The China Syndrome

Thursday, April 30, 1998

The changes in China in the last two decades have no precedent in the twentieth century. It is as though the ruling class and the Chinese people were as one in resolving that China should become the leading power in the world. For the country to grow rich, free markets had to be allowed, the disabling effects of state ownership overcome. The remarkable thing, unforeseen by Western elites and political theory, was that this happened under a communist government. The rulers understood that democracy was not essential and perhaps was an impediment to economic growth. The Chinese of Hong Kong, Singapore, and Taiwan had pointed the way. To legitimize their hold on power on the mainland, the party kept the flag of socialism flying. A decentralization of authority--the antithesis of socialism--was called "socialism with Chinese characteristics." But economic practice could diverge from theory to whatever extent was needed.

The Chinese leadership had grasped the truth of one of Samuel Johnson's maxims: "There are few ways in which a man can be more innocently employed than in getting money." Able now to buy consumer goods, perhaps even an automobile, the people would relish the novelty of prosperity. So they would be content to live without politics. Intellectuals, of course, would be madly frustrated. Accustomed as they were to making trouble and influencing people, they would beat the drums of protest--always on behalf of the people. But the people would pay them little heed.

Much power had already been ceded to the people--above all the right to work, to earn a living, to retain the fruits of labor. Those who scorn "trade" and value political rights more highly than economic rights have failed to appreciate the point. Since 1978, China has enjoyed the largest tax cuts and the highest economic growth rates in history, according to Alvin Rabushka of the Hoover Institution. The economy has grown five times faster than that of the United States in the nineteenth century. If such changes are sustained for the next decade, the consequences will be felt around the world. In fact, the rise of China is probably fueling the economic boom right now. How did this happen?

Since 1978, China has enjoyed the largest tax cuts and the highest economic growth rates in history. The Chinese economy has grown five times faster than that of the United States in the nineteenth century.

The New York Times's picture of China is one of growing income inequality, of vast regions "left behind," of "many who remain dissatisfied." New millionaires, we read, "arouse resentment." Endless the corruption, the pollution, the repression! Above all China is seen as a place where intellectuals have been deprived of their rightful powers of agitation. The Washington Post has been more balanced. It has given us the rage of the repressed intelligentsia but also some good reporting.

Revolution from Below

An interesting account is to be found in Kate Xiao Zhou's How the Farmers Changed China. A professor of comparative politics at the University of Hawaii, she must be one of the few academics who has actually lived in rural China. Following farm collectivization, perhaps 40 million people died of starvation in the years 1959–1962. Then came the horrors of the Cultural Revolution, in which she soon became enmeshed. Her father, a professor of English, was imprisoned as a bourgeois intellectual in 1966, and she was dispatched to live with a poor rural family. Life in the countryside was primitive: no electricity, running water, or toilets. But she made many friends and was able to return to the city in 1972. She worked in a factory and soon learned to save her energy to stand in food queues for hours each day after work.

Central control was gradually relaxed. A new system evolved from which first the farmers and then the country as a whole benefited greatly. The Cultural Revolution had created such anarchy that the chain of command within the party was broken. "Farm families began to 'bribe' their way out of collective chores by making deals with local cadres," Kate Zhou writes. "The head of a family would promise to fulfill the production quota and gave the cadres a bit over." Farming teams divided themselves back into family units and kept the surplus above the quota. This encouraged everyone to work long hours. In some prefectures, officials promised that the policy would not soon be changed. The farmers had long-term leases, not fee-simple ownership. The land remained formally the inalienable property of the state. Economically, however, it was the equivalent of a system in which private property was restored. Once the quota had been met, the marginal tax rate was zero. And the surplus could be traded.

Production rapidly increased, and when it came to the attention of Beijing in 1978, the pragmatist Deng Xiaoping was content to let the system continue. Food lines disappeared as farmers sold their surplus in the cities. When Kate Zhou returned to the village of her youth in 1982, it had changed beyond recognition. "Almost everyone was building a new house. Every family was engaged in market exchanges. Dinner conversations focused on making money. Linked with moneymaking was the rise in consumption. There was at least one bike in each family. Talk of buying a TV and a small tractor preoccupied villagers." Her essential claim is that the farmers ("peasants" in communist lingo) led the way and the government followed.

The new policy spread beyond farming. Between 1978 and 1996, the percentage of the population in agriculture fell from 75 percent to 50 percent. (A similar transformation in Japan took sixty years.) The area devoted to farming also declined, as housing, offices, and factories expanded. Thanks to its long-postponed industrialization, essentially skipping the Industrial Revolution, the country was able to take advantage of new technology that permits low-cost production on a small scale. There are now about 2.5 million local enterprises operating under the umbrella of municipal governments, employing more than 125 million people. For the last fifteen years their output has grown at the rate of 20 percent a year, twice the national average.

Critics lambast China for being undemocratic. It is worth repeating that the countries of Western Europe were not democratic when they advanced ahead of the rest of the world. In their current rigor mortis they are fully democratic.

The demarcation between public and private is not as clear cut in China as it is in the West. The senior official who sponsors a company's transit through the maze of communist prohibitions in exchange for a slice of equity is "corrupt" but usually only to Westerners. The Western understanding of local government must also be rethought. Local government enterprises are said to be the closest thing to a market economy in China. Unlike traditional state-owned enterprises, they don't survive if they can't meet debts from their own income. Often they have business partners in Hong Kong or Taiwan, and their products must compete on the world market. As to the lack of environmental controls: "Local governments face conflicts of interest as regulators and principal shareholders," according to the Washington Post. Regulations are costly, in short, and profits from these enterprises must often be used to finance roads, clinics, and primary schools. To "peasants" so recently poor, these amenities have a higher value than the EPA's seal of approval.

Writing in the Nation in 1995, Orville Schell drew a Gilderesque picture: "Driving in from the Shanghai airport is like being in one of those American children's workbooks in the thirties that boastfully limned futuristic landscapes filled with belching smokestacks, trains barreling down tracks to distant horizons, planes zooming overhead, and freeways coursing through thickets of skyscrapers." The city added 500 million square feet of office space in three years, and one-fourth of the world's construction cranes are said to be operating there.

The Problem with China's Critics

I know about the labor camps and the religious persecution that some encounter. But 20 million Muslims are more or less left alone, and Catholic difficulties would seem to be amenable to a diplomatic solution. The belief that Rome-appointed bishops are loyal to a foreign power is an old story in the history of Catholicism. It is intensified in China's case by the Vatican's continued recognition of Taiwan. Robert Novak wrote last June that "there is emotional opposition to breaking the link with Taiwan from Cardinal Ignatius Kung, the 92-year-old exiled archbishop of Shanghai, who now lives in Connecticut."

The main complaint is that China is denied the blessings of democracy. It's worth repeating that the countries of Western Europe were not democratic when they advanced ahead of the rest of the world. In their current rigor mortis they are fully democratic. Seymour Martin Lipset is no doubt correct that democracy is more a response to prosperity than a cause of it. And China is duly moving in a democratic direction. "The introduction of the direct election of village level officials since 1988 represents a major institutional breakthrough," Drew Liu wrote recently in the China Strategic Review. "There are in total 931,716 elected village committees and four million elected village officials. All of which are elected by the direct ballots of 600 million peasants."

If it follows the path of Taiwan, as seems likely, China may well be democratic in a few years. At that point we may anticipate that economic growth will be tamed, that the familiar trading bans on such beneficial goods as ivory and Freon will be restored, along with pollution control devices, safety nets, perhaps even income redistribution. In short, the country will rejoin the "international community." The intellectuals will have been restored to power. But until that happens, let us rejoice that there is at least one country in the world where they are not in charge.