CAN MODI CONQUER THE DRAGON?
Posted on 2015-04-16 21:13:46
Ever since the sudden collapse of Soviet Union in the very early 90’s, there has been a large community of futurologists and political commentators who have tried with varying degrees of failure to predict the imminent breakdown of the only other remaining communist superpower, China. The inherent problem with such predictions is that no one can accurately time their assumptions about authoritarian regimes because of fundamental lack of political metrics in order to understand internal changes unlike say in democratic setups with cyclical electoral processes. As for an eventual Chinese Communist meltdown, it is not a question of “if” but a question of “when”.
This month, the western world’s foremost Sinologist, Dr David Shambaugh, presented a simplistically controversial and yet the most significant paper on China in recent times – what I believe is the most insightful political hypothesis to have emerged since Huntington’s “Clash of Civilizations” in the early 90’s.
“Xi Jinping is determined to avoid becoming the Mikhail Gorbachev of China, presiding over the party’s collapse. But instead of being the antithesis of Mr. Gorbachev, Mr. Xi may well wind up having the same effect… In the decades since the collapse of the Soviet Union, the upper reaches of China’s leadership have been obsessed with the fall of its fellow communist giant. Hundreds of Chinese post-mortem analyses have dissected the causes of the Soviet disintegration.
Mr. Xi’s real “China Dream” has been to avoid the Soviet nightmare. Just a few months into his tenure, he gave a telling internal speech ruing the Soviet Union’s demise and bemoaning Mr. Gorbachev’s betrayals, arguing that Moscow had lacked a “real man” to stand up to its reformist last leader. Mr. Xi’s wave of repression today is meant to be the opposite of Mr. Gorbachev’s perestroika and glasnost. Instead of opening up, Mr. Xi is doubling down on controls over dissenters, the economy and even rivals within the party.
But reaction and repression aren’t Mr. Xi’s only option. His predecessors, Jiang Zemin and Hu Jintao drew very different lessons from the Soviet collapse. From 2000 to 2008, they instituted policies intended to open up the system with carefully limited political reforms.”
Thus writes Dr David Shambaugh, who, it must be stressed, has always been a pragmatist often rejecting claims of other sinologists about the imminent collapse of China in the past. So what is it that has changed now for Dr Shambaugh to conclude that “the end game of Communist rule in China has begun”? He has given five lucid reasons for his hypothesis. The first four reasons – although very valid – are essentially socio-political in nature. It is the fifth and final point that is of significant importance. After all it is the economy, stupid!
“China’s economy — for all the Western views of it as an unstoppable juggernaut — is stuck in a series of systemic traps from which there is no easy exit. In November 2013, Mr. Xi presided over the party’s Third Plenum, which unveiled a huge package of proposed economic reforms, but so far, they are sputtering on the launchpad. Yes, consumer spending has been rising, red tape has been reduced, and some fiscal reforms have been introduced, but overall, Mr. Xi’s ambitious goals have been stillborn. The reform package challenges powerful, deeply entrenched interest groups — such as state-owned enterprises and local party cadres — and they are plainly blocking its implementation.”
This is the surest symptom of an authoritarian regime’s imminent sudden collapse. Even as late as 1989 when the Eastern-European block was disintegrating and the German wall was all but collapsing, not many political commentators believed that the end of the Soviet empire was in sight. When the August coup of 1991 happened and a certain Boris Yeltsin climbed on a tank in Moscow to put an end to communism as we knew it in the 20thcentury (Chinese Communism is hardly a distant replica of merely pure authoritarianism), the whole world was taken aback by the sheer abruptness of its end. Even the omnipresent CIA was clueless about the Soviet collapse almost entirely because it missed the systemic traps that the Russian economy had created for itself.
Similarly, in recent times, as we have seen in the suddenness of many deeply entrenched authoritarian regimes collapsing in what has since been termed as the “Arab Spring”, the endgame is almost always unexpectedly, brutally quick.
China may not be the classic case of an authoritarian ending. “Communist rule in China is unlikely to end quietly. A single event is unlikely to trigger a peaceful implosion of the regime. Its demise is likely to be protracted, messy and violent” warns David Shambuagh. This is why the fifth reason assumes significance. At the heart of the imminent endgame of Chinese communism is going to be the economy and nothing but the economy.
Communist China had a near death experience at Tiananmen Square in 1989, but since then the Chinese economy took off in the 1990’s and the country has had no trouble after that. In the new millennium, China’s meteoric rise has almost been mesmeric. At the dawn of the new century, in 2000, Chinese GDP was a 10th of the US at 1.2 trillion dollars, but today, in 14 years, China has grown ten times to reach 10 trillion dollars (where US was at 2000), while America has not even managed to double at roughly 17.5 trillion dollars.
Similarly, within just one year after overtaking the other Asian giant, Japan, in 2010, China managed to add the size of South Korean GDP to its economy in just 1 year flat. At this rate, by 2021, China should easily be the largest economy in the world surpassing the United States of America. In fact, some optimistic economic projections indicate that the Chinese economy could be double the size of the US economy by as early as 2030, just 15 years from now!
While all of this was happening, India was strutting and shuffling to reach the 2 trillion dollar mark. The decade long UPA regime with absolutely no long-term vision for India’s emergence as the counter-economic power in Asia has had such debilitating impact that we were almost a stunted country. Furthermore, by formulating a large government spending regime in the name of reinvented socialism, Sonia Gandhi – helped by Nobel hearted economists like Amartya Sen – created further black-holes like NREGA, Food Bill, Loan Waivers, and other such money guzzling, vote-getting voodoo schemes into the system which only accentuated India’s stagflation. A decade of decay marked by policy paralysis meant that India simply had no chance to keep pace with China.
Yet, there is a huge potential awaiting India unlike China which is already past its miracle years. The most optimistic projections for China’s growth over the next decade hover around 7% per annum, whereas the pessimistic ones project a more modest 4% growth – either ways, it is a far cry from the double-digit growth China has been witnessing in the recent past. On the other hand, India is poised to hit the double-digit growth trajectory any time now. This could well be a classic case of history repeating itself, but neither as farce nor as tragedy, instead as capitalist democracy’s final victory over Marxian tomfoolery.
In the 1970’s even as America was going through a decade of stagflation marked with low economic growth, high inflation, high interest rates and a deepening energy crisis, Soviet Russia was on the verge of winning the cold war due to its vast energy resources, increased military adventurism and the sheer brazen power. The 70’s America was marked by Carter’s “despair and pessimism” which was also the time when leftism had captured the country through the countercultural mores. Many believed that Soviet Union would eventually emerge on top, just like most people believe today that China would not only dethrone USA but would be doubly stronger in 15 years from now.
Then, Reagan happened to the 1980’s world order with his effervescent optimism of “morning again in America” which altered the course of history within just a decade. From a moment of despair to emerging as the sole surviving superpower while the Soviet Union collapsed under its own weight was achieved in the span of one decade. It is that history which may repeat in the world’s largest democracy over the next decade.
Realizing the scale of gargantuan mistakes of the decade of decay presided over by the Sonia-Manmohan duo, Narendra Modi has started his innings by taking the bull by the horns. While India has matured as the technological service provider of the world by developing a first-rate service economy over the last 25 years, it had also never developed a serious manufacturing capability. History is witness to the fact that no large economy of the world since the advent of the industrial revolution has ever achieved nirvana without being a manufacturing powerhouse. Be it Europe or America or Japan or Korea, all the global economic powers have gone through the manufacturing economic cycle and only then matured into a service economy.
This is where China is facing its Achilles heel, for a country and economy so centrally fine-tuned to manufacturing, it is simply incapable of evolving into a service economy. This is the fundamental reason why the Chinese economy should eventually start stagnating. At the same time, Modi is attempting what no other economy has ever attempted in history – to reverse an economic cycle, wherein a majorly service economy is now being rechristened with “Make in India”. If India gets its act together, and there is no reason to believe it won’t, under Modi, then it would be a perfect antidote for the burgeoning costs of production in China which is maturing at tremendous speeds to virtually wipe-out all its pricing advantages within just 3-5 years.
This is the reason why the newly modified land bill is so important to India, to kick-start the engine of a manufacturing economy at the earliest. China has enjoyed almost a three decade long monopoly as the manufacturing hub of the world, but it may be quickly unraveling now and India’s emergence as a manufacturing power will act as a catalyst to that process. It is therefore in the interest of China that Modi’s “Make in India” flounders. While the Indian Right is busy fighting western/evangelical demons for their propensity to nurture the anti-Modi forces in India, we are missing the elephant in the room, or in this case, the dragon in the room. It is possibly China that is nurturing all the historically left oriented opposition to Modi in India.
We are already witnessing a parliamentary battle in the upper house, but that could just be the tip of the iceberg. The deeply entrenched tribal militia in the form of Maoists/Naxals and the various socialist labour unions of large tracts of PSU landscape is where Modi is likely to face the next battle, even as a secular-socialist media creates a frenzied narrative of big businesses as the villains. This is a classic war of capitalism versus the left and Modi has to emerge triumphant in this war in order to redefine history.
India’s emergence as a manufacturing power of Asia would only hasten the process of unraveling of the Chinese economy and that social contract of three decades that the Communist rule has with its citizenry – that of providing a towering economic growth to her people as a corollary to running an authoritarian regime – would stand broken leading to internal chaos. The process has already begun. In fact, ever since taking office in 2012, Xi has greatly intensified the political repression that has blanketed China since 2009 (history again; Just a decade after the peak of Soviet global power was on display at Moscow Olympics, the “evil empire” collapsed).
“The Central Committee sent a draconian order known as Document No. 9 down through the party hierarchy in 2013, ordering all units to ferret out any seeming endorsement of the West’s “universal values”—including constitutional democracy, civil society, a free press and neoliberal economics.
A more secure and confident government would not institute such a severe crackdown. It is a symptom of the party leadership’s deep anxiety and insecurity.”
This is a telling observation made by Dr Shambaugh of an insecure Chinese government which appears so invincible at the outset. Reagan did not wage a military offensive against Russia to win the cold war, he simply unleashed the power of democratic capitalism to force a self-destructive retreat of the Soviet Union. Can Modi unlock India’s enormous potential by effecting a decisive shift away from the left and in the process conquer the dragon?