China's "Capitalist Communists"
Jude Wanniski
August 13, 2001


Memo To: Thomas L. Friedman, NYTimes
From: Jude Wanniski
Re: It Seems to Be Working

You may recall I’ve written you open memos in this space from time to time regarding your commentaries on China. Two years ago, 9/1/99, I wrote you about China and religion and earlier, on 3/23/98, I wrote you about democracy in China. In your column last Friday from Beijing, where you and other NYT editors had a lengthy interview with Ziang Zemin, you note how odd it is that the Communist Party can invite “capitalists” to join. You make a good stab at explaining how the CP is really the Party of the Ruling Elite, which is the point I made to you last year in my memo on democracy. Here are some further thoughts, from me and from my associate at Polyconomics, Nathan Lewis, who covers Asia for us. I’ll go first, then Nate:

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Chinese "communism" officially ended in September 1977 when Deng Xiao Peng announced a change in the underlying philosophy of the central government: "From each according to his ability; to each, according to his work." The kind of communism you have in mind reflects the slogan: "From each according to his ability; to each according to his needs." There is no conflict between "capitalism" and "communism," as the Chinese understand the terms. I suggest you read a 1994 paper I wrote about Karl Marx and you will see what he was all about, and how close he came to understanding the problems of capitalism and how it could succeed. Remember Marx argued that the dialectic would eventually see the withering away of the state.

On my first trip to China in 1983, it was so clear to me that the "communist" label was a PR burden to the regime that I suggested to high officials that they change the name to "Democratic Socialist Party." There are of course elections taking place all the time in China, but all within the framework of the Ruling Party, as you put it. The reason Pat Buchanan and Ralph Nader ran for President in the U.S. last year was their sense that there was no difference between the two allegedly different parties, both controlled by a single "Political Establishment."

You err in the column in saying the Tiananmen massacre was the result of a student movement while workers and peasants were the bulwark of the regime. Of the 300-400 Chinese who died that day, fewer than 30 were students or intellectuals. Nobody died on the Square itself. The "massacre" was the result of a clash between police and workers that took place two miles from the square. The clash probably would not have occurred, but when the students were driven from the square, they moved as a body down the avenue to where the workers were demonstrating against low wages, which had been driven down in purchasing power by an IMF-inspired devaluation. You can look it up. Or check with Jay Matthews, who covered the event for the LA Times and wrote a long piece for the Columbia Journalism Review trying to correct the record. The baloney in the major media got to the point where Tim Russert casually referred to the 10,000 students machine-gunned to their deaths on Tiananmen.

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The following is from Nathan Lewis:

China now has a political system that is virtually identical to the mandarinates (governments by a bureaucracy whose members are usually chosen by "hiring" rather than through elections) that ruled China for most of the last two millennia. China is not "communist" in the sense that it is organizing productive forces through a state bureaucracy instead of by market forces. On the contrary, China will be undertaking a major round of privatization of state-owned enterprises this year.

There's really nothing wrong intrinsically with mandarinate governments. Indeed, there is a trend toward mandarinate governments worldwide, especially in Europe. The United States is much more mandarinate now than it was a hundred years ago. Japan has been primarily mandarinate for most of the last several centuries as well, leading up to the present day. The only problem with mandarinate governments is that once they make mistakes, they often fail to correct them. Democracies make mistakes too, but the mistake-makers are more easily thrown out of office and replaced. In this way, democracies are able to renew themselves, while mandarinate governments often suffer a long, slow decline, as evidenced by the dynasties of China.

There are many democratic governments that fail miserably, India's for example, or the former Yugoslavia's, or the Breuning government in Germany in 1932, or the U.S. government of 1929-1932, or the Russian government of the early 1990s, while there are mandarinate governments that are raging successes, like the governments of the Meiji period in Japan, or Hong Kong, or China today.

The "Communist" countries of the last several decades combined a mandarinate government with command-and-control statism. Now they have a mandarinate government with free-market capitalism. It is perfectly possible, although rare, to have a democracy with command-and-control statism. For example, this might describe the United States during World War II. Some have argued, however, that the natural demands of command-and-control statism will tend to favor a mandarinate government.