Milestones Give Party A Lot To Ponder

Sydney Morning Herald

Monday December 15, 2008

John Garnaut

Thursday is the official 30th anniversary of the beginning of China's era of reform. It marks a pivotal moment for humanity when a fifth of the world's population turned from poverty, autarky and dictatorship towards prosperity.

It should be a day to reflect on the extraordinary achievement of hauling nearly two-thirds of its population above the World Bank's poverty line, thanks to the fastest sustained economic growth in history.

Instead, the Chinese economy is faltering and the Communist Party is struggling to chart a credible path forward. There is a risk that the 30th anniversary will turn out to be less of a milestone than a bookend for what was possible in the absence of political reform.

The leadership will probably succeed in propagating the untruth that the ill-disciplined US is responsible for everything that is going wrong with China's economy.

They can point to figures like last Thursday's export figures, showing exports shrunk 2 per cent over the year to November, rather than today's industrial production numbers that will show an alarming drop in domestic demand.

There will be little mainstream discussion about how the country's unique political system has exacerbated the economic imbalances that inflated GDP growth on the way up and crushed it on the way down.

Political choices since 1989 have ensured the country does not collapse or descend into civil war like other former communist nations.

That is no small achievement. But the same choices entrenched a hierarchy of unaccountable officials, powerful government bureaucracies and state-backed capitalists over workers, peasants and landholders.

The system conspires to accelerate the accumulation of capital by lowering the prices of exports, land, wages and environmental degradation.

This political system has led to excessive investment in heavy industry and construction while leaving little money for consumers, reducing the space for genuine private enterprise and providing weak incentives for delivering crucial services such as health and education.

It has created a country of first-world hardware but developing world software.

Unlike in the US, there will be no election to enable the public to vent its dissatisfaction and move on. There will be no new set of leaders who can easily abandon policies that are not working and start again.

And despite the misgivings of many individual leaders and advisers, the collective leadership seems to know no way out of the current economic malaise other than to siphon ever more resources towards the interests of capital.

The Government is responding to a demand slump caused by an oversupply of airports, apartment blocks and fancy government buildings by building more of them. The bill will be deferred but will one day fall due.

It is far too early to dust off books like The Coming Collapse of China, but the economy and political system are stuck at a single crossroad. The coming year is crowded with politically charged anniversaries and is looming as China's annus horribilus.

There will be plenty of festivities to mark Thursday's official anniversary of the beginning of reform. But the leadership will be distracted by the problem of how to suppress a series of less glorious anniversaries.

The Public Security Bureau, which bears primary responsibility for ensuring a "harmonious" atmosphere, is standing ready to make the mammoth security clampdown during the Beijing Games seem like a picnic.

A bureah officer told the Herald last week: "Next year will be the anniversaries of Tibet, Falun Gong and Tiananmen - it's going to be much more tense than anything we saw this year. It's not just me; everyone thinks so."

The foreboding dates start with the 50th anniversary of the "Liberation of Tibet", for which many Tibetans remain profoundly ungrateful.

Next year is also the 50th anniversary of the worst year of the Great Famine, which left upwards of 30 million people to starve to death. There is still no open discussion of what went wrong.

It also marks the 10th anniversary of the Falun Gong "sit-in", when the paranoid and brutal crackdown of the former president Jiang Zemin turned a meditation cult into a political movement dedicated to the end of Communist Party rule.

And then there will be the big one: the 20th anniversary of the June 4 military suppression of protesters in and around Tiananmen Square. On that date the party showed it lacked the confidence to loosen its grip and open itself to independent accountability.

Since then the party has pushed reforms when it could but always subordinated them to the imperative of maintaining a monopoly on political power.

Some officials are confident the campaigns for Tibet, Falun Gong and Tiananmen are all losing momentum. But the security apparatus is well equipped to deal with all of them.

But suppressing dissent requires more political control, which will tend to exacerbate the economic imbalances.

In between those anniversaries the party also has to work out how to deal with protests and riots that will erupt around the country as workers lose their jobs and corrupt officials abuse their renewed licence to revive the economy.

The Communist Party has proved many times more durable and flexible than most outsiders thought possible. The high investment rate will provide a foundation for economic recovery that other countries do not have.

But it will take all of the party's improvisation skills to steer the economy through to October's 60th anniversary of Communist Party rule without increasing the chances of an economic and political disaster down the track.

© 2008 Sydney Morning Herald

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