The Mother of All Experiments in Authoritarian Capitalism Is About to Begin

Back in the summer, when reports about Document Number Nine were trickling out of Beijing, I blogged the following about China’s future path of economic reform:

[I]t seems that China has hit the limits of its current growth model, and therefore needs to pursue reforms in order to boost long-term growth, which would help sustain the political legitimacy of the Chinese Communist Party. As [the press reportage] suggests, however, an attack on neoliberalism makes it kinda harder to do that. So a short-term effort to boost ideological consistency and legitimacy would seem to be coming at the expense of longer-term strategies to sustain political legitimacy.

To be fair, I’m hardly the only amateur China-watcher to be flummoxed on this point.

Over the weekend, the full English translation of Document Number Nine was posted by Asia Society’s ChinaFile. Here’s the key portion about neoliberalism:

Neoliberalism advocates unrestrained economic liberalization, complete privatization, and total marketization and it opposes any kind of interference or regulation by the state. Western countries, led by the United States, carry out their Neoliberal agendas under the guise of “globalization,” visiting catastrophic consequences upon Latin America, the Soviet Union, and Eastern Europe, and have also dragged themselves into the international financial crisis from they have yet to recover. This is mainly expressed in the following ways: [Neoliberalism’s advocates] actively promote the “market omnipotence theory.” They claim our country’s macroeconomic control is strangling the market’s efficiency and vitality and they oppose public ownership, arguing that China’s state-owned enterprises are “national monopolies,” inefficient, and disruptive of the market economy, and should undergo “comprehensive privatization.” These arguments aim to change our country’s basic economic infrastructure and weaken the government’s control of the national economy.

So, this would not seem to bode well for the future of market reforms in China.

On the other hand, over the weekend China’s Communist Party also held its much-ballyhooed Third Party Plenum, at which Big Economic Policy decisions are ostensibly made. The reports of that plenum are starting to trickle in, and the New York Times’ Chris Buckley reports on what they’re saying:

Chinese Communist Party leaders emerged from a four-day conference on Tuesday with vows to push through changes that will give market competition a “decisive role” in the economy and a plan to establish a new committee to oversee national security…. Mr. Xi has accompanied his vows of economic rejuvenation with a drive to stifle political opposition at home and a tougher position on many foreign policy issues. In what appeared to be an effort to impose greater control over those areas, the officials approved establishing a new state security committee. The formal name of the new body was unclear, but state media used the same name for it (???????) as it uses for the National Security Council in the United States. For many years Chinese officials have studied the workings of that body and other foreign security councils. The initial reports did not explain the role of the new council or how it would work with the party leadership committee that currently coordinates foreign policy.

Xinhua’s announcement of the national security council uses the translation "state security committee," which doesn’t sound good.

This blog post appears to offer a full translation of the communique. The key parts:

The Plenum pointed out that we must closely revolve around the decisive function that the market has in allocating resources. Deepen economic structural reform, accelerate the perfection of modern market systems, macroeconomic regulation systems and open economic systems, accelerate the transformation of economic development methods, accelerate the establishment of an innovative country, promote even greater economic efficiency, justice and sustainable development; closely revolve around deepening political structural reform on the basis of the organic integration of persisting in the leadership of the Party, the people mastering their own affairs and governing the country according to the law…. The Plenum pointed out that to comprehensively deepen reform, we must base ourselves on the largest reality that our country will remain in the preliminary stage of Socialism for a long time, persist in this major strategic judgment that development still is crucial in resolving all of our country’s problems, put economic construction central, give rein to the driving function of economic structural reform, promote relationships of production to be adapted to productive forces and the superstructure to be adapted to the economic base, promote that the economy and society develop in a sustained and healthy manner. The Plenum pointed out that economic structural reform is the focus point for comprehensively deepening reform, the core issue is handling the relationship between government and the market well, to ensure that the market has a decisive function in resource allocation and to give fuller rein to the function of government. (emphasis added)

Now let’s be honest — most of this is written/translated with all the charm of an obscure United Nations committee report. That said, the last bolded section is actually pretty clear and offers an insight into how China’s leadership thinks it can reconcile a push for market reforms with cementing the CCP’s political control. To paraphrase Montesquieu, Xi Jinping’s position seems to be that in China, useless authoritarian measures weaken necessary authoritarian measures.

To elaborate on what I think the Chinese leadership is thinking: they now seem pretty sure that greater state control over the economy is doubly counterproductive. It introduces inefficiencies that a slowing Chinese economy can’t afford anymore. Furthermore, they make the Party vulnerable to corruption, weakening political discipline. By getting the state out of the resource allocation business, the market can function better. More importantly, the CCP and the Chinese state can function better by concentrating on doing the things it has to do — provide for the common defense, promote the general welfare, ensure the security of the state, and oh yes, snuffing out any political threat to the Chinese Communist Party.

Will it work? I have my doubts — with the exception of Singapore, this model has never worked over the long run. The conventional wisdom in comparative politics is that as societies get richer — which further economic reforms would accomplish — they also start demanding more political accountability. China’s environmental degradation and economic inequality tee up some contentious political issues that won’t go

away anytime soon.

But it doesn’t really matter what I think. If Xi and Li believe that they can manage a simultaneous economic loosening and political tightening, then we’re about to see the Mother of All Experiments in Authoritarian Capitalism going forward. And as a political economy watcher, all I can say is, pass the popcorn.