Monday, January 08, 2007

Chinese dragon tottering?

Is China heading for a fall? Will its rampant corruption and weird form of capitalism doom it to a day of reckoning that will end the miracle of its economic rise?

That's what Will Hutton writes in today's Guardian; from his article I would analogize modern China to the Catholic church prior to the Reformation: the rulers are corrupt, and the ideology they spout has little connection to the masses. The upshot of his lengthy article: the Chinese economy will falter if corruption and state control are not lessened, with potential disator to follow. He makes a good case.
[...] The truth is that China is not the socialist market economy the party describes, nor moving towards capitalism as the western consensus believes. Rather it is frozen in a structure that I describe as Leninist corporatism - and which is unstable, monumentally inefficient, dependent upon the expropriation of peasant savings on a grand scale, colossally unequal and ultimately unsustainable. It is Leninist in that the party still follows Lenin's dictum of being the vanguard, monopoly political driver and controller of the economy and society. And it is corporatist because the framework for all economic activity in China is one of central management and coordination from which no economic actor, however humble, can opt out.

In this environment genuine wholesale privatisation is impossible and liberalisation has well-defined limits, as President Hu Jintao himself brutally reminds us. The party, he says, "takes a dominant role and coordinates all sectors. Party members and party organisations in government departments should be brought into full play so as to realise the party's leadership over state affairs". [...]

Absolute power corrupts, and the Chinese Communist party has become one of the most corrupt organisations the world has ever witnessed. The combination of absolute power and an ideology that palpably no longer describes reality is a virus that is morally and psychologically undermining the regime. And if the regime wobbles, then its capacity to sustain the unsustainable economic structures will wobble and Leninist corporatism will unravel. Beijing's authority could fragment and China's provinces reassert their destructive independence as they did in the 1910s and 20s, or a new and fiercely repressive regime could try to hold the country together abandoning economic openness and market reforms - and even pick some international fights (such as invading Taiwan?) to rally the country to its side. It is because this prospect is so real that the task of peacefully moving to a sustainable capitalism, and building the necessary institutions to do it, is so vital for both China and the world.
China is increasingly selling its economic model to developing countries, especially in Africa. The potential to bring economic improvements without the usual accompanying political demands for representation is quite appealing for corrupt rulers everywhere.

We'll have to see if China can pull it off. I'm guessing sometime in the next 20 years will see a China confronted with monumental social problems--a topic not brought out in the article.