China now faces the downsides of dictatorship


China’s nearly 30-year experiment with time-limited government is officially coming to an end. The Chinese Communist Party has suggested amending China’s constitution to allow President Xi Jinping (picture) to serve more than two five-year terms. Considering that the party rules the country, and Xi rules the party, that means two things: The constitution will be amended. And Xi is going to be president for life, much like Mao Zedong or Deng Xiaoping.

From the standpoint of communism, this result isn’t terribly surprising. From Vladimir Lenin to Joseph Stalin to Nikita Khrushchev, Leonid Brezhnev and Yuri Andropov, the Soviet Union was never out of the hands of a dictator-like ruler until Mikhail Gorbachev presided over its collapse.

Nor is Xi’s ascent surprising in the light of China’s traditional norm of imperial rule, which effectively carried over into communism.

What’s remarkable, rather, is that from the time Deng Xiaoping retired in 1989 until now, China seriously experimented with a term-limited presidency.

Jiang Zemin stepped down after two terms, although he retained some influence thereafter.

And Hu Jintao went him one better, actually giving up power in 2012 when Xi came in.

This matters because the period of China’s limited presidency corresponded almost exactly to one of the fastest periods of economic growth in human history, comparable to Britain in the age of industrialisation and the US in the years after the Civil War.

If scale is taken into account in addition to rate, it isn’t an exaggeration to call China’s period of growth the greatest in history.

To be sure, the growth had already begun under Deng. But Deng himself set the groundwork for the model of the limited presidency.

He was old by the time the economic reforms began, and understood that he would not live or rule forever. He resigned from some senior posts in order to signal that he wanted power eventually to be spread among a group of leaders, not consolidated in him.

To Deng and his immediate followers, then, China’s experiment with markets went hand-in-hand with an experiment in governance.

The basic idea was for power to be shared among the elite, senior members of the Chinese Communist Party. The most important decisions were made by consensus.

The limited presidency was both evidence of this consensus and an institutional mechanism designed to ensure its continued existence.

Not only the president, but also the members of the central committee rotated every 10 years.

This was intended to allow younger generations to rise to power, avoiding the pathology of a hidebound country run by one old man, or even several.

Reasonable people can debate whether the governance experiment helped bring about China’s economic miracle. Indeed, that debate can be expected to go on for many years.

But there is a good reason to think that term-limited government and rough consensus among senior party members helped create the conditions for risk-taking and openness.

Power that is mildly diffused meant that no one official would accrue all the benefits of economic improvement, and the dangers of the whole experiment would be spread among the leadership.

Instead of trying to displace each other, as much of the party leadership had done before, during and after the Cultural Revolution, the party leadership tried to make the country grow, and to advance within the hierarchy they had collectively created.

There was, admittedly, one major flaw in the system of consensus leadership: It bred corruption.

If leaders were not constantly trying to displace each other, many were trying to make themselves rich.

As the party legitimacy grew because of economic gains felt by the whole society, it was very tempting for senior party members to enrich themselves.

And no one in the party leadership had much incentive to blow the whistle. The shame of corruption would have been spread among the entire elite, just like the credit for growth.

Much easier, safer and more profitable to stay silent about corruption, and to try to get a piece of the action.

Xi was ultimately able to exploit the structural problem of corruption to facilitate his rise and the destruction of the consensus system.

First, he drew attention to the public dissatisfaction with rising corruption. Then, he focused that frustration and even rage on particular party leaders whom he investigated, charged, tried and jailed.

The brilliance of Xi’s anti-corruption campaign was that all the people targeted really were corrupt. They were also Xi’s opponents or those he feared might become his opponents.

That was secondary from the standpoint of public relations, but primary from the view of those in the party leadership who feared they, too, might be targeted. There was no one in a position to stand up to the anti-corruption campaign, in large part because there was no one really senior who was wholly free of the taint.

The best argument in favour of Xi’s ascent to the status of dictator is that only a dictator would have the leverage to solve the corruption problem.

That might even be true. In many dictatorships, the only real corruption comes in the form of the dictator’s own theft. Sometimes, everyone else is too scared to steal in a big way.

But the downsides of dictatorship are well-known — and China now will face them all.

Dictators are bad at hearing diversity of opinion. And a single-partyline is particularly dangerous when an elite is trying to run an economy in a delicate world environment.

Dictators are prone to believing their own propaganda. That breeds overconfidence, overreach and poor decision-making.

Dictators have to spend a good deal of their time assuring that they remain in power.

That gives them the incentive to marginalise or jail or kill the most talented young politicians in their orbit. In contrast, the last several decades China has been able to draw on an extraordinary talent pool.

Most important of all, dictatorships are terrible at transition. Political stability is absolutely crucial to investment, both from within China and from the outside.

China’s decades of political stability have made the investment climate in the country highly attractive. That can’t continue indefinitely — especially not for anyone who worries about what will happen after Xi.

The experimental system of time-limited government was not perfect. But it created unprecedented stability in the middle of unprecedented economic growth.

It might still be reasonable to bet on China in the short term. But in the long run, wagers on its stability and growth should be revised downward. Dictatorship does not have a good track record, historically speaking. — Bloomberg

  • This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.