China: Economic Development and Political Power

CHINA: ECONOMIC DEVELOPMENT AND POLITICAL POWER Jan S. Prybyla Xn the last several years, particularly since 1979, China's post-Mao leadership has recognized that economic modernization provides the surest foundation for national power. Of the "four modernizations" (agriculture, industry, science & technology, national defense), three are concerned with the economy and take priority over the military. Nevertheless , the military still absorbs a substantial portion of China's scarce resources—mostly advanced capital and high-level scientific and technological skills. China's promotion of national power through economic growth has a corollary among the Communist leadership—at least at the Politburo level: an increased understanding of the meaning of growth. The grossquantity -of-output approach (with output dominated by producer goods remotely, if at all, relevant to consumer welfare) has yielded to talk, and some action, about "better less, but better." Consumer well-being has been upgraded on the national agenda largely because the system of incentives collapsed during the old dispensation. As we shall see, there were unfortunate repercussions in labor and capital productivity and in per-capita incomes. It is useful to point out at the very beginning that the regime's new preoccupation with consumer well-being (which involves some free choice but no consumer sovereignty) has been forced on the leaders by a critical situation, particularly in the countryside. The case is Jan S. Prybyla is professor of economics at The Pennsylvania State University and has written numerous articles and books on centrally planned economies. His books include The Chinese Economy: Problems and Policies (1978 and 1981), Issues in Socialist Economic Modernization (1980), and the forthcoming Comparative Communist Economies. 45 46 SAIS REVIEW not unlike Lenin's New Economic Policy, which was adopted by the Soviet leader—against the grain of his beliefs—in the aftermath of War Communism . It remains to be seen whether the mild, paternalistic consumerism pursued since 1980 survives the doctrinal preconceptions and the systemic compulsion to generate steel and producer goods for producergoods industries through high investment rates. If China's consumeroriented attitude persists, will paternalism be replaced by consumer autonomy? Such a move would require a structural reform accompanied by a philosophical revolution—a complete reorganization of the economy and the system of prices and property. In addition to targeting the critical peasant sector, the new course reveals an unprecedented (since 1949) opening of the domestic economy to foreign capitalist contacts. In terms of the overall economy, however, the so-called open door isjust slightly ajar. But there is enough ofa draft to affect key segments of the economy (e.g., energy development). The opening of the door (which started with the Gang of Four, from 1973 to 1976) was not an enlightened act on the part of the crusty old Yenan and post-Yenan types now in charge. Like the new preoccupation with consumer satisfaction, internationalism was forced on the leaders by China's lagging science and technology sector, insufficient domestic innovation, and the prohibitive costs of inventing at home what had already been invented abroad. Many officials in China are unhappy about the capitalist fallout of the open door policy. Yet the policy is convenient from a cost-accounting standpoint and has been legitimated by no less an authority than Lenin. The relative pragmatism now prevailing in China is dictating that the revolving open door be exploited like any other dialectical opening (e.g., the uniting with the intellectuals, religious toleration). The contractual links forged with foreign businesses have terminal dates, and, besides, any unpleasantness arising from shutting the door can be handled when the time comes. That is part of pragmatism. In that sense, East European countries have been pragmatic vis-à-vis Western bankers and governments. I shall review the ramifications of China's approach to political power through strengthening the economy with planned consumerism and the open door. This exercise involves an appraisal of China's economic record of the past thirty years or so, the legacy ofachievements and shortcomings that comprise the present, and the options for future action. Finally, I shall address the impact of this new course on the East Asian free market countries and the United States. Enough statistical information is now available...