If China does not abandon one-party rule, will it stumble under the stresses of state capitalism? Or will it show that there can be a successful authoritarian road to modernity?by Will Hutton / January 14, 2007 / Leave a comment
Dear Meghnad 29th November 2006
It is a commonplace to observe that the rise of China is transforming the world. Extrapolate from current growth rates and China will be the world’s largest economy by the middle of this century, if not before. If it remains communist, the impact on the world system will be enormous and very damaging. Britain and the US are, for all their faults, democracies that accept the rule of law. This is not true of China. If an unreformed China takes its place at the top table, the global order will be kinder to despotism; the fragile emergence of an international system of governance based on the rule of law will be set back and the relations between states will depend even more nakedly on their relative power.
All that, however, is predicated on two very big “ifs”—if the current Chinese growth rate continues, and if the country remains communist. I think there are substantial doubts about each proposition. What is certain is that both cannot hold. China is reaching the limits of the sustainability of its current model, and to extrapolate from the past into the future as if nothing needs to change is a first-order mistake.
Our concern in the west should be to help China face its enormous challenges without damaging us in the process. If Chinese communism can transform itself, then China could, like Japan before it, smoothly integrate into the world power system. If not, severe convulsions lie ahead.
China’s economic growth is based on the state channelling vast under-priced savings into huge investment projects driven by cheap labour. Some 200m of China’s 760m workforce are migrant peasants employed in factories, construction sites and offices in its new towns and cities—the biggest migration in history. The Communist party has permitted free movement of prices, encourages profit-seeking and has sharply lowered tariffs on imports and obstacles to inward investment. Its success in creating annual growth of some 9.5 per cent for a generation, lifting 400m people out of poverty, is widely acknowledged. But the party keeps firm control of ownership, wages and company strategies—and of the state. In other words, China occupies an uneasy halfway house between socialism and capitalism; its private sector, although growing, is still puny. It is a system of Leninist corporatism—and it is this that is breaking down.