Trade as An Engine for Democracy in China: The Big Lie

(Washington, D.C.): Despite last week’s resolution by the European Parliament opposing Beijing as the site of the 2008 Summer Olympic games, the International Olympic Committee is poised to announce its selection of the PRC. This is due, in no small measure, to the Bush Administration’s deplorable decision to “remain neutral” on the question.

Perhaps, as William Safire suggests in his column in today’s New York Times, the Administration was moved not to oppose the Chinese Olympic bid — despite their persecution of American citizens and U.S.-based scholars, their reckless action against a U.S. military aircraft and detention of its crew, their offensive build-up and threatening behavior towards Taiwan, etc. — because of bad intelligence served up by the CIA.

If so, a presidential announcement that the United States does, in fact, oppose any Olympics in China until the Communist Party’s misrule there is ended should only be the beginning of an overhaul of American policy towards the PRC. Mr. Bush should also adopt the recommendations of a congressionally driven, blue-ribbon commission charged with reviewing the assumptions and results of U.S. intelligence with respect to Communist China. According to a report by Bill Gertz in the Washington Times, this panel has reportedly concluded in a sharply critical classified assessment that a sort of pro-Beijing “group think” is skewing the hiring and products of analysts in the Nation’s intelligence community. Specifically, this mindset appears to be dismissive of the growing body of evidence that China is consciously preparing for a potential conflict with the United States.

There can be no doubt, however, that at least one other misperception is at work in the Bush position on the Olympics, and China more generally — namely, that doing business with the PRC will transform its despotic government. Fortunately, a corrective to this illusion is also at hand, in the form of a cover article by Lawrence Kaplan published in the 9 July edition of The New Republic. Mr. Kaplan’s essay establishes persuasively that increased Western trade with and investment in China is not having any appreciable positive effect on the repressiveness of the Communist regime, its strategic ambitions and/or movement to a full free-market economy.

On February 25, business professor and writer Li Shaomin left his home in Hong Kong to visit a friend in the mainland city of Shenzhen. His wife and nine-year-old daughter haven’t heard from him since. That’s because, for four months now, Li has been rotting in a Chinese prison, where he stands accused of spying for Taiwan. Never mind that Li is an American citizen. And never mind that the theme of his writings, published in subversive organs like the U.S.-China Business Council’s China Business Review, is optimism about China’s investment climate. Li, it turns out, proved too optimistic for his own good. In addition to rewarding foreign investors, he believed that China’s economic growth would create, as he put it in a 1999 article, a “rule-based governance system.” But, as Li has since discovered, China’s leaders have other plans.

Will American officials ever make the same discovery? Like Li, Washington’s most influential commentators, politicians, and China hands claim we can rely on the market to transform China. According to this new orthodoxy, what counts is not China’s political choices but rather its economic orientation, particularly its degree of integration into the global economy. The cliche has had a narcotic effect on President Bush, who, nearly every time he’s asked about China, suggests that trade will accomplish the broader aims of American policy.

Bush hasn’t revived Bill Clinton’s recklessly ahistorical claim that the United States can build “peace through trade, investment, and commerce.” He has, however, latched onto another of his predecessor’s high-minded rationales for selling Big Macs to Beijing–namely, that commerce will act, in Clinton’s words, as “a force for change in China, exposing China to our ideas and our ideals.” In this telling, capitalism isn’t merely a necessary precondition for democracy in China. It’s a sufficient one. Or, as Bush puts it, “Trade freely with China, and time is on our side.” As Congress prepares to vote for the last time on renewing China’s normal trading relations (Beijing’s impending entry into the World Trade Organization will put an end to the annual ritual), you’ll be hearing the argument a lot: To promote democracy, the United States needn’t apply more political pressure to China. All we need to do is more business there.

Alas, the historical record isn’t quite so clear. Tolerant cultural traditions, British colonization, a strong civil society, international pressure, American military occupation and political influence–these are just a few of the explanations scholars credit as the source of freedom in various parts of the world. And even when economic conditions do hasten the arrival of democracy, it’s not always obvious which ones. After all, if economic factors can be said to account for democracy’s most dramatic advance–the implosion of the Soviet Union and its Communist satellites–surely the most important factor was economic collapse.

And if not every democracy emerged through capitalism, it’s also true that not every capitalist economy has produced a democratic government. One hundred years ago in Germany and Japan, 30 years ago in countries such as Argentina and Brazil, and today in places like Singapore and Malaysia, capitalist development has buttressed, rather than undermined, authoritarian regimes. And these models are beginning to look a lot more like contemporary China than the more optimistic cases cited by Beijing’s American enthusiasts. In none of these cautionary examples did the free market do the three things businessmen say it always does: weaken the coercive power of the state, create a democratically minded middle class, or expose the populace to liberal ideals from abroad. It isn’t doing them in China either….

China’s market system derives…from a pathological model of economic development. Reeling from the economic devastation of the Mao era, Deng Xiaoping and his fellow party leaders in the late 1970s set China on a course toward “market socialism.” The idea was essentially the same one that guided the New Economic Policy in Soviet Russia 50 years before: a mix of economic liberalization and political repression, which would boost China’s economy without weakening the Communist Party….

The reason isn’t simply that government repression keeps economic freedom from yielding political freedom. It’s that China’s brand of economic reform contains ingredients that hinder–and were consciously devised to hinder–political reform. The most obvious is that, just as the state retains a monopoly on the levers of coercion, it also remains perched atop the commanding heights of China’s economy….

Washington’s celebrations of the democratic potential of the new Chinese “middle class” may be premature. “Entrepreneurs, once condemned as `counterrevolutionaries,’ are now the instruments of reform….[T]his middle class will eventually demand broad acceptance of democratic values,” House Majority Whip Tom DeLay insisted last year. Reading from the same script, President Bush declares that trade with China will “help an entrepreneurial class and a freedom-loving class grow and burgeon and become viable.” Neither DeLay nor Bush, needless to say, invented the theory that middle classes have nothing to lose but their chains….

But middle classes aren’t always socially moderate, and they don’t always oppose the state. Under certain conditions, late modernizing economies breed middle classes that actively oppose political change. In each of these cases, a strong state, not the market, dictates the terms of economic modernization. And, in each case, an emerging entrepreneurial class too weak to govern on its own allies itself — economically and, more importantly, politically — with a reactionary government and against threats to the established order….

In China, which killed off its commercial class in the 1950s, the state had to create a new one. Thus China’s emerging bourgeoisie consists overwhelmingly of state officials, their friends and business partners, and — to the extent they climbed the economic ladder independently — entrepreneurs who rely on connections with the official bureaucracy for their livelihoods. “It is improbable, to say the least,” historian Maurice Meisner writes in The Deng Xiaoping Era: An Inquiry Into the Fate of Chinese Socialism, “that a bourgeoisie whose economic fortunes are so dependent on the political fortunes of the Communist state is likely to mount a serious challenge to the authority of that state….the members of China’s new bourgeoisie emerge more as agents of the state than as potential antagonists.”
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Beijing requires foreign investors in many industries to cooperate in joint ventures with Chinese partners, most of whom enjoy close ties to the government. These firms remain insulated mainly in three coastal enclaves and in “special economic zones” set apart from the larger Chinese economy. Moreover, they export a majority of their goods — which is to say, they send most of their “seeds of change” abroad. At the same time, their capital largely substitutes for domestic capital (foreign-owned firms generate half of all Chinese exports), providing a much-needed blood transfusion for China’s rulers, who use it to accumulate reserves of hard currency, meet social welfare obligations, and otherwise strengthen their rule.

Nor is it clear that U.S. companies even want China to change. If anything, growing levels of U.S. investment have created an American interest in maintaining China’s status quo. Hence, far from criticizing China’s rulers, Western captains of industry routinely parade through Beijing singing the praises of the Communist regime (and often inveighing against its detractors), while they admonish America’s leaders to take no action that might upset the exquisite sensibilities of China’s politburo. Business first, democracy later….

…[T]he best measure of whether economic ties to the West have contributed to democratization may be gleaned from China’s human rights record. Colin Powell insists, “Trade with China is not only good economic policy; it is good human rights policy.” Yet, rather than improve that record, the rapid expansion of China’s trade ties to the outside world over the past decade has coincided with a worsening of political repression at home. Beijing launched its latest crackdown on dissent in 1999, and it continues to this day. The government has tortured, “reeducated through labor,” and otherwise persecuted thousands of people for crimes no greater than practicing breathing exercises, peacefully championing reforms, and exercising freedom of expression, association, or worship…Nor is it true that linking trade and human rights will necessarily prove counterproductive. When Congress approved trade sanctions against Beijing in the aftermath of Tiananmen, China’s leaders responded by releasing more than 800 political prisoners, lifting martial law in Beijing, entering into talks with the United States, and even debating among themselves the proper role of human rights. As soon as American pressure eased, so did China’s reciprocal gestures.

Turning a blind eye to Beijing’s depredations may make economic sense. But to pretend we can democratize China by means of economics is, finally, a self-serving conceit. Democracy is a political choice, an act of will. Someone, not something, must create it.