The Communist Party of China holds dear slogans and fetishes that underpin them. Its first slogan after the founding of People?s Republic of China, ?letting hundreds flowers bloom and a hundred schools of thought contend?, that orchestrated the Hundred Flowers Campaign in the 1950s, rooted on the idea that one-party dictatorship needs, believe it or not, criticism from its people. It was a trap: the Anti-Rightist Movement that quickly followed turned out to be savagely vicious for anyone who expressed even the closest approximation of dissent in the Flowers Campaign. Later, both the Great Leap Forward and Cultural Revolution ended in producing the opposite results, the party?s fetishes being what they were.
It was Chairman Mao?s failures that gave the Deng era reforms much of its popular appeal. Yet, after the Tiananmen Square massacre in 1989 that took place 10 years into the country?s experimentation with ?socialism with Chinese characteristics?, variations in the theme were inevitable. From Jiang Zemin?s refrain ?rejuvenating China? to Hu Jintao?s signature tune of ?harmonious society?, the intention is axiomatic: the legitimacy of the party?s monopoly on power turns critically on economic numbers. This philosophy has given rise to the fetish that a minimum of 8% per annum growth in China?s GDP is essential to retain the party?s grip on political power.
In Mao?s days, no civil society existed in China, and getting rich was the most inglorious thing to do. Today?s China is marked by a growing tension between rising expectations of economic prosperity and the all too narrow scope for disagreement in a nascent civil society. Yet, ?crossing the river feeling for one pebble at a time?, in Deng?s poetic words, has never been harder than in times of global recession, in which China has been a big loser.
Therefore, to no one?s surprise, Premier Wen Jiabao said on Friday that the authorities ?have prepared enough ?ammunition? and can launch new economic stimulus policies at any time?. He spoke two days after the announcement that Chinese exports plunged by more than a quarter in February from a year ago. Earlier in the month, Wen declared an annual growth target of 8% and said: ?We will improve the early warning system for social stability to actively prevent and properly handle all types of mass incidents.?
It?s no accident that the government has stopped publishing estimates of what it euphemistically calls ?mass incidents?. If you take the latest official figures at face value, 20 million of the country?s 130 million migrant workers are now unemployed or laid off, as contracting exports forces large-scale factory closures and employee sackings. Considering the appalling lack of social safety nets, rule of law and official respect for human rights, the size of such incidents ? and state repression of them ? can only go up.
At another level, the obsession with GDP numbers has blinded China to mature domestic market expansion. Rapid GDP growth has been mainly export-driven; China?s household incomes, particularly rural, have grown in much slower pace. The gigantic production capacity China built over the last 30 years has come at the cost of widening its own domestic consumption base. In other words, the obsession with GDP growth has effectively tied China?s fortunes to feeding the western consumerist creed.
Why is this so? The answer lies in the arbitrary nature of one-party state that China is, where the regime controls all aspects of normal economy ? from spending priorities to taxation power to lending regulations ? sans any democratic accountability. Moreover, the government holds formal ownership of all land and state enterprises occupy the dominant role in wealth creation. In 30 years of economic liberalisation, profit maximisation was the operative word for the Chinese authorities. A significant share of the GDP growth China has sustained since the 1990s has been the result of big government expenditure on infrastructure, urban development and industrial projects. Even the $586 billion stimulus plan China announced in last November was heavily skewed to favour big infrastructure projects, underlining the low priority the government accords to social sector plans or developing the income-boosting potential of rural peasantry.
The overarching role of the state is a drag on the dynamics of wealth distribution. The more fixed assets the government controls, the greater profit maximisation for state offers. However, rapid GDP growth rates thus achieved can be deceptive. They don?t necessarily trigger a domestic consumption boom because of the mismatch between GDP growth rates and people?s income. According to figures cited by Zhiwu Chen, professor of finance, Yale School of Management, from 1995 to 2007, inflation-adjusted government fiscal revenue increased 5.7 times. In contrast, over the same period, the cumulative per capita disposable income increase of urban residents was 1.6 times and 1.2 times of rural peasants?. The gap shows the perils of the official emphasis on production over consumption. That problem can be skirted when the economy grows full steam ahead on the back of surging exports; but it may spell social instability when growth slows.
Building ?harmonious society? is a cause noble enough, but how such a radiant society can be perfected without adherence to rule of law, basic freedoms for citizens and a balanced growth strategy is the key challenge for the communist party now. It does not mean, though, that the party can be any less strident on nationalism. When desperate, that?s its secret weapon. And the world has much to fear from it than China?s wobbly economic performance.
-rajiv.jayaram@expressindia.com