The Chairman Blinks Twice
On the campaign trail in 2000, George W. Bush, commenting on China’s future, noted “once a measure of economic freedom is permitted, a measure of political freedom will follow.”
Today, GOP China Hawks partly regard Bush as intolerably naïve. Former House Speaker Newt Gingrich, their intellectual leader, chides, we now know such hopes were “rooted in nothing more than fantasy.”
Yet in the past six months, we have seen at least two examples of a Chinese Communist Party (CCP) desperate for popular support.
First came Chairman Xi’s about-face on Covid lockdowns, which in China had reached the extreme of padlocking entire apartment buildings to keep the residents indoors regardless of any evidence of infection. When emergency vehicles could not get through for sick residents and people forbidden from going to shops started running out of food, riots ensued.
The first CCP reaction was predictable: arrests, police violence, and stricter confinement. Then after several weeks came a dramatic reversal: by the Chairman’s order the lockdowns were lifted, stores and offices and factories reopened, life began to return to normal.
For Xi, relenting was risky. Everyone in China would know he yielded to public pressure. Xi had clung fiercely and publicly to the lockdowns, which allowed him to brag about China’s allegedly low infection rate—probably faked—compared to countries taking less repressive measures.
Forced to back down, still he could not concede what everyone knew, that the CCP was terrified of the most serious public revolt since Tiananmen Square. Instead, ending the lockdowns was represented as a shift in priorities toward reviving the sagging Chinese economy.
Within months, that reversal precipitated another. Having proclaimed that economic growth was the new priority, the regime was dismayed to discover it was not happening on the scale hoped for.
In desperation, the government has announced a reversion to massive fiscal stimulus, spending on big infrastructure projects and encouraging real estate speculation it once condemned.
Significant is not only the government’s anxiety to appease a discontented populace, but the extent to which the fiscal stimulus reverses another cherished policy of the Chairman’s.
Xi’s chief weapon in consolidating power was his anti-corruption campaigns typically ending in the arrest, disgrace, and sometimes execution of his political opponents.
We don’t doubt corruption was rampant; government spending on infrastructure on the scale China pursued for decades guarantees massive fraud. Going back to big spending, Xi must know he is creating new opportunities for the corruption he made his bones opposing.
The obvious motive for this concession is that the regime is frantically fearful of popular discontent. Another, not unrelated, is that providing new opportunities for corruption might win Xi additional support in the provinces.
The Wall Street Journal reports increasing panic among local officials, including fears of provincial and municipal bankruptcies. Rake-offs on building projects would ease that problem as well as enriching the officials. And more corruption invites more prosecutions for corruption: another weapon to keep locals in line.
It should not surprise us that dictatorships crave public approval. Most such regimes have vigorous internal politics that sustain a coalition of sorts, keeping the leader in power. Waning public support can make it much harder to keep the coalition together.
Xi has long aspired to become a new Mao—or Stalin—and free himself from the need of such support. Yet even Mao never entirely succeeded making coalition-building unnecessary. In the wake of the Great Famine, he came close to being deposed by his colleagues. He responded with mass murder, evoking the cultural revolution which sidelined—or eliminated—his enemies.
Deng Xiaoping reacted to the greatest challenge against his rule by ordering the army to fire into a crowd of students, killing hundreds, perhaps thousands.
Xi has responded to his challenge not by mass murder, but by publicly reversing two of his most cherished policies. This also should not surprise. As more of the population becomes both personally prosperous and crucial to sustaining the economy, they inevitably gain political power, even if they lack institutionalized means of wielding it.
In always surprisingly decentralized China, the policies that brought about the Great Famine were enforced by a cadre of local officials, not very powerful, yet strong enough to bully starving peasants accustomed to feudal servitude.
Today across China, a growing bourgeoisie subsists in mutual dependence with the successors of those local officials. If the businessmen have much to fear from the officials, the officials have much to gain from the businessmen, including bribes and jobs for their children.
No regime could impose a Great Famine on China today and survive. Local officials depend on the prosperity and goodwill of the prospective victims.
One might observe even that “once a measure of economic freedom is permitted, a measure of political freedom will follow.”
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Of interest to tech investors
Did Micron’s anti-China lobbying provoke sanctions?
https://www.ft.com/content/7f3f3636-9639-4d45-8366-c12a982513c6
China’s ban on Micron memories seemed a little arbitrary. Maybe not.
More to the Micron story from Chinese TV:
Of course, the aggrieved Chinese media covered this story and, of course. U.S. media was uninterested.
AI is both accelerating demand for connectivity and helping to fulfill it.
Another example of why we believe the Microcosm is at an inflection point of explosive, self-generating growth.
How the cable guys will deliver 10 gigs to your home, cheaply, years before you will need it.
This story is from last year, but worth a look today. $200 per home passed for 10 Gbps! The telcos are so toast; but you knew that already.
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