It is a truism that authoritarian and totalitarian leaders often emerge in times of political and economic crisis. The century 20 had many examples, including those totalitarian leaders whose defeat at the hands of democratic capitalism defined the century.
In our time, an emerging orthodoxy on Xi Jinping turns this lesson on its head. As the 20 th Congress of the Communist Party of China approaches – at which Xi must extend his power indefinitely – there are daily stories about how his draconian tactics provoked a backlash: the economy is slowing and China’s growth and prosperity are going down the drain.
According to With this analysis, Chinese society’s adherence to the ideological dogmatism of “Xi Jinping Thought”, the disastrous Zero Covid policy, accusations of corruption armed to purge “moderates” who pose a threat to it, and other dictatorial actions hardened the party apparatus. It is undoing the economic progress made by its predecessors and driving away decades of global investment, which is now fleeing the country.
Recently, stories on social media have been about a possible “coup”. against Xi, made by enlightened, market-oriented moderates who are alarmed at the direction Xi is taking in the country. , it is not good when the word “coup” is associated with them. And we must spare any sympathy for Xi. But this emerging conventional wisdom is absurd and probably wrong, like the earlier conventional wisdom that China and its leaders discovered a “third way” — neither capitalist nor communist — and that economic growth would continue forever. Many believed that China had the tools that democracies lacked to control the economy and that growth was guaranteed.
This has not been proven. Xi may be in office and on the verge of getting an extension precisely because of the understanding by the party leadership — even if Wall Street analysts and corporate bosses, seeing endless market opportunities, have completely missed it — that the “economic miracle” and the rapid China’s growth were unstable, unbalanced. , uncoordinated and unsustainable. Don’t take my word for it: it was using these four adjectives that former prime minister Wen Jiabao described China — in 2008, well before Xi took office .
China’s challenges are the natural result of the inherent inconsistencies and doomed characteristics of centrally planned economies with authoritarian leadership. The fact that so many people have suspended skepticism for so long, wanting to believe that the Chinese Communist Party had created something different, reflects a seven-decade crisis of global self-delusion from which the world seems to be awakening. Targets, quotas, prohibitions, and a philosophy of punishment for failure — the hallmarks of totalitarian central planning — will never match the economic results of vibrant democracies and capitalism, which accept failure as a catalyst for learning, progress, and growth. Xi’s Chinese Communist Party today is simply reaping the bitter fruits of a system that has never succeeded anywhere.
The inevitable path to the crises facing the country today is well known. from the beginning by the Chinese Communist Party, even as the era of reforms initiated by Deng Xiaoping masked the underlying inconsistency. The challenges Xi faces today have their roots in the early days of communist rule.
Consider just one issue: the forced collectivization of agriculture in the second five-year plan (China is in your plan now) and the Great Leap Forward. Initiated in the late 1990s 600, this policy resulted in the worst famine in the history of the world. Up to 20 millions of people died, not including the dissidents who were killed and the countless suicides. The extent of this central planning madness included such gems as the “four plagues” campaign, in which the government urged the population to get rid of flies, mosquitoes, rats and sparrows. The program was “successful” enough to decrease rice production because of the lack of sparrows to eat the locusts and other insects that fed on the grain. Refusing to admit failure, Mao replaced the sparrows with bed bugs to keep the four plagues campaign going. Of course, millions perished anyway.
The Great Leap Forward institutionalized in China a pathological rural poverty that continues to this day. Even now, hundreds of millions of China’s rural poor subsist on a few dollars a day. The hukou family registration system keeps the rural population stagnant and unable to permanently migrate elsewhere. Migrant workers from the country going to cities are eligible for services only at their residence of record. According to Scott Rozelle in his book “Invisible China” (2020), 70% gives China’s workforce has no high school education. In rural areas, this number is much higher.
Which brings us to the great reformer himself. Deng Xiaoping is the West’s favorite communist leader, alongside Mikhail Gorbachev. Deng suffered from Mao’s Cultural Revolution, having been attacked as a capitalist. It was with Deng that Jimmy Carter negotiated the US recognition of China and the downgrading of US relations with Taiwan. Deng ordered the market reforms that spurred growth that some now accuse Xi of stifling. primarily investment-oriented economy. With quotas and forced market manipulation came unprecedented structural official corruption and inflated government stimulus to accelerated growth. Today’s wasted infrastructure, half-empty trains to nowhere, environmentally destructive hydroelectric projects and dams, and ghost towns with associated real estate collapse all date back to that earlier era.
Whatever the progress that may have been made, the benefits fall far short of the immense damage done by Deng’s other legacy: the one-child policy he initiated shortly after taking power. From this policy derive the profound demographic challenges that China faces today, notably the aging and inevitable shrinkage of the Chinese population. By some estimates, China’s population, which today stands at 1.4 billion, could drop to 700 million by the end of this century. Worse, this smaller population would have a higher percentage of less educated and poorer rural dwellers, as the urban educated found fewer and fewer opportunities and had fewer children. Urban unemployment is already at 30% and growing.
Heartbreaking stories of forced abortions and sterilizations on a horrific scale are bad enough. But what we capitalists call the law of unintended consequences is another matter: China has now lost generations of its most productive working-age population. This caused insurmountable socioeconomic tensions, as a single child must care for two parents and four grandparents in a country without a significant social safety net.
Deng’s one-child policy created other pressures on today’s economy and society. Xi is trying (and failing) to control them. Consider the current collapsing housing market. This sector represents about 30% of China’s GDP. The speculative bubble that is bursting was inflated in part by unmarried children, who significantly outnumber eligible women because the one-child policy involved sex-selected abortions. These men look for apartments as a marriage offer. Journalists are reporting on engagements falling apart as unfinished apartments pile up and hope of marriage is dashed.
Government central planners, of course, have played their part in inflating the economy. with more and more spending on infrastructure and real estate, it doesn’t matter that the units under construction are never completed and occupied. The song is coming to an end; what will happen is unknown. To a significant degree, Xi must thank Deng for that.
The corruption that flourished in the Deng era was such that even the Tiananmen Square massacre, the most notorious incident of his tenure, was fueled by the frustration of many ordinary citizens who were fed up and wanted to change the system. Much of the world quickly got over it.
Western companies pressured their governments to support the chimera of Deng’s market reforms and accept that there would be setbacks along the way. China was booming, and the growth would lead to more market openings and, ultimately, political openings. Of course, none of that worked. Instead, Tiananmen created an enduring reputation for the Chinese Communist Party as a ruthless power and a major violator of human rights. A generation of human rights activists added the tragedy to China’s litany of sins, alongside Tibet, Nepal, Xinjiang and now Hong Kong.
Yet another area where Xi must to face the structural flaws of a planned economy over many decades is access to natural resources, especially water. China has a water crisis. This is hardly Xi’s fault. Even Mao understood from the beginning of his time in power that access to water for China’s growing population was a fundamental challenge. His oft-quoted observation was that southern China has a lot of water, but people are in the North, where water is scarce. In his formulation, the South should lend a little to the North.
Things haven’t changed much. Wen Jiabao said in 2002 that water scarcity was a threat to “the very survival of the Chinese nation”. The main approach to the problem has been to control the price of water and launch a series of large top-down water projects, notably the South-North Water Diversion Project (SNWD). The SNWD consists of tunnels, canals and reservoirs to divert water from the Yangtze River basin to the North for up to 1.600 kilometers.
One of the channels has elements of 2.600 years — this is not a new challenge for the country. The project displaced nearly half a million people. The government has closed industries along the route to minimize water pollution. But, as always, the party apparatus, which exerts an iron grip, cannot tolerate failure. The government instituted price controls to hide the true cost of water. This prevents conservation in agriculture, industry and domestic consumption. Coupled with the effects of climate change and China’s poor record of industrial water management in general, the program has yielded little so far. Beijing officials have warned that the capital’s water infrastructure is reaching capacity.
Most worrying for the Party is that not only are the challenges facing Xi and the leadership span many decades, but there have been warnings about the inevitability of failure for almost as long, and they were visible to everyone. I visited China for the first time in 1985. It was hard not to be impressed by the country’s poverty, just a few years after Deng’s tenure. Beijing’s wide avenues were crowded with people on bicycles and crappy trucks hauling goods around the city. Although the city didn’t have the same industrial pollution that we see today, I remember Beijing from that period as having all the characteristics of underdeveloped economies.
I came back at the end of the years 80 and had my first opportunity to travel outside of Beijing. Although still poor, the country was beginning to grow. The people were friendly, and it was exciting to be there. read I look at the Great Wall Hotel, at the time one of the best in town, and the Christmas decorations made by pastry chefs and chocolatiers. It was beautiful and welcoming.
I spent a lot of time in China also in the decade of 2002, a period of visible changes. Jiang Zemin became the supreme leader in 1989 and remained in that position the entire time I was professionally in China. Jiang’s goal was to keep growth rates high and he ordered massive investments in construction and infrastructure projects. His government ordered large state-owned companies in all industrial sectors to become bigger.
With all this came lack of transparency, lack of competition, bribery and more corruption, which became the most defining characteristics of the operation in the country. While Deng’s earlier market reform policies likely led to the growth of a billionaire class in China, the phenomenon occurred in the Jiang Zemin era of massive state-led funding programs. The systematic program of theft of intellectual property from companies in advanced economies that were trying to invest and profit in China also grew during this period.
, I became president and managing director of the American Institute of the Department of State in Taiwan. That same year, the RAND Corporation published a brief analysis, ‘Fault Lines in China’s Economic Terrain’ [Falhas na economia da China], by Charles Wolf Jr., KC Yeh, Benjamin Zycher, Nicholas Eberstadt, and Sungho Lee. Despite the perception of visible growth and modernization, Western investment analysts published reports on how China was doing something different and lasting. They ignored the historical record of failed central planning. The authors of Fault Lines, by contrast, have laid out with surprising insight every major problem China faces today.
For those of us who saw growth but knew something wasn’t was right, and who had always doubted that the Chinese Communist Party had somehow figured out how to make central planning and authoritarianism – with a dose of market reforms – work, RAND’s analysis validated our skepticism. Long before Xi, it was known that as the CCP became unable to generate rapid growth through ever-increasing government spending, it would shut down and become repressive. The party’s philosophy reflects the maxim that if you cannot succeed with everyone’s cooperation, then proceed without it.
Today, this philosophy translates into the intrusion of the state into life of the common citizen and in the repression of those who doubt the supremacy of the party. The CCP has one goal now: to maintain the party’s power. Xi Jinping is the man who was given the task.
That’s why the 30 th Party Congress will extend Xi’s term. Much has been written about the unprecedented nature of a third term for the People’s Republic of China’s top leader. Equally unprecedented, however, is the way the world seems to have woken up to the serious difficulties – economic, social, political and diplomatic – that the country is facing.
The fundamental flaws central planning and authoritarian government are becoming too obvious to ignore. Xi’s hardline leadership is not what is causing China’s troubles. Xi Jinping is in office because the Chinese Communist Party knew that a hard line was the only way to deal with the inevitability of failure of the system they created. This is the essential problem with oligarchs, autocrats and dictators: since they cannot risk failure, they have no idea how to manage it.
Thérèse Shaheen is an entrepreneur and CEO of US Asia International. She was President of the American Institute of the State Department in Taiwan from 2002 to 2008 .