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China: Don’t Look Now, But . . .

For most of the last three decades, China has presented a challenge to a favorite axiom of classical liberals—namely, that economic freedom begets political freedom in the fullness of time. China appears to be a huge exception to this idea (which was popular with, among others, Milton Friedman).  How long would China be able to go on with economic liberalization without political and social liberalization?  Or had they in fact developed a stable new combination of economic dynamism within political authoritarianism?*

With China’s economy slowing, it looks as though the classical liberal view may turn out to be right—except that what is going to change is not political authoritarianism, but economic freedom.  Today’s New York Times has an important story, buried on page 6 of the national print edition, with the ominous headline: “China Closes Window on Economic Debate, Protecting Dominance of State.”

After nearly a decade of President Hu Jintao’s focus on strengthening the state, a broad consensus of Chinese economists says the country is overdue for another big push to encourage private enterprise and to foster a shift toward a more consumer-driven economy. The challenge, they say, is turning back China’s domineering state sector.

But that seems increasingly unlikely. Publicly controlled enterprises have become increasingly lucrative, generating wealth and privileges for hundreds of thousands of Communist Party members and their families. And in a clear sign of its position, the government has moved to limit public debate on economic policy, shutting out voices for change. While political reform has always been a taboo topic in China, in economics, from the late 1970s to the early 2000s, almost anything went, with powerful voices backing strong measures that challenged the status quo. But now, despite the rise of social media, fewer prominent voices within China are able to make the case for a systemic overhaul that would prepare the nation for long-term prosperity on sturdier foundations.

“It’s not a good time to speak out for reforms, but it’s a good time to speak out against them,” said Li Shuguang, a professor at the China University of Politics and Law. “The government doesn’t encourage debate.” . .

 

Challenging the system, Mr. Zhang contends, has been the key to China’s economic success. Today, he says, that would mean reducing the party’s control over important sectors of the economy. Over the past decade, state companies have maintained and expanded control over industries like automobiles, aviation, chemicals, energy, information technology, machinery, metals, steel and telecommunications.

Mainstream criticism of this trend, however, is limited. A propaganda department directive this year explicitly banned the term “monopoly” to describe state-owned enterprises. Journalists say they regularly have articles kept from publication if they discuss the deadening effect of state control over so many industries.

This is not good.

By the way, there is this amusing and revealing correction to the online version of the story: “An earlier version of this article incorrectly referred to the Propaganda Ministry of the Communist Party. While there is a propaganda department under the Communist Party Central Committee, there is no government ministry by that name.”  Talk about a distinction without a difference: if the Communist Party has monopoly control of the government, then…

* Yes, yes, I’m aware that much of China’s economy is more properly characterized as state capitalism (or crony capitalism), and that foreign investment is tightly controlled and overseen, but even with this important caveat the rapidly emerging middle class ought to be a force for social and political liberalization, as well as the rising class of entrepreneurs who will want further economic liberalization and eventually will see that political reform is the necessary condition for that.

Now back to the elections in Greece and Egypt.

Image courtesy Shutterstock.

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