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Lessons for China, from Poland

Lessons for China, from Poland
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First Published: Wed, Jun 03 2009. 10 26 PM IST

Photograph: Catherine Henriette / AFP
Photograph: Catherine Henriette / AFP
Updated: Wed, Jun 03 2009. 10 26 PM IST
Champions of democracy from around the world remember 4 June 1989 as a day of infamy for outrages witnessed on and around Tiananmen Square. However, on the same day on another continent other notable, and less tragic, events unfolded. A comparison of these events provides an interesting perspective on the failures of the regime in Beijing. At the same time, there are guides for those who seek further economic as well as political reform in China.
Photograph: Catherine Henriette / AFP
On the very same day, an election in Poland allowed its citizens to register their distaste for an authoritarian regime. Instead of mourning their dead, the Polish people commemorated the beginning of their liberation. With the opportunity to express their choice at the ballot box, the Poles did not have to take to the streets or risk their lives to protest the oppression and corruption of their communist regime.
There have been claims in Asia and elsewhere that authoritarianism provides greater stability by limiting the voice of its citizens and avoiding open conflict. However, historical evidence suggests that democracy is a better means for peaceful conflict resolution. The Polish experience confirms that consensus can emerge from conflicts with authority without passing through chaos. While political reform may increase uncertainty and democracy has glaring imperfections, both provide citizens with a safety valve to vent their frustrations.
Of course, the stabilizing effects of democracy cut both ways. India’s democracy allows political dissent, but politicians are also under less pressure to make tough choices concerning economic reforms. Indeed, democracy provides perverse incentives for India’s political leaders to keep people poor so that voters who depend upon political patronage and largesse support them. Despite substantial political freedoms, too many Indians are too poor because there are so many remaining constraints on economic freedoms.
But China’s citizens cannot express their discontent through street protests, or changing or starting new political parties. As such, communist dictators face incentives to increase economic freedoms in order to maintain their monopoly on power and curb political reforms.
As such, much can be learnt from the Polish experience concerning the direction and pace of economic reform. Debates continue over the appropriate sequencing of economic transformation, i.e., whether change should be rapid or gradual. However, one point should be kept in mind: Given the inefficiencies and distortions from decades of central planning, most of the industrial sector of a communist economy cannot survive in the face of market logic. Attempts to resist the inevitable collapse of the industrial dinosaurs will transform an economic inconvenience into a potential catastrophe.
After wresting political power from communist functionaries, Poland quickly underwent a period to eliminate some of the worst effects of central planning. The new democratic leaders understood that political and economic freedom would offer mutual support to one another. Their inability to grasp this interdependenc means that Chinese leaders’ attempts to hold on to power doom their citizens to slower economic growth and greater future hardships.
Instead, the Poles chose rapid transformation of their economy by introducing a solid institutional framework that supported private property and favoured deregulation. This meant that if elections brought new leadership or different ruling parties, the momentum for change would not be lost.
Poland quickly shed industrial over-capacity and resolved a potential banking crisis caused by unrecoverable loans made by state-run banks to state-owned enterprises. At the same time, the economy was opened to free trade. By unleashing the entrepreneurial skills of the Poles, many of the jobs lost to post-communist downsizing were replaced in the mushrooming private sector. After sharp declines in the gross domestic product in the early 1990s, the average growth rate of the Polish economy from 1992 to 1998 was 5.2%.
True, this was slower than the growth experienced by some of the Asian tigers. But then Poland is decidedly more stable and its economy much less affected by the recent events than most other emerging market economies.
China’s leadership faces the sharp horns of a nasty dilemma. On the one hand, closing the largely inefficient state-owned enterprises could lead to massive social upheaval. On the other hand, continuing to provide subsidies for the bankrupt enterprises will lead to a collapse of the banking system that could lead to massive social upheaval.
With export growth slowing and declining foreign investments, the best choice to avoid conflict is to allow more of China’s citizens to embrace the free market. Unfortunately, such changes require additional political reforms that would weaken the regime’s hold on power.
Apparently, the dread of relinquishing power is more important to Beijing than granting liberties to, or reducing the suffering of its people. Indeed, increasing freedom even more than democracy is at the heart of the matter for China.
The current leadership could join the pantheon of Chinese heroes by undertaking resolute actions and allowing their citizens to realize their just destiny. Or they risk being remembered for villainy, corruption and selfish conceit.
Christopher Lingle is a research scholar at the Centre for Civil Society, New Delhi, and visiting professor of economics at Universidad Francisco Marroquin, Guatemala. Comment at theirview@livemint.com
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First Published: Wed, Jun 03 2009. 10 26 PM IST
More Topics: Tiananmen Square | Democracy | Poland | China | Views |