Park's economic success ensured him and adequate base of support for eighteen years. Oppositions cannot overthrow the regime so long as it continues to progress--until the progress creates a vast, educated middle class which believes it can afford economic risks in the search for political dignity. The experience of South Korea, Taiwan and Singapore has been that such oppositions can be managed and mollified for a generation or two. When the economy has been built and nationalist fears have been satisfied, the old leadership suddenly finds itself isolated. But by that time the transition can be relatively peaceful, unlike the situation in former Soviet Union and much of Eastern Europe. Both Taiwan and South Korea had peaceful transitions to full democracy in the late 1980s and early 1990s. China is well launched on the South Korea/Taiwan path. Contrary to western perception, in this Asian context the legacy of a Bolshevik-tipe party can be stabilizing and helpful in the transition to democracy. Taiwan's Kuomintang Party, with its deep roots in society, made the late 1980s transition to democracy much smoother than in Korea, where the major political parties were personal entourages without deep roots. The ultimate kind of civil disturbance is national fragmentation such as occurred in the former USSR. But China is an ancient nation, not a new creation like the Soviet Union. China's population is 94% Han Chinese, whereas the USSR's was less than half Russian. China is growing at over 8%, whereas Russia is growing at minus 18%, and China is following a model of development that can continue to generate 7% growth indefinitely. A strong sense of history, a firm sense of national identity, and a growing economic pie do wonders for unity. Apart from minority regions (most notably Tibet with two million Tibetans, and Xinjiang with seven million Uyghurs) which harbour a tiny percentage of the population, China's regions, including ones like Guangdong which are always seeking greater economic autonomy, would be willing to pay some price--for instance, increased taxes--to maintain national unity if it were threatened. So long as the Chinese leadership follow the policies required for rapid economic growth, such fragmentation is extremely unlikely.

The differences between the more prosperous coastal regions and the poorer interior provinces do not elicit politic alarm. Interior provinces are to enjoy the same privileges of economic liberalization and in the meantime, millions of workers had migrated to work in factories there and returned home with money and stories of prosperity. If the local economy is moving forward, inequalities in Chinese society does not elicit political alarm. Other countries; like Thailand and Indonesia have dealt with much more serious ethnic and religion problems than China's. Indonesia, stretched over a larger fraction of the planet, has some thirteen thousand islands and at independence had distinct groups speaking more than three hundred different dialects. Rapid economic growth pulls together diverse groups and regions by providing a sense of  shared gain. In contrast, countries like Burma and the Philippines, which have failed to grow, disintegrate as different groups grab desperately for shares of shrinking pie; Burma's initial post-World War II ethnic divisions approximated Thailand's and Philippines' are less significant than Thailand's, but Thailand succeeded because it generated steady growth. Indonesia has far more social cleavages than China, and they were complicated at independence by lack of shared history and a shared language; Indonesia's difficulties were further complicated by disparities of development and income far more serious than China's. A more plausible problem is the concentrated plight of factories relocated to the interior for security purposes. During the Maoist era, there was an obsession with the risk of invasion by the United States or, later, by the Soviet Union.  To ensure China's economic survival in the event of invasion, Mao Zedong engaged in a vast programme of industrial relocation. The result was a concentration of heavy industries in impossible locations like rural Sichuan, where the transport costs would kill them if the inefficiencies of gigantic state enterprises somehow proved inadequate to that task. As the Chinese government leadership has grown weary of subsidizing these industries, many have been quietly but relentlessly starved of funds and bureaucratic support. The only strategies available to such Chinese subsidized huge enterprises are: partnership into a private firm or a state enterprise on the coast or, best of all, enter a joint venture with a foreign firm.

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