A cover story by Ron Unz, publisher of The American Conservative, appears in the journal's May 2012 issue in the form of a critical comparison between the U.S. and China's body-politic, posing the question as to "Which superpower is more threatened by its “extractive elites”? Click here
The title of the article "China’s Rise, America’s Fall" is over-hyped, as many Chinese would be the first to admit. Nevertheless, the author explains,
"In a recently published book, Why Nations Fail, economists Daron Acemoglu and James A. Robinson characterize China’s ruling elites as “extractive”—parasitic and corrupt—and predict that Chinese economic growth will soon falter and decline, while America’s “inclusive” governing institutions have taken us from strength to strength. They argue that a country governed as a one-party state, without the free media or checks and balances of our own democratic system, cannot long prosper in the modern world. The glowing tributes this book has received from a vast array of America’s most prominent public intellectuals, including six Nobel laureates in economics, testifies to the widespread popularity of this optimistic message".
"Yet do the facts about China and America really warrant this conclusion?"
"Meanwhile, the rapid concentration of American wealth continues apace: the richest 1 percent of America’s population now holds as much net wealth as the bottom 90–95 percent, and these trends may even be accelerating. A recent study revealed that during our supposed recovery of the last couple of years, 93 percent of the total increase in national income went to the top 1 percent, with an astonishing 37 percent being captured by just the wealthiest 0.01 percent of the population, 15,000 households in a nation of well over 300 million people".
"Evidence for the long-term decline in our economic circumstances is most apparent when we consider the situation of younger Americans. The national media endlessly trumpets the tiny number of youthful Facebook millionaires, but the prospects for most of their contemporaries are actually quite grim. According to research from the Pew Center, barely half of 18- to 24-year-old Americans are currently employed, the lowest level since 1948, a time long before most women had joined the labor force. Nearly one-fifth of young men age 25–34 are still living with their parents, while the wealth of all households headed by those younger than 35 is 68 percent lower today than it was in 1984".
"The total outstanding amount of non-dischargeable student-loan debt has crossed the trillion-dollar mark, now surpassing the combined total of credit-card and auto-loan debt—and with a quarter of all student-loan payers now delinquent, there are worrisome indicators that much of it will remain a permanent burden, reducing many millions to long-term debt peonage. A huge swath of America’s younger generation seems completely impoverished, and likely to remain so".
"International trade statistics, meanwhile, demonstrate that although Apple and Google are doing quite well, our overall economy is not. For many years now our largest goods export has been government IOUs, whose dollar value has sometimes been greater than that of the next ten categories combined. At some point, perhaps sooner than we think, the rest of the world will lose its appetite for this non-functional product, and our currency will collapse, together with our standard of living. Similar Cassandra-like warnings were issued for years about the housing bubble or the profligacy of the Greek government, and were proven false year after year until one day they suddenly became true".
"But if our government policies are so broadly unpopular, why are we unable to change them through the sacred power of the vote? The answer is that America’s system of government has increasingly morphed from being a representative democracy to becoming something closer to a mixture of plutocracy and mediacracy, with elections almost entirely determined by money and media, not necessarily in that order. Political leaders are made or broken depending on whether they receive the cash and visibility needed to win office".
"When parasitic elites govern a society along “extractive” lines, a central feature is the massive upward flow of extracted wealth, regardless of any contrary laws or regulations. Certainly America has experienced an enormous growth of officially tolerated corruption as our political system has increasingly consolidated into a one-party state controlled by a unified media-plutocracy".
"Ordinary Americans who work hard and seek to earn an honest living for themselves and their families appear to be suffering the ill effects of exactly this same sort of elite-driven economic pillage. The roots of our national decline will be found at the very top of our society, among the One Percent, or more likely the 0.1 percen".
"Thus, the ideas presented in Why Nations Fail seem both true and false. The claim that harmful political institutions and corrupt elites can inflict huge economic damage upon a society seems absolutely correct. But while the authors turn a harsh eye toward elite misbehavior across time and space—from ancient Rome to Czarist Russia to rising China—their vision seems to turn rosy-tinted when they consider present-day America, the society in which they themselves live and whose ruling elites lavishly fund the academic institutions with which they are affiliated. Given the American realities of the last dozen years, it is quite remarkable that the scholars who wrote a book entitled Why Nations Fail never glanced outside their own office windows".
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Why Nations Fail shows that truly democratic and inclusive institutions may take centuries to build, as in the case of Britain and the United States. It also flags up the importance of centralised state authority to maintain political stability including law and order, without which countries can hardly take off, as in the case of Colombia. It highlights the need for basic infrastructure such as shelter and schools in such failed states as Afganistan and certain countries in sub-Sahara Africa, where "conditional" development aid has been too much squandered by corruption and layers of aid bureaucracy to deliver. What is more, it shows how, even in democratic India with inclusive institutions, basic public services such as healthcare could break down because of collusion of health workers with local authorites.
All these examples seem to suggest that for countries at a relatively early stage of development, the need for infrastructural and livelihood improvements may be more immediate than building inclusive political institutions. Without a solid economic foundation, it is doubtful that inclusive institutions alone can feed the hungry masses, nor are they likely to endure. Indeed, as Dambisa Moyo says in "Dead Aid - Why Aid is not working and how there is another way for Africa", (Allen Lane, 2009), "What is clear is that democracy is not the pre-requisite for economic growth... On the contrary, it is economic growth that is a pre-requisite for democracy...." (p.43)
Ironically, while America seems to be turning more and more "extractive", the Communist Party of China (CPC), notwithstanding its deep-seated corruption and other foibles, has been making itself more and more "inclusive". Since China launched the Open Door Policy in 1978, the Party had succeeded in lifting more than 400 million peasants out of abject poverty. Right now, Deng Xiaping's old slogan of "letting a few people get rich first" regardless is outliving its usefulness. Former President Jiang Zemin introduced the doctrine of "The Three Represents" as political code to co-opt China's entrepreneurs, professionals, and others in the private sector into China's body politic so that they, too, would have a stake in the country's economic success. President Hu Jintao likewise ushered in the doctrine of "Harmonious Society" embedded in the current Five Year Plan (2011-15), designed to create a more equitable, more balanced, and more sustainable society.
For China, notwithstanding years of stellar growth, the development ahead remains uncertain and success is by no means guaranteed in face of mounting domestic and global challenges, including rampant corruption, acute inequalities, resource scarcity, worsening ecological strain, and rising social unrests. Complacency or self-congratulation is clearly no alternative to perennial reform, adaptation and transformation, if China under the CPC is to survive, let alone prosper.
The jury is still out as to which development model best suits China's own circusmtances.With increasing evidence of dysfunctional Western democracies, including destructive partisan politics, it seems unlikely that China would wish to abandan her well-tried experimental approach to finding her own development path - "groping for stepping stones in crossing a river" - and simply download a Western one-size-fits-all mode of democracy.
But the Bo Xilai affair has sounded very loud alarm bells of the resurgence of Maoist "extractive" vested interests. The Party leadership appears now to be more alive to the urgency of democratic reform, as Premier Wen Jiabao has repeatedly urged in the recent past.
What is instructive is the newly-announced promotion to full general of Liu Yazhou, Political Commissar of the National Defense University, a member of the Central Commission for Disciplinary Inspection, China's top anti-graft watchdog. He is also a prolific writer, a global strategist and a rare out-spoken young Turk for urgent democratic reform. He studied in the U.S. for ten years. and rose steadily through the ranks partly through the power of his pen. As the son-in-law of Li Xiannian, one of China's most-respected founding revolutionaries, he is one of the princelings exceptionally known for his integrity, frugal living, and hatred of corruption. He is well-chosen counterweight against any ramnants of the Bo Xilai clique who may choose to rear their heads at some future juncture.
An article "China must reform or die" on 12 August 2010 in the Sydney Morning Herald quoting General Liu says a lot about where he is coming from. Click here
With increasingly conciliatory responses to social unrests, a high-profile promotion of the Wukan model of open and fair village elections, and a newly released 468-page World Bank report jointly undertaken with the Development Research Centre of the State Council, which promotes a more inclusive society amongst a swath of other reforms ("China 2030: Building a Modern, Harmonious, and Creative High-Income Society" Click here ), there is likely to be more than meets the eye following the coming leadership transition in the autumn.
So, afterall, along with more inclusive economic institutions as proposed in the World Bank report, reform towards a more inclusive political system in China, whether Western democracy or democracy with Chinese characteristics, may be coming sooner rather than later.
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