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A Key to Bringing Capitalism to China—Avoiding the Mistakes of the U.S.

Yasheng HuangYasheng Huang

Since 1989, the Chinese government has not taken on any genuine political reforms, relying instead on the country’s spectacular economic growth to maintain its power. This is okay so long as the economy is booming, but there is no guarantee that China can take double-digit growth for granted. In fact, evidence from the last two years suggests that it should not.

China recently completed its once-in-a-decade leadership transition in 2012, and the country now has an opportunity to adopt important political and economic changes. The Chinese leadership has signaled some willingness to introduce economic changes, but would the leadership consider giving democracy a try?

Transitioning to a democracy sounds good on paper, but it is a hazardous process. It’s not as though Chinese leaders could copy a ready template. Many may argue that the U.S. model is such a template, but this is by no means a settled question.

But first, it is important to make the case for why China should move to a democracy.

True, China has made huge economic and social advances in the past few decades. However, it is equally true that its growth has not been efficient, and this has costly environmental consequences. On the social side, the growth has led to massive corruption and high income inequality.

A recent survey by Peking University showed a large gap in income between the country’s top earners and those at the bottom. In 2012, the households in the highest 5 percent income band earned nearly a quarter of the nation’s total income. Those in the lowest 5 percent accounted for only 0.1 percent of total income.

The accumulation of wealth among the elites has contributed to corruption. Graft, bribery, and cronyism are rampant. Indeed, the Chinese government itself has repeatedly said that corruption is the chief threat to the leadership’s legitimacy.

China’s growth is perilously unbalanced, as well. The country relies far too much on cheap labor and subsidized capital as opposed to technology and science-based innovations. While for years the Chinese leaders have talked about the imperative to change growth from extensive margins to intensive margins, it is easier said than done.

Technology-based growth drivers require a rules-based system, freedom to think and challenge authority, and a government with limited reach and power. In short: rule of law and political openness that are the hallmarks of democracy. But let’s not delude ourselves: Democracy is not the panacea, and the U.S. model, in particular, is far from perfect. This country has, time and time again, failed to enact policies that protect citizens against gun violence, to tackle climate change, and to enact universal healthcare. If a mature democracy with high income and with a relatively educated electorate has failed in so many fronts, we should worry about how a beginning democracy would fare in the context of a developing country.

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