What Does China Think?. Mark Leonard
But Wang Hui has not lost his anger about China’s condition. He has managed to stand aloof from the commercial mainstream. Because he has not joined the party, he has no official positions (unlike Zhang Weiying, he is not the director of a university institute or department). For a decade he held an influential post as editor of Dushu – the leading intellectual journal in China – but it was taken away from him with very little notice in advance of the 17th Party Congress in 2007. Although he is a professor at Tsinghua University, Wang Hui has an uncomfortable relationship with the authorities: writing reports exposing local corruption and helping workers organize themselves against illegal privatizations. He often uses the media to put the spotlight on government failings.
Wang Hui is one of the leaders of the ‘New Left’, a loose grouping of intellectuals that is increasingly capturing the public mood, and setting the tone for political debate. They are ‘new’ because unlike the ‘old left’ they support market reforms. They are Left, because unlike the ‘New Right’ they worry about inequality. Many sought exile in the USA in the 1990s, but now they are back to join the debate about China’s future. In an interview, Wang Hui set out their stall: ‘China is caught between the two extremes of misguided socialism and crony capitalism, and suffering from the worst elements of both systems … I am generally in favor of orienting the country toward market reforms, but China’s development must be more equal, more balanced. We must not give total priority to GDP growth to the exclusion of worker’s rights and the environment.’
Their philosophy is a product of China’s relative affluence. Now that the market is driving economic growth, they ask what should be done with the wealth. Should it continue accumulating in the hands of a privileged elite or can China foster a model of development that benefits all its citizens? Thirty years into China’s reform process they are challenging the philosophy of growth as the ultimate goal: instead of hurtling towards nineteenth-century laissez-faire capitalism, they want to develop a Chinese variant of social democracy. And while, like magpies, they adapt ideas from all over the world to Chinese conditions, they feel that China’s development should be built on Beijing’s terms. As Wang Hui says:
We cannot count on a state on the German or Nordic model. We have such a large country that the state apparatus would have to be vast to provide that kind of welfare. That is why we need institutional innovation. Wang Shaoguang [a political economist] is talking about low-price health-care. Cui Zhiyuan [a political theorist] is talking about socialized capital and reforming property rights to give workers a say over the companies where they work. Hu Angang [an economist] is talking about Green development.
Their goal is to challenge the imported ideas of ‘Pearl River Capitalism’ and replace them with a home-grown philosophy: ‘We have to find an alternate way. This is the great mission of our generation.’ And as the list of problems arising from the market grows almost as long as the many achievements, the senior leadership is taking note of their ideas. They are beginning to feel that their time has come.
Yellow River Capitalism
Henan literally means ‘South of the River’, because of its location on the banks of the Yellow River. This is the heart of inland China, the spiritual opposite of Shenzhen. Traditionally regarded as the birthplace of Chinese civilization, it is also home to a village that became the poster boy of the ‘New Left’ in the 1990s: Nanjie. In a deliberate experiment, Nanjie’s leaders created a synthesis of the market and collectivism, as they abandoned their agricultural heritage to embrace industrialization (the authorities built twenty-six factories making everything from instant noodles to plastic wrappers). Village life in Nanjie is resonant of nineteenth-century experiments in ethical capitalism such as Robert Owen’s New Lanark in Britain. The workers are paid above average wages and everyone is given free housing, free healthcare, rations of meat and eggs, and a daily bottle of beer. Primary and even college education is subsidized. The authorities look after the moral welfare of their citizens, not with religious sermons as in New Lanark, but through compulsory study-sessions of Mao’s philosophy and regular ‘criticism and self-criticism’ of each other’s behaviour. In 1996, the village was immortalized in a glowing book by the ‘New Left’ political theorist Cui Zhiyuan.
For him, the village was a living embodiment of an ‘alternative way’. It showed that the market could be used to finance social welfare; that success could be achieved in the rural communities of inland provinces rather than only on the coast. And it showed how government intervention – to provide health and education – could improve economic dynamism. Today some of the sheen has come off Nanjie, which is increasingly seen as an artefact rather than a model. But even in 1996, Cui Zhiyuan did not think that Nanjie could be universalized. Instead, he argued that it showed how China could survive in market conditions without slashing the wages, terms and social protection of its workers. It was an emblem of an alternative form of capitalism to that practised in the Pearl River Delta, one which I will call ‘Yellow River Capitalism’.
Where Wang Hui speaks slowly and deliberately, Cui Zhiyuan can be exhausting to follow. When he talks his sparkling eyes almost pop out of his head. His delivery is breathless with the enthusiasm of a mad scientist intoxicated by the pursuit of knowledge. As he draws on learned quotations to back up his points, one gets the sense that he is holding the ring for a perpetual argument that is going on in his head between his intellectual mentors: Niccolò Machiavelli, Jean-Jacques Rousseau, John Stuart Mill and James Meade. Cui Zhiyuan is one of the most optimistic members of the ‘New Left’, seeing experimentation as a key to solving China’s problems: ‘The present experience of Russia – and the experiences of developing countries around the world – demonstrate that these countries cannot achieve the wealth, strength and freedom of rich industrial democracies by simply imitating the economic and political institutions of these democracies. They must, to succeed, invent different institutions.’ For the ‘New Left’, the key to the Yellow River Capitalism is a philosophy of perpetual innovation – developing new kinds of companies and social institutions that marry competition and co-operation.
The weakest state in the world
‘Big state bad, small state good’ was the mantra of the economists in the 1980s and 1990s. But the ‘New Left’ team of Wang Shaoguang and Hu Angang has done much to turn that debate on its head. This odd couple – who had a chance encounter at Yale University – emerged as a sort of Lennon and McCartney for ‘New Left’ economics in China. In an influential report in the early 1990s, they argued that the Chinese state had the wrong kind of power: despotic rather than governing. Its ability to restrict the personal freedom of its citizens was second to none. However, when it came to running the country in an effective way, China’s state was one of the weakest in the world.
They showed that central government’s revenue had steadily fallen as a percentage of GDP from 31.2 per cent in 1978 to 14.7 per cent in 1992. As the central state’s budget fell, the income of local governments grew and grew, creating a series of ‘red barons’ in the provinces who used dubious ad hoc charges to line their personal and provincial coffers and increase their power. By the end of the 1980s, the ‘red barons’ had become as powerful as the central government.
For the ‘New Left’, almost all of the problems hampering China’s reforms – corruption, overheating of the economy, bad investment, non-performing loans, low levels of domestic consumption and growing inequality – had come about because the central government was too weak, rather than too strong.
Hu Angang estimates that the combined costs of illegal bribes, tax evasion, arbitrary local charges and straightforward theft add up to a staggering 15 per cent of China’s GDP every year. He shows how, without democratic accountability from below or fear of sanctions from above, provincial leaders put their own interests above those of the people, spending most of their extra-budgetary revenue on themselves and their families: higher salaries, cars, air-conditioning, refrigerators and shiny new office buildings. The solution, according to him, was to centralize the collection of taxes in order to prevent the proliferation of arbitrary charges and to create central institutions to tackle corruption.
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