Iron Fist Economics

Posted January 2, 2007

Categories: Articles

Capitalism and democracy go together like … like what? Peanut butter and jelly? Or a fish and a bicycle?

The leaders in Beijing are happy to eat their peanut butter sandwiches without jelly. Since launching economic reforms in the late 1970s, the Chinese government has promoted rapid economic growth but without much in the way of political liberalization. The Communist Party remains in charge, the state is still involved in the economy (though perhaps less so than in France), and the leadership argues that chaos would result from the introduction of a multiparty system.

Look at Russia, urge the proponents of the Beijing model. Under Yeltsin, Moscow tried to introduce markets and elections at the same time. See what happened? The country practically imploded. Gross Domestic Product, the standard of living, and life expectancy plummeted because Russia foolishly heeded the advice of Washington neo-liberals.

Sure, there are lots of shades of grey between Beijing and Washington: Europe’s social democracies, Japan’s managed capitalism, and the various alternatives being explored in Latin America. And despite the insistence of the late Milton Friedman and Francis Fukuyama, the relationship between market economics and democratic practice is far from a settled question. Would China’s economy grow more rapidly or more equitably if the Communist Party suddenly held elections? Why do transnational corporations, which speak so highly of democracy at home, so often search out democracy-free countries to build their factories? If the leading industrialized countries are so enamored of democracy, why don’t they inject more of it into the World Bank and International Monetary Fund?

The sad truth is that in both China and the United States—and many places in between—democracy is often seen as a pesky obstacle to “getting the job done.” Iron-fist economics appeals to dictators and CEOs alike.

On this topic of the market and/or democracy, FPIF has an embarrassment of riches. Democracy, FPIF columnist Walden Bello argues, has already helped to slow down the spread of unfettered markets through globalization. It’s but one of several reasons why globalization has hit its high-water mark and begun to recede. Sam Pizzigati provides some additional statistics to demonstrate that globalization has helped the few, not the many, and international financial institutions govern on behalf of a global wealthy elite. And Dave Ranney shows in detail how McDonald’s has needed McDonnell Douglas: the U.S. military has been a key element in promoting the U.S. economic agenda. Talk about iron fists!

China v. Taiwan

For a brief period, after the one launched economic reforms and before the other transformed its political system, Beijing and Taipei saw eye to eye on the market/democracy nexus. If it hadn’t been for pesky geopolitics, the Taiwan Straits issue might have been resolved in the early 1980s by the two market-oriented authoritarian regimes. But when a democracy movement unseated the Kuomintang in Taiwan, the terms of debate shifted. Democratic ferment brought to the surface a new, grassroots push for Taiwanese independence.

In the third installment of FPIF’s China Focus, Fei-Ling Wang argues that China’s hope for democratization is to unify with Taiwan. Beijing has long wanted to absorb the island and its thriving economy, and has long put off substantial political reform. Imagine what would happen if all the feisty Taiwanese were suddenly let loose on the mainland? “Taiwan’s role of catalyst is especially valuable given that Beijing now seems to be lacking both the appetite and the stamina to engineer its own democratization,” Wang argues.

Ian Williams disagrees. “According to modern international practice and the principles of democracy, the Taiwanese do indeed have the right to ‘declare’ what is manifestly already true: that they are an independent, sovereign state,” he writes. “It is also clear that the Taiwanese, on the political level, do not want to be ruled by Beijing.” The articles by Williams and Wang, by the way, have generated quite a heated debate in their respective comments sections.

On one issue related to political economy, the Chinese government has proposed some important changes—only to be overruled by U.S. and European corporations. As Tim Costello, Brendan Smith, and Jeremy Brecher point out in “Labor Rights in China,” transnational corporations have organized to oppose a new Chinese law that would improve the wages, treatment, and health and safety of Chinese workers. The corporations don’t want to pay their workers more—in China or elsewhere. “The ability to hire cheap labor in China has put downward pressure on wages and workers’ conditions around the globe,” Costello, Smith, and Brecher write. “China plays a key role in setting global wage norms.” Check out the 60-Second Expert version here.

Vietnam and Laos

Like China, Vietnam has ignored the prescriptions of the “Washington consensus” and profited by its stubbornness. “In addition to maintaining a large state sector in the economy, Vietnam has resisted capital liberalization and proceeded cautiously on trade liberalization,” writes Andrew Wells-Dang in the new FPIF strategic dialogue on economic development in the Mekong region. “The results have been mixed: excellent at head-count poverty reduction, good in education and health, less good on labor and welfare, and poor on corruption and waste. Some of Vietnam’s growth has been sustainable and productive, but both the state and foreign-invested sectors have also squandered resources on low-quality projects.”

The Lao experience by contrast, Ronald Bruce St John writes, “suggests real limits to a development model that combines single party rule with market economics.” The country has survived on foreign borrowing and limited economic reform. Significant political reform, St John writes, is what’s necessary: “Although the Communist Party has used economic performance to retain governing legitimacy for over three decades, this development model has real limits, as the experience in Vietnam and elsewhere suggests. At some point, increased respect for human rights and religious freedoms, in conjunction with real democratic reforms, are certain to become a precondition for Party survival.”

Does economic development go hand in hand with authoritarian politics in the Mekong region? Is democratization necessary to ensure more equitable development and less government corruption? Andrew Wells-Dang and Ronald Bruce St John respond to each other’s arguments in a “Dialogue on Laos and Vietnam.” For a glimpse into the much broader region of the Mekong River, check out my review of a new book from Inter Press Service.

Meanwhile, elsewhere in Asia, has democracy broken out in the fairy-tale kingdom of Bhutan? Not yet, warns Murari Sharma. Although the king has pledged to introduce political changes, he hasn’t made any plans for the over 100,000 Bhutanese refugees now living in Nepal, many of whom left their country because of political crackdowns.

In Sri Lanka, the tsunami is still claiming victims two years later. As James Ross points out, “many tsunami survivors are still homeless, still dying, and still searching for safer ground. They are not fleeing the sudden onrush of a massive wave, but the armed conflict that has engulfed this island nation once again after more than four years of relative peace. Many survivors are victims yet again.”

Saddam, Ford, Ike

FPIF’s Middle East editor Stephen Zunes reflects on three very different figures this week. Saddam Hussein was a thoroughly reprehensible fellow, but his record of atrocities shouldn’t blind us to the flaws in his trial, sentencing, and execution. Gerald Ford, meanwhile, was a thoroughly likable fellow, but his nice-guy charm shouldn’t distract us from scrutinizing his atrocious foreign policy record. And Dwight Eisenhower was an architect of many enduring Cold War institutions, but this record shouldn’t detract from his excellent judgment in the Suez Crisis of 50 years ago.

If you’re already nostalgic for your holiday eggnog, check out this Fiesta piece on the political and economic history of rum by Ian Williams. If you’re nostalgic for the early days of FPIF, check out Erik Leaver’s reflections on the first ten years.

By the way, it’s never too late to contribute to FPIF. If you’ve gotten this far in the overstuffed New Year’s edition of World Beat, you’re clearly getting something out of FPIF. Go here to give something back.

FPIF, January 3, 2007

Leave a comment

Your email address will not be published. Required fields are marked *