China's way

With a per capita GDP of almost $6,000, China is ranked the 80th wealthiest nation in the world. This indicates that despite its position as the second-largest country in terms of size, in terms of well-being, China is in fact still quite a poor country. Some unreliable statistics state that almost 90 percent of the national GDP is controlled by just 10 percent of the population. In a country where the communist ideology advocated “absolute equality among people,” which dominated for at least 50 years starting in the early 1950s, how could such a one-sided development in terms of income inequality emerge? Under such a regime, which has been increasingly characterized by crony capitalism, how can almost 1.5 billion people be kept together in peace or harmony? What would be the future of such a regime?

In my view, due to China's huge population, gigantic emerging market potential and quite a large land mass, these questions are critical not only for China but also for the rest of the world.

In a workshop organized by the İstanbul-based Dialogue Eurasia Platform (DA), an NGO operating across the Eurasian region with participants from several countries and Marmara University, we had the chance to come together with many social scientists from Chinese universities and research centers to exchange ideas regarding the future course of China as well as its relationship with Turkey.

Professor Hu Wei, dean of the School of International and Public Affairs at Shanghai Jiao Tong University, in his presentation “China's Political Development: Retrospect and Prospect,” discussed some of the questions asked above.

Mao's China (1949-1976) was a “Leninist party-state” with an overwhelming ideology and charismatic leadership. Moreover, this system survived with a dominant party (controlling the government, army, economy and society along with a planned economy), strict organization and discipline (iron discipline) and also a dictatorship of the proletariat.

As is known, China's reform and the opening-up of its economy began when Deng Xiaoping came to power in 1978 after defeating the Maoist faction within the party. With his reforms and opening, China has recorded almost 9.9 percent real (official) economic growth per annum for the last 30 years. Growth at such a pace had never been seen before in modern history. With its almost 10 years of double-digit growth in the 1960s, Japan overtook Germany by the early 1970s, becoming the second largest economy in the world after the US, and remained there until it was surpassed by China in 2010.

What were the characteristics of Deng's reforms that pushed China in such a way? There were three main principles behind the Chinese opening and reforms under the Deng regime. It represented a change from class struggle to economic construction, from isolationism to an opening to the outside world, from a planned economy to a market economy. In Professor Hu's terms, this period is marked by “marketization without democratization.” Relatively speaking, although there were still powerful leaders, this period saw no charismatic leadership. Again, there was still a dominant party, but it was not as strong as before due to market-oriented reforms. Also, notwithstanding massive propaganda, the foundations of the powerful ideology started to be undermined. Despite a sense of intra-party hierarchy being maintained, it was no longer an iron discipline. In this period, there was no dictatorship of the proletariat, but “democratic dictatorship” and “democratic centralism,” so to speak.

This was unlike the Russian transition experience where Mikhail Gorbachev's reforms came in a shocking manner and the entire society was pushed into a chaotic environment. As expected, democracy and fair political and economic cooperation do not emerge from chaos. On the contrary, it resulted in the continuation of the previous power holder within the body of a different structure. That is what happened in Russia in the post-Gorbachev era when Boris Yeltsin came to power and the regime shifted to dramatic crony capitalism among the previous members of the Politburo. It could be argued that Vladimir Putin's contemporary Russia has changed the country's transition path to a market economy and democratic governance in a radically different manner, which resembles China's way since the early 1980s.

The figures given below compare Chinese and Russian regime change. In the case of Russia, a path of change prevailed without a plan implemented for its success. The regime did not change, but after many years of wasting time by what I would call here irresponsible negligence, it simply collapsed. It was thought and expected at the beginning that the regime could move towards a market economy and a participatory multi-party democracy. When we look back, we can see that today it is neither a market economy nor a democracy.

Unlike such shock therapy, using the slogan “Cross the river by feeling the stones,” Deng adopted a strategy with gradual change that gave priority to economic development over political development, marketization over democratization, institutionalization over participation and efficacy over legitimacy.

This is a legitimate approach in the sense that in order to establish a functioning economic system, we need not only pursue a policy framework conducive to the market but also establish market-conforming institutions as the market does not function in a vacuum. The last and most critical item is to have a market-conforming culture that cannot be imported or emulated but could be cultivated through at least five generations. In order to substitute and strengthen that culture, an acceptable level of economic development is required, which means that per capita GDP reaches at least the $5,000-7,000 threshold level across the nation with an acceptable distribution of income.

As viewed from this perspective, my Chinese colleagues believe that the path of transition will follow the line that is given in the second figure below. It would start at totalitarianism, pass through authoritarianism and, after a while, hopefully, move on towards more democracy and a better market.