Saturday, June 12, 2004

China, repression and East Asian capitalism

The suppression of the Tiananmen Square protests of 1989 was a victory for the Chinese Communist Party, but not, of course, for Communism - not in Marx's sense of 'from each according to his ability, to each according to his needs', nor in the sense of the totalitarian system developed in the USSR shortly after the 1917 revolutions and imitated (with alterations) in China.

From the late 1970s China has been on a different path under Deng Xiaoping towards what is sometimes called developmental capitalism, with political control still in the hands of the party and the army but some economic power moved to investors. During the same period the Chinese economy has grown rapidly - more than 9% last year - and the gap between rich and poor has widened to a huge gulf.

A Spectator article points out that the massacre of June 4th 1989 allowed the Chinese regime to keep all of its political power while 'liberalising' the economy. Notoriously - but not notoriously enough - there are no free labour unions in China and freedom of movement is restricted: the article notes the system of permits for travel inside China but does not mention that permits are also needed to leave the country.

This is undoubtedly bad news for the people of China, and also, less obviously, for the Western economists who claim that increasing prosperity is bound to lead to political freedom and democracy. This is the premise behind the Spectator article and the reason why its writer finds the continuing lack of democracy in China newsworthy.
There is still a feeling that although Tiananmen Square put things back for a bit, all that economic liberalisation must be followed by political freedom somewhere down the line, and that constructive engagement, as it used to be known when South Africa was the issue, will help it along.
In fact, the only thing that's wrong with the thesis that is supposedly being questioned by events in China is that it is all complete nonsense. The history of the 20th century is full of counter-examples, a number of them in East Asia.

A caveat is needed here though. The author of the article makes it very hard for himself to shed real light on what is happening in China by assuming that there are only two systems in competition here: capitalism and Communism. He also seems to think that China's development in modelled on US capitalism.

Powerful people in China no doubt admire America's wealth and power and would like to catch up and even overtake the US. But that doesn't mean that they do economics the American way, any more than they plan to base their politics on the US constitution. Their model is East Asian developmental capitalism, practiced by Japan, South Korea and Taiwan, in which there is no clear separation between the higher levels of business, government and the bureaucracy. Investment is channeled towards strategic industries by preferential loans made by supposedly private banks following guidance from central government. In these countries the economic system is kept afloat by the high percentage of household income which ordinary people put into savings accounts and the high prices that they pay for many commodities because of import barriers.

Among political economists of East Asia this is pretty well understood, since these countries have done extremely well over the last 60 years while neighbouring countries under US influence such as the Philippines and Indonesia are basketcases (to use the technical term). What is more, none of these countries made their rapid economic gains under multiparty democracy. The rightwing parties which came to power in the aftermath of WWII in these countries were all still in power in the early 90s; South Korea and Taiwan were military dictatorships during this time and Japan was effectively a one-party democracy.

This is the model that China is following, and it doesn't just allow for a strong or totalitarian state, it probably requires it.

A separate question is whether the prosperity produced by this model will lead to or is even compatible with pressure for change. The precedents are mixed. In South Korea and Taiwan the mid-90s finally saw an end to one-party rule and military dictatorship and a transition to a sytem more like Japan's (although huge demonstrations continue to win concessions, particularly in Korea). In Japan, protest movements have been dedicated but without great public support since the student and labour movements were crushed around the late 60s.

(Codicil: of course the US capitalist model also relies on state handouts to corporations, and politically the US is well short of proper democracy. I don't have the time now to look in detail at the differences between this and the Japanese model, but it is clear that they are different and I think there is little doubt which option China's rulers have chosen.
I'm also keeping out of the debate about whether China's economic system before the 70s was 'state capitalist' - as Rocker described the USSR - or 'coordinator controlled centrally planned public-enterprise' as Michael Albert might put it.)

Thanks to Alex Higgins for pointing out the Spectator article, and noting that it says that Blair wants an end to the EU arms embargo against China. Blair loves modern China, clearly wishes he had as much control over the UK and will go to great lengths to avoid displeasing China's rulers. Refusing to meet the Dalai Lama the other week when he was in the UK (Blair was 'too busy') must have been the least he could do.
I have been critical of the Spectator article here but I agree with Alex that "In describing how right-wing the Chinese Communist Party has become, and how both Western capitalism and Maoist totalitarianism complement each other in a rather ugly alliance, ... it is broadly correct in its argument."

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