Fellow Studies How China's Capitalists are Turning Red
Wilson Center Fellow Bruce Dickson is writing a book about how the Communist Party in China has managed to retain power while the country moves in a seemingly contradictory direction— toward a market economy.
How does a country liberalize its economy when its government ideologically opposes modernity? Yet China is doing just that, and Wilson Center Fellow Bruce Dickson is researching how the Communist Party has managed to retain power there while the country moves toward a market-oriented, technologically advanced society.
A few years ago, private enterprises could not secure bank loans or export licenses. Businessmen had to bond with officials to get any support.
"Some 15 years ago, the private sector in China was relatively insignificant," said Dickson. "Now, there are more than four million privately owned enterprises and the private sector is now a source of new jobs, economic growth, and tax revenue."
These days, the Communist Party and the private sector cooperate closely. "To get promoted, local officials have to show above average economic growth," said Dickson. "Private firms produce that growth, offering a strong incentive for the government to cooperate." In effect, the Communist Party is using its relationship with the private sector to remain in power and to prevent political pressure from mounting among the rapidly growing middle class and business entrepreneurs.
There is, however, resistance among some officials who oppose the privatization of state assets, and this controversy has prevented the proper infrastructure and legal safeguards from being established. For example, a proposed law to protect property rights, he said, "mimicked the Western notion of property without accounting for the communist nature of China. But to make China's economy more stable, better protection is needed or predatory officials could extort and confiscate from businessmen."
In addition to ideological objections, some officials oppose the methods in which private sector protections would be implemented. Privatization has created an unequal playing field, he said, "but it is supposed to increase competition, not collusion."
Labor-intensive industries from food processing to textiles are particularly thriving under private ownership. But the state still keeps a firm grasp on energy, telecommunications, banking, and strategic industries that it deems in its national security. The state also holds a monopoly on agriculture. Interestingly, there are a growing number of "red capitalists" in China—entrepreneurs who are members of the Party.
China's economic modernization is occurring without a parallel political process, based on the premise that the failed Russian model showed political reform should be introduced only after the economy is stable.
"There's a general expectation that if China modernizes its economy, the country would progress politically," said Dickson. But, he said, the assumption that a developed market economy would result in a democratic government is wrong. Economic development leading to political change "assumes that private entrepreneurs have policy preferences that are different from the status quo, and that's not true in China." In fact, the Communist Party is active in the process, integrating entrepreneurs into political institutions. He said, entrepreneurs and the Party "favor increasing economic reform, but are not interested in democracy."
Dickson, a George Washington University professor, is working on his second book on integrating wealth and power in China. This book is a follow-up to his 2003 work, Red Capitalists in China. Both are based on original survey data.
