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ECONOMIC GROWTH AND GOVERNMENT LEGITIMACY IN CHINA

ECONOMIC GROWTH AND GOVERNMENT LEGITIMACY IN CHINA. NS3041:Comparative Economic Systems U.S. Naval Postgraduate School Maj Paul Mancinelli, USAF 2 March 2009. OVERVIEW. The Chinese Communist Party (CCP) has remained in power as result of explosive economic growth.

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ECONOMIC GROWTH AND GOVERNMENT LEGITIMACY IN CHINA

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  1. ECONOMIC GROWTH AND GOVERNMENT LEGITIMACYIN CHINA NS3041:Comparative Economic Systems U.S. Naval Postgraduate School Maj Paul Mancinelli, USAF 2 March 2009

  2. OVERVIEW The Chinese Communist Party (CCP) has remained in power as result of explosive economic growth. • Brief review of Marxism-Leninism • China under Mao • Deng’s “Socialism with Chinese characteristics” • Jiang’s “Three Represents” • Hu’s “Harmonious Society” • China today

  3. A BRIEF ON MARXISM-LENINISM • Societies evolve through stages characterized by their modes of production in their economic base. • These five stages are: • Primitive communism. • Slaveholding society. • Feudalism. • Capitalism. • Socialism/Communism. • Social, cultural, political aspects of society are derived from its material base. Therefore, the economy is the foundation upon which everything is shaped.

  4. CHINA UNDER MAO • Studied Marxist ideas at Beijing University. • Studied Stalin-era Soviet texts translated into Chinese • Never left China until 1949 • Emphasis on “Human will” over material conditions • Great Leap Forward (1958-61) • Cultural Revolution (1965-75) • THE BOTTOM LINE: Mao Inverted the basic tenets of Marxism • Believed society based on class struggle, not the economy • Rural vs urban focus Kenneth Lieberthal, Governing China, 2nd edition (WW Norton, 2004)

  5. THE GREAT LEAP FORWARD • Goal to develop rural-based industrialization • People’s communes, forced labor • Dormitories • Backyard furnaces • Industrial output grew initially, then fell • People forces to smelt all steel • Poor weather in 1960 • 1957-1960: Agricultural production declined 22.8 percent. • Grain consumption fell from 200 kgs per capita in 1958 to 156 kgs in 1960 • Pork 4.6 kgs per capita to 1.2 in 1960 • Worst famine in Chinese history • Quotas repeatedly adjusted upward due to inflated data • ~30 million die (official numbers) • PRC stops publishing economic statistics, 1960. • Weakens Mao politically, Tries to reassert power in Cultural Revolution • THE BOTTOM LINE: An economic disaster J. Barkley Rosser and Marina V. Rosser, Comparative Economics in a Transforming World Economy, Second Edition, MIT Press, 2004.

  6. THE CULTURAL REVOLUTION 1965-75 • Mao attempt to reassert dominance within CCP by fostering violence against party cadres • General anarchy • Old traditions discarded • Violence spiraled out of control, PLA needed to restore order • Crackdown resulted in banishment of Red guards to countryside, purge of high-ranking officials, including Deng Xiaoping • THE BOTTOM LINE: Completely delegitimized the communist ideology Naughton, Barry. The Chinese Economy: Transitions and Growth MIT Press, 2007

  7. DENG’S MARXISM-LENINISM • Takes over as paramount leader after Mao dies • Studied Marxism-Leninism in France and the USSR itself (early 1920s). • “It doesn’t matter if the cat is black or white, as long as it catches mice” quoted at end of GLF • Emphasis on economic modernization consistent with orthodox Marxism-Leninism. • Toleration of “capitalist” economic methods under framework of socialism's “initial stage” • Expanding “the forces of production and raising the people’s livelihood” as the CCP’s foremost task—no longer Mao’s emphasis on social transformation (“class struggle”). • December 1978: the 11th CC’s Third Plenum. • THE BOTTOM LINE:Deng was a devout Marxist. The current “long phase” of capitalism is only a stage on the way to socialism. Kenneth Lieberthal, Governing China, 2nd edition (WW Norton, 2004)

  8. SOCIALISM WITH “CHINESE CHARACTERISTICS” • Dissolution of planned economy and return to market economy • Agriculture • Decollectivization and return to family farming and open markets. Household Responsibility system • Industry • state-owned industrial enterprises into public corporations and rise of private enterprise. Township and Village Enterprises. • Reemergence of Private sector • Promotes international trade • 1979: Four “special economic zones”: Shenzhen, Shantou, Zhuhai, and Amoy. • 1985: 15 “coastal cities” get comparable privileges. • 1987: The “coastal policy.” • THE BOTTOM LINE:CCP has linked nationalistic economic growth with requisite CCP rule under a continued “socialist” facade Naughton, Barry. The Chinese Economy: Transitions and Growth MIT Press, 2007

  9. THE CCP HAS DELIVERED, BUT… • Average 9.5% GDP growth from 1978-2004 • 3rd Largest economy in the world (2nd based on PPP) • 100 million still live on less than $1 a day • Since 1979, 400 million people lifted out of poverty – most in history • Urban population grew from 17.9% in 1979 to 41.8% in 2004 • Chinese savings rates at 40% THE BOTTOM LINE: The 30 years since the 3rd Plenum have been China’s most stable in centuries. PRC trade volume: 1979-2005 Naughton, Barry. The Chinese Economy: Transitions and Growth MIT Press, 2007

  10. …THE COSTS ARE GROWING • Rising inequality • Gini coefficient in 1983 -- .28 • Gini coefficient in 2001 -- .45 • Cf. Japan .25, Germany .28, Mexico .55 • Rural-Urban migration ~ 150 million • Depend on remittances to grow interior • Hukou system – technically illegal • Environmental “Kuznets” curve? • Pollution costs estimated at 8% GDP • THE BOTTOM LINE: Increasing urban-rural split and environmental damage are the two greatest factors contributing to civil unrest. Naughton, Barry. The Chinese Economy: Transitions and Growth MIT Press, 2007

  11. THE “THREE REPRESENTS” • Jan-Feb 2000: Jiang talks during tour of Guangdong Province • The CCP should represent: • The demands of the advanced productive forces. • Advanced culture • The basic interests of China’s people. • A strategy of political co-optation in a changing society. • An attempt to broaden party base by authorizing party membership for elites: • Businessmen, entrepreneurs • Professionals • Technical elites • The wealthy • A “life and death” issue for the party’s survival and effective governing capacity • THE BOTTOM LINE: an attempt to head off the creation of an effective political opposition to CCP rule Jiang Zemin Shirk, Susan. China, Fragile Superpower. Oxford University Press. 2007.

  12. THE “HARMONIOUS SOCIETY” • “People-centered” governance—a more balanced approach to economic growth that takes account of its social consequences. • Policies that moderate the social tensions • Promoting a “scientific” development concept Hu Jintao • THE BOTTOM LINE: The CCP is active in monitoring and mitigating the social instability being caused by growth– a democratic feedback loop Beijing skyline 1 week before the Olympics Miller, Alice. “China’s New Party Leadership,” China Leadership Monitor, No.23, http://www.hoover.org/publications/clm/issues/14128727.html

  13. CCP INSECURITY • CCP believes rapid economic growth necessary to prevent massive unemployment and labor unrest • CCP figures 7% growth required to prevent unrest (about 9 million jobs/year) • “Mass incidents” (over 100 people) tracked by CCP up from 8,700 in 1993 to 74,000 in 2004 • THE BOTTOM LINE: “The greatest political risk to China’s leaders is the possibility of an economic crash that sheds millions of jobs” –Susan Shirk, 2007 Shirk, Susan. China, Fragile Superpower. Oxford University Press. 2007.

  14. THE LATEST NEWS • About 20 million Chinese rural migrant workers, or 15 percent of the country's total, have lost their jobs as the nation's growth has faltered in a global economic slump. --The People’s Daily • “China's economic growth in 2009 could be worse than expected” – The Economist • “Global recession is hitting China’s workers hard” – The Economist • “China's annual GDP growth falls to 6.8%. How much worse can it get? ” – The Economist • “China exports fall at fastest rate in 10 years, social unrest grows” --International Business Times • The Chinese Academy of Social Sciences warned recently that urban unemployment reached 9.4% between May and September of last year. In December, President Hu Jintao announced that China's employment situation in 2009 will be "extremely grim." --Time http://www.economist.com http://english.people.com.cn/90001/90776/90882/6601152.html http://www.time.com/time/world/article/0,8599,1868667,00.html http://www.ibtimes.co.in/articles/20090114/china-exports-factory-closures-layoffs-trade.htm

  15. WHAT TO WATCH • Impact of China’s $586 billion stimulus • Statements by Chinese leaders blaming US for economic crisis • In the past in China, mass uprisings have occurred on ANNIVERSARIES: • June 4th 2009 -Tiananmen massacre 20th • March 10th 2009 - 50th anniversary Dalai Lama’s flight into exile in India. • July 22nd 2009 – 10th anniversary Falun Gong banning • October 1st 2009 – 60 years of Communist Party rule • December 2009 – 30th anniversary of the end of “Democracy Wall” movement • THE BOTTOM LINE: When things go bad in China, the CCP cannot be voted out. 2009 could be exciting. • BUT, don’t conflate “regime change” necessarily with democratization. http://www.economist.com/displayStory.cfm?story_id=12932214

  16. QUESTIONS?

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