THE GHOST OF COMMUNISM PAST: Reform in Russia and China

with Michael McFaul, Coit Blacker, Orville Schell
Tuesday, October 23, 2001

After two decades of reform, Stalin and Mao wouldn't recognize Russia and China today. But each state has taken a different path away from their communist past. Russia has emphasized democratic reforms while enduring economic instability. China has promoted economic growth based on market reforms, while maintaining tight control over politics. Which path will prove to be more successful, Russia's or China's?

Recorded on Tuesday, October 23, 2001

Peter Robinson: Today on Uncommon Knowledge, China and Russia, Tigers and Bears, oh my.

Announcer: Funding for this program is provided by The John M. Olin Foundation and The Starr Foundation.

[Music]

Peter Robinson: Welcome to Uncommon Knowledge, I'm Peter Robinson. Our show today, China and Russia.

After years of reform, China has established a very rapidly growing economy, yet it remains a one party communist party, authoritarian regime.

Russia, by contrast, suffered very steep economic decline after the collapse of the Soviet Union, yet Russia has managed to become a functioning democracy.

A growing economy in China, a functioning democracy in Russia, which nation is getting it right?

Joining us today, three guests, Orville Schell is dean of the graduate school of journalism at the University of California at Berkeley and the author of many books on China. Chip Blacker is a senior fellow at the Institute for International Studies at Stanford University and Michael McFaul is a fellow at the Hoover Institution and the author of Russia's Unfinished Revolution, Political change from Gorbachev to Putin.

Title: The Road Best Traveled

Peter Robinson: China and Russia, both have been undergoing dramatic reforms. Now listen to two sets of facts about those two countries, fact set one, China has been experiencing rapid economic growth, according to the international monitoring fund, I quote; "Close to four hundred million people have been lifted out of poverty in China since 1978." Russia not experience economic growth, to put it mildly, according to the Russian government's own statistics between 1989 and 1998, the Russian's GDP tumbled by 44%. Fact set two; China remains a one party dictatorship. Russia, for all the faults of its political system, represents a functioning democracy. Economic growth in China, democracy in Russia, which country is getting it right, Chip?

Coit Blacker: Uh, I think--I think the Russian's are.

Peter Robinson: Mike?

Michael McFaul: Uh, The Russians are.

Peter Robinson: Will you make it unanimous Orville?

Orville Schell: Well I would say in the short run, I think the Chinese have had it right, in the long run, uh, I would put my money on the Russians.

Peter Robinson: Let's talk about Russian for a moment. Beginning in the 1990's, Boris Yeltsin's finance minister, Yegor Gaidor--Gaidar decided that shock therapy was the only way; I quote him; "to drag the patient off the bed." He decides to, in--in one sweeping movement, so to speak, transform the old command and control Russian economy into a market economy. Eliminates prices controls, liberalizes trade policies, and the result, a system of mafia capitalism in which the small oligarchy appropriates billions in Western aide and plunders state assets. As early as 1993, Strobe Talbot, then at the state department said the Russia needed less shock and more therapy. Was it--was Gaidar's shock therapy a failure, Mike?

Michael McFaul: In my opinion, they didn't really, uh, succeed in, uh, implementing shock therapy. They didn't implement a set of reforms that one might call, unfortunately that--I think that term is very unfortunate, shock therapy. But if you look at what they set out to do and then what they really did under Mr. Gaidar and his government, uh, they--maybe fifteen days, several months at most, they were doing shock therapy, but then what happened was the rolling back of that. It wasn't hard budget constraints. It wasn't controls on spending. It wasn't, uh, market oriented privatization. Instead they had to compromise with, uh, interest groups from the Soviet, uh, days, the red directors, the--the governors and gradually by the end of 1992, the--the year that Mr. Gaidar was in power, I would say that shock therapy, to the extent that it existed at all, had effectively ended.

Peter Robinson: By when, by 1990…

Michael McFaul: 1992, so then most of the '90's was incremental change, haphazard change, uh, in a way that kind of change--partial reform is in many ways, the worst of all worlds. Uh, it--it created all sorts of perverse incentives for these oligarchs and--and the mafia and--and it's only after the crash of August of 1998, uh, that you begin to get genuine fundamental, structural reform in Russia. And, by the way, you're--you started your statistics by saying, uh, Russia's had no growth up to 1998, but since 1998, they've had real growth. Last year 8.4, 8.5%, that even makes the Chinese look like laggards.

Peter Robinson: That summation sounds right to you?

Orville Schell: Well I think, you know, there--there--there's two aspects of reform in my view. One is tearing down the old system…

Peter Robinson: Right.

Orville Schell: …which is a prerequisite finally for any comprehensive, new system. And the other is building the new system. And I would say that Russia is more advanced in terms of demolition, but it still has a lot to a--a--a lot of, uh, ground to cover in terms of reconstruction.

Peter Robinson: Is the lesson that they didn't reform enough and that led to the muddle and the so-called mafia capitalism of a decade or so, or that they went about the reforms too quickly and in a hand fisted way?

Coit Blacker: I think, uh, Orville had it absolutely right, that--that the process of--of substantial reform requires that the old system be dismantled before the new one can be put in place. Uh, I think it's inevitable, uh, for all centrally planned economies that they're going to go through this phase. Uh, it's expensive, it's costly, it's disruptive, it's painful, but I think it has to be done.

Peter Robinson: So the first thing you have to do is stop central planning?

Coit Blacker: The first thing you--you must do is kind of tear apart the very structure of the system and part of the mistake, uh, that the Russians made was they couldn't get around to the issue of property rights in a way that would enable new stakeholders to--to, uh, have a sense of ownership of the system and they're still struggling.

Peter Robinson: So, since 1998, what have they done? Have they gone far enough, have they--have they got…

Coit Blacker: They're getting there.

Peter Robinson: If I wanted to invest in Russia would I come back with a certificate that granted me property in my investment, a property right that we would recognize as such in the West?

Coit Blacker: It's property rights, it's, uh, contract enforcement, it's transparency, it's accountability. They've made a lot of progress, I think since 1998, which is why they've had some growth, high commodity prices…

Peter Robinson: So could the Russians have done any better? Or have they done about as well as could have been expected given their starting point?

Title: Muddling in the Middle

Peter Robinson: The Soviet Union was still in existence until 1991, the economy is growing, they've managed to muddle through a transition, a decade of mucking around before you come out the other end of the tunnel might not be that bad. In other words, would you--give me a kind of grade of Russia and how Russia has done it, do they get an A?

Michael McFaul: Well, of course it's always compared to what.

Peter Robinson: Right.

Michael McFaul: And, uh, the--the counter-factual would be if they had truly implemented shock therapy, would you have not had revolution? That is, maybe muddling through was the best that you could hope for. I think if you compare Russia to the rest of the post-communist world, uh, at least the European and post-soviet world, Russia's kind of in the middle and maybe in--in the front. Uh, that is corruption is about average for the region, growth is a little bit above average. And--and--and, by the way, if you look at the region as a whole, the twenty-seven or twenty-nine countries that are a post-communist Europe and--and former Soviet Union, there's a very strong correlation between those that went the fastest, those that did shock therapy and those that…

Peter Robinson: So the Czech Republic say…

Michael McFaul: Poland, Czech Republic, even Hungary comes in later, uh, whereas those that did the slow reform, uh, they're--they're still the ones that are still having slow economic growth.

Peter Robinson: Okay, so you have centuries of autocratic rule under the Czars, seven decades of communist rule and now one decade, or so, after all that comes to an end. There's been muddling around, there's been tremendous dislocation, but you're fundamentally hopeful about Russia at this stage, Orville?

Orville Schell: Well I--I see Russia as something as a sheet of blank paper that's waiting to be written on…

Peter Robinson: Still?

Orville Schell: …Still, uh, with some--some interesting signs of--of progress, whereas I see China as a piece of paper that is still written on from the past.

Peter Robinson: Okay, on to China now.

Peter Robinson: Now that we're back to China, let's take a closer look at China's path of reform.

Title: The Gang of More

Peter Robinson: Communist party in the 1980's embarks on a course of measured economic reforms while retaining total political control. China over the last decade, has logged the most rapid growth rate of any major country in the world. So the question is, did China achieve this greater success because it engaged in reforms more slowly? Or because it simply made politics, so to speak, illegal and the--and this communist party retained total control over politics, Orville?

Orville Schell: Well, I think it--it--it made the progress it did make economically because, uh, both of the things you said are true. It did hold the old form and it reformed economically, but not politically. And that did kind of keep continuity in a certain, uh, kind of cryptic stability. The--the real question, uh, and on--and one has to be impressed by what they've accomplished, it's been extraordinary, uh, in many ways counter-intuitive and I think it's impressed a lot of us who thought by the end of the '80's, the communist party was finished in China. However, the--the--the question that you really have to ask now is, where do they go from here?

Peter Robinson: Um hum.

Orville Schell: And where are they trying to go? And the perplexing, uh--uh, dilemma for China is that they really don't know, not only that, they really are not even having a debate about where it is that they're trying to go. And they're locked in, uh, in many respects by clinging to the old ideology in the old structures which prevent them from kind of imagining the future in a way that would actually give them a target…

Peter Robinson: Uh…

Orville Schell: So we may see China heading into a--a more difficult decade.

Peter Robinson: Senator Fred Thompson says this; that the United States and China and the Chinese leadership are both, in effect, making a bet on China itself. The United States is betting that market reforms leading to greater and greater free markets, greater and greater levels of affluence, the creation of a huge middle class. Our bet is that that will in turn force political changes and a loosening up in turn of the political system. The Chinese are making the opposite bet. Their bet is that they can reform just enough, uh, that they can reform quite dramatically, uh, economically, but just enough politically to let the economic reforms blossom while never the less retaining the traditional kind of Chinese control, uh, uh, strongly centered in Beijing. Chip, who's going to win the bet?

[Laughter]

Peter Robinson: How's that?

Coit Blacker: I'm not sure that those two views are mutually exclusive. That is to say, I think the Chinese strategy to this point and time, the strategy of the leadership, has been to create just enough political space to co-opt, uh, those who now find themselves empowered economically.

Peter Robinson: Capitalist, practicing capitalist, rich people may now join the communist party.

Coit Blacker: This is the most important point that if, in fact, you have a communist party that not only accommodates capitalist interests, but welcomes capitalists into the party, you don't have a communist party anymore.

Peter Robinson: Right.

Coit Blacker: You have, uh, a ruling structure that is trying, through some very creative means, um, to--to provide good reasons for people to continue to come into the tent, as opposed to trying to pup their own tents, uh, and it might work.

Peter Robinson: If--if it's true, as you say, with capitalists in the communist party, nobody believes in communism anymore, then you've got, what? A structure of, what's the membership of the communist party in China, it's something like sixteen million, I think. Sixteen million people running a country of over a billion and if you're one of the billion, you look at the sixteen million and say, why them and not us? Where is the legitimacy, isn't that a problem for them Mike?

Michael McFaul: Well, not when you have economic growth and stability.

Peter Robinson: As long as that--as long as there's a payoff.

Michael McFaul: As long as you're performing well, uh, I--I think that one party dictatorships do okay. And the evolutionary notion that, you know, we can have a one party system and maybe we'll split between us and--and a Japanese style party system or a Mexico before the Vincente Fox' victory. Uh, that kind of model, I think is one, the Chinese are very interested in, um…

Peter Robinson: If communism is dead, why are China's leaders so insistent on maintaining a one party state?

Title: The Vote is Out

Peter Robinson: There seems to be anathema to the Chinese leaders even to attempt a--a kind of a multi-party system like that in the West. Now why is it that they look admiringly to our economies, but view with abhorrence our political systems?

Orville Schell: Well I think they see that market economies do work. Uh, and centralized economies through their own experience didn't work. Uh, I think the problem is that in good times as you suggest, uh, you don't need an ideology, you don't even need values or a fabric of society to hold it together. But, as we discover now, after the World Trade Tower, uh, disaster, it is precisely at the difficult times that you need some sort of sustaining ideology or belief in yourself or some value system. And this is precisely what China doesn't have. They've been through, uh, historically, you know a whole series of cancellations, canceling Confucianism, then you had Chiang Kaishek, a kind of a syncretism of East-West Christianity Confucianism, then that got cancelled. You had communism came in and it was a new identity born of nationalism and--and--and, uh, class warfare. Then Deng Xaioping came along. That got cancelled and you've got this kind of curious, uh, there's an expression in China, Asu bishan (ph), which means it's not like anything. They have one kind of politics and one kind of economics, then you get Jiang Zemin, letting capitalists into the party, you even get a stranger, uh, construction, but what is the fundamental belief system that ties all this together? That's the question and--and I think there is no answer for it and--and when trouble…

Peter Robinson: Can they invent one?

Orville Schell: You can't invent these things; they're trying to revive…

Peter Robinson: So where will they ultimately go if ca--if communi--what I'm asking I guess is--is there any way for the current leadership of China to reach back into Chinese tradition? Uh, Confucianism is an impressive body of thought; can they work their way back to that?

Orville Schell: Well, I think it's very difficult and, uh, my impression is that, uh, the revolution has almost totally savaged the old structure of tradition and culture so that you can bring it back…

Peter Robinson: They can't put that back together.

Orville Schell: …in a kind of a mummified symbolic form, but it isn't a living, breathing thing that sustains people, that people believe in. It's museum pieces and that finally does not, uh, answer the question.

Peter Robinson: Okay, let me give you one more quotation here from this journalist Ian Buruma, quote; "Violent rebellion, especially in the countryside where trouble is brewing once again, has been a feature of Chinese history for thousands of years. Once the people revolt," he envisions this taking place in an economic downturn, "once the people revolt, there will be no way to contain them" closed quote.

Give me the odds on that.

Coit Blacker: That particular outcome is not one that I worry about. What I worry about is the slow unraveling, actually, which I think over, uh, a long period of time could be no less de-stabilizing than a kind of violent collapse.

Peter Robinson: When you say slow unraveling you mean loss of power from Beijing to the regions?

Coit Blacker: Yeah, the uh--um gradual relocation of--of power from the center to--to, um, more affluent regions.

Peter Robinson: A business elite would end up running the co--in other words are you saying--suggesting that it'll…

Michael McFaul: Old war lords.

Peter Robinson: Go back to the old--old sort of warlord pattern. What's you--is that something that you'd give odds on?

Orville Schell: Well I think it's a--it's a real concern the sort of decentralization of power not only brought about by economic reform, which disperses it. But China has had a long history of unraveling, uh, through provincial uprisings of one kind or another. And I think that to a degree that we--we really are not fully apprised at this point the Na--National Government is a very shaky proposition now.

Peter Robinson: I see.

Orville Schell: And it is a--an unsystemic system.

Peter Robinson: And they're worried about this unraveling. That's another reason why Beijing insists on--on total control.

Orville Schell: They're passionately worried about it and I think you can go down the list of floating population, you know, China has the largest migration in human history. It's an internal one of over a hundred million peasants going to the cities.

Peter Robinson: From the interior to the coast effectively?

Orville Schell: Well, or to large industrial cities.

Peter Robinson: I see.

Orville Schell: Uh, environmental problems, it has a banking problem, it has a labor, I mean, you know, when you go down the catalog, it's a pretty daunting and frightening look of unresolved issues.

Peter Robinson: Back to Russia.

Peter Robinson: If it's possible that China might revisit its chaotic past, what about Russia and its past?

Title: The Old Grey Bear

Peter Robinson: I quote Michael McFaul; "Russia is weaker than ever before, not surprisingly many within Russia now argue that the country's re-orientation towards Western countries, institutions and values was a strategic mistake that must now be reversed.? What are the odds that Russia will lurch back toward the old state socialism?

Michael McFaul: Next to nil, I would say.

Peter Robinson: Really? Oh, so this man who wrote this must be an alarmist, is that it?

Michael McFaul: Well, there--there, I don't know when that quote is from, but um, I would say two things, the--the probabilities of going back to communism I think are almost zero. Even the communist party of Russia now advocates private property and markets. Uh, the different question, I think is whether Russia makes it into the West--into the Western club of Nations. Uh, after September 11th, there's actually a new opportunity to do that and a new sense of, well maybe this is really where we truly belong. If you look at public opinion in Russia, you look at what President Putin has stated, uh, that--that makes me optimistic that maybe we can get done some of the things that were…

Peter Robinson: When you say looking at public opinion in Russia, are there good polls, reliable polls that are done, is that what you mean?

Michael McFaul: Yeah, there are good polls. I've done my own, in fact, I've done my own.

Peter Robinson: And what do they show?

Michael McFaul: On the big picture they show, uh, a society that I think is actually transformed faster than the state and is actually more pro-democratic, pro-western. Uh they're not quite as pro-market as one would think, but on the--on the big questions, they--they're much more, uh, looking to the West and wanting to join the West, much more than state and the elites. But, we've been through this before. We had a decade, a--a--a decade ago, where we thought, oh, the cold war is over, Russia's going to come in, they're going to join…

Peter Robinson: Let's be friends.

Michael McFaul: …everything's be--going to be happy. We're now a decade out and we still have a lot of lingering legacies from the cold war.

Peter Robinson: Does our leadership in Washington right now, does--do President Bush and Colin Powell and--and whoever is at the Russia desk in the state department, do they recognize this post-September 11th period as a moment of tremendous opportunity?

Coit Blacker: Well I think as Mike said, um, I think it is, uh, an important moment, but the moment has to be managed realistically. That is, um, both sides ha--have to struggle very hard not to over-sell what's possible. If you look back over the last ten years, there's plenty of blame, I think, uh, that can, uh, be properly apportioned to both sides, in terms of not kind of managing expectations correctly, um, very painful for the Russians in particular, because they thought they had done all this heavy lifting, they had done all of this work, they had done away with communism, the communist system, the Soviet Union, what more could they do? Here we are, take us in and we said, okay, you're part of the club, except, not really. And so you need to do the following ninety-seven hundred things and report back to us and when you've done those all successfully, then we'll treat you like a full member. It was a very painful process.

Peter Robinson: And that was humiliating to a nation that ten years, just ten years earlier…

Coit Blacker: Absolutely

Peter Robinson: …had been able to stare us down…

Chip Blacker: Absolutely.

Peter Robinson: …anywhere in the globe.

Chip Blacker: So--so now they've re-calibrated, they have lowered their expectations. They think they now understand what the terms of entry are and the events of September 11th in their view and our view once again set the stage, uh, for a process that should have a happy ending. But it's not going to have a happy ending if--if either side, or both sides, um, fail to set the expectations.

[Talking at the same time]

Orville Schell: At a point, I think, uh, what you say is very interesting vis-à-vis China because, um, Russia at this point in its history seems not to have that almost autoimmune reaction against the West. There is a moment here where I think there can be great change, whereas China has this kind of historical grievance, uh, certainly capitalized on by the revolution, anti-imperialism, anti-capitalism, anti-colonialism, which makes it very difficult for it to have a long term stable relationship with the Western America. We keep having these eruptions of passionate nationalistic sentiment, which I think do not bode well for its ability to integrate into the global world, uh, the way I--I could imagine Russia might in due course…

Coit Blacker: I think that's exactly the way it is.

Peter Robinson: Last topic, predictions and some advice.

Title: Future Shocks

Peter Robinson: Would you all agree then that a decade from now, if you had to bet which country is likely to prove the most stable over the coming, let's say, coming decade, decade and a half, you all three would agree Russia? Orville?

Orville Schell: I--I mean, you know, we don't know, but I could imagine such a scenario. The thing about China that's hard is that you can imagine absolutely opposite scenarios with equal plausibility.

Michael McFaul: Well, I would just add that, if you look comparatively and put China and Russia in a bigger comparative sun, uh, democracies are much more stable entities than dictatorships. They last longer and especially at a certain level of economic development, they rarely fall into a different kind of regime. Dictatorships are not that way, and--and let me just add in this conversation about dictatorships and economic reform…

Peter Robinson: Right.

Michael McFaul: …um, what's interesting about the post-communist world is the strong correlation between democracy and economic reform. That is the fastest democratizers are also the fastest economic growers…

Peter Robinson: With the--with the huge exception of China.

[Talking at same time]

Michael McFaul: China, I'm not cou--I said post-communist…

Peter Robinson: All right, all right, all right.

Michael McFaul: China's more in between. But it--it's an interesting, uh, analytical point, because we love to talk about China and Chile and before South Korea as the success stories of dictatorships with economic growth.

Peter Robinson: Right.

Michael McFaul: We don't talk very often about Saudi Arabia, Pakistan, Afghanistan, Angola. That is, there's a lot of dictators out there, all around the world that aren't doing economic growth and it's important to remember, it's not necessarily a direct relationship.

Peter Robinson: Gentlemen, this is television, so I have to round it out, but I wanna ask--I wanna put to you a kind of mental experiment. Fidel Castro has just died, may the day come soon, you have been called upon, each of you to advise his brother Raul. Raul says to you secretly, look, this communist thing, backward country, I'm sick of it. I want to move Cuba forward, but I want to do so in an orderly, not a chaotic way. Do you tell Raul Castro to follow the Russian model or the Chinese model? Orville?

Orville Schell: I would say follow a new Cuban model. Uh, I would embrace markets, but I would embrace them very cautiously, because they can be wild beasts too.

Peter Robinson: And what about democracy?

Orville Schell: I would say democracy; in my experience, is never a bad road to try.

Peter Robinson: O--okay, I'm a little unsatisfied because I'm--what I'm trying to poke for here is the question of which comes first, free markets or democracy?

Orville Schell: You--you--you have to have an orderly transition to a more democratic system. You can't simply just throw back the shroud and expect Cuba to be, spring forth like Athena out of the head of Zeus democratically, but I--I--I can't see any scenario where democracy isn't a good recipe for what ails.

Peter Robinson: Mike?

Michael McFaul: Well, the--the polls and many others in Eastern Europe have shown that there's not an either/or, that they can be simultaneous and self-supporting.

Peter Robinson: So the answer is follow the Polish model?

Michael McFaul: Follow the Polish model, but from his own strategic perspective, I would say with one but, which is, divide the communist party in Cuba, set them up as the two competitive parties for the first round of elections and that might lead to a smoother transition than what you got, say in Russia where that didn't happen.

Peter Robinson: Chip?

Coit Blacker: You can't build democracy on rubble. It's an important lesson. You have to give people hope that through the process of political participation, um, making choices, they can look to a future that's going to be better for them economically. You have to provide people a road map, you have to give them some sound basis that--that their lives, or the lives of their children will be better than their own.

Peter Robinson: And--and immediately.

Coit Blacker: And immediately.

Peter Robinson: And immediately.

Peter Robinson: Chip, Mike and Orville, thank you very much.

For Uncommon Knowledge, I'm Peter Robinson, thanks for joining us.