Since the end of the 1970s, the People’s Republic of China (PRC) has achieved striking economic progress as it has gone about the task of reforming state socialism. Can this progress help the communist regime to retain power over the next decade, and even display to the world the miraculous spectacle of a communist government saved by economic liberalization?
The expectations of the regime and of Western observers have always been at variance. While many Westerners believe that economic reform must ultimately lead to a market economy and a democratic polity, the leadership in Beijing anticipates that such reform will actually strengthen the hegemony of the communist regime. Indeed, even intellectuals and new entrepreneurs now tend to accept the idea—very effectively sold by the Chinese Communist Party (CCP)—that there can be no prosperity and no stability without CCP leadership. Can this be true? Is democracy unnecessary for progress in China?
The limited and unbalanced reform strategy adopted in 1979 provided for the “marketization” of rural economic life and the decentralization of state socialism in the cities. Economic performance improved markedly, strengthening the regime’s grip on power. It is crucial, however, to grasp the huge institutional gap that opened between rural and urban China in the 1960s and 1970s if one hopes to understand the course and outcome of this reform strategy. Before reform, standard-issue socialism existed only in urban China: city dwellers got lifetime jobs and welfare benefits through the public sector. In rural areas, the government exerted strict control over daily life through the People’s Commune system, but neither job opportunities nor social-welfare benefits were part of the [End Page 6] deal. Peasants, deprived of both political and economic liberty, were simply left to occupy the lowest rung of a regime-constructed “caste” hierarchy, a real irony in a society whose ruling party-state rests its legitimacy on its leadership of a revolution “for the people.”
Currently, urban society is dominated by the public sector, which comprises hundreds of thousands of state-owned “working units” (danwei). These units not only produce goods and services, but also distribute a vast range of “cradle-to-grave” welfare services and shape the political attitudes and behavior of their employees. Thus employees and their families depend heavily on a politicized network run by the party-state. Urban dwellers enjoy little or no political freedom, but do receive a guaranteed basic living.
In the countryside, by contrast, peasants gained economic freedom but lost nothing when reform released them from strict economic and social controls and set off a rush to embrace the market economy. Agricultural productivity shot up, and a nonpublic rural industrial sector blossomed.
Such an outcome cannot be duplicated in the cities, where 85 to 90 percent of the populace depends directly on the state sector for jobs and welfare. The urbanites’ response to economic reform has been far more ambivalent than the peasantry’s. City folks welcome the new opportunities opened up by limited economic liberalization, but fear damage to their vested interests as well. This fear redounds to the advantage of the regime, of course, since it can offer welfare benefits in exchange for political compliance.
This explains why the regime, despite its two-decade-old advocacy of economic reform, has in recent years been reluctant to promote thoroughgoing public-sector reform. Limited reform must be conceded in order to satisfy the escalating demands of the urban dwellers, but to go farther would threaten the economic instruments of political control and with them the supremacy of the CCP. The limited reform carried out to date has failed to liberate state employees and has done little to boost productivity in the public sector, which remains sluggish.
This strategy, which CCP chairman Jiang Zemin matter-of-factly calls “the buying of political stability,” was tried by the Soviet Union and some of its East European satellites during the Brezhnev era. To maintain the subordination of its subjects, the regime must devote more and more state resources to the satisfaction of increasing popular demands; these resources cannot be replenished, however, because the performance of the public sector continues to...