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In China, the party is on

In China, the party is on
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First Published: Mon, Aug 09 2010. 09 15 PM IST
Updated: Mon, Aug 09 2010. 09 15 PM IST
I picked up The Party, a book on the secret world of China’s Communist rulers. The book’s jacket comes with glowing tributes to the contents. There is no doubt it is an important addition to the literature on the political economy of modern China. However, for those who have regularly read Richard McGregor’s insightful dispatches when he was the Financial Times (FT) China bureau chief, they would not gather too many new insights from the book.
For instance, on Page 180 of the book, McGregor writes, “In truth, the Chinese economy is less like a single super-tanker than a vast armada of small, headstrong commercial ships, all still determined to proceed full-steam ahead, whatever the cost to the fleet as a whole.” The first time he wrote this in one of his FT dispatches two or three years ago, it was a revelation. It conveyed the impression of a disparate, incoherent state. But McGregor seems divided on where his analysis leads.
On Page 266, he approvingly cites Prof. David Shambaugh who had argued in his book Atrophy and Adaptation that the Communist party had constantly adapted to stave off atrophy, somewhat like athletes who keep changing their training regimes to keep pace with the demands of their sport. In fact, he turns around the argument of China’s low consumption share of the gross domestic product from being a problem to a source of potential growth for the future.
The party pulled off a massive restructuring of the public sector units in the 1990s that involved massive worker layoff and dislocation. Yet, at the end of it, China’s public sector stood strengthened. It has advanced national interests overseas rather than being a drag on the nation’s resources, as is the case in India. The party took a very calculated gamble on this since it happened in the immediate aftermath of the 1989 Tiananmen riots and its violent suppression. Then, there was the problem of inflation in the early 1990s and the collapse of federal tax revenues. That China had tackled all of these and emerged stronger at the turn of the millennium is an empirical fact.
Two smaller but no less significant examples should be mentioned here. The party quietly pushed reunification with Taiwan into an indeterminate future while, at the same time, locking Taiwan into a tight economic and commercial embrace with itself. Second, it changed tunes on Japan when the latter elected a new prime minister and became conciliatory towards the nation.
The truth—a hard one for many Westerners and Indians to accept—is that economic success has reinforced “the pride that many Chinese feel about the revival of a great civilization humiliated by the West”. The party has placed itself at the centre of economic revival and resurgence of nationalism. By most known accounts, the public is not keen to rock the boat.
From his typically Western perspective, McGregor opines that the party has not drawn the obvious lesson that open debate and competition in the public policy sector have produced the best outcomes. The implication is that a similar approach should be applied to the political arena as well. That is where Westerners fail to see the scope for alternative paradigms. The political system in China might evolve at its own pace and finally take on a different shape, more similar to the rest of East Asia than to the model that prevails in the West. Based on what has been delivered in terms of economic welfare over the last three to five decades in East Asia, the notion that the invisible hand of the market and the visible hand of the state complement and reinforce each other appears reasonable. As the author notes, over the last three decades, the party has consciously retreated from the private lives of Chinese citizens.
McGregor, for all the contradictions and corruption he sees in the society and in the party, throws in the towel in the end and concludes that the wish of the Chinese to “bestride the world as a colossus on their own implacable terms, would come true”.
In the final analysis, the very moment in which we throw up our hands could also very well market the apogee of the party’s famed adaptability and survival capabilities. After the financial crisis in the West, there is more than a hint of hubris in the manner in which China conducts itself on the global stage. Its inability to evoke love and respect rather than admiration mixed with fear must rankle in the minds of the party leaders. That is what has made it difficult for many Western corporate targets to eventually accept Chinese corporate ownership. Then, scandals such as suppression of SARS or Sanlu’s baby-food contamination could quickly spiral out of control, breaking the Faustian bargain between the public and the party.
Western policymakers were eventual victims to their own sense of exaggerated competence in taming business cycles. While China has taken care not to emulate the West in many aspects, it is dangerously close to the West in its display of hubris.
V. Anantha Nageswaran is chief investment officer for an international wealth manager. These are his personal views. Your comments are welcome at baretalk@livemint.com
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First Published: Mon, Aug 09 2010. 09 15 PM IST