Market capitalism best option for China
Tuesday, 20 March 2012 | 00:00
The world is once again intent on China. Only this time it is seeking to understand not the country's economic but its political trajectory and whether its three decades of reform might be derailed.
No one with experience of watching the annual sessions of the "rubber-stamp" legislature in Beijing would have expected it to end in such drama, with a blast from Wen Jiabao (pictured), the departing premier, that without political reform China could face a repeat of the Cultural Revolution and then on Saturday the purging of Bo Xilai, the maverick regional politician.
Wen has laid bare the rift in China's leadership about how the country will evolve. His comments have also sparked fresh reflection in the outside world on the merits of the so-called "China model", combining authoritarian politics with an increasing role for the state in markets and economic affairs.
This model has gained credibility in the west in recent years, thanks to the crises in western economies. China's model call it "authoritarian capitalism" or "socialism with Chinese characteristics" is seen as a potent alternative for governance. The crucial question, though, is whether it is the best option for China. The answer is no.
First, China's emergence as an economic power is the direct result of its embrace of free markets and globalisation, perhaps the biggest experiment in market capitalism in history. The distressed state of economic and financial affairs in the west today should not obscure the fact that it has changed China.
Moreover, though western leaders view the "China model" as a formidable rival just as they once admired Joseph Stalin's transformation of the Soviet economy their Chinese counterparts know the difficulties of governing China. In private, leaders can be surprisingly honest and damning. They are acutely aware of the system's flaws and what would happen if the control room fails.
China's model does have certain advantages: creating national champions, building infrastructure, responding fast to natural disasters and economic downturns. But it fails in accountability, transparency, democratic representation and the rule of law. Many observers believe that China has recently become, if anything, more authoritarian. Because of this, it now confronts rampant corruption, rent-seeking, cronyism, nepotism, injustice, inequalities and social instability.
I once asked a senior adviser of China's leaders if there was nothing Beijing could learn from western-style democracy. He uttered, after an excruciating pause, one word: "Voting." Within China's political establishment, a consensus seems to be quietly emerging that, sooner or later, China will have to undertake a long and painful process of democratisation to address, once and for all, the party's legitimacy.
However, the recent global turmoil has shaken Beijing's confidence in the western financial system, making it more reticent and inward-looking.
Under Deng Xiaoping, market forces were deployed in dismantling central economic planning, creating consumers and relaxing social and political controls. In recent years, the market has suffered a worrying setback, while the state and state-owned enterprises are marching on. National champions increasingly have the upper hand over domestic privately owned companies when seeking capital, investment, fair competition or legal protection.
The run-up to China's leadership transition, late this year, will as always be a tense period in politics. As the China model delivers ever greater wealth, consolidating, as a result, the power of the central government, the most pressing issue is: can such power be accountable?
My concern is that when market freedoms shrink, so will the political and social liberties that come with them. Here, the China model has a poor record. Market capitalism is at low ebb but it remains the best option for China's gradual political evolution. It is in China's interest to make peace with liberal capitalism. China has little choice, if it is to transform itself into a fairer, freer and more stable society.
Source: Financial Times