I have just finished reading John Lee’s book, Will China Fail?, released by the Centre for Independent Studies. Lee has performed a valuable service by documenting what moving towards freer markets has achieved – stunning growth rates and lifting hundreds of millions out of poverty. He also notes the fundamental contradictions that must eventually be resolved by the Chinese Communist Party.
These contradictions arise from the tension between free markets and political authoritarianism. Free markets cannot exist in a vacuum. Markets require the defence of private property, enforcement of contracts and government organs operating under the rule of law. Though no longer a totalitarian state, China is still very authoritarian. It does not have an independent legal system, and thus cannot provide businesses the certainty they need to prosper.
This coming clash between authoritarian politics and laissez faire economics doesn’t mean China will become a Western-style democracy. I personally think this is highly unlikely. But I think it’s a safe bet to suggest that China will within the next 10-15 years become a democracy along the lines of Singapore. This process will be hastened by China’s entry in the WTO.
Singapore is a procedural democracy, not a multi-party Western-style democracy. The casting of ballots in Singapore is legitimate, as all votes are counted fairly without manipulation. But it is effectively a one-party state due to strict defamation laws and undemocratic rules that prevent opposition candidates from achieving much success. Such a system might still seem bad, but Singapore has a comparatively decent human rights record according to the US Department of State. Singapore has draconian laws, but unlike China’s government, it operates according to the law.
Lee compiles a long list of factors he thinks should temper optimism about China succeeding. He suggests it will either stagnate, decline or implode. But almost every single example he provides can equally be used to prove the opposite point, that China’s government will be forced to reduce political authoritarianism.
Once some regulations are removed, policymakers begin to see with greater clarity the stupidity of remaining regulations. Australia has experienced this. With microeconomic reform in the 1980s, we saw the benefits of financial sector deregulation. Today, policy dialogue takes it one step further. There’s little talk of nationalising and reverting to the dark ages of high tariffs. Once the move towards individual freedom and free markets has started, it is a process that cannot easily be reversed, at least not in full. Once people acquire a taste of freedom, they want more. For this reason, I am optimistic about China.
Likewise, I believe that China’s government knows the path it has to pursue to enshrine its legitimacy. Legitimacy arises from being able to improve the economic lot of its people. Yet to increase economic wealth it has to privatise and deregulate. It has to remove the intrusive State even further. So while Lee is correct to note the problems facing China are stark (high rural unemployment, too much capital diverted to inefficient government firms, etc.) I also think the regime is smart enough to know it cannot revert to socialism now that people have gotten used to an adequate standard of living. So it has to pursue reform to fix the problems that Lee notes. This will involve a further reduction in the scope of government, and in the long-run we will see a semi-democratic China.
No longer are there mass famines in China. While there is brutal political suppression, pragmatism and a growing informed middle-class have moderated the government response. Those who believe that the concept of freedom is indivisible (that is, economic and social freedoms are inseparable because infringing one affects the other) will not be surprised to learn that since China began moving away from Mao-style communism in 1978, it has greatly improved its record on civil liberties. Amazingly, China’s constitution has been amended to allow for private property.
Taiwan and South Korea became democracies after liberalising their economic systems. Singapore’s leaders at this moment face internal pressures to convert from a procedural democracy to a genuine democracy. Hong Kong has autonomy from China’s authoritarianism under the “one country, two systems” policy. Is there any example of a country that has not improved its record on civil liberties by moving towards economic freedom?