Did Rejecting Political Reform Help China Achieve Economic Prosperity?

Taking the Long View of the Global Economy
June 4 2014 4:38 PM

In the Context of No Context

We can’t understand Tiananmen Square if we don’t understand the lethal chaos of the century that preceded it.

Xi Jinping.
China's President Xi Jinping.

Photo by Jason Lee-Pool/Getty Images

Twenty-five years ago, China made a choice. Rather than embrace the demands for greater political openness emanating from the students and protesters camped in Beijing’s Tiananmen Square, the leadership of the Communist Party decided to crush the protests with lethal force on June 4, 1989, leading to hundreds and perhaps thousands of deaths.

Zachary Karabell Zachary Karabell

Zachary Karabell is an author, money manager, and commentator. His most recent book is The Leading Indicators: A Short History of the Numbers That Rule Our World.

That was not the end of the story, however. The Chinese then embarked on a hyper-charged policy of economic liberalization, culminating in arguably the fastest, most transformative period of economic growth the world has ever seen. China’s economy overall has become the second largest in the world by most calculations, and the incomes and living standards of hundreds of millions of people have risen precipitously, as income per capita has gone from less than $500 in 1989 to more than $6,500 today.*

The lens in the West and for much of the world is that all the economic success of China in the past 25 years has been tainted indelibly by the violent repression of the Tiananmen protests and the subsequent political repression that continues today. Many have noted in recent days that China’s culture of harsh political control stifles dissent more than ever, by imprisoning those who challenge the system and by controlling what is said and disseminated online and in public. (As Max Fisher pointed out in Vox today, just 15 in 100 Chinese university students recognize the iconic “tank man” photograph from the 1989 protests.) On these scores, there can be little disagreement.

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The real-world reality—fueled first by Deng Xiaoping and then by his successors Jiang Zemin, Hu Jintao, and now Xi Jinping—is that political repression went hand-in-hand with rapid and relentless economic liberalization, driven by the state with the ultimate aim of empowering and enriching hundreds of millions of Chinese citizens. Is that trade-off truly unacceptable because it was coupled with such egregious acts of violence and repression?

Obviously, this is not an either/or scenario. That said, my own views have evolved over the past two decades. As a graduate student, I marched in Oxford in early June 1989 to protest the clearing of the square and the killings. I saw the issue then as many did: an act of political violence designed to keep a small clique in power.

Since then, however, I have learned more, and find that the story isn’t quite that simple. The chaos and instability that characterized China from the late 19th century through the late 1970s is truly mind-boggling. Decade after decade of war, civil war, invasion, forced collectivization, famine, and political terror had seen the deaths of literally hundreds of millions over that century. Some of that violence stemmed from outside forces: western armies during the Boxer Rebellion, Japanese forces during the 1930s and ’40s. Much of the violence was between various factions in China, or took the form of terror and slaughter under Mao’s government.

The result, by 1989, was a terribly impoverished country that had just begun to stabilize based on the economic reform experiments initiated by Deng Xiaoping in a few select regions. The decision in 1989 to crush the student protesters happened in the context of that century of lethal chaos. It happened out of a determination not to enter yet another cycle through a revolutionary upheaval like those occurring in Eastern Europe and the Soviet Union at the time.

This is not to justify the violence, any more than it is to justify any other country’s troubled history of using brutal force to carve out a stable polity. It is, however, to recognize that what happened at Tiananmen is part of a larger story.

On several levels, China’s path poses a challenge to a particular vision of both economic development and human rights. In 1989, the “Washington consensus”—embraced by not just the U.S. government but by the World Bank, the IMF, and most development groups—held that the most viable path to economic growth and stability was to open up an economic system to international trade and capital flows and finance, and to reduce the interventionist role of the state. Those policies were then implemented in Latin America, the former states of the Soviet Union, and elsewhere, with some instances of success in Latin America and with highly destructive consequences in Russia.

China rejected that vision, and pursued instead a state-driven policy that kept currency and international capital under tight state control along with state-owned enterprises driving development. It thus avoided the fate of Russia, which embraced (or was forced to embrace) the Washington Consensus and saw a near-total economic collapse in the 1990s. At the same time, China rejected as well the demands from the West that it take a less harsh approach to political dissent, democracy, and free expression.

Even there, however, China has posed a challenge. The Universal Declaration of Human Rights issued in 1948 included economic rights as a key component. Even more telling, the U.N. Charter established an Economic and Social Council thought to be nearly on par with the Security Council in guaranteeing basic rights that were seen as key to international peace. The Chinese leadership honored those elements of human rights more than many societies, even as they refuse to honor the political dimension that has been such a focus in the West.

In electing to pursue economic reform while closing the door on political openness, the Chinese leadership made a choice that has led to China’s present prosperity. No, that choice did not necessitate clearing the square in June 1989 with soldiers and tanks. Nor did it require killing protestors. Deng had already begun his policy of economic opening in the mid 1980s, albeit in very limited areas. But to focus only on that violence and not its twin—massive and transformation economic reform—is to tell only one part of a vital and challenging story.

Now, the leadership is again engaged in serious efforts to move the economy away from sclerotic state-owned industries and policies that rely on exports and infrastructure; they wish to move instead to an economic model built on the domestic economic power of hundreds of millions of middle-class Chinese while adding hundreds of millions more to the ranks. The Chinese under Xi Jinping have decided to push forward financial liberalization, banking reform, health care reform, and urban reform. Freedom of expression and democracy remain low on that list.

The economic reforms of the mid 1980s were controversial and limited. By the mid 1990s, they were ubiquitous and extensive. Deng consolidated power with the conviction that unless ordinary Chinese saw a path forward to improve their lives, Tiananmen would be only the beginning of a new revolution that had a decent chance of descending yet again into chaos.

There were, of course, many other paths available to the government to deal with the Tiananmen Square protests—paths that would not have led to massacre. But condemning what happened on June 4, 1989 without a sense of the political context and the latticework of choices that it represented does not move the needle of understanding. Tiananmen was a pivotal point in Chinese history that saw an end to a long century of violence. What followed was a 25-year period of unparalleled growth, increasing prosperity, and economic freedom for vast millions. It is a messy, lamentable legacy for sure, but so is much of human history.

Correction, June 5, 2014: This article originally misstated that income per capita in China is more than $3,500 today. It is more than $6,500.

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