The rise of China, Part II: the Party.

In part I, I discussed the general geo-political situation that we are moving towards in the coming decades, which is a world in which China will be the single most powerful country for a long time, constrained by a more diffuse West that is nevertheless wealthier and more populated, as well as large regional neighbours with little innate affinity for China. It seemed likely that China will become a regular member of the world community, interested in international cooperation where-ever possible. The one cloud on the horizon is its internal politics, which may yet drive it to war with neighbours over territory and civil unrest.

Surely not, I hear you object right at the outset. Would China really jeopardise a growing economy and its primary place in the world for the sake of internal politics?

This mindset, though understandable, is unfortunately wrong. China has known many instances of ambitious politicians completely wrecking the country in a fight with internal rivals. Politics in China is much more brutal than in a democracy and the mass mobilisation of the population for projects that are really not in China’s interest is all too normal in its history.

Mao Zedong’s Great Leap Forward, as well as the Cultural Revolution in the 1970s are perfect examples of this self-destructive behaviour. The Great Leap Forward was foremost about Mao’s attempt to get greater control over the Party and the country by means of mass mobilisation towards one of the figments of his imagination. It cost the country up to 30 million deaths and a major economic slide-back, but it worked for him politically. He was more firmly in charge afterwards than before, having side-lined his opponents.

The Cultural Revolution was started for the same reason: by factions within the Communist party trying to oust others. Hence young people were mobilised to harass, shame, and marginalise other party members. Whole cohorts of children of ‘losing’ party members were sent to the countryside for ‘re-education’. And there was not much other motive than internal politics.

Going back before the dominance of the Communist Party, China has seen civil wars on a scale almost unknown in the west (perhaps with the exception of the 30-year war). And in many cases, fault lines within the ruling elite were directly involved. The An Shi Rebellion in the 7th century, in which large parts of the population rose up against an extremely ineffective and atrophied imperial bureaucracy, led by ambitious elements that came from that very bureaucracy, is proportionally probably the most devastating single conflict the world has ever recorded. It is followed closely in devastation by the Chinese internal civil war in the 19th century, which itself involved around 20 million deaths but was followed by a famine that may have cost it up to 100 million people. That was the conflict that was the direct cause of the waves of Chinese migrants that then came to Australia, the US, and elsewhere (yes, you read it right: a hundred million). Interestingly, that conflict (The Taiping Rebellion) involved ambitious imperial bureaucrats and would-be bureaucrats (those who learned for the exams) joining a small nationalist Han-based rebellion.

So yes, Chinese history has known internal struggles involving factions within the bureaucracy having a devastating effect on China itself, as well as its neighbours. Internal politics in China matters for how it deals with its neighbours and is one of the big unknowns in the next 100 years.

To focus the mind on the present, let us talk about two important aspects of internal Chinese strife: conflicts within the bureaucracy and conflicts with capitalists. The former is certainly more important in the short run, but the latter is also on the horizon. In this essay I will only talk about the bureaucracy, and leave the capitalist issue for the next one.

To set the scene for an analysis, a quick primer on the bureaucracy and the Communist Party is useful. By necessity I will talk in broad terms so will gloss over a lot of detail.

The Chinese bureaucracy is ancient and has over the many centuries completely wiped out all other political opposition. As a matter of course, it has suppressed organised religions, overly wealthy individuals, separatist ideologies, sectarian identities, alternative ideologies, etc. Whilst countries in the rest of the world are full of competing loyalties, this struggle has long been won by a single entity in China: the imperial bureaucracy. It dominates everything. From how people marry, to the importance of education, to everyday manners and language. Hence a Westerner looking at China and expecting to see a civic society and independent business organisations will be sadly disappointed. Everything you see, the bureaucracy watches and controls.

Yet, the Chinese bureaucracy is huge, and it is controlled by an equally large Communist Party. Indeed, the bureaucracy and the Party are for most purposes one and the same. The Communist Party has around 80 million members and includes all the senior bureaucrats, nearly all the senior businessmen, and all the ambitious politicians. It has officials cells inside every business over 100 people.

Yet, apart from the goal of controlling everything outside the party, the Communist Party is not a united front with a single will. How could it be with more members than the entire population of Chile or of the UK ? There are thus factions that mainly run on regional lines – the Beijing faction, the Shanghai faction, provincial factions, etc. These factions vie for control by means of appointments to the politburo of the Communist Party, as well as all the top ministerial posts.

How do factions arise and sustain themselves? You should essentially see factions within the Communist Party as competing entrepreneurial unions of members. They are regionally based only because they make their money by means of local taxation. Hence their relative power is determined by how wealthy their region is and how much of that wealth they manage to tap into. Beijing matters less because it is wealthy itself, but more because it controls central taxation. Shanghai matters not because it has central taxation but because it is the biggest commercial center in the wealthiest region of China. This wealth is held by individual Party members as well as via their collective. Factions have richer sub-groups as well as poorer foot-soldiers. This wealth is mainly obtained by means of networking and family members who are businessmen, meaning that it is both derivative of political influence and instrumental in keeping that influence – it is a symbiotic relationship. In the long-run, the Party lives off the wealth created by business, but it is in the short and medium run the main conduit for easy economic success as well as its political patron.

It is in the internal battle of influence between and within the factions that foreign and domestic policy is decided upon. The main reason China is now growing so quickly is because local growth is the main vehicle for increased wealth of local Party members and increased influence of their regional faction. Outsiders who think it is due to some brilliant deliberate policy cooked up in the center overestimate what the center can do in China. In the last 30 years, the center mainly reacts to and approves regional initiatives, but does not pro-actively come up with much of anything. The last 15 years or so has seen the center trying to regain the power it gave up after Deng Xiaoping, but the regional factions have so far successfully resisted and many new laws coming from the center are ignored. This tugging between center and regions has a long ancestry in China. As the Chinese say, ‘The emperor is far away’.

What should one expect of these power struggles in the coming decades? Well, one should expect them to heat up. In the last 30 years or so the struggles have been deceptively peaceful as all factions have mainly focused on local growth so as to personally and collectively gain wealth and influence. As the growth spurt comes to an end in about 20 years or so, more combative fixed-pie politics will again resume if there are no internal reforms.

Is this danger not recognised within the Party and are there no moves to come to a more permanent conflict-resolution model?

Yes, the danger is well-recognised and fiercely debated within the Party. The obvious solution is for the Party to become an internal democracy – that is to have conflicts between individuals and factions resolved by means of democratic voting within the Party. Reducing conflicts is one the main points of democracy. Within this scenario, as more of the population is then let into the Party, the internal democratic politics of the Party effectively becomes the democratic politics of China.

This solution is acknowledged, mulled over, and even openly advocated by some of the old Party guard, but there is an important barrier. Whichever faction is temporarily more important has an obvious incentive not to dilute its own power by means of democratisation. It is always hence the group in charge that is the one group that doesn’t want to democratise the Party but have an appointment system based on current networks of influence and the current allocation of major posts. The current system of having relatively young leaders groomed to take over 5 years before they do, is just the latest in a long line of technocratic attempts for the most powerful factions to keep control and pretend this does not lead to increased internal tensions.

The usual historical solution to the issue of ‘democracy, yes, but not in my time’ is to have a very slow democratisation process that simultaneously buys out those currently in power. That is more or less what happened in Europe where the industrial/business elite bought out the kings and nobility of old.

However, the problem in China is that its internal politics is a winner-takes-all set-up. It does not have a mechanism to buy out those currently in power. There is no-one who can credibly make the deal and no-one who would enforce it later on. While in Europe, there was the option of guaranteeing power and influence to the kings and nobility via constitutions, property rights, and parliaments, there are no such mechanisms in China. They have all long been destroyed by the bureaucracy. Property rights only exist as networks of influence within the bureaucracy and the Party, and constitutions are worth nothing if not supported by current factions within the Party. So if you lose in China, you lose everything, quite possibly your life. This gives Party members a pretty strong incentive not to lose.

Hence the road to internal reforms must first of all create some notion of outside guarantees via which to be able to bribe the currently powerful into accepting slow internal conflict-resolution reforms. But those outside guarantees only work if the power if the Party would be lessened, which is something that would go against the interest of each individual faction and completely against the current political tide in China, where the Party is only appropriating more control, not losing it.

The Party is thus stuck in a chicken-and-egg problem where its total dominance leaves it without a third party to arbitrate internal problems. One might naively think that the remaining solution then is the road of very slow reforms, in which only regions and layers without much political power democratise and adopt other conflict-resolution institutions. As more of the rank-and-file of the Party experience democratic conflict resolution, the resistance to adopting it in places that do not yet matter would then reduce.

This is to some degree what is happening. At local levels (villages, small cities) there is increasing use of democratic principles to resolve conflicts between different Party members. There is a very gradual up-scaling of this.

Yet, this process is easily reversed and there are perfectly selfish reasons to do so. Regional power brokers can help their own sub-group by un-doing local democratic reforms and simply putting their friends in charge of villages and small towns. This too happens frequently.

Therefore, to be blunt, one should not expect internal Party democratisations to happen without real external pressure. It will need a strong within-China reason for the Party to accept continuing internal democratisation for its own internal dynamics do not lead to it.

Without an emerging within-China-reason, what would this mean for the rest of the world? Well, you should then expect real trouble. For as soon as the easier growth pickings run out, local factions and entrepreneurs will start looking for foreign conflicts to increase their internal standing. We can already see a bit of this in the current conflicts with Japan over some puny islands: the factions in charge can’t be seen to back down.

But I do in fact believe that internal China-pressure will occur in the form of the emerging capitalist class, despite the fact that the capitalists there are nearly all Party members and the Party now has cells inside every major business. That is a topic for the final essay.

Author: paulfrijters

Professor of Wellbeing and Economics at the London School of Economics, Centre for Economic Performance

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