Four Shocks That Could Change China

 

In the past four months, the Chinese Communist Party (CPC) has experienced four shocks that could materially affect, if not eventually end, its “leading role” in Chinese society.

First, on December 13 of last year, a mob of villagers forced out local party leaders and the police and took control of the town of Wukan. Enraged by illegal land grabs and police brutality, the villagers installed their own representatives after gaining concessions from national authorities. The Wukan uprising is symbolic of the two hundred thousand mass protests reported for 2010.

The Chinese people are fed up with the corruption, indifference, and incompetence they encounter from local government.

Second, on February 27, a key government think tank issued its China 2030 report in conjunction with the World Bank. Rapid growth could only be sustained, the report argued, by giving free rein to the private sector and ending the preferential treatment of the state economy: The role of the government “needs to change fundamentally” from running the state sector to creating a rule of law and the other accoutrements of a market economy. A month later (on March 28), the state council approved a financial reform pilot experiment to legalize private financial institutions and allow private citizens to invest abroad.

China 2030 is an open warning that China’s vaunted state capitalism model cannot sustain growth and usher China to the next level. A faltering economy would pose an imminent threat to the CPC’s claim to its leading role.

Third, on April 10, charismatic regional party leader, Bo Xilai, was fired as party boss of Chongqing and expelled from the Politburo. Bo Xilai embodied the party faction favoring state-led economic development and Maoist ideology. Bo’s status as the son of one of China’s “Eight Immortals” did not save him from charges of political deviation and corruption. Bo’s influential wife was arrested under suspicion of murder of an English business associate.

The ringleader, cheerleader, and most visible practitioner of China’s party-led state capitalism is no longer a power broker.

Fourth, on April 27, blind dissident and noted civil rights lawyer, Chen Guangcheng, evaded the security guards guarding his house in his home village and made it to Beijing, where he gained refuge in the U.S. embassy. Guangcheng’s escape shows the sophistication, dedication, and coordination abilities of the dissident community and is an embarrassment to the CPC and its security forces.

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Making Sense of China’s Bo Xilai Earthquake

The removal of Chongqing party boss Bo Xilai from the Politburo and the announcement that his wife is under investigation for murder are a political tsunami, the likes of which have not been seen in China since the defeat of the Gang of Four shortly after Mao’s death.

To put this in perspective: Bo’s fall is the equivalent of a RFK III and George Bush Junior announcing that Richard Daley III has been banned from politics for life and his wife, Amanda Cabot Lodge-Daley, has been placed behind bars.  All the players are the sons and daughters of the Maoist elite, many survivors of the Long March. Bo had been expected to be promoted to the elite standing committee of the Politburo, where he could have become a contender for the top position as general secretary of the CPC.

The true story behind Bo’s fall will perhaps become known with the passage of time, but here is what can be pieced  together from news accounts and from the Chinese rumor mill: 

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China’s Red Campaign: Back to Mao?

In 2012, the Chinese Communist Party chooses a new Politburo. This once-in-a-decade event will set China’s course through 2025. The new Politburo must decide whether the Communist Party will continue as the dominant force in politics and society, or will China evolve towards some kind of pluralism.

China’s successes over the past three decades should give “liberals” a strong claim to a solid Politburo majority. Under a continuing “liberal” majority, private enterprise will outgrow state enterprise, China will deepen its integration into the world economy, the party will explore pluralism, at least at the local level, and Maoist philosophy will become a remnant of the past.

The “Red Campaign” offers a quite different path: The party reasserts its central role, rejects Western or universal values in favor of “red culture, enacts statist policies to replace free-wheeling capitalism, and crushes challenges with a powerful security apparatus. 

The pilgrimages of top party leaders to Chingqoing party boss Bo Xilai are much in the news. New Leftist Bo, a favorite to take one of the Politburo seats, proposes to apply his brand of patriotic TV programming, red singing shows, extra-judicial crackdowns on crime and dissent, and government spending on worker housing to all of China. Bo’s “Red Campaign” has clearly struck a responsive chord.

Why this nostalgia for the Mao era despite its horrors and China’s enormous economic successes? President Obama would have few 2012 election jitters with such an economic record. The New Leftists are, in effect, proposing dramatic changes to what the rest of the world views as a most successful policy.

Let me suggest possible explanations:

1). China’s communist party faces irrelevance under the current course. As the state enterprise share shrinks below one fifth, all pretense of China as a socialist market economy disappears. The private sector will be clearly exposed as the engine of growth, not the “wise leadership” of the Communist Party, as is currently claimed.

A market economy integrated into a global economy does not leave room for party domination. Markets replace plans and administrative allocation, and state influence is exercised through macro policy and regulation, as it is elsewhere.

To avoid redundancy in the economic sphere, the party must reestablish a statist economy based on party direction of a dominant state sector, as proposed by the Red Campaign.

2) China’s “New Left” believes that the Chinese people associate the market economy with the corruption of party officials and their Princeling offspring. They offer a  “pure” party and a statist economy as a cure.

China’s communist party finds itself in much the same position as Boris Yeltsin’s “democrats” in the 1990s.  The Soviet Communist Party was no longer around to take the fall for corruption and unpaid pensions, so democracy and capitalism got the blame.

In China, the party is still very much around to be blamed for theft, corruption, illegal land grabs, unemployment, and the Princeling Mercedes Benzes that run over workers on the streets

The Red Campaign offers a simple solution:  A return to the days of a pure party motivated not by money but by ideology. The party of Mao made disastrous mistakes, but al least it did not steal.  Although the mass starvation of 1958-1960 and the Cultural Revolution of 1965-1968 left dark shadows on millions of Chinese families, the New Left counts on such memories dimming.

Many Russians feel nostalgia for the “old days” when the party kept order, they had their jobs, and party theft was limited.  For Russians, the Stalin terror and famine lay almost a half century back. The Chinese New Left hopes to play on similar nostalgia, especially now that Mao’s excesses lie more than thirty years in the past.

China in 2012 confronts the same choice as Gorbachev in 1989, but under quite different circumstances. Gorbachev in 1989 was firefighting the crisis of the collapsing command economy. The Chinese Politburo in 2012 will face a non-crisis. Even with slowing growth, China will still be among the world’s fastest growing economies and an envy of the world.

Confronted with his crisis, Gorbachev chose to end party dominance of the economy and weaken the party’s central apparatus.  His Politburo hardliners timidly acceded at first.  Their amateurish coup, launched to save the party, came too late.

If China’s 2012 Politburo attempts to implement the Red Campaign, it will discover the genie of private enterprise cannot be put back in the bottle. They can restore the dominance of state companies only through extreme favoritism and even repression of the private sector. The New Left will find themselves like a King Canute trying to hold back the sea. They cannot mount enough political power to revert back to the economic statism of earlier years.

Gorbachev did not understand that the reforms he launched would inevitably end the Soviet economic and political system. Had he understood, he would have followed the course of his predecessors. The Chinese New Left apparently sees the handwriting on the wall. They see 2012 as their last chance to save the party as they want it to be.   

The Red Campaign’s Allure: China Chooses Its Course

In 2012, the Chinese Communist Party chooses a new Politburo. This once-in-a-decade event will set China’s course through 2025. The new Politburo must decide whether the Communist Party will continue as the dominant force in politics and society, or will China evolve towards some kind of pluralism.

China’s successes over the past three decades should give “liberals” a strong claim to a solid Politburo majority. Under a continuing “liberal” majority, private enterprise will outgrow state enterprise, China will deepen its integration into the world economy, the party will explore pluralism, at least at the local level, and Maoist philosophy will become a remnant of the past.

The “Red Campaign” offers a quite different path: The party reasserts its central role, rejects Western or universal values in favor of “red culture, enacts statist policies to replace free-wheeling capitalism, and crushes challenges with a powerful security apparatus. 

The pilgrimages of top party leaders to Chingqoing party boss Bo Xilai are much in the news. New Leftist Bo, a favorite to take one of the Politburo seats, proposes to apply his brand of patriotic TV programming, red singing shows, extra-judicial crackdowns on crime and dissent, and government spending on worker housing to all of China. Bo’s “Red Campaign” has clearly struck a responsive chord.

Why this nostalgia for the Mao era despite its horrors and China’s enormous economic successes? President Obama would have few 2012 election jitters with such an economic record. The New Leftists are, in effect, proposing dramatic changes to what the rest of the world views as a most successful policy.

Let me suggest possible explanations:

1). China’s communist party faces irrelevance under the current course. As the state enterprise share shrinks below one fifth, all pretense of China as a socialist market economy disappears. The private sector will be clearly exposed as the engine of growth, not the “wise leadership” of the Communist Party, as is currently claimed.

A market economy integrated into a global economy does not leave room for party domination. Markets replace plans and administrative allocation, and state influence is exercised through macro policy and regulation, as it is elsewhere.

To avoid redundancy in the economic sphere, the party must reestablish a statist economy based on party direction of a dominant state sector, as proposed by the Red Campaign.

2) China’s “New Left” believes that the Chinese people associate the market economy with the corruption of party officials and their Princeling offspring. They offer a  “pure” party and a statist economy as a cure.

China’s communist party finds itself in much the same position as Boris Yeltsin’s “democrats” in the 1990s.  The Soviet Communist Party was no longer around to take the fall for corruption and unpaid pensions, so democracy and capitalism got the blame.

In China, the party is still very much around to be blamed for theft, corruption, illegal land grabs, unemployment, and the Princeling Mercedes Benzes that run over workers on the streets

The Red Campaign offers a simple solution:  A return to the days of a pure party motivated not by money but by ideology. The party of Mao made disastrous mistakes, but al least it did not steal.  Although the mass starvation of 1958-1960 and the Cultural Revolution of 1965-1968 left dark shadows on millions of Chinese families, the New Left counts on such memories dimming.

Many Russians feel nostalgia for the “old days” when the party kept order, they had their jobs, and party theft was limited.  For Russians, the Stalin terror and famine lay almost a half century back. The Chinese New Left hopes to play on similar nostalgia, especially now that Mao’s excesses lie more than thirty years in the past.

China in 2012 confronts the same choice as Gorbachev in 1989, but under quite different circumstances. Gorbachev in 1989 was firefighting the crisis of the collapsing command economy. The Chinese Politburo in 2012 will face a non-crisis. Even with slowing growth, China will still be among the world’s fastest growing economies and an envy of the world.

Confronted with his crisis, Gorbachev chose to end party dominance of the economy and weaken the party’s central apparatus.  His Politburo hardliners timidly acceded at first.  Their amateurish coup, launched to save the party, came too late.

If China’s 2012 Politburo attempts to implement the Red Campaign, it will discover the genie of private enterprise cannot be put back in the bottle. They can restore the dominance of state companies only through extreme favoritism and even repression of the private sector. The New Left will find themselves like a King Canute trying to hold back the sea. They cannot mount enough political power to revert back to the economic statism of earlier years.

Gorbachev did not understand that the reforms he launched would inevitably end the Soviet economic and political system. Had he understood, he would have followed the course of his predecessors. The Chinese New Left apparently sees the handwriting on the wall. They see 2012 as their last chance to save the party as they want it to be.   

Of Four 2012 Elections, Ours May be the least Significant

It is hard to imagine a more important U.S. presidential election. At long last, the two parties are taking strikingly different positions, and the choice will be clear to voters. The election result could change our country: Will we devote nearly half of our resources to government to fund a European-style welfare state? Or will this approach be rejected?

There are three other 2012 elections that have greater long-run significance, if one can imagine that.

1. The Eighteenth Congress of the Chinese Communist Party

At stake are 14 out of 25 seats on the Politburo, the supreme body that runs China. These 14 seats will go to the “princelings” – the children of the elite, who increasingly manage the party, state, and economy. The princelings appear to be split between liberals and Maoists. The current wave of arrests of dissidents, the removal of the Confucius statue from Tiananmen Square, and the “revolutionary programming” on television are subtle signs that the behind-the-scenes power struggle has begun. This election will determine China’s stances towards political reforms and foreign policy – whether China will move towards democracy and a less aggressive foreign policy or the reverse.

2. The 2012 Russian Presidential Election

The odd presidential campaign between Prime Minister Vladimir Putin and President Dmitry Medvedev has also begun. Only one will stand for election against minor opponents. The “nomination” campaign will be fought behind Kremlin walls, but the candidates have staked out their positions. Putin (the ex-KGB colonel) is the champion of a strong Russian state, an aggressive foreign policy, an intrusive state, and is not concerned about the lack of a rule of law. Medvedev (the lawyer) supports a rule of law, a more accommodating foreign policy, the rights of opposition political parties, and halting the repression of journalists who write things the Kremlin does not like. This election will determine whether Russia sinks deeper into the KGB state that Putin has created or begins to pull itself out of the swamp of thuggery and corruption.

3. The 2012 (2011) Egyptian Elections

We do not know the election rules and dates of the first “free” Egyptian election in a half century. This election, now scheduled for November 2011 but likely in early 2012, will be the true test of the “Arab Spring.” Will it result in a real democracy with multiple parties contending against each other with a free press informing the public, or will the election go to the only organized party (the Muslim Brotherhood), which then proceeds to use all means available (following the example of Chavez in Venezuela) to insure its permanent reelection? Or will a true democracy, in which liberal political parties are real contenders, be the result?