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Why Isn’t China Democratizing? Because It’s Not Really Capitalist

Tuesday, April 26, 2011

The presence of markets and economic exchange does not make a country capitalist.

Why isn’t China democratizing? The Chinese Communist Party’s continued firm monopoly on political power is particularly puzzling to policy makers: China was supposed to liberalize after its abandonment of Maoist Communism. For Washington the stakes are high: it made a huge bet on Chinese democratization, assuming that if China was encouraged to enter the international economy it would become capitalist and then democratic. Accordingly, Washington has helped integrate China into the liberal international order. Yet Chinese democracy is nowhere to be found.

Some analysts have tried to explain the absence of Chinese democracy by describing China’s political-economic system as a new form of “state” or “authoritarian” capitalism. This argument holds that the Party has found a way to have its cake and eat it too: it can be wealthy and authoritarian. If this argument is correct, the implications for the future of democracy and capitalism are profound. A new, successful “Beijing Model” of what some call “authoritarian capitalism” would break the relationship between free markets and political liberty. If Beijing has found a way to sever the capitalism-democracy link then the United States should re-think many of its foreign and economic policy assumptions.  But fortunately for proponents of democracy and capitalism, China has not invented a new political-economic system of “authoritarian capitalism.” China is definitely authoritarian but it is not really capitalist at all.

Washington has helped integrate China into the liberal international order. Yet Chinese democracy is nowhere to be found.

At first glance, the notion that China is not capitalist seems preposterous. Much of China’s economy is organized around market principles and the country is deeply embedded in the international trading and production system. But the presence of markets and economic exchange does not make a country capitalist. The “founding fathers” of capitalism conceived of it as a moral and social order—a way of ordering economic as well as social life.

At base, the capitalist order is supposed to provide its citizens with three things. First, it provides the opportunity for all citizens to become wealthier. Second, capitalism encourages maximum individual liberty. Citizens are free to pursue the work they want and are rewarded based on enterprise and initiative rather than birthright. At the core of this idea is the notion that property rights are sacrosanct. Individuals own what they buy or make, and are then free to invest, save, and give away charity as they please. Third, capitalism is supposed to ennoble public virtues by encouraging free exchange among citizens and opportunities for self-betterment. Capitalism frees individuals to develop the “better angels of their nature”—sympathy, generosity, integrity, self-reliance, and self-restraint. All of these virtues are conducive to a system of political liberty and democracy. That is why democracy theorists and policy makers assume that free markets are a necessary if not sufficient condition of democracy.

Some analysts have tried to explain the absence of Chinese democracy by describing China’s political-economic system as a new form of ‘state’ or ‘authoritarian’ capitalism.

But the Chinese system has made good on only one of these promises, albeit on a massive scale. Almost all Chinese citizens are better off since the abandonment of Maoism. This is no small achievement. Since Chinese leaders allowed markets to operate in the Chinese economy, hundreds of millions of Chinese people have been lifted out of poverty. But individual liberty consistent with a capitalist order is severely curtailed. Physical and intellectual property are owned by the state and the Party puts stringent restrictions on where a Chinese citizen can invest and save money or give away acquired wealth. “Private” entrepreneurs are at the whim of the Party for the resources they require to form and run enterprises: financing, land, and the enforcement of contracts. Most remarkably, a Chinese citizen is even told how many children to have. A state that engages in forced family planning is shockingly at variance with capitalism’s core tenets.

The last of capitalism’s promises—the ennobling of virtue—has also been undermined by the Chinese state. Absent freedom of association, freedom of religion, and the protection of individual rights, it is very difficult for citizens to be virtuous. The Chinese state prohibits the formation of organizations that it cannot control, thus suppressing charity. In capitalist societies, virtues such as generosity, public spiritedness, and sympathy are often expressed through religious practice. But the Chinese state has repressed religious institutions as well. Moreover, without the protection of property rights or contracts, it is difficult for a Chinese entrepreneur to maintain integrity. It is therefore no surprise that corruption and cheating are endemic to China. And since the state controls the resources the entrepreneur needs, self-reliance cannot flourish.

A state that engages in forced family planning is shockingly at variance with capitalism’s core tenets.

The Chinese people are obviously very enterprising and capable of great generosity. Indeed, under China’s repressive social and economic arrangements, it is remarkable that Chinese entrepreneurs have done as well as they have. And the outpouring of charity after the Sichuan earthquake showed that the Chinese people can be animated by public-spiritedness. The growth of religion in China despite efforts to repress it means Chinese are searching for deeper meaning and values beyond Deng Xiaoping’s famous admonition to his people that “to get rich is glorious.” For many Chinese, getting rich is not enough. But China’s repressiveness is corrosive of the spirit of capitalism—the empowering of citizens to better themselves morally as well as materially. This is not just a problem for Chinese people searching for greater meaning in their lives. It is a problem for capitalism. Masses of people have become cynical about a “capitalist” system that makes good on only one of capitalism’s three promises.

Recently, Premier Wen Jiabao has taken to mentioning his admiration for Adam Smith, capitalism’s most prominent theorist. But if Premier Wen wants China to remain a dictatorship, then Smith’s teaching should scare him. Smith never used the word capitalism in his writing—he spoke of “a system of natural liberty.” This system, today called capitalism, has been a successful training camp for self-government precisely because it has permitted citizens the liberty to pursue self-betterment and self-reliance tempered by virtues such as restraint and sympathy. Capitalists have thus played leading roles in democratic transitions. They have been powerful forces for change, making ever greater claims against state injustice and rapaciousness. But in China, entrepreneurs are dependent upon or given special privileges by the state. The incentive or even opportunity to form a distinct “class” of burgeoning democrats does not yet exist. Absent the existence of such a class whose interests sometimes clash with the state, the formation of democracy is very unlikely.

The Chinese Communist Party has managed to benefit from the employment of some market principles to grow the Chinese economy and essentially buy off many of its people through the provision of material gains. But this social compact is increasingly unsatisfactory to many Chinese, who are searching for meaning beyond riches. The current economic arrangements in China are not capitalist—“authoritarian,” “state,” or otherwise. Rather, China mixes markets with heavy doses of mercantilism and corporatism. This socioeconomic order is meant to strengthen the state rather than the individual. Until Premier Wen and his comrades allow Adam Smith’s capitalism to take root, China will simply remain a more prosperous dictatorship.

Dan Blumenthal is a resident fellow at the American Enterprise Institute.

FURTHER READING: Blumenthal also wrote, “Why It’s Still a Unipolar Era,” “Sea Change in the Pacific,” and “Riding a Tiger: China's Resurging Foreign Policy Aggression.” John Bolton argues, “The West Needs to Stand Up to Beijing” and Thomas Donnelly and Gary Schmitt observe, “China's Military Buildup Could Push US Out of Asia.”

Image by Darren Wamboldt/Bergman Group.

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