Friday, April 20, 2012

Political reform or consolidation of power?

The Chinese leaders should have know
better than to pick an Olympic image
so easily lampooned.

Greeting citizen,

 I come with news from the orient, over in the mythical land of the Han people.  Their leader Wen Jiabo has announced a reform package, that some postulate has already been passed, which ostensibly is to curb corruption in the nations government.  Now corruption is a serious problem in China, having had the opportunity to travel to that nation I saw both honest officials and corrupt ones that ruled over their districts over like fat little huttlings.  But when politicians anywhere around the world talk about reforms, it usually means a consolidation of power, be it fiscal, immigration, or other any other thing.  In our republic it usually means more bureaucrats, and the legislation and regulation created to justify their positions; but in this instance, in China, it means much more.
China has gone through fantastic amounts of growth these last few decades.  Their standard of living has increased, and the accounts of many, they are on their way to becoming a potential equal of our republic in terms of prowess and prestige.  However, this has happened many times before.  China opens up their continent, driving wealth into the coasts; yet, the interior is too isolated, rugged, and the surrounding regions to unstable to have the wealth come from anywhere but the coast. This makes the coastal states prosperous; however the interior states lag, which creates social unrest.  This unrest helped lead to the fall of the Qing Dynasty, and to Nationalist government after it. The country is either poor and stable, or economically growing and unstable. Stratfor has written about it extensively, unfortunately most of their articles are not free, but their weekly free reports are worth checking out.  Pulling a record from their compendium, it details just this tension. When the Chinese were issuing their $ 586 billion stimulus, which should give any fiscally sensible person pause considering that the stimulus was around 10% of their GDP, there was political infighting over where it should go, the coastal states, or the interior.

What many of us citizens of res publica don’t realize, or can even appreciate, is that China has historically been an unstable country.  I, Cogitans Iuvenis, will humbly give you a short history lesson.  The largest demographic in China, the Han, historically have occupied the fertile regions along the coast and the interior near the coast. However, these regions were wide open to attack and occupation by neighboring peoples.  To protect themselves, the Han Chinese chose to expand and exert control over the surrounding regions, finding natural barriers like mountains or deserts upon which they could anchor and secure their nation. This forces them to control vast areas of land and numerous people.  When the empire was strong, the central government ruled, and when weakness persisted, or when provinces became wealthy enough, the far flung administrative districts would largely govern themselves.  Issues would then arise when the central bureaucracy tried to re-exert control, or if the province grew wealthy enough to challenge the central leadership openly.  This has gone on for millennia.  Mao first tried to start his communist revolution in Shanghai, but he failed. Why would people in a prosperous city want a communist revolution that would seek to take their wealth and give it to others?  Something we should think about, as a communist revolution has never succeeded in a wealthy nation. It wasn't the Americas', Englands, or Japans of the world that became communists, or even had viable communist parties. It was the North Koreas and Czarist Russias of the world. He then went on his Long March to the poorer regions of the interior, where he rallied a peasant army that was eventually victorious largely due to the corruption of the nationalist leaders.  The CCP is very aware of this, and are cognisant of the Mandates from Heaven idea that runs strong in their culture.  Their leaders have staked their legitimacy on economic growth, but knowing that economic growth will create instability that might lead to a possible overthrow of their political system, they seek to manage it.  This is what their ‘reform’ is all about.  The cause of this reform is the downfall of the governor of Chonging province and the whispers of corruption about him.
Former governor of Chongqing province, Bo Xilai, repeatedly ignored central government directives and followed his own economic policy. Only a short while ago, economic pundits were praising the Chongqing economic model, which made it one of the fastest growing cities in the world. Ostensibly a scandal, the murder of a prominent English businessman, was the reason for Bo Xilai being cast aside, but the real reason was due to politics.  There is a growing divide between the coastal and interior provinces.  The Economist has a handy chart that compares the provinces GDP and GDP per capita as if it were other nations.  Chongqing is the province that has the GDP of Qatar on the first chart, and the GDP per person of Maritius in the other.  What you will immediately notice is Chongqing ranks 24th in GDP and 17th in GDP per capita (It should be noticed that 2011 figures show Congqing at $ 5,341 per person not the 7,170 of the 2010 Economist numbers, either way a useful comparison will be drawn).  There are some coastal regions that have a GDP per capita almost double that.  The nimble minded will point out that situations like this exist in America as well; Delaware has a GDP per capita twice as high as Mississippi. Yet there is one fundamental difference that separates the two examples.  US states are largely allowed to determine their own economic future without direct dictates by the central government; the only thing preventing a state from becoming wealthy is either a lack of natural resources, access to a the coast, and poor self government.  States like Wyoming, ranked 4th in GDP per capita, show that you don’t need to be a coastal state to become relatively wealthy.  Just a government that doesn’t regulate itself to death or make laws that prohibit the utilization of its natural wealth, like say California. 
Chongqing doesn’t have that option, or as much of an option as Wyoming does.  During the boom years the central government allowed governors like Bo Xilai to steer the city’s economic policy. Chinas central government wants to present a unified party system.  And during good times the Chinese government is willing to defer somewhat to local leadership to ensure harmony. This results in local leaders trying to turn their cities into the next spot on the map, which eventually commences with the cycle of malinvestment and grandiose projects doomed for failure.  This happens in US municipalities, China is no different.

With the global recession the Chinese central government is trying to exerting control.  Naturally interior provinces, like Chongqing, view this as detrimental and took exception.  They see that they are being prevented from using the same strategies that the coastal states did to spur economic growth and dynamism.  This has caused political infighting. We now have two major factions within the communist party, leaders and officials of the coastal regions and those of the interior. You could add a third if you include the leaders of the central government. Each one has its own aims. The central government wants to exert more control over the Chinese economy to try and prevent the ebb and flow of instability and unrest that can lead to a change of governments.  The coastal regions want to continue policies that favor their economic growth. And the interior regions want a piece of the pie.  Moreover, Bo Xilai was popular and charismatic, possibly enough so that he could contend for future the leadership position and shift the national focus to the interior; politics, not corruption, is the real reason why Bo was ousted.  And the real reasons for this ‘reform’ are to further consolidate central government power.  
                Now the most perceptive of you citizens will realize that what the central government is doing now will lead to the very instability that China seeks to avoid.  And the fact is that this instability is unavoidable for one simple reason.  Central planning and government intervention on the national doesn’t works, or doesn't work that well. Some nations might get by with some goverment internvention, but typically the ones that do are smaller nations and the goverment is only lightly involed, a case of limited damage really.  The larger the nation gets the less succesful the strategy becomes.  True you will have nations like Japan that werer able to ride the wave for a couple decades, what has happened since the 1990s?  They have the honor of having gone through numerous PMs and economic stagnation.  Japan is relatively lucky that they are a developed nation with rule of law that means they only have economic stagnation.  For China, a still very poor nation with massive amounts of corruption and rule by bureaucrat this means unrest. What does this mean for America? The balance of power? And the ability to get super cheap Angry Birds dolls? More on that later citizens.
Humbly yours,
Cogitans Iuvenis

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Seattle resident whose real name is Kevin Daniels. This blog covers the following topics, libertarian philosophy, realpolitik, western culture, history and the pursuit of truth from the perspective of a libertarian traditionalist.