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Tuesday, May 30, 2006

The Mountains Are High and the Emperor is Far Away

Martin Wolf discusses the political and economic future of China and the growing tension he foresees between the goals of those in power and the goals of society:

China’s autocracy of bureaucrats, by Martin Wolf, Commentary, Financial Times: What happens when a communist autocracy presides over a dynamic market economy? Do they live together happily ever after or does one destroy the other?

A visit to Beijing last week, combined with reading the thought-provoking new book by Minxin Pei ..., an American scholar of Chinese origins, has persuaded me to raise these questions. But they have been bubbling in my mind since I read S.E. Finer’s illuminating discussion of the history of China’s government. What emerges from this masterpiece is how much today’s party-state is just another imperial dynasty in twentieth century guise.

Finer summarised the contrast between the ideology of the Ch’in state, which unified China 2,200 years ago, and of the Greek and Roman republics, which are the west’s ancestors, as follows: “Collective and mutual responsibility, not individualism; authoritarianism, paternalism and absolutism, not self-determination; inequality and hierarchy, not equality before the law; subjects not citizens; duties not rights.” Who, reading this list, can fail to recognise its continued relevance?...

In imperial China, strong rulers could subject the bureaucrats to their will. This was easiest in the early years of a dynasty. Sooner or later, however, the bureaucrats pushed the emperor into a ritual role: ossification then ensued. ...

“The mountains are high and the emperor is far away.” This well-known saying captures what so often happened. When the emperor was weak, it became difficult to reach decisions. Officials looked after themselves and their families. Infirmity of purpose, corruption and an inability to protect the empire itself ensued. Sooner or later the dynasty fell, to be replaced by another, often after a period of chaos.

Using the analytical machinery of political science, Mr Pei describes today’s “dynasty” as being in just such a period of bureaucratic ossification. He points to the emergence of a “decentralised predatory state”, in which officials feather their nests at the expense of the state, the economy and the people. ... Tension is growing, he suggests, between the state and the society.

Mr Pei argues, persuasively, that China’s gradualism, often favourably contrasted with the former Soviet Union’s ... radical reforms, is as much a political as an economic strategy. Its aim is also to generate rents for those with political power or those whose support the powerful need... This is a vision of the state, not as benign maximiser of the public welfare, as traditional Chinese and contemporary communist ideology would suggest, but rather as a vehicle for competitive rent-seeking. By preserving profitable distortions, gradualism creates the rents. The more dynamic the economy, the greater are the rents. But the bigger the distortions, the less dynamic the economy risks becoming. The government is walking a tightrope.

One vast difference between what is happening to China today and what has happened to it in the past is evident: its dynamic economy. By offering its cheap, hard-working labour to the world and investing almost half of gross domestic product, China has managed to lift itself from age-old poverty. The society now emerging is increasingly urbanised, literate and open to the world. What might all this mean for the country’s political and economic future and so for its relations with the rest of the world? I envisage four possibilities.

First, reforms continue, the economy grows and political reform restarts. A democratic, law-governed society then emerges smoothly over the next few decades.

Second, China becomes a prosperous market economy under a reforming communist regime. An autocratic superpower then transforms the political balance of the world.

Third, China proves unable to pursue the necessary reforms, which ultimately stifles the economy’s progress. The regime becomes ever more repressive and China becomes a sad case of failed development.

Fourth, slowing growth generates political crisis. Turmoil ensues. But a democratic regime finally emerges.

I find it hard to believe in the smooth transition explicit in the first possibility. I find it as hard to believe in an advanced, internationally integrated economy governed by a communist autocracy... The third also looks implausible: it is hard to believe the Chinese will allow anything to stop them from gaining greater prosperity. The last possibility is far easier to imagine.

I am forecasting neither a political crisis nor a sharp economic slowdown in the near future. The Chinese economy could continue to grow rapidly for years. But the combination of a market-led economy with a bureaucratic autocracy does not look a good bet for the long run. The market’s irresistible force is meeting the party’s immovable object. At some point, one of them must surely give.

    Posted by on Tuesday, May 30, 2006 at 02:02 PM in China, Economics | Permalink  TrackBack (0)  Comments (9)


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