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    Greater China
     Nov 15, 2012


Page 1 of 2
BEIJING HANDOVER
The China challenge: War or peace
By Francesco Sisci

It is no mystery that the main issue in the Chinese Communist Party 18th National Congress, which concludes this week, is political reform, as both outgoing President Hu Jintao and Premier Wen Jiabao have said on several occasions in recent months.

China's political transition is of massive importance for the world. The crucial relevance of the whole Bo Xilai affair is also about political reforms. In a more open political system, a man like Bo, the disgraced party secretary from Chongqing, would have been stopped long before he could cause serious damage, or he would have amended his ways to run for the top position with full legality.
Yet political reforms are not simply a Chinese internal matter. As

 

China became the world's second-largest economy and continues its fast-track development, the issue is no longer the full integration of China into the world economic system but also China's full integration into the global political system.

The harmonization of China's political system with the rest of world is of paramount importance to improve economic integration and also to maintain peace. Although being ruled by similar political systems is no guarantee of peace and political integration, there are few historical examples of wars between democracies or of wars between authoritarian systems. Differences in political systems multiply reasons for distrust and misunderstanding and could more easily lead to clashes, economic rifts, and thus war.

Certainly there are a few things the world can learn from China (its meritocratic system, its organizational skills), but since the world has been dominated and ruled for the past 300 years by Western rules and ideas it is thus practically impossible that in the next 30 years the same world will accept rules of Chinese origin.

If China in this period were to gain massive political and military might and were to try to impose its own rules on the world, this could easily cause the world to join together against China and thus crush the country and its ambitions.

Therefore, the harmonization of China and the world has to occur largely according to Western rules. Yet democracy is not just a few regulations about how to cast a ballot. It is about the complex systems and cultures expressed by these systems and reinforcing these systems.

China is largely dominated by a special mix of old imperial and Leninist structures and culture. It is very hard to change these structures or even alter them without risking a confrontation with strongly embedded vested interests - and threats to collapse these structures or their interests could create an almost armed resistance against change.

For the past 30 years, the World Bank has assisted with the growth and transformation of the Chinese economy. Yet in the much more difficult and delicate - both for China and the world - political reforms, China is not assisted by anyone. Beijing needs guidance to guarantee that political changes in the country will help it integrate into the world and will not set the two further apart. It is therefore an issue of global governance, with heavy fallout in terms of peace and the global economy.

Moreover, political harmonization is also the basis for economic harmonization. Without politics, economics alone cannot bring unity and peace, as Europe has shown in recent months. The present and still ongoing euro crisis proves that monetary union without political unity eventually creates a monster. Even in the most peaceful and settled environment, such as Europe now, shaped by decades of strong cooperation at all levels, including strategic and military, monetary unity that is not underpinned by fiscal unity (which is the real basis of political unity) will not avert disasters.

Furthermore, in times of great crisis, it is not clear whether a monetary union without political unity helps. Many in Germany, Italy, Finland, Spain, or Greece argue that they would now be better off without the euro.

If lack of political unity creates huge problems in a place like Europe, where there has been strong cooperation at all levels for decades, one can only imagine what the lack of political harmony may create in an environment like that of China in relation to the rest of the world. Here, we see that between China and the rest of the world we do not have strong strategic and military collaboration, there are huge cultural differences and territorial disputes, there is deep-seated distrust, and exchanges with the rest of the world basically involve economic cooperation for short-terms gains (ie, production in China or purchase of Chinese-made goods because of cheap production costs in China).

If and when production costs in China rise without a parallel growth in quality, Chinese goods will lose their advantage and the Chinese internal market may fail to draw consistent attention from abroad - and then China could easily be isolated and thus attacked.

Certainly the euro has been a major boon for growth and peace in Europe, but it has two problems: it didn't harmonize the European fiscal systems, and this problem was combined with its great volatility with the US dollar (the standard currency since the end of World War II) and with the latecomer global currency, the Chinese yuan. These elements have helped to creating huge swings in social and political systems worldwide.

In a conference in Beijing in November, Robert Mundell indicated the following major problems in the lack of a global currency: "Lack of an international unit of account, lack of an anchor for currency stabilization, wild swings of major exchange rates, wild swings of raw material prices, demand-determined levels of international reserves."

This fits with the three points of great economic concern indicated during the 2010 Group of 20 meeting in Paris: "1. Excessive instability of raw material prices. 2. Excessive instability of exchange rates. 3. Poor governance of the system."

The necessity of politically harmonizing China with the world is not only an external factor. The model of legitimization of power in China has been, simply speaking, the following in the past centuries: a group of people under a charismatic leader would a lead a successful revolution or invasion that would topple the existing dynasty and establish a new one.

The new emperor would be a semi-religious figure responsible for maintaining peace in the country and the welfare of the people until a new revolution, after one or two centuries, would topple his dynasty. The typical cycle would also entail redistribution of the land under the newly established dynasty and expansion of the tax base (when nobody had the clout to force the government to accept someone not paying taxes). [1] Then, in a later period, there would be a concentration of the land and shrinking of the tax base, as rich and powerful landowners, who had accumulated wealth and had squeezed others out of their land, gained enough clout with the government not to pay taxes they owed.

The concentration of land and shrinkage of the tax base would push the state in turn to increase taxes while the population grew divided between "haves", land-owning families, and "have-nots", landless families. The first would grow richer and the latter would become poorer. This situation would create more poor people, who would become angrier as their ranks swelled, and this in turn, according to ancient beliefs, would cleave the ruler from divinity and the people. The people, helped by the divinity, or heaven, would bring down the dynasty and establish a new son of heaven, a new emperor.

This was in ancient times, until Mao Zedong, who was really China's last emperor. After that there were no emperors, but the collective leadership of a few party elders around Deng Xiaoping and later rule by the grand technocrats Jiang Zemin and Hu Jintao. But Mao didn't ask for the support of divinity or heaven, as he was notoriously atheist, and his successors tried to get the support of the people. But without the old religious prop of divinity or the modern prop of elections, this support is hard to measure and to rely on.

The old rules in the West were based also on God and the people. According to the old saying, vox populi, vox dei (The voice of the people is the voice of God). When, with the Enlightenment, God was cast out of the political picture, Western countries found a new source of divinity in the worship of the popular mandate of the vote. The modern saying could be: vox populi, vox voti.

At present, China is without God and without the clear, measurable mandate of a popular vote. This has de facto left China without heaven and without people. Moreover, the ancient tradition of land ownership, land distribution, and land concentration - which drove the dynastic cycles of the past - has also disappeared for the simple reason that land economics is no longer important in China.

In the past, over 90% of the Chinese population lived in the countryside, while at present less than 50% live there, and the number is decreasing. Contributions to the agricultural economy in China are also decreasing, and therefore the ancient cycle of dynastic rise and fall has ended forever. If the communist power will be toppled this will not happen with a peasants' uprising as in the past.

This has left the Chinese political system like a balloon up in the air: it has no people, it has no heaven, it has no land cycle, and it has no major threats to its rule - but it also has no major support, no major anchor.

It could be viewed as very strong, but it could also be seen as extremely weak, with very little foundation. Its only real basis for support is its structure: a Soviet system grafted on to the old Chinese imperial system. This structure feeds itself and on the country. This is also the main obstacle for other advancements of the country and reforms. Reforming this state structure is also extremely hard because it is based on and grooms a culture that has spread all over the country.

Yet, China needs reform to advance, and the world needs China to reform its structure to harmonize the Chinese political system with that of the world. Political harmonization could help to anchor the global economy and move the global economy onto a sounder footing. It could help control prices of raw materials, help with technological innovations, and help rein in speculation for natural resources.

A dollar-yuan agreement could be somewhat easy because it would involve only two centers while it would command 35% of the global economy and possibly about half of all global growth. It could also be easier because a crawling peg exists between the dollar and yuan. But to reach that economic agreement, there must first be an agreement on political harmonization.

A dollar-euro agreement would conversely be harder because the systems don't have just two political entities that could speak to one another. Behind the fictitious leadership of Brussels, there is cacophony of voices in Europe, each with its own priorities, which have not been reduced despite the ongoing threat of a major economic, social, and political crisis.

Yet if a political and economic agreement between China and America were to take place, this could also lead Europe to join in, and the same force of attraction could occur for the yen or pound sterling. This could also help fix the prices of raw materials, such as oil and gas in the Middle East and Russia. This would be the basis for a new political and economic Bretton Woods.

This could also help with a military and strategic convergence. Fixing the exchange rates and political-strategic military convergence would create a level field for innovators and entrepreneurs to move worldwide. 

Continued 1 2  






China sets out its future (Nov 14, '12)

China moves to new era (Nov 10, '12)

 

 
 



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