Will China Fail? The Limits and Contradictions of Market Socialism, by John Lee

Will China Fail? The Limits and Contradictions of Market Socialism,
by John Lee;
Centre for Independent Studies, 2007, $24.95.

JOHN LEE NEEDS to get out more. More travel in China would be a good start. Although he argues well and strongly from a selection of mainly American academic authorities, a little on-the-ground practical experience would be of immense benefit. And, with a due bow in the direction of Pei Minxin, just a couple of Chinese economists might be a welcome addition to his reading list.

I had intended to sit down and give this slim tome a serious review. But after wading through 155 pages of factoids and out-of-date “data” it just got a bit much for me. Any given page is just a catalogue of woe and disaster. Take page 90, a page opened at random. You see life expectancy has risen to seventy-one years—he breathlessly tells us that this is the result of “disease prevention measures”. But, as he then goes on to tell us, nobody can afford the health care. But that’s not all! The population is ageing; McKinsey tells us (another factoid) that the pension funds are on “the verge of bankruptcy”. In Tianjin only 2.3 per cent (what a wonderful number!) of laid-off workers will rely on government support. And to top it all off, they’re not collecting nearly enough taxes. Local government’s share of the tax take (incidentally at about 30 per cent of GDP giving the lie to lots of other rhetoric about “socialism”) has skyrocketed and Lee knows well that this is all being squandered on long lunches and big cars.

At this stage I reached for a stiff drink. On the Beach scenarios flashed before my eyes. You know the scene, the one where they line up in front of the Melbourne State Library and take their suicide pills while the Salvation Army band plays “Nearer My God to Thee”. Will the band of the People’s Liberation Army play this important role as the masses line up to put an end to it all?

This is unfortunate because China does have problems. A grossly polluted urban environment, a rural land-holding system which effectively holds back a large proportion of the population in poverty, a political system which never quite knows where it’s going, a serious problem with law enforcement, a banking system which has had to be refinanced several times in the past decade … the list goes on. And, in apparent sharp contrast, above all this, the indisputable fact, albeit that Lee appears to attempt to dispute it, that more people have been lifted out of grinding poverty in China in the last twenty years than at any other time or place in history.

These are things which cannot be lightly dismissed, and not the least of the issues screaming out to be discussed is whether the Chinese “model”, supposedly one of combined free-market gradualism and political authoritarianism, is something that other developing countries should follow. And the first place I would normally go for sensible discussion of an important subject like this in Australia would be the CIS. It’s unfortunate that they don’t seem to have got it right yet because this is precisely the sort of area where they should shine.

Let’s forget about the “market socialism” which Lee seems to put so much store by. Nobody has thought a socialist thought in China for fifteen years. Let’s concentrate more on the multitude of begged questions. What does “authoritarian” mean? Not an attractive question to ask in a week when the armed riot police are in the streets but a very real one and one to which there is no simple answer. Chinese bookshops are full of all manner of books. Hardly a subject (the Dalai Lama and Falun Gong come to mind as obvious exceptions) seems to be taboo. Anne Coulter sits alongside the Bible and Kant on the bookshelves of China’s massive bookshops. Television current affairs programs have vigorous debates about just about everything. But then suddenly your screen goes blank for five minutes. The censor has aroused himself from slumber. So you switch to another channel and get the same story without the blank. And next morning the Hong Kong English papers, to which many Chinese subscribe, are calmly delivered to your door by the state postman with the same story free from any censorship. Go figure!

And while we’re discussing the Chinese “model”, wouldn’t it be useful to examine whether there is such a thing as a “Chinese model”? My sense is that there isn’t. There is an enormous number of people discussing practical political issues from a multitude of “ideological” standpoints. The Party has 70 million members. Proportionally in Australia this would be the equivalent of the Liberal and Labor parties having a combined membership of half a million, which they plainly don’t. The range of ideologies is from the extreme left to the extreme right. I even met a communist a couple of years ago. So talking of an ideological model makes no sense.

But there is common ground. Everybody knows what they don’t want. They don’t want the totalitarianism, the chaos and the violence of the Cultural Revolution. They don’t want compulsory political meetings, or heavily controlled art and culture. They want bread before correctness. They want an end to arbitrary government, and proper institutions of government.

Within those bounds the debate is vigorous and wide ranging. Of course they screw up constantly and occasionally appallingly but the trend is positive. Perhaps rather than talking about political models we should be asking whether this tacit agreement between Right and Left is the basis of a Chinese constitutional settlement. Once again who knows? But we should be talking about it.

Does this have any practical application to any other developing country? Other than the general principle that you should open your markets to the maximum possible extent, probably not. The practice of government in China is too specific to actual daily problems. There never appears to be an ideological answer handed down from above to any given question.

THE OTHER ISSUE which is very much alive and which Lee fails to address in any useful fashion is political reform. You can’t simply dismiss political reform as a constant issue in Chinese public life. It was debated vigorously in the years leading up to the June 4 events in 1989. Zhao Ziyang was a strong proponent of political reform. He finished up dying in comfortable house arrest after the uprising, and political reform as an agenda item didn’t fare much better.

But Wen Jiabao, Zhao’s secretary and a leading proponent of political reform in the 1980s, is now Premier. Strong elements on the Left are implacably opposed to political reform, and this limits what can be quickly achieved. Chinese government relies on constant compromise between Right and Left and most government decisions are by committee. But the recent Party Congress laid particular emphasis on intra-party democracy and those in the know say that this is simply formalising what has been the case for some time. I’m not saying that we should expect to watch primaries on television next year but these are real issues and in the constant ebb and flow of Chinese life the ebb appears to be in the direction of political reform once more. I notice that, as a resident of China, I am eligible to vote in local elections. This is on the property franchise. Once again, go figure!

I would also have appreciated some treatment of the vexed question of the development of civil society in China. Of course the Party wants the final word on every question of importance and there is an official society for just about everything; an artists society, a writers federation and so on. But this hides the fact that there are enormous unofficial networks with greater or lesser degrees of organisation for people who are interested in art, literature, you name it. My sense is that the government just doesn’t care about most of these and the amount of leeway allowed is enormous. Is this the beginning of civil society as we know it? Who knows—but it’s certainly a subject worthy of sensible debate.

A word about Chinese statistics. Of course they’re rubbish. Everybody knows that. Sometimes it’s because of political manipulation. More often it’s because of bad data. Using Chinese statistics requires careful judgment and selectivity. Unfortunately Lee exercises this selectivity by selecting the numbers that agree with his thesis and rejecting those that don’t. This leads him down some very dubious paths. Thomas Rawski of the University of Pittsburgh tells him that growth figures up to 1998 were basically accurate and that since then the numbers have been inflated by a factor of three. Nobody, but nobody who has travelled extensively in China before and after this magic date and watched the wealth suddenly appearing around him would believe this. A very cogent case can be made for the exact opposite view that growth numbers have been seriously understated. Tax collection is less than a perfect art and the incentives for under-reporting activity are obvious. A country where there is an active black market in receipts (my local is in Shenzhen’s Huaqiang Road) is hardly fertile ground for accurate economic reporting.

So please, CIS. As Deng Xiaoping said, “Shishi qiu shi”—seek the truth from empirical facts. China doesn’t fit easily into small boxes. It’s big, vibrant, constantly in flux. People are always thinking thoughts and expressing them and sometimes, quite often, the thoughts are subversive. China’s worth better than a long desk exercise, however painstaking it may be. We’re still waiting for it.

Ted Rule lives in retirement in the southern Chinese mega-city of Shenzhen, just north of Hong Kong. His forty-year career as diplomat, investment banker and private equity professional was spent mainly in Taipei, Beijing and Hong Kong.