2005 March 15 Tuesday
Four Key Questions On China

From the perspective of non-Chinese East Asians, Americans, and Europeans here are what I see as the key questions about China's future:

  1. Can China as an authoritarian free market system continue to grow toward Western levels of per capita GDP?
  2. Will rising living standards inevitably lead to unstoppable pressures for democracy in China?
  3. If China becomes a democracy will it become a liberal democracy with protection of indivdual rights including political speech rights at levels that begin to approach the political speech rights of Europeans? (keep in mind that Americans have much stronger political speech rights than Europeans and even more than Brits or Canadians and so I'm setting a lower bar here)
  4. Would democracy make China more or less aggressive toward Taiwan and neighboring countries?

One argument advanced for why China has to become a democracy is that only a democracy will be able to control corruption well enough to prevent corrupt officials from undermining private enterprise. But first note that China has to achieve only a quarter of American per capita GDP in order to have a much larger economy than the United States. If corruption prevents China from becoming more than a third as efficient as the United States then China will still become the most powerful country in the world.

One argument made against non-democratic systems is that the quality of the leadership will typically change much more from generation to generation than is the case with democracy. Democracy will not reach peaks of good government as high as the best dictators have managed. But it will not hit troughs in leadership quality (or so the argument goes) that are as low as that which will be found when, say, a king's eldest son is a moron. However, note that a period of relatively good dictatorial leadership can last for decades. China might well be on such a roll.

We should be reluctant to assume that dictatorships always will turn in worse economic records than democracies for another reason: Most of the countries that are poor failed states and not democracies may not be failed states because of a lack of democracy. Rather, they may be failed states economically for the same reasons that they failed to achieve or sustain liberal democracy. Instead of democracy that is making some states wealthy other factors (e.g. intelligence distributions, culture, religion, location, etc) may be making some countries both wealthy and capable of supporting a democracy.

One advantage of democracy is that the ballot box sometimes provides an effective means to limit the excesses of corruption. However, in the current era democracy also comes with Robin Hood voters who vote for taxes to fund welfare state transfer payments. While democracy is a net benefit for many countries it is far from clear that a better economic growth is an assured outcome of democracy in all societies at all times.

When dictators have both sufficient virtue and a firm grasp of market economics then one potential gain from a dictatorial system could be a more pragmatic Benthamite utilitarian approach to managing a society. The Chinese have an obvious successful modern model for this approach to government with Lee Kuan Yew who ruled Singapore for decades in an only superficially democratic system. But can an undemocratically chosen much larger mainland Chinese government possibly become as well run and uncorrupt as Singapore became under Lee Kuan Yew?

The question of how well run pre-democratic or non-democratic China will be in the future depends in large part on how leaders will be chosen in absence of mass vote. One possibility is something akin to early American and early British democracy where only land owners or title holders were allowed to vote. There is a mechanism for how this could be accomplished without public elections. China still has an official communist party. The party now attracts the new capitalists of China as members. One potential direction of development for China's political system would be to develop a leadership selection system where the wealthiest become party members and choose regional and national leaders. Anyone know whether China's capitalists are getting involved in selecting party leaders? Or do the capitalists limit themselves to just bribing whoever is in power?

I do not view the transition of China toward Western style liberal democracy as inevitable. My guess is that the Chinese are more interested in having a "good emperor" than in having a democracy. To some extent they may even have enough animosity toward Westerners for some of them to see democracy as not authentically Chinese. Still, maybe China will become a democracy some day. Maybe China will even become a liberal democracy with widely popular protections for free political speech. But in my mind this outcome is still in doubt.

Nor do I believe that democracy would necessarily make China into a benign nation in relation to the rest of the world. Intensely nationalistic feelings in China - especially among professionals and intellectuals - have been compared by some commentators to those of Wilhelmine Germany. The Chinese strike me as feeling aggrieved with a lot of resentment toward Japan, Europe, and the United States.

Okay, I hear some of you saying "But I just know that economic development will lead to democracy in China". Well, okay, maybe you are right. That still leaves one problem: timing. Germany eventually became a liberal market democracy. But unfortunately it industrialised and carried on a couple of really big wars before making the transition into "nothing to worry about here folks" category of countries. Japan went through a similar rough transition period. Will China?

Share |      By Randall Parker at 2005 March 15 05:32 PM  China


Comments
Jay Z said at March 15, 2005 6:42 PM:

You're right that China will be able to surpass the U.S. economically even if it reaches a moderate per capita GDP only fourth that of the United States. It currently appears that China will eventually play a major role in world affairs and become the next major rival of the United Sates if it continues to grow at this rate. However, I'm not neccessarily sure if China will surpass the United States in military power just because it surpasses the U.S. economically. If we continue to maintain our technological lead, we may be able to develop more advanced weapons and military technology than the Chinese. That would allow us to maintain our military dominance even if we lose our economic dominance.

India is another rising world power that is rapidly modernizing. We could always support India to counter the growing strength of China. We could also strengthen relations with Russia, South Korea, Taiwan, Japan, Singapore, and other nations that fear Chinese dominance in the far east.

Remember that we needed to ally ourselves with England and Russia to combat the Axis powers during WWII. We may need a strong alliance to contain a nation as massive as China.


kurt said at March 15, 2005 10:24 PM:

Why do we want to ally with India against China? In my dealings with Indians and Chinese people, I find Chinese people to be more pleasant to be around than the Indians, in general.

Why view China as an enemy? A competitor, yes, but not necessarly an enemy.

I view China as an opportunity.

Maybe the Chinese will get it together enough to do the O'neill high frontier concept. Maybe they will go full speed ahead with neurological enhancements, thus making the luddites in our country look like the fools that they are for trying to oppose the development of such capabilities here at home.

The Japanese automakers forced the "Big 3" to get their act together and start making good cars. Maybe we need Chinese genetic and neurological enhancement to force us to get our act together so that we get rid of the luddites that prevent us from doing the same.

Competition can be a positive influence.

Randall Parker said at March 15, 2005 10:46 PM:

Kurt,

I certainly think that pressure from China will be used as a strong argument for accelerating the adoption of genetic and neural enhancement technologies. National security types and well and business types are going to see that keeping up is an absolute strategic necessity.

My fear is the FDA, Congress, the NIH, and other players are just going to be too slow to accept that we need to race into brain enhancement especially.

I also think the US is being way too slow to embrace a massive effort to cure all diseases and reverse aging. If we want to remain leaders we need to be bolder. The nation's politics is increasingly tied down in the present with too much focus on how to manage lots of problems within the box.

Kurt said at March 15, 2005 10:58 PM:

Societies that cure aging and increase their "human capital" will, no doubt, be more sucessful and, thus, dominant over those that do not. On a personal level, I am becoming less concerned about the FDA and congress. Any therapy I can't get in the U.S. I will simply get on a business trip to Asia. Medical tourism is already a big business simply because its alot cheaper internationally than in the U.S.

On the national level, I am concerned. I would rather the U.S. remain the world leader in technology and economics than for us to be passed by by countries that are less "free" than us.

The bio-luddites have got their heads so far up their arses that their stupidity and ignorance is simply astounding.

GUYK said at March 16, 2005 4:36 AM:

China as a democracy? I seriously doubt it. However, I do suspect that China will adopt a government that protects property rights ( at least their own property rights.) Democracy in itself is not always a perfect form of government. The majority seems to always want some form of income redistribution and exhorbent taxation follows. The Chinese economy is surging now as much because of government (democratic government) regulation in other countries that stifles business. Outsourcing to China is the norm now instead of the exception.

Will China be expantion minded once it dumps communism? For all practical purposes it appears to me that China has already dumped communism. China will be expansionist in looking for new markets and in insuring neccessary imports. The question is will they back the expansion militarily. Or maybe, will they have to use force to gain their import/export markets.

A Chinese American friend explained some Chinese business philosophy to me. She
said that Americans plan for the near future and have somewhat hazy long term goals. Chinese plan for the long term. I asked what she meant by long term and she explained that fifty years in the future is considered near future to the Chinese business people. It well could vbe that the Chinese government thinks in this manner also.

PacRim Jim said at March 16, 2005 7:04 AM:

The Chinese lay plans well into the future? Judging from the effectiveness of their plans over the past few centuries, I am not impressed. China was Europe's bitch, and then Japan slaughtered hundreds of thousands of Chinese. Chinese Communists changed all that; they slaughtered tens of millions of Chinese. Some plans. Some planners.

GUYK said at March 16, 2005 7:27 AM:

My Chinese friend was explaining business philosophy. Apparently this philsophy has worked for individual Chinese in places such as the Phillipines and Singapore as well as in parts of the USA. Chinese start a business with plans for generations to come to run it and prosper from it. I can only speculate what the Chinese government is planning and opinions abound about such plans. One would hope that a free market economy in China will emerge and China finds that peaceful trade is better than aggression.

gcochran said at March 16, 2005 8:27 AM:


You can't make that kind of plan. There are too many unknowns. Well, maybe _I_ could, but ordinary people can't. And then they try, they waste time and effort.

They'll do well enough anyow: enough to dominate the world, if the present US administration is a fair sample of what we can expect over the next generation or two. Think about it: they're putting their treasure in industry and technological development, while we're investing in Arab democracy. It's embarrassing. Magic beans would make more sense.

Kurt said at March 16, 2005 8:59 AM:

GCochran,

I agree with you that spending $300 billion on IFR (integral fast reactor) plants or the O'neill high frontier concept would be a much more effective use of that money than pouring it into the rat-hole of middle-east. Unfortunately, the Bush administration and many American people do not share this sentiment. Investment in engineering talent is always preferable to investment in career diplomats.

The Chinese (and the Japanese and Koreans) seem to have a longer term world view.

Invisible Scientist said at March 16, 2005 11:06 AM:

GCochran and Kurt:

See the Marlon Brando movie called "The Formula". In this fiction movie, one day it is discovered that
the Nazis had a cheap method of extracting oil from coal during WW II, but after WW II, the oil companies
use every dirty trick in the book (including bribery, extortion, murder) to suppress this formula.

Basically, isn't it ridiculous to expect the Bush family to help innovations that can displace oil? Bush and
his entourage are strongly connected with the oil industry. Period.

GUYK said at March 16, 2005 11:17 AM:

It is basically ridicules to believe in the 'big oil' conspiracy theories. I remember one about an invention that would deliver 60 mpg but the oil companies bought the invention to keep it off the market. Balderdash!

Jay Z said at March 16, 2005 1:28 PM:

"Why do we want to ally with India against China? In my dealings with Indians and Chinese people, I find Chinese people to be more pleasant to be around than the Indians, in general."

Most Americans probably find Japanese and German people much more pleasant than Russians, but we had no problem allying with Russia to defeat the Axis powers during WWII. If neccessary, we should be willing to ally with India to contain China.

Kurt said at March 16, 2005 4:03 PM:

Jay Z,

Perhaps you should start by explaining why China is a threat in the first place, such that we have to ally with other countries to "contain" it. Do you honestly believe that China will be fielding 30-40 million men armies across the Eurasian landmass to subdue the Middle-east and Europe or sending 100 carrier-group fleets across the pacific to conquer us? If so, please explain your thought process leading to such a conclusion. I honestly do not believe that the Chinese hunger for world conquest. Please explain why you think different.

Unlike most of you here, I do not fear China. I see the rise of China as an opportunity. I import manufactured products from China and I sell scientific instrumentation into China. Alot of what I am reading here is simply xenophobia.

John Derbyshire has a good article on the national Review site today about why we are highly unlikely to go to war with China and why such a war is completely irrational to even contemplate. Yes, they want to become the Asian hegemon. Yes, they are far more likely to evolve politically into something like Singapore by 2040 rather than into "western-style liberal democracy". But so what? I fail to see a problem with this.

I lived in Asia for 10 years and am more than likely to go back. What Asian people like, especially the Chinese, is both economic and personal freedom. To do whatever kind of business you want to make lots of money and to go out on Friday and Saturday night clubbing and to get laid. Travel, partying, and adventure. These are the kind of freedoms that many asians aspire to, especially the young people, and that continue to grow in China (and much of the world). As long as they get these things, many Asian people don't really care about who gets to be president or who runs the government. This is the reason why Singapore is the way it is (and is actually a very nice to live).

Many westerners have difficulty understanding this point of view. It actually comes quite natural to me.

The big problem with China, and this hurt them much more than it will us, is a lack of statutory due process (where the cops cannot arrest you for no reason at all) and a lack of transparency in business law. The Beijing government is begining to recogize that the second is a real problem and, I think, they will begin to recogize that some limits are desirable on arbitrary arrest power in the manner of Singapore. Singapore has harsh laws and a single party government, but the policy cannot arrest you arbitrarly. I think China will evolve in this fashion. I met someone who comes from a family that is heavily connected with the Beijing government. He says that they are quite open about their intent to become like Singapore. They could aspire for alot worse (like world conquest).

Even Japan is alot like this. There is the liberal-democrat party and a bunch of small, flaky parties. Noone (including my wife, who is Japanese) pays much attention to the elections. Japan, as you know, is a heavily regulated economy that is slowly deregulating because of the 13 year recession (which is exacerbated by the structural rigidities of escessive regulation, not due to the "birth dirth" as some have suggested).

I have noticed that many Americans, particularly those who have never lived as expats, is the desire to "convert" the rest of the world to be like us and to share our values system. A kind of "missionary" impulse. Such people are not content with us simply being a "commercial republic" (as I would have us be), but that we must be the "city on the hill" and be a "missionary" country. I believe that our attitude and thoughts about China are tainted by this mentality. We are not content to live and let live with a China that has no desire for global conquest. This is a mentality that I have never understood, not do I see it as "useful" to me personally in the pursuit of my dreams and goals.

As long as China does not hunger for world conquest, I don't care what politics or value system they live by. In this case, I do not consider them to be a threat to me and see no reason why I should limit my business dealings with them.

Personally, what value systems countries choose to follow is irrelevant. If a country makes it difficult to do business or is unpleasent to be in, I can always go somewhere else (as I have done before). The global free-market will put competitive pressure on countries to create decent pro-business environments and these are the countries that I either live in or do business in. As long as noone desires to enslave my arse, why should I care what they believe in?

I have live in Japan, Taiwan, and Malaysia. I have travelled extensively throughout the Asia region. I have created a life and found happiness for myself in each of the places that i have lived in. I am also as comfortable living in these places as in the U.S.

Again, please tell me why I should fear China.

Randall Parker said at March 16, 2005 4:12 PM:

Kurt,

My take on the situation is that I hope we do not have to fear China but do not know whether we will have to or not. If we do have to fear China then we are in deep trouble because I think China is going to become more powerful than the United States.

Jay Z said at March 16, 2005 6:21 PM:

I don't think that China has to become a threat to the United States. I actually hope that China becomes a democratic, free, and liberal society like the United States and chooses to remain peaceful. I'd prefer to see China as a U.S. ally and proponent of liberalism rather than a competitor.

However, I think we need to be cautious in dealing with China because they show many signs of heading in the wrong direction. We shouldn't initiate hostilities with them just because they could become a competitor, but we need to be ready with a plan.

Pop said at March 16, 2005 9:20 PM:

Everyone seems to have forgotten about the original inhabitants of Taiwan, those resident prior to the arrival of Chang Kai Shek. What did they ever do to China? What are they supposed to do when 20% of the worlds population arrive on their doorstep, sing?

tim said at March 16, 2005 9:29 PM:

I can't help but think western nations are like buffalos/moose/deer/kangaroo/kiwis (is that everyone?) staring blankly into the headlights. Its not a matter of when the US is in competition with China, that phase has started, why do you think oil costs so much? In 10 years time, will the US will perceived as Russia is today, a failed experiment? In years to come the US will still be telling us how important human rights are etc but I don't think anyone will be bothered listening, they'll be too busy cutting deals with China. This phase may have started also.

Kenelm Digby said at March 17, 2005 2:01 AM:

Whenever a politician describes something as "inevitable", you can rest assured that he's talking a load of bullsh*t, the phrase usually being connected with the necessity of massive non-White replacement immigration into previously White lands, or some re-warmed over nuggets of Marxist deterministic theory remembered from his long-haired youth.
However, with the unstoppable industrial and econmic juggernaut of the Chinese economy, I fear that the word "inevitable" is actually true.For a combination of reasons, but principally the indelible racial characteristics of intelligence, self-discipline and industry, China will be by far the dominant economic power of the latter 21st century.
The Western Europe/North American axis time in the sun is over.It is something we will just have to learn to accept and accomodate.
After all great Empires have risen and crashed before many, many times in history.

Kurt said at March 17, 2005 9:12 AM:

I think China has a good long term future, but please remember that they have a banking crisis that they have to pass through in the next few years. Many of the large banks are directed by the state to issue loans to prop up the state-owned enterprises (SOEs), many of which are technically bankrupt. The government cannot shut down the SOEs because this would throw an additional 100 million people out of work. Since the growing capitalist economy cannot absorb that many workers in a short period of time, such huge unemployment is not good for political stability. Not at all.

The government is trying to promote free-market based economic grow so as to create as many jobs and business opportunities as they possibly can. Yet, the government must keep the SOEs going until the free market economy grows sufficiently to create enough jobs to reduce unemployment. This is a difficult task and is the "tight-rope" that the government must walk over the next 20 years or so. With luck, they do not fall off too badly.

in any case, by throwing good money after bad, the Beijing government is forcing the banks to underwrite too many non-performing loans. This, coupled with an over exuberant investment boom, is increasing the risk of insovancy for many of the banks. If or more likely, when, the banking crisis occurs, debt capital will become scarce, dring up its cost. This will cause many businesses as well as some of the SOEs to fail, reducing the overall economic growth of China and exacerbating the unemployment problem. This will result in political instability.

This sort of a funk will go on for a few years until the banking situation gets sorted out. Once the restructuring takes place, China's economy will start to grow again. I think the coming funk will last 3-5 years, during which time, all the media and the journalists will yammering mercilessly about how the Chinese miracle economy has come to an end that that it is doomsday for them forever (don't say I didn't warn you). 3-5 years later, when their economy gets going agaian, the medias' doom and gloom will go away.

During the funk, investers and businesses may or may not be reluctant to invest in China. Depending on the commercial law environment, they may invest even more, swapping up businesses and what not at fire-sale prices (just like Japan). If this happen, China Inc. will go away just like Japan Inc. did, and China will become a "normal" country in terms of politics and economics.

If investers become leary of China during the funk, Malaysia and Thailand will benefit enormously, because the business investment that would have gone into China would go to these countries instead. Indeed, Bangkok is Detroit of the East. Because all of the big 3 as well as the Japanese carcompanies have manufacturing plants there. Since I have many business contacts in Malaysia, this could be good for me personally.

Thailand and Malaysia are actually a good place to get into the Indian market. There are many Indians (Tamils) in Malaysia and Thailand is low cost place like China. Noone will do industrial investment in India because of the onerous Indian bureaucracy and its laws as well as the aftermath of the Bhopol disaster (remember that?). So, you build your factory in Thailand or Malaysia and sell into India, like the car manufacturers do.

Malaysia's economy has been hit hard as a result of the transfer of productiuon into China. If China goes into a correction for a while, it would be good for Malaysia.

Lurker said at March 17, 2005 5:51 PM:

China is not a threat because of their growing power and influence per se, or from their form of government. They do not seek to compete with the ideology of democracy/capitalism the way the Soviet Union did. Their economy is fundamentally linked to ours and thus would seem to want the US to have continued prosperity. The problem, the threat, will be in the competition for natural resources. If peak-oil is here, or almost here, then China is a threat (and others as well but China is probably the biggest).


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