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Saturday, September 27, 2003

China's Economic Future IV: Fears of Social Strife, Political Protests, and a New Tiananmen Square in Chinese CP Circles As Brakes on Reform. FINAL VERSION

From Michael Jabbra, a former UC Santa Barbara student full of talent, the brief following query was left as a comment attached to the previous article. Given the importance of the topic it deals with, it's published here along with the buggy reply.

Dr. Gordon,

It's true that the Chinese government will face a potential political upheaval because economic reforms will be painful. How effective will the memory of Tiananmen Square be in reducing mass dissent? People tend to suffer in silence if they know that protesting brings death; hence we don't see any protests in North Korea, for example.


Yes, Michael: You're right, from a variety of sources, the party leadership clearly remains worried about a new nation-wide protests and demonstrations of the sort that erupted in the late 1980s, on a large scale, and led a badly divided party to opt for violent repression . . . with all the international repercussions that ensued. The result: nearly a 1000 deaths at Tiananmen Square in a bloody massacre, followed by similar crackdowns around the country. The date was June 1989. For a good survey with easily read commentary and documents, go here.

For the next four years, the party remained warily vigilant; it isolated radical reformers within its own ranks, and governed with tight repressive controls, only to loosen these after about 1993 for the next four years, hopeful the crisis was behind them. Opponents of the system took heart. In particular, as political reigns loosened, there was growing confidence in these oppositional circles, some in the party, others outside it, that liberalization would continue apace for years and decades. Some even hoped the process would be irreversible.

Not so. They were wrong.

New Repression

After mid-1997, the sharp decline in economic growth and new surging social tensions and conflicts --- in the wake of the wider Pacific Asian financial meltdown --- reinstituted a new wave of repression . . . less violent and bloody, to be sure, mainly because there wasn't the degree of open defiance of the regime that marked the late 1980s protests. What happened? For a start, the efforts of the Zhu Rongji government to severely prune the bankrupt state-enterprise system --- where 120 million workers were employed in late 1997, enjoying the only social security safety net in the country, paltry as it was --- provoked new waves of strikes, protests, and demonstrations, a common sight in northern Chinese cities even now. Nor was that all. The party and government have been especially worried about the growing influence of the Internet and the related ability to sidestep intense censorship. Then, too, the crackdown on the small religious group, Falun Gong --- which began in the late 1990s --- is a good example of the party's continued fears about a renewal of protests, now or in the future, that could turn political and shake the regime to its roots.

For another good article that documents the party's divisions in the spring of 1989 --- in the run-up to Tiananmen Square's massacre --- see this link, published in 1999 and based on party documents: For a wider, intelligent academic analysis of China's democratic oppositional movement, see the Harvard Asian Pacific Review for 2000. On labor unrest as the party presses on with restructuring the state-enterprise system, see Amnesty International 2002 In May 2002, coordinated demonstrations in three northern cities attracted large crowds of protestors, and the regime cracked down hard: see Human Rights News:

For an up-to-date article that documents the growing gap between urban incomes and those in the countryside, where most Chinese still live, see The Economist, Rich Man, Poor Man.

Earlier this month, on September 3rd, 2003, the World Bank published a 15 page memorandum on the Chinese economy that praised some reform progress, then set out a lengthy agenda of needed changes and reforms (similar to what the previous buggy article did, without prior knowledge of this recent World Bank publication), and then --- in language very unusual for the bland but highly competent World Bank studies --- noted that "enormous political will" would be required for the reform program to be implemented. See World Bank, Promoting Growth with Equity


Economic Reform, Social Strife, and Communist Party Repression

This social strife is bound to continue. That said, your analogy with North Korea --- the last brutal Stalinist-Maoist system in the world --- is misleading.

The End of Maoist Totalitarianism

Since 1978, despite the ups and downs of repression and crackdowns on dissent and workers' and peasant's demonstrations of a non-political sort, the Communist-dominated system in China has opened up in ways that mark a clear break with the Maoist form of extremist ideology and total societal control . . . whether by the party and the government it ruled over from 1949 until 1965, and then increasingly in the next decade ---after Mao and CP radicals encouraged the Great Proletarian Cultural Revolution and the storm-trooper Red Guard thugs, millions of frenzied youth, to attack even the CP for its bourgeois tendencies --- by use of demagogic manipulations of his fanatical supporters at the grass-roots level. What has emerged since then is a form of modernizing authoritarianism . . . similar, as we'll see in a few moments, to the military-dominated authoritarian regimes that ruled in South Korea and Taiwan and Indonesia and Thailand --- or civilian bureaucratic authoritarianism in Malaysia and Singapore and British-ruled Hong Kong --- from the early 1950s until the 1990s. It's a key point this, the modernizing authoritarian system in China since 1978. Whether it enjoys legitimacy is another matter. As we'll see when we return to this topic shortly, the CP itself has admitted that alienation toward the party and the government is widespread throughout the population.

The Great Proletarian Cultural Revolution and its aftermath --- which raged for a decade after 1966 and then led to the post-totalitarian system in place since 1978 --- needs to be clarified for those interested in the historical background here.

For a decade, during this frantic, turmoil-charged period when millions of people were tortured and killed and especially between 1966 and 1969, the country drifted toward cascading civil war. The CP party was fully caught up in the swirling conflicts. Factionalized and purged repeatedly by the Maoists, it was rent with rippling discord from top to bottom and came near to shattering apart. By 1969, anarchy and chaos were rife throughout China; the urban economy had ground to a halt; law and order ceased to exist; the thuggish Red Guards, whipped up to lathers of frenzy, attacked whoever they felt like. The outcome? Ultimately, in early 1969, the military --- worried about the endless strife and violence --- intervened and put an end to the anarchy and Red Guard brutalities by cracking down with force on the street thugs, millions of them. Millions, note, is noi exaggeration. Around 17 million Red Guard members were deported to confinement camps in the countryside and kept there for months or years. Not that law and order were completely restored iin 1969. In the outlying provinces especially, tumult and low-level violence sputtered on for another two or three years. And not just there. Astonishingly, even in Beijing --- in Tiananmen Square as late as April 1976 (13 years before the later massacres ensued) --- 100,000 rioters fought off-and-on street clashes with police, militia, and regular army for days on end.

Not until until late 1976, when Mao died, did the shocks and fears of renewed large-scale violence fully end.

As for the CP itself --- from 1966 until late 1976 --- the vicious, factionalized struggle it underwent pitted Mao and his radical faithful, fearful China was drifting into a bourgeois-dominated system, against the moderate modernizers in the leadership ranks . . . mostly advocates of a more flexible, less statist-dominated industrialization, technocracy, and above all an end to Maoist ideological fanaticism and the statist siege economy that it had spawned. Remember, the Communists came to power in 1949. In just 25 or 26 years, it had undergone huge purges and murder of landlords and small businessmen and other opponents --- the owners of the giant factories, interestingly, were converted to civil servants with good salaries to manage them --- then a brief period of liberalization in 1955-56, then the savage campaign to drive hundreds of millions of peasants into communal living, then a brief liberalization again, only for the decade-long Cultural Revolution and its aftermath to create turbulent chaos everywhere in Chinese life. The moderates were determined to end these destructive, mass-murdering swerves in the country.

With Mao's death in September 1976 --- the country's economy still in ruins --- the strife within the CP drew to an end. In particular, the modernizers --- rallying --- moved quickly to arrest Madame Mao and the other leading radicals, then began systematically to purge the CP leadership of their influence and supporters. Over the next two years, Deng Xiaoping --- the leading modernizer whom the Maoists had arrested earlier in the 1970s, took control of the party's leadership; and one by one, all the commanding posts in the party, government, and military came under their sway.

The result? In 1978, with the moderates fully in control, the post-Maoist reforms of the economy were launched with fanfare, disguised as "market socialism" . . . first in the countryside, where the collectives were disbanded in favor of private market-oriented agriculture, then by 1983 in the urban industrial areas as well.


The Reform Era, 1978 On: Modernizing Authoritarianism

Keep in mind the motive forces for sweeping change and reform. :

* First and foremost, the party under the leadership of the modernizers was seeking to revive the broken-down economy, full of poverty and a miasma of statist and collectivist ills;

* It sought no less energetically to solidify law and order throughout the country;

*Then, as agricultural output rocketed and new private or town-and-village owned firms emerged, millions of them --- the party and other elites in the government and military have united on a clear ambition to propel China toward the ultimate goal of becoming a modern, industrial economy of wealth and advanced technologies.

* Almost certainly too, there is no less unity on the related ambition of propelling China forward into the front ranks of the great powers, a natural hegemon in Asia and beyond that a peer-rival of the US on the global scene. It's important to add that the Chinese CP isn't a reckless, adventurous movement inclined toward militarization; and there's at best scattered evidence, mainly in military not party circles, that it sees war as inevitable to achieving those goals. Among other things, the leadership and probably most of the military understand what war can mean in a nuclear age; and more recently, since the late 1990s, they have taken arms control and other confidence-building measures much more seriously than they had earlier.


The Resulting System

The best way to describe the new political and economic systems that the CP-led changes have structured ever since? A clear break with Maoist totalitarianism and crazed ideological zealotry, the two responsible for tens of millions of deaths over its 25 - 30 years of reign, from 1949 to the late 1970s. Since then, the resulting system looks more like a modernizing authoritarian regime . . . something more akin to South Korea and Taiwan, say, in the period of militarized authoritarianism from 1950 until the early 1990s.

Of course, as with any authoritarian regime, the Chinese CP rules ultimately --- claiming a total power-monopoly --- by means of repression or its threatened use. In China, the authoritarianism is all the more effective because a still fairly disciplined CP blankets the country --- 64 million strong, all privileged and found in every area practically of Chinese life, a huge movement that closely monitors conformity to the system. Major social change has nonetheless continued, propelled by constant economic upheaval. What's more, except by stopping economic growth itself, the pressures toward further social transformation --- charged with political implications --- can't be halted. The result? For all the tight CP monopoly of political power and the arbitrariness of its rule, Chin has emerged since 1978 as a far more open, fluid society with far a vastly greater range of ways in which relatively non-political discontent can be openly voiced. Millions of people are no longer arbitrarily imprisoned, tortured, and killed off. Red Guard thugs don't run amuck. Fear isn't pervasive.

And provided they don't become outrightly political, protests and demonstrations and even strikes and worker-instigated lockouts of factories are tolerated and a common everyday sight in Chinese cities in the northwest rust belt and the interior.


The Ups and Downs of Hard-Nosed Repression Since 1978

The last point deserves to be clarified.

Essentially, only when the Communist Party finds that the protests and other expressed means of opposition to the status quo become clearly politicized and threaten the CP's firm commitment to maintain its political monopoly will it use widespread violence to quell it. The late 1980s were precisely such a period . . . years of cascading democratic mobilization and protests at the grass roots, with workers, peasants, intellectuals, students, media types all caught up in the swirling demands for a more open, democratic form of rule. (A similar flurry of politicized democratic opposition had briefly erupted in 1956, only to be mercilessly and quickly crushed.) The party leaders, divided on what to do, took fright and openly vented their divisions. Then a decisive wave of repression emerged in June 1989. In particular, when Beijing looked like being overwhelmed by waves of democratic protests and demonstrations --- especially in Tiananmen Square, days on end --- the moderates in the CP who sided with the demonstrators were arrested and removed from office, and the military and police ordered to crack down with rigorous force everywhere. Over a thousand protestors were killed. Repression rippled across the country. The hard-boiled repression and vigilance lasted about three or four years, then moderated as opposition melted away, the economy boomed, and hundreds of millions of Chinese --- say, half the population --- overcame poverty and began to enjoy the trappings of prosperity.

Since then, especially from the mid-1990s on, the CP and governmental authorities have ruled by less hard-nosed violent means. Political opponents, several thousands --- but not millions or tens of millions as in Maoist times --- have been jailed. The Internet and the media remain heavily censored. Grass-roots movements that are nation-wide and hence threatening to CP controls --- even when they're not explicitly political, like the Falun Gong religious sect --- are tightly monitored and their leaders arrested, often in show trials. In urban areas, limited strikes and demonstrations are tolerated as long as they avoid any political challenges or look like spreading from one city to another. Similarly, in the countryside, isolated attacks on tax collectors by irate farmers are generally handled with limited reprisals. And, of course, a secret police and Communist presence in schools, universities, every government bureau and agency, the media, local government, factories, collective-owned enterprises, even --- it's to be supposed --- within the middle ranks of private firms, combines to reinforce the limits on dissent and ensures that overall conformity to party and government authority is maintained.

Not that this means the Chinese people are happy with the existing system of CP rule, far from it.


A Challenge to Legitimacy Remains

To explain the last point, note that the CP itself admitted in an extraordinary party document made public in June 2001 that the vast masses of the Chinese people regarded the existing political system as dysfunction and saw the CP itself, from top to bottom, as little more than a self-serving engine of aggrandizement, advancement, and enrichment for its 60 million members. Why did the party let the document be aired publicly? Most likely, it reflected the ongoing struggle within the top leadership ranks to determine who would succeed Jiang Zemin, its head who had replaced Deng Xiaoping after his death in 1997. (The third buggy article on China's economic future, published on September 25th, 2003, details this breakdown of legitimacy, so there's no point in elaborating on it here.)

Whatever the reasons for the CP's decision to publish the document, one thing's clear: its findings about the degree of alienation rife in the country. Among other things, numerous, officially sponsored public opinion survey and studies of social problems --- alcoholism and drugs, crime, family conflicts and break-up, protests and riots and strikes --- underscore just how shaky, at bottom, the CP's image happens to be . . . to say nothing of the overall breakdown of any widespread sense of political legitimacy that alone can underpin, over prolonged periods of time, effective political rule. To the extent the CP commits itself to vigorous economic reform --- social strife and dislocations inevitably to follow --- this lack of political legitimacy remains a decisive problem hanging over China's destiny: economic and political.


Party Fears, Party Divisions, Reformers' Illusions

Essentially, to continue with this line of reasoning, the CP remains wary and fearful of a repeat of open, grass-roots political opposition of the late 1980s sort. What are the implications for reforms?

On all the evidence, the party remains badly divided on how vigorous to push a reform strategy. The reformers, more or less in control without being able to pursue a strategy of change as energetically and rapidly as they'd like, have to tread cautiously. No less than their opponents, they're aware that as the economy is overhauled, updated, modernized, and hence made to look more like a Pacific Asian economy in the era of authoritarian military or civilian rule that prevailed in the four decades from 1950 on, social conflict and strife will probably continue . . . maybe even intensify. But they argue, first of all, that there's no alternative to reform. In particular, unless continued economic changes and reform are pursued vigorously, economic stagnation is inevitable sooner or later . . . a prospect that would undermine the support that the regime and CP leadership still enjoys among the ranks of the Chinese people --- in Beijing and the coastal cities --- that have benefited from the economic changes of the last 25 years.

Nor is that all. Economic stagnation would end the CP's ambitions --- universally shared in the party and military, scarcely any exceptions --- of making China a great power again, a peer rival of the US or the EU if the latter should become one too. Its history, its civilization, its humiliation and shame during foreign invasion and occupation from 1850 right through the war with Japan between 1936 and 1945, all combine to create these ambitions, seen as China's historical right --- its due destiny. It's argument like these that have carried the day so far.


A Reformist Illusion?

For all that, an underlying illusion in the ranks of the reformers can be identified--- or so it seems (remember, we're still dealing with a notoriously secretive system of rule and have to speculate). Namely?

*Essentially, the illusion that economic reforms can proceed steadily, maybe even at an intensified pace --- the social strife contained, maybe diverted by some resources channeled into a social security safety net of sorts for laid-off workers and retirees --- without major political changes that, if implemented, would undermine CP rule. And not only undermine it, but --- in the wake --- destroy the CP's sources of power, influence, prestige, and vast wealth-making for its members and families. How, then, to maintain control and political monopoly while encouraging monumental economic and social changes?


The Soviet Example?

That, as it happens, is the central dilemma for the reformers. For the die-hard groups in the party, the dilemma can't be resolved in ways that maintain the CP's power-monopoly: hence their opposition to any vigorous, full-tilt reform program. Their resistance isn't without intellectual merit. Above all, the opponents note what happened to Gorbachev's Soviet Union after he initiated a reform program there in the late 1980s, his aim being to revitalize a bankrupt system. Gorbachev proved wrong. His gamble at reforming the Soviet Union failed.

Go back to the start of the Gorbachev era there, in the mid-1980s --- and the initiation of economic restructuring and political liberalization . . . Perestroika and Glasnost. What happened?

Thanks to these changes, crackling high-voltage changes were initiated in Soviet life --- economic and political --- that Gorbachev and the reform group around him in the CP couldn't control. Worse, within a three or four years, they found themselves increasingly isolated in the political center, the rest of the country quickly polarizing . . . even in the Soviet CP (about 20 million). That's the predictable fate of reformers, it should be noted, who seek to salvage a bankrupt system. Polarization is well-night inescapable. In particular, on one side were the Soviet CP diehards there, backed by similar resistance from within a vast governmental bureaucracy that would be severely pruned and its power undermined if Gorbachev's economic reforms succeeded. On the other were radical reformers led by Yeltsin who criticized the pace of reforms, then carved out an independent political base for themselves, above all by electrifying wide support: first, they won elections in key Russian cities, then the Russian presidency in an open election . . . the first democratic election in Russian history, even as the Soviet Communist system remained intact, since before WWI. Amid such polarization, the Soviet state and CP rule were eroding rapidly by 1990. In 1991 the rule of both collapsed, then disappeared. The non-Russian Republics, over 50% of the Soviet population, declared independence in the early summer of the year; desperate, the CP diehards sought a coup to salvage the state and their rule, only to fail; and by the fall the Soviet Union had disintegrated. Gorbachev was left to govern, nominally, a Commonwealth of Independent States that existed only as a fantasy.

The rest, as they say, is history.


What Will Happen to Reform?

Against this background, small wonder that the opponents of big reform in the Chinese CP resist and fear it.

But note. For the Chinese CP reformers, the Soviet analogy is misleading. Above all, as they've openly argued --- what goes on in top leadership circles, recall, remains tightly secretive --- there aren't any noticeable equivalents of the non-Russian peoples in China; 92% of the 1.3 billion population is Han Chinese, and hence there's no danger of the Chinese state breaking up along nationalist lines as happened in Gorbachev's Soviet Union in 1991. Then, too, the non-Chinese minorities live in far-flung backward areas along the 4000 mile Chinese frontier, where there's strategic value, but no major resources or agricultural land of great value to be found. For that matter, only in the Turkish Islamic areas like Xinzhang in the west does the regime face violent resistance, itself being contained by armed repression and a steady influx of Chinese to live there. Then, too, China's economy is far more successful and flexible than the tinkered-with top-heavy Soviet economy that Gorbachev tried to reform. By 1991, the Soviet economy's half-hearted reforms had made things worse, not better. Big shortages of vital goods stopped being available; strikes were commonplace; utilities weren't working in many cities. Nothing similar exists in China these days. It hasn't since the anarchy of the Proletarian Cultural Revolution ended in 1975.

Whether the reformers are right that, for all the dislocations that ambitious, far-flung reforms will entail, the CP system can remain intact is another matter. There are only so many alternatives for maintaining its power-monopoly and control, none of them sure-fire. We'll return to these in a second or two.

For the moment, consider the concluding paragraph in the recent World Bank publication on China's economy (September 3rd, 2003), "Promoting Growth with Equity". After detailing for 14 pages the list of needed economic reforms --- including a detailed set that would improve not just the economy's efficiency for long-term growth, but also its benefits for the masses of Chinese people (about half of them still not enjoying improved living standards, and many of these actually hurt since 1978) --- the report ends in this hard-hitting way on p. 15:

"Given various competing interests typically facing government and given the complexities of structural and institutional reforms, these priorities may, at times, be difficult to implement. Although beneficial for the majority of China' s population and for China' s national competitiveness in a globalized economy, each of the policy priorities listed above is likely to be resisted by some interest groups, and there will be many trade-offs that will have to be weighed. For example, reforms of the banking system will likely affect the flow of credit in a way that is good for the long-term but may have adverse employment consequences in the short-term. Reforms in inter-governmental finance, pensions, the composition of public services, and macro-economic risk mitigation are specific areas where the costs and benefits to different groups will vary significantly. Moreover, policy-induced changes will occur within the broader context of major structural changes that are underway already, partly to accommodate the forces of globalization. It will be a task of enormous political will and strategy to navigate among sources of resistance and to mitigate the sharpest edges without undermining the objective of China' s growth with equity."


The Alternatives for Ruling

In the epochal upheaval under way in China since 1979 --- massive economic change and dislocations, plus inevitable social strife (whether reform intensifies or not) --- the diverse means for a system of authoritarian rule to maintain full control are essentially four in number.

*The first is intensified repression and violence.

*Another is to hope that economic benefits will eventually spread and win support among the half of the population hurt by all the vast changes since 1978.

*Another is to co-opt the growing numbers of wealthy, important business leaders . . . along with other members of the new, more cosmopolitan middle classes before they turn to democratic opposition.

*And a final method of control --- used off and on --- consists of drumming up nationalist support, especially against outside powers that, it's claimed, are working against China's inevitable surge to the fore of world power and influence again.

Relations with the US

Consider the latter method briefly. It's full of implications for US-Chinese relations.

Since 1989, for fairly obvious reasons, the threatening outsider that nationalist agitation has been directed --- off and on --- is naturally the US, with Japan mentioned frequently as its running dog ally. But that's off and on. For the most part, the CP leadership in Beijing knows it needs good relations with the US in order to concentrate on its major priority right now --- continued economic growth, way into the future --- and to enjoy ongoing access to the huge and rich US market for its exports. About 30% of China's annual growth comes from its exports. Last year, the trade balance was about $75 billion in surplus . . . and only because the bilateral trade surplus with the US happened to be $105 billion or so, roughly the level at which it's advancing this year too. Right now, the access to the US market is all the more important because the overall trade balance for China the first few months of this year had turned negative.

On all these grounds, it seems, China's leadership wants above all good relations with the US . . . or so it seems. A deterioration in relations --- provoked, say, by renewed international conflicts and fears in North Asian security relations: due, say, to North Korean nuclear arms and Japanese rearmament and an opting for nuclear weapons; or maybe with an open flaring of rivalry with India, another economic giant with a nuclear force and a big technological base, which borders China along a contested frontier --- is about the last thing the CP wants . . . not least because it would hurt trade and investment and also because it would require reallocating more resources to the military that would hurt the ongoing levels of economic development.

Note finally, in passing, that China and the US do share a common enemy: Islamo-fascist terrorism, something that has helped forge the generally good relationship between Beijing and Washington that is now in place.