One of the strongest arguments for the continued control of the Chinese government by the Chinese Communist Party is that the Party has created and well-managed the Chinese economy since the time Deng Xiaoping decided around 1980 that the Chinese economy should open up and a degree of privatization and capitalism should exist in China. And, it is true that the growth of the Chinese economy since that period has been unprecedented, lifting hundreds of millions of Chinese out of poverty and placing China and its economy as a leader on the world stage. And, the Chinese Communist Party has consistently presented such economic success as being a creation of the Party and, by extension, could only have been accomplished by the Party. As such, the argument is, there is no need for political opening of any sort because the country and its economy are on some sort of scientific and inevitable march to higher and higher future success through "Socialism with Chinese Characteristics".
Most Chinese less than 40 years old have never known anything but economic progress and the great decision making of the Party I recall meeting several years ago with a very successful Chinese businessman who was very supportive of the Party and described how the government policy-making system was so perfect that it really could not make a mistake. Until possibly recently, most Chinese truly believe that the China economic success story is, in fact, the result of the current political system, in particular the manner in which the Party controls and runs the country and its economy.
However, it is worth considering a very different explanation for how the Chinese economy got to where it is today and the related risks from the generally accepted story being wrong. I suggest that we need to look at the Chinese economy not over a period of 40-50 years, but more like 500 years. China has always been a very large country. In the year 1500, China was the leading economy of the world. Given its size, resources and culture, that was not unusual. In fact, China had long been one largest and most-successful economies. Then the industrial revolution happened in the England and Europe and China missed it. For many reasons, China turned inward and made some very poor decisions that severely weakened the country and its economy. That continued well into the late 1900s when foreign powers had much control over parts of the Chinese economy and even Chinese territory (e.g., Hong Kong and Shanghai). Then, there was a short period of a republic and some self-determination to be followed by additional self-imposed weakness by way of poor decisions and then in 1947 the Communists took over and further accelerated the bad decision making by insisting that Marxism was a panacea to success. Horrific decisions were made such as the Cultural Revolution and the Great Leap Forward that effectively destroyed the Chinese economy to a degree that it could hardly get much worse. Only after sinking as low as they could possibly be did the fantasy thinking of the Party capitulate and provide the room for someone like Deng Xiaoping to achieve power and commence with reforms.
But, what really happened and who was responsible for it? One view is that what the Chinese Communist Part largely did was to stop making bad decisions. That is, the allowed Chinese people to start making some of their own decisions and the state-owned enterprises started to conduct business on rational and international terms. And, the Party started to operate in a manner that supported, or at least did not so strongly opposed, economic growth. However, that is some thing quiet different than causing the growth of the economy. It is more like stepping off a giant balloon and simply allowing it to re-inflate to its normal size. That Party has squeezed all the air out of the balloon for so long that when allowed to re-inflate it was naturally going to grow fast and for a long time. During this 30-40 year period, the Party used the economic growth to maintain control and convinced the Chinese that the Party was the instrument of the economic growth. Even non-Chinese were impressed, wondering if "State Capitalism" was a potential way forward for many economies. Chavez in Venezuela was a prime example.
Then, China's economy started to slow in 2008. And, importantly, the Party stated to implement decisions to prop up the economy, such as flooding the economy with cash that the country has accumulated over the period of its growth, That stabilized the economy enough that some people were again impressed, but in reality the issues were just being kicked down the road. Then, more recently, the stock markets collapsed and the Party intervened again and implemented horrible policies that have left many in the financial and economic community wondering whether the Party really knows what it is doing at all. In my "balloon" theory the last 7-8 years shows that the Party really doesn't know what it is doing and, more importantly, was never the cause of the growth of the Chinese economy. Instead, it was the result of the re-inflation of the balloon that naturally revived the Chinese economy to its more natural level. And, once the Chinese people start to realize this and realize that the Party is not only not really in charge of the economy but also was never really responsible for the growth of the economy, the people will then start to ask what the Party and the entire system is about. Then, social and political unrest will be natural and the entire Chinese entity and political system are at risk.
Most Chinese less than 40 years old have never known anything but economic progress and the great decision making of the Party I recall meeting several years ago with a very successful Chinese businessman who was very supportive of the Party and described how the government policy-making system was so perfect that it really could not make a mistake. Until possibly recently, most Chinese truly believe that the China economic success story is, in fact, the result of the current political system, in particular the manner in which the Party controls and runs the country and its economy.
However, it is worth considering a very different explanation for how the Chinese economy got to where it is today and the related risks from the generally accepted story being wrong. I suggest that we need to look at the Chinese economy not over a period of 40-50 years, but more like 500 years. China has always been a very large country. In the year 1500, China was the leading economy of the world. Given its size, resources and culture, that was not unusual. In fact, China had long been one largest and most-successful economies. Then the industrial revolution happened in the England and Europe and China missed it. For many reasons, China turned inward and made some very poor decisions that severely weakened the country and its economy. That continued well into the late 1900s when foreign powers had much control over parts of the Chinese economy and even Chinese territory (e.g., Hong Kong and Shanghai). Then, there was a short period of a republic and some self-determination to be followed by additional self-imposed weakness by way of poor decisions and then in 1947 the Communists took over and further accelerated the bad decision making by insisting that Marxism was a panacea to success. Horrific decisions were made such as the Cultural Revolution and the Great Leap Forward that effectively destroyed the Chinese economy to a degree that it could hardly get much worse. Only after sinking as low as they could possibly be did the fantasy thinking of the Party capitulate and provide the room for someone like Deng Xiaoping to achieve power and commence with reforms.
But, what really happened and who was responsible for it? One view is that what the Chinese Communist Part largely did was to stop making bad decisions. That is, the allowed Chinese people to start making some of their own decisions and the state-owned enterprises started to conduct business on rational and international terms. And, the Party started to operate in a manner that supported, or at least did not so strongly opposed, economic growth. However, that is some thing quiet different than causing the growth of the economy. It is more like stepping off a giant balloon and simply allowing it to re-inflate to its normal size. That Party has squeezed all the air out of the balloon for so long that when allowed to re-inflate it was naturally going to grow fast and for a long time. During this 30-40 year period, the Party used the economic growth to maintain control and convinced the Chinese that the Party was the instrument of the economic growth. Even non-Chinese were impressed, wondering if "State Capitalism" was a potential way forward for many economies. Chavez in Venezuela was a prime example.
Then, China's economy started to slow in 2008. And, importantly, the Party stated to implement decisions to prop up the economy, such as flooding the economy with cash that the country has accumulated over the period of its growth, That stabilized the economy enough that some people were again impressed, but in reality the issues were just being kicked down the road. Then, more recently, the stock markets collapsed and the Party intervened again and implemented horrible policies that have left many in the financial and economic community wondering whether the Party really knows what it is doing at all. In my "balloon" theory the last 7-8 years shows that the Party really doesn't know what it is doing and, more importantly, was never the cause of the growth of the Chinese economy. Instead, it was the result of the re-inflation of the balloon that naturally revived the Chinese economy to its more natural level. And, once the Chinese people start to realize this and realize that the Party is not only not really in charge of the economy but also was never really responsible for the growth of the economy, the people will then start to ask what the Party and the entire system is about. Then, social and political unrest will be natural and the entire Chinese entity and political system are at risk.
