The Telegraph
Since 1st March, 1999
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- China's success is also the source of its dilemmas

While attending a seminar in Beijing, yet another one of those ubiquitous India-China events that are likely to be the flavour of the century, I could not help but admire the depth and frankness of China's engagement with Indian democracy. Discussions amongst Chinese scholars of Indian democracy are well informed and frank, at least more so than Indian discussions of China. This interest arises from a variety of sources: India's growth performance is convincing many Chinese intellectuals that democracy is not an obstacle to growth. Although the degree of openness and liberalism of China cannot be exaggerated and nor can its trajectory be taken for granted, intellectual discussions in China seem remarkably candid.

Under the surface there is discontent brewing. The Chinese regime wants to be ahead of the curve in dealing with it. In some respects, it is openly acknowledging this discontent as a way of defusing it: there are official websites in China that register literally hundreds of thousands of protests every year. Gathering this information does not just help the regime be more responsive when it can, it can also potentially contribute to the stability of the regime. China's economic transformation has been truly remarkable, and the manifest prosperity and instrumentalism of economic life in its cities make you wonder whether accounts of discontent, and the potential for public action, are exaggerated.

But as with any economy that grows fast, there are two potential sources of discontent. One is those who are left behind: largely rural and poor, for whom no policy instrument quite seems to work. The other source surprisingly is those who have done well during the last few years. Even prosperous young people in cities like Beijing seem to be susceptible to an undertow of anxiety; like many middle classes they wonder how secure their future is going to be. With an ageing population and a one-child policy that imposes burdens on the youth on the one hand, weak social security systems and soaring real estate prices on the other, even the middle class can get nervous.

Both rural discontent and middle-class nervousness are trends India will have to reckon with as its growth gathers momentum. China has the additional challenge, since it is open to the question: does the emperor have any clothes' What is the legitimizing ideology of the state going to be' So far the Chinese state is assuming that the momentum of the economy, the weakness and fragmented character of the opposition, will pull it through. But no state has long survived purely on its ability to give instrumental benefits: its normative basis sometimes needs to be understood. Some Chinese are wondering when this deficit will come home to roost.

The Chinese regime takes these anxieties seriously. It is manifested in many ways. The most striking thing about discussions in China is their genuine curiosity about what is happening elsewhere in the world, India, Russia, Indonesia. Oddly enough, they were even interested in what the Bharatiya Janata Party's loss at the last general election means for the relationship between growth and political stability. In economics, the Chinese have been genuinely pragmatic and open to all kinds of borrowing and adaptation. One of Deng Xiaoping's most quoted aphorisms is something to the effect that China will have to cross the river by feeling the stones. This suggests an image that is both cautious, and firmly grounded, that takes each step as it comes.This is ironic for a man who, perhaps, more than any other, launched an extraordinary revolution in world history. But although Deng's Great Leap Forward was dramatic, the last 20 years of Chinese evolution have been improvisational and circumspect: no shock therapy, but a myriad of experiments that have produced an economy that does not correspond to any text-book model, but is a patchwork of all kinds of entities and interventions.

There always has been this puzzle about how a communist regime could facilitate the deepest and most intense penetration of capitalism in the shortest span of time. One of the speakers I had the privilege of hearing was Qin Hui, an iconoclastic renaissance intellectual, very much the object of suspicion for the regime, but also important enough to be taken seriously. His writings, at least those available in English, range seamlessly from the intricacies of China's agrarian problem to the fine distinctions between Nozick, Rawls and Hayek; from reform in Eastern Europe to India-China comparisons.

One startling point he makes in his writings is that the essence of socialism may be described not as equality, but as the use of state power to reduce transaction costs and obstacles that stand in the way of development. Whether the state does this to collectivize or to promote private property, nationalize or create markets, the important thing is that it is the state that is doing it. On this view capitalism and socialism do not define the essence of a polity; rather both are merely instruments that a state may use on any given occasion. Deng Xiaoping once said in a rather revealing remark about China's reform process that 'the greatest superiority of the existing system is: when going in for something, once minds are made up and a resolution is passed, it can be carried out without hindrance'. The essence of socialism is not the nature of property rights; it is the ability of the state to carry its will through. Qin Hui adds rather pithily, that it is precisely this logic, 'If a father says his son must be poor, poor he must be; and when a monarch says his subjects should get rich, rich they must get,' that allowed China to be successful at accumulation. Paradoxically, 'get rich' became the call of the socialist state. On this view, the difference between India and China is not the difference between capitalism and socialism. It is rather that China remains a command economy that can command the creation of capitalism; India's state remains less commanding.

China's reform did better than Eastern Europe and Russia because the pre-reform state in China was a dismal failure. Again, in Hui's pithy formulation, in Russia you got bondage but social security; in China you got only bondage. Therefore any change, even to a market economy, was an improvement; whereas in Russia, it was not necessarily perceived as such. In fact, the Eighties, as the MIT scholar, Yasheng Huang, has argued, was a time of radical political and economic openness, precisely because the system had failed so dismally. In fact, it is during the Nineties that there was a little more political and economic closure in China. China's very success produced a paradoxical result. There is no doubt that the state's success in lifting millions out of poverty brought it a great deal of legitimacy.

But this success itself generates new forms of discontent. Success also makes it more difficult to further reform the existing system, because more interests are threatened. A less successful state would have been easier to change. So the system needs to adapt at the same moment that it is deeply entrenched and legitimate. This is the paradox that discussions in China seem deeply aware of: there is candid acknowledgment that the system will need to evolve further. Current discontent might provide an argument for change, but change can also lead to de legitimation.

The striking topic of discussion was: will it be easier for the Chinese political system to adapt while the going is good' Or should it wait till discontent reaches a critical level, hoping that it never actually does' This is the delicate judgment call that intellectuals and leaders in China seem acutely aware of.

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