In contemporary China, is democratization really an issue?

Gallagher’s “Reform and Openness” takes a different direction than Lipset, describing the causal relationship between economic growth and a movement towards democratization. Though China remains a Leninist state among a sea of collapsed socialist states, Gallagher suggests that China will eventually follow the path to democratization. This view is clear in the title of the last section of the article (“Delayed Democracy”).

However, I would like the point out that Gallagher’s article does not acknowledge the possibility that the Chinese people may not necessarily care to democratize at all (at least during the current times). Her attention to FDI, while raising several points about why China’s shift to an open market economy was smooth, seems to ignore some human realities of China’s history and mentality during the 20th century. Mao Zedong’s Great Leap Forward and Cultural Revolution did not just cause a “dire capital shortage”; millions of people starved as a result of these policies. Perhaps China’s smooth transition can also be attributed to competition between firms, but the simple realization of the Chinese people that they have more to eat as a result of the “Reform and Openness” policy could have very well led to their ignoring of now seemingly lesser important governmental actions. This point is made clear in the Tiananmen Square case: though it stands stark in the minds of the older generation of political dissidents, a new generation of young Chinese, now spending, eating, and playing as they please, do not know nor may not care about this event that happened merely 20 years ago. This dismissal can not only be attributed to governmental censorship.

China and FDI: A Break in the Correlation

I distinctly remember one day in one of my high school government classes when my professor told the class that economic growth and democratization are correlated. This notion was further proven to me when I read Seymour Martin Lipset: when a country’s economy grows and progresses to a more worldly economy, democracy “and democratic characteristics” are also developed—especially with communication and education.

 

As is usually the case with many of these “rules” and assumptions, there is an exception; and China is clearly the one in this case. According to Mary E. Gallagher, “China has maintained a rapid pace of economic growth for over twenty years without succumbing to political liberalization—indeed with only the slightest movement toward democratic government.” A key factor is the country’s foreign direct investment liberalization. In this case, therefore, economic growth has not influenced or aided the advancement of democracy (despite the opposite being the foundation of United States foreign policy toward China for the last two and a half decades or so), but has instead been credited with saving the Chinese Communist Party. By opening its borders to large flows of foreign capital, China’s communist leaders have related this economic issue to nationalist ones, thus leaving no space for any demands on political reform by society. Gallagher posits, “Economic development amid increasing openness has contributed to the stability of authoritarian rule in China.”

 

Foreign direct investment has furthermore created greater competition between firms and between workers. This competition has developed pressures to adopt capitalistic practices learned from foreigners. By obtaining more capitalistic practices, those in the state can gain not only capital and technology but also “the prestige that comes with ties to the international economy.” Because they are being separated by this competitiveness, workers are not able to unite into a strong urban class and uniformly protest for reform in the political sphere.

 

So, will China stop being the exception to Lipset’s correlation? Perhaps… but in the long run! Gallagher concludes,

 

While foreign investment may indirectly improve the environment for future democratization, through the promotion of the rule of law, transparency, and the freer flow of information, in the short term its presence has afforded the regime more time and more political space to pursue economic reform without political liberalization.

 

I can say I somewhat agree. After growing up in an environment that has always portrayed China as unfaltering and “übercommunist,” it is a bit difficult to imagine it as a “real” democracy. Gallagher’s argument, nonetheless, seems plausible. I really do hope that in the long run China’s integration into the global economy and interaction with democratic countries will hopefully influence its society and build a more stable foundation for future democratization; after all, it can be as Gallagher asserted: “political change has been delayed, not stopped.”

Will China Ever Move Towards Democracy?

As we have read and learned, mainly from Seymour Martin Lipset, it is generally thought that economic growth directly correlates to a growth of democracy. As a nation’s economy grows, increases in communication, mobilization, and education all occur throughout society. All of these factors point toward an increase in democracy. So why is China, which has experienced some of the most staggering economic growth of the last century, still under the control of an authoritarian regime? Gallagher argues that it is the timing and sequencing of its reforms, combined with the prevalence of foreign direct investment, that have kept the communist party in control of China. By utilizing foreign direct investment as the catalyst and engine for economic growth, competition, and with it capitalism, increased dramatically in China. Competition for jobs decreased the power of the urban working class (often a strong supporter of democracy), gave the government political capital to enact reforms in the future, and also allowed the Communist Party to frame privatization and reform as vital for Chinese interests. All of these factors have stemmed the tide of political liberalization, and many now believe China may remain under authoritarian control for the foreseeable future. However, there are many problems that China’s rapid growth has created which may test the sturdiness of the Communist Party. The rewards of the booming economy have created an enormous gap between the rich and the poor and rural areas and cities. The increase in industries has forced China to rely on coal for much of its energy, making many Chinese cities some of the most polluted on the planet. Corruption is still widespread throughout China, and causes many ordinary workers to see smaller incomes. The Chinese banking system has taken on many bad loans at the orders of the government, and as we have seen this can lead to financial disaster. Lastly, what was once China’s great strength, its seemingly limitless potential work force and giant population, may soon become a problem. Will China be able to take care of its elderly, with the one-child policy limiting younger generations? All of these are serious problems China is faced with. While the Communist Party’s grip today seems as strong as ever, there are many roadblocks towards its continued dominance.

Civil Society: A Help or Hindrance?

China began its process toward rapid growth and expansion under Deng Xiopang, who believed the road to advancement was through slow, deliberate reforms of the economic system rather than through pronounced revolutionary change. In Robyn Meredith’s work, The Elephant and the Dragon, we are given a thorough account of the Communist Party of China’s micromanagement of economic growth, from the formation of special economic zones to huge infrastructure development projects. Several questions are especially salient with respect to the relationship between economic reform and political reform, the space for civil associations and institutions in society, and ultimately China’s ability to maintain its superpower status and its economic growth. Meredith paints an image of the Chinese countryside being lifted out of poverty, and to be sure, Chinese citizens are better off because of the Communist Party’s invitation of foreign investment and implementation of economic projects. Yet as Mary Gallagher’s article points out, much of China’s economic growth stems from Foreign Direct Investment. It seems that a strong indigenous Chinese role in the country’s economic development does not exist. Is this the reason why China persists in its authoritarian system, why citizens have been reticent to demand real political and social reform from their leadership? Buruma’s article speculates that because Chinese civil society is so weak, and because opposition is rigorously suppressed, this idea of a new, modern China could fail, stemming from the fact that citizens have no outlets for protest. China is always being brought up as an example of rapid economic growth and success, but are the achievements of countries like India in some ways more enduring, because the leaders have been held accountable for their actions? India’s growth rate is nearing China’s, but what is interesting is that India has had a long history of opposition movements and freedom of expression. Or is the lack of civil society in inconsequential, as Marc Morjé Howard brought up in his article. Would a more vibrant civil society in China merely “rock the boat,” creating disruptions domestically and economically? Is it possible to sustain this impressive rate of economic growth and societal advancement while at the same time introducing more democratic processes?

Thoughts on Merediths Book and Policy Recommendations

In many ways Robyn Meredith’s 2007 book The Elephant and the Dragon portends many of the financial hardships and burdens of the financial market the U.S. is facing today in 2008, in light of the rise of China and India. The book does a great job documenting China and India’s rise to global prominence, appearing more like a statistical review at times rather than an analytical approach to globalization and its implications. Nevertheless, Meredith manages to highlight several problems the U.S. faces with the rise of China and India. The first and most obvious is the use off-shoring and outsourcing practices by American corporations to save money. In my opinion, however, the most disconcerting and important obstacle the U.S. faces in light of the rise of China and India is her perennial budget deficit and shoddy monetary policy. It is remarkable how the U.S. went from the world’s largest creditor country (in the 50s-70s) with monumental foreign projects like the Marshall Plan, to the world’s largest debtor country in a matter of one generation. As of 2005, the U.S. has perpetually had a negative savings rate (-0.4%), yet the Federal Reserve continues to keep interest rates hovering around 1.5-2%. Pulling up interest rates is imperative in combating inflation and encouraging savings—after all, capital comes from savings, not the printing of money out of thin air. Besides, the market would never set interest rates at 1.5-2%, and the only way to effectively have artificially low interest rates is to print money, i.e. inflation (a direct increase in the supply of money). Meredith talks about the erosion of the middle class in America, but I feel that she neglects the monetary aspect of the issue. Inflation acts as a second tax on the citizenry and it is the most regressive tax of all, disproportionately affecting the middle and lower classes. People are quick to notice their cost of living go up, manifest in the Department of Labor’s monthly calculation of the Consumer Price Index (CPI) and Producer Price Index (PPI). Though the markets are quick to adjust for inflation, daily wages and thus yearly salaries are the slowest to adjust; therefore, the middle and lower classes find themselves having to spend more of their money on daily items for sustenance and hence less on savings and retirement. This contributes to a severe case of “status anxiety”—a more subtle, yet pervasive type of class warfare whereby members of the middle class will “lash out” at any attempt by others at social mobility, for fear that there place will be usurped (as if it were a zero-sum game). Tocqueville called this “the constant search for place”, or “place hunting.” Perhaps the most unfortunate aspect of the U.S. debt, however, is the fact that we have nothing to show for it. The government has borrowed trillions of dollars and told consumers to do just that—consume. We have no improved infrastructure, restored manufacturing base, improved education, increased research in science and technology, or increased service sector to show for it; we only have new cars, more plasma televisions, and bigger homes to show for it. I am optimistic that the U.S. can turn its economy around, but first it must do several momentous things: 1) reign in federal spending and fix the national deficit, 2) pass a constitutional amendment requiring a balanced budget to ensure that we groom Congressman that value sound budgets and monetary policy (currently we have the most fiscally irresponsible Congress in the world), 3) decrease our global empire and thereby reign in military spending, 4) fix social programs like Social Security and Medicare (part D) to ensure that they do not bankrupt our country, 5) transform our phony economy into one that actually produces things or provides services instead of merely consuming, 6) reform monetary policy so that inflation is curbed and therefore increase incentives to save (right now there is no incentive to save if one knows that there money will not be worth anything when they want to take it out—the time value of money), and 7) transform the notion of the American dream from one that values riches and material possessions to one that values living within one’s means and values the notion of constant evolution, not necessarily measured in material wealth.