IN EVERY GENERATION, it seems, some Americans find a foreign alternative to this country’s brand of democratic capitalism. During economic downturns, the grass on the other side of the fence looks especially green. In the Great Depression, many in the United States thought that Nazi Germany or the Soviet Union had cured unemployment. Today, some say we must learn the lessons of China’s state-run capitalism.
Just four months ago, Andrew Stern, former president of the Service Employees International Union, published an op-ed in the Wall Street Journal urging the United States to adopt a “forward looking, long-term economic plan,” like China does. Mr. Stern was just back from Chongqing, impressed by that mega-city’s “people-oriented development” under “an aggressive and popular Communist Party leader — Bo Xilai. A skyline of cranes are building roughly 1.5 million square feet of usable floor space daily — including, our delegation was told, 700,000 units of public housing annually. ”
Alas for his admirers in the West, China’s Communist authorities purged Bo Xilai on March 15, shortly after his former police chief unsuccessfully tried to take refuge in the U.S. consulate in Chengdu. Explanations for Mr. Bo’s downfall range from corruption to the human-rights excesses that Mr. Bo’s police committed to official disgruntlement with Mr. Bo’s promotion of a neo-Maoist “red” culture. Or perhaps his rivals in Beijing simply concluded that the populistic Mr. Bo had gotten too big for his britches.
Clearly there was a lot more happening in Chongqing than just “people-oriented development.” But neither the Chinese people nor the rest of the world can really tell, because the central government’s censorship apparatus is working overtime to suppress media discussion of Mr. Bo’s ouster.
The purge comes at a time of transition in China, as the Communist Party prepares to anoint a new politburo chief this year, probably Xi Jinping. The new leadership must wrestle with profound structural challenges — including a housing bubble and a decrepit financial system — caused or exacerbated by the heavy hand of government. “If our pace of reform continues to lag behind the pace of expansion of state-owned capital,” writes Hu Shuli, one of China’s leading financial journalists, “we will soon hear talk not of the rise, but a crisis, of state capitalism.”
China’s ability to reform what is now the second largest economy will affect not only its own people, but the entire world. The fact that a country of such global importance is governed according to the Leninist principles of a self-selected elite — insofar as the rules of the game can be discerned at all — is both a source of weakness in the Chinese model and a sobering concern for the United States and other countries with which China does business.
Though some visitors to China, dazzled by the high-rises and humming factories, may miss the point, the true sources of long-run stability and prosperity, for any nation, are the rule of law and transparent government. China still has neither.