China’s Directionless Transition: A Commentary

INTRODUCTION

That China is in transition no one can doubt: In ten years she will be very different than she is today, not to mention in twenty or thirty years. This is simply a fact, guaranteed by the unleashing in China, in the twenty-eight years since Mao Zedong died, of powerful and transformative forces of every sort. These range from the loosening of economic regulation to the restoration of high academic standards in elite schools to the welcoming of foreign investment and the granting to many Chinese of the right to travel–to mention but a few.

But as the Year of the Monkey dawns, no one–inside China or without–can provide a description of the goal, or desired end-state of this undoubted transition. To the extent answers are given, they beg the question. Thus, for example, Deng Xiaoping’s oft-repeated remark that China would “cross the river by feeling the stones” underfoot. That may or may not be a good way to cross a river. But the question is not how to cross, but rather why? What does the opposite shore look like? Why should we want to go there? As the distinguished scholar Professor Wang Gungwu has noted, this sort of approach, what might be called “pure pragmatism” (from the Greek pragma, “deed”), did not originate with Deng. Sun Yatsen often said “Act and then you will know.”

But history suggests that successful (and even unsuccessful) changes of a certain scale require a comprehensive plan, as much as making a journey requires a map and a choice of route or building a house requires a blueprint.

The American founding fathers drew up a plan that was ratified by the states; the Meiji reformers in Japan created a constitutional monarchy that much resembled the Prussian system though it was briefly democratic in the 1920s. Failures have also been planned. The Soviet dictatorship implemented a series of economic plans that were drawn up by specialists; said Zhou Enlai in the 1950s, “The future of China is the present of the Soviet Union.” In those days the Chinese Communist Party had a plan.

TO REFORM OR NOT?

The problem in both the original Soviet case and the Chinese that followed it was that the plan proved not to work. Until recently it has been fashionable to suggest that China “got it right” by focusing first on the economy, while Russia fouled up by introducing freedom and democracy. That is not quite correct.

Russia chose to take her bitter medicine in one big and seemingly near-fatal dose: Abolition of communism, legalization of political parties, free election of parliament, convertibility of currency, privatization of the economy. Russia has still not fully implemented all of these and may backslide, but she had a coherent approach to her problems that she implemented painfully. Now she is beginning to reap benefits.

By comparison, in China communism has not been abolished, independent political parties are illegal, the relatively powerless parliament is not elected, the renminbi is not convertible, and the state-controlled sector of the economy is actually growing in proportional terms, from about two-thirds a few years ago to about four-fifths today.

Nothing remotely like even the Russian plan has been articulated by China’s leaders, nor have outside observers reached any sort of consensus about where the winds of change now released, as in the Odyssey, will carry that country in the years ahead. All we know is that they will carry her somewhere and that they will not carry her everywhere–and when one is speaking of a country as important in every respect as China, this fact is troubling, to put it mildly.

HOW WILL CHINA CHOOSE AND LEGITIMATE HER LEADERSHIP?

Sooner or later the pressure of circumstance, if nothing else, is going to force China’s leadership to give answers, even if only in the form of demonstrative actions, to questions hitherto skillfully avoided. Hence the primacy of the leadership question.

No leader of the People’s Republic of China has ever been chosen in accordance with either the Chinese Constitution or the rules of the Chinese Communist Party. Mao Zedong seized power during the Long March in 1935 through a conspiracy, and when he finally got to a short-wave, reported the fact to Moscow. After his death in 1976 Mao’s designated successor was ousted in short order in a military coup d’etat and subsequently Deng Xiaoping came to exercise supreme power, though his titles never fully reflected that fact. As the democracy movement of 1989 was crushed in the Tiananmen massacre, Deng and a few colleagues, gathered irregularly and in violation of party rules, placed Jiang Zemin in power and designated Hu Jintao as his eventual successor. But on the eve of this handover, Jiang enlarged the politburo standing committee to include more of his people and entrenched himself as chairman of the Central Military Commission–a good base from which to exercise real power, while Hu and Wen Jiabao sought to get their hands on some levers that actually worked. That is how things stand in Beijing today. There are two competing courts, as it were, each headed by an individual–Jiang and Hu–whose selection was irregular even according to party procedures.

This is not a trivial fact, or one that will be washed away by tides of trade. China has traditionally been ruled hierarchically, and disagreements at the top have always ramified down, splitting society in a vertical fashion, at every level to the grassroots, according to whom one aligns with at the top. The process is regularly conflictual, as among the heirs of Zhu Yuanzhang, the Ming founder, or the successors of Yuan Shikai, president from 1912 to 1916, or between the left and right factions of the Kuomintang–and the examples are nearly endless. One cannot choose leadership simply by “feeling the stones” underfoot.

Clearly China today has no plan for a transition in the system of choosing leadership. Such a transition will come, but it will be a surprise to all concerned, more likely involving a whiff of grapeshot than a deliberative assembly.

HOW WILL DISPUTES BE RESOLVED?

One alternative of course is for the Party to continue to insist that it alone is in charge. That can work in a simple, largely agricultural country, cut off from the world, such as China was in Mao’s day. But as such a society becomes more complex, disagreements arise; at first not so much about human rights issues, freedom, and so forth, but rather about practical matters. Can your factory discharge waste into the river from which we draw water for our soft drink plant? Must the lavish new building for China Broadcasting permit a planned new boulevard to pass under and through it? How does one decide, and how consistently?

In his important book, Soviet Marxism-Leninism: The Decline of an Ideology (Westport, Ct: Praeger, 1993), Alfred B. Evans lays great stress on the degree to which the inability to answer this question undid the USSR, which, in its latter decades, was also becoming complex. One choice would be to set up rules for resolving disputes and set up impartial mechanisms for adjudication–laws and courts. But to do this would eliminate the crucial “guiding role” of the Communist Party–its rule is legitimated, after all, by the argument that the party knows best–and leave it with little to do and no rationale for ruling. So that is unacceptable.

But what about the Soviet and current Chinese system, in which the party can intervene, capriciously and inconsistently, to be sure, but decisively? How can anything be accomplished under such a completely unpredictable system? But once again, no genuine transition in dispute resolution is planned. The Party intends to retain its prerogative to intervene, regardless of the rules.

DEMOCRACY OR NO?

The answer most states have found is to involve the people and all their diverse interests in electoral politics, which in turn legitimates objective mechanisms for resolving disputes. This is what China must do if she is not to become so entangled by misrule and inconsistent regulation as to suffocate her society and economy.

But will she do so? Little talk is heard these days about “political reform” in China, and in Hong Kong the central government appears to be willing to tear up all the solemn commitments to democracy it made in 1984, to world-wide acclaim, just because it fears the opposition parties may win control of the Legislative Council.

Or to put it another way, no political transition is currently planned. One will come, we may be sure, for it is inescapable unless China abandons her ambition to be a great modern state, but it will be a surprise to all concerned. And like the French revolution’s, its trajectory will be erratic, dizzying, and quite possibly destructive.

WILL CHINA CREATE AN ECONOMY BASED ON PRIVATE PROPERTY AND FREE ENTERPRISE?

This again is a case where conventional wisdom–that China is engaged “in a wrenching transition to a free market economy,” as a recent Freedom House draft put it–is at odds with reality.

As already mentioned, in proportional terms, the state controlled sector of the economy is growing, not shrinking. Bank credit goes overwhelmingly to failing state owned enterprises, to create both an oversupply (90% is the current figure) of goods while at the same time adding to a mountain of bad debt. Genuine entrepreneurs receive roughly one percent of bank credit, yet they account, in urban areas, for something like two thirds of new jobs–and unemployment is a terrible problem. If the Chinese authorities had actually intended to privatize the economy, they would have done so by now–twenty years is surely sufficient time. So what in fact are they doing?

The answer, I think, is that they are trying to create an efficient and profitable economy that the party and state own and run–what Eastern European reformers used to imagine as a “socialist market economy.” The communist leadership thinks of markets as, in the words of Harvard’s Huang Yasheng, “therapeutic.” That is to say that if you immerse a failing state enterprise into the market, it will somehow be strengthened and heal. But that is not the case. A far more likely outcome is that it will go bankrupt, to be replaced by a far more efficient private firm.

If one compares Japan at the same distance from World War II that China is now from the beginning of “reform” in the late 1970s, one finds that by the mid-1960s Japan already boasted scores of privately owned internationally competitive firms that gobbled up market share around the world not only on the basis of price, but also of quality and design. One is hard pressed to think of even one Chinese firm today, public or private, that is comparable.

So whence China’s massive growth? The answer, I think, is that the growth has been driven much more by increases in capital investment (and money being spent, say, on men and concrete is a positive increment to GDP, even if the project being constructed is a huge pyramid that will never yield any return) than by true productivity growth and assignment of factors to their highest paid uses. Quite the opposite: Faulty capital allocation is perhaps the biggest economic problem China faces today.

But again, we have no planned economic transition. Such a transition will occur, we may be certain, but it remains to be seen whether that transition will be a “breakthrough” into a genuine capitalist economy, or a “big bankruptcy” of an unsustainable and artificially inflated state economy.

CONCLUSION

By now the reader will, I hope, have caught my drift. Similar questions can be posed about China’s pension and social welfare policies, her pervasive corruption, her military future, her foreign policy, and numerous other areas–and always with the same answer: No transition is planned, but one is surely coming.

This is not a happy thought, given the world wide ramifications of any sort of change in China, planned or unplanned. But unless circumstances become so desperate as to force change (and with her vast foreign exchange reserves it seems unlikely that anyone in Beijing feels the genuine urgency of beginning real reform) or some visionary and powerful figure somehow emerges to lead China from the wilderness of state planning and dictatorship to the promised land of freedom and dignity, the rest of the world will have little choice but to remember Sun Yatsen’s words: We will watch how China acts, and then know what happens.

A directionless transition is under way in China and it will continue, destination uncertain. This is surely an ironic fate for a country whose citizens, a generation ago, were loudly chanting a paean to Mao Zedong called “Sailing the Seas Requires A Helmsman.”