Democracy in China Jude Wanniski September 21, 2000

To: Sen. Jesse Helms [R-NC]
From: Jude Wanniski
Re: There is democracy in China

As I saw you preparing for the big Senate debate over trade with China this week, I noted you put forward an amendment to the bill that would require more “democracy” in China. Yes, China is not the constitutional democracy we are, but I do believe there is much more democracy in China today than you realize. If “democracy” means to you a national presidential election between two competing partisans, of course there is no democracy in China. If, though, democracy means there is a system by which the interests of the masses of people are taken into account by the political leaders, and the political leaders who do this have come from the common clay, then there is more democracy in China than there is, say, in India, where there are cultural barriers that prevent leaders from arising out of the masses. Once you see this, as I began to see it on my first visit to China in 1983, you may be able to get the rest of China into focus. I send along a memo on this topic I wrote to Tom Friedman of the NYTimes on March 23, 1998. Also appended is an op-ed I wrote for the NYTimes upon my return from China in September 1983. I hope this helps in your deliberations.

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March 23, 1998
Memo To: Thomas L. Friedman, NYT "Foreign Affairs" columnist
From: Jude Wanniski
Re: Democracy in China

Your March 21 column from Beijing, "The Cultural Revolution," argues that the people of China are happy with the authoritarian government in Beijing because the economy is expanding, but they will be unhappy with the central government and demand democracy as soon as the economy goes into a recession. Your previous columns from China indicate there is already a serious degree of democracy at the local level, and that there are increasing signs that it is moving up the political pyramid. You are discovering what I found on a two-week trip to China in September 1983, almost 15 years ago. My letter to clients of Polyconomics, dated October 4, 1983, argued that China was well on the road to capitalism and that it would have to add democratic features in its next stage of development. My report was the first of its kind, totally at odds with the reports of our national press corps. Max Frankel, who was editor of the Times editorial page, saw my report and asked me to write a short op-ed, which he ran in the October 25th issue. I append it here so you will appreciate how far in advance I was, not only relative to the American press but to the Central Intelligence Agency, which still does not know what is going on, despite the fact that we annually spend almost $30 billion on its budget.

If you don’t mind my saying so, you do not have it quite right yourself. A recession will only slow the advance of democracy in China. Anytime a national population is under the stress of economic contraction, there is more, not less, demand for government intervention. That’s how we got New Deal socialism out of the Great Depression. What is happening in China is a continuation of what I found in 1983 and on the several trips I’ve made to China since then. The political establishment in China is building its system from the ground up, the way a man will build a house. Each step of the way takes time, because there are several thousand experiments in democracy underway all across the nation. Those that succeed become role models for those less successful. "Rome was not built in a day," an idea ignored in the NYTimes’ support of Jeffrey Sachs and his "shock therapy" approach to building a capitalist democracy in what had been the USSR.

As long as you keep an open mind, Tom, you will be able to see China’s development along the line I suggest. In the 15 years I have been advising the Chinese government, pro bono when asked for my advice, I’ve encouraged it to ignore western advice about national elections, that they knew better how to build a solid structure that would be able to challenge U.S. primacy in 30 or 40 years. They could not believe an American would be telling them this kind of thing, but I explained that I believe in competition, and I’’m afraid that unless we have a serious challenge from China, we will become fat, lazy, corrupt and imperialistic in mentality -- a global bully boy. To challenge our primacy, I suggested they think not of democratic elections, but of constitutional democracy. I told them that if there was one thing I would wish for them and their people, it would be the equivalent of our First Amendment. In your column, you touch on the idea that with television sets, they now have one-way communication from the government to the people, and the next stage will give the people telephones. This is not quite what I meant.

There is now two-way communication between the people and the government, which Americans never quite see. This is the result of 3000 years of Confucian meritocracy, which makes China much more democratic than India. That is, China has a fluid society, like ours. Any Chinese can aspire to become the leader of the nation, because the mechanisms developed over three millennia have this idea as a central paradigm. Even at the height of the Cultural Revolution and Maoist communism, the decision was made to force the elites to work on the pig farms. Zhu Rongzhi, who will be the new boss, was one such elitist, and he remembers it was not a nice experience, but he also will never forget what it is like to slop pigs. On the other hand, India has elections, but also a stratified social system that prevents communication from bottom to top. India has telephones and newspapers, but its power elite has arranged to keep all relevant power in its own hands.

In any case, you do seem to be on a learning curve, which is more than I can say for Abe Rosenthal, who looks at China and sees only people who are jailed for breaking laws that he does not approve of, and looks at India, where he once served as Delhi bureau chief, and sees laws he likes and democratic forms, which excuse the abject poverty. Abe is also on a learning curve, but one that points down.

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The New York Times -- October 25, 1983
China’s Capitalist Road
by Jude Wanniski

MORRISTOWN, N.J. -- In my first visit to China, last month, to look at the economy, two things astonished me. I found an economic boom unfolding whose implications are exciting for the world, and never once during nine days in Peking and Shanghai did I feel I was in a Communist country. China is running, not walking, down the capitalist road.

Yes, there have been steady reports of Deng Xiaoping’s liberal economic reforms bringing economic improvements. But nothing had prepared me for the dynamism of the economy and the vitality of the people. Nor was I prepared for the total absence of interest in the Communist idea among the people and in the Government.

Unlike the Soviet Union, plastered with Marxist slogans and portraits of Lenin, China displays no sloganeering and only one outdoor portrait of Chairman Mao that I could see -- a relatively small picture facing the Chairman Mao Memorial Hall on Tian An Men Square. It is half the size of a Sony billboard down the street.

The Shanghai People’s Acrobatic Troupe has changed its name to Shanghai Acrobatic Troupe. When I suggested to a Government tour guide that perhaps the state will also change its name, to the Republic of China, he insisted this could happen "only for purposes of shortening."

The Communist Party is expelling all egalitarian opponents of the Government’s capitalist reforms -- that is, all known Communists are being purged from the party.

The China Daily, a Government-published English-language newspaper with an upbeat, free-enterprise flavor and Wall Street market news, reports that 70,000 private enterprises were registered in Shanghai alone last year -- an individual is now permitted to hire up to 11 employees.

The boom is evident in the cities and the countryside. It’s seen in the markets, with good produce plentiful and in shops, bulging with consumer goods and apparel that put Moscow's finest department stores to shame. It’s seen in the housing and building construction all about. Mostly, it’s seen in the briskness of the people, freed from the ideological penitentiary that the Soviet people still occupy, free to exploit their own energies and abilities in exchange for commensurate rewards.

The "responsibility system," involving "rights, duties and benefits," has effectively ended communal enterprises in favor of co-operatives. The co-ops are still called communes, but economic decision-making has shifted to the family unit. Families can join with other families and take responsibility for meeting the state’s quota, or tax, on a parcel of land. The group gets to keep the proceeds of any surplus and also has a degree of discretion on crops and livestock to be raised. An elected communal board decides on the portion of surplus that should go into capital investment. And workers supplement their income on private plots.

The responsibility system also seems to be working well in light industry and in retailing, where it’s possible for smaller groups to supervise the link between individual effort and reward. Shop clerks seem extraordinarily motivated -- they can earn up to four or five times the monthly wage in bonuses keyed to the profits of the state-owned shops.

The system hasn’t worked as well in heavy industry, and since 1978, when Mr. Deng began the incentives, several approaches have been tried and abandoned in the steel mills, chemical and auto plants. In these more complex state enterprises, effort and reward have to be balanced at several levels of capital and labor, to avoid inefficient taxing or subsidizing of either. The Government is still tinkering; a new incentive system was begun June 1, I heard.

All of this suggests that Deng Xiaoping’s goal of a $1 trillion gross national product by the year 2000, from the current $400 billion, is realistic. The goal almost seems too modest, given the likelihood that there will be 1.25 billion people by 2000, even if the current extremely low birth rate holds up.

Unfortunately, liberal economic reforms have not been matched by liberal political reforms. Mr. Deng is a capable political leader, but he’’s still a dictator. Students with whom I talked at universities in Peking and Shanghai had every reason to worry that, in the absence of democratic reforms, Mr. Deng would surely be succeeded by a less capable dictator.

Unless there are political channels that permit the masses of people to determine policy through their leaders, economic reforms can go only so far before new stagnation sets in. The Maoist reactionaries are waiting to say we told you so, to reassert their views through a power elite. Mr. Deng knows this, which is why the purge is on. Only a gamble on democracy can carry China to the economic goals Mr. Deng envisions.