Robert Reich, Berkley Professor of Public Policy, writes:I don't know if I agree with all of this, but it certainly should give pause to our current policies with China. I have always thought that as China modernizes, it will have to move to a more Western-style democratic political system, following Japan and South Korea. If Reich is right and I am wrong, the US may face a growing challenge as China emerges as the next superpower. I am particularly alarmed at what this may mean for Taiwan and the rest of the "free world".
China shows that when it comes to economics, the dividing line among the world’s nations is no longer between communism and capitalism. Capitalism has won hands down. The real dividing line is no longer economic. It’s political. And that divide is between democracy and authoritarianism. China is a capitalist economy with an authoritarian government.
For years, we’ve assumed that capitalism and democracy fit hand in glove. We took it as an article of faith that you can’t have one without the other. That’s why a key element of American policy toward China has been to encourage free trade, direct investment, and open markets. As China becomes more prosperous and integrated into the global market -- so American policy makers have thought -- China will also become more democratic.
Well, maybe we’ve been a bit naive. It’s true that democracy needs capitalism. Try to come up with the name of a single democracy in the world that doesn’t have a capitalist economy. For democracy to function there must be centers of power outside of government. Capitalism decentralizes economic power, and thereby provides the private ground in which democracy can take root.
But China shows that the reverse may not be true -- capitalism doesn’t need democracy. Capitalism’s wide diffusion of economic power offers enough incentive for investors to take risks with their money. But, as China shows, capitalism doesn’t necessarily provide enough protection for individuals to take risks with their opinions.
If China ever succeeds at developing a functional capitalist economy with an authoritarian government, it will be a very dangerous model for other countries to follow. Economically speaking, I am dubious of their ability to do this. One of the inherent conflicts is with the issue of property rights and the rule of law. Without these two fundamental securities, is it possible for a capitalistic economy to thrive? It seems as though most of China's growth has been in the low-tech sector. My assumption is that in order to move into the hi-tech sectors, it will have to allow greater freedom of information. Without this, it will hinder China's ability to innovate and will be left to imitating technologies developed elsewhere.
While some level of economic growth can be maintained in this way, I believe it will keep China below its full economic potential. If my analysis is correct, the dilemma faced by Chinese authorities is that their power will be reduced with greater information flow. Reduced economic realization may be a price they are willing to pay to maintain power?
My father has a friend who was a Marine during World War II and the Korean War and who has fought directly against the Chinese. He is also an expert in military history and is convinced that US and China will have a war with each other sometime in the next 20 years. I sure hope both he and Reich are wrong.
Hattip Economist's View
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