Martin Wolf on `enlightenment infrastructure'

Earlier, I had blogged about Will Hutton's important book The Writing on the Wall and a recent development in terms of enlightenment infrastructure taking root in India -- the Supreme Court judgment on the Ninth Schedule of the Constitution. I saw a fascinating review of this book by Martin Wolf in the Financial Times, where he says:

"Will Hutton's ability to articulate contemporary anxieties borders on genius." This remark, cited on the dust-cover of his latest book must be true: I wrote it. The Writing on the Wall is a superb demonstration of my thesis. In writing about the interaction between a rising China and the West, Hutton takes on the most important political and economic story of our time. He has also produced a thought-provoking, wide-ranging and largely correct analysis.

The book advances five fundamental and, in my view, fundamentally correct propositions.

First, for all its manifest achievements, the Chinese attempt to marry a communist party-state with the market is unsustainable. Hutton does not deny the economic achievements of the past three decades. But he stresses that the result has been "not free-market capitalism but Leninist corporatism". This is not a viable new model, but an ultimately dysfunctional hybrid.

The inevitable consequences include rampant corruption, an absence of globally competitive Chinese companies, chronic waste of resources, rampant environmental degradation and soaring inequality. Above all, the monopoly over power of an ideologically bankrupt communist party is inconsistent with the pluralism of opinion, security of property and vibrant competition on which a dynamic economy depends. As a result, Chinese development remains parasitic on know-how and institutions developed elsewhere.

Second, "the Chinese economy and the Chinese Communist Party are in an unstable halfway house." The latter is "a post-revolutionary party running a post-revolutionary society and an economy in transition to a form of capitalism". Sooner rather than later, the party's monopoly of power must end. Indeed, "all that stands between [the party] and its own demise is its capacity to deliver economic growth and its control of the army and the police."

If the party does not accept reform voluntarily, economic trouble is inevitable. Should the economy indeed falter, a politically unstable or, worse, assertively nationalistic China might emerge, which would pose grave dangers to the world. But political transition is itself risky, as the Chinese instability of the 20th century proves. China has a tiger by the tail: that tiger, of course, is itself.

Third, coping with China's evolution and encouraging it in an internationally co-operative and domestically pluralistic direction will be a huge challenge for western statesmanship. Hitherto, happily, the US has not merely accommodated China's rise but encouraged it, with successful consequences for both sides.

Unfortunately, adverse economic, political and ideological changes are undermining the willingness of the US to persist with these wise policies. Rising inequality and a growing sense of economic insecurity are reinforcing long-standing protectionist attitudes, the Democratic party now being almost entirely in that camp. Meanwhile, the rise of the religious right, of strident nationalism and of assertive unilateralism are leading to more confrontational attitudes towards a country that is not merely a potential rival, but is also ideologically alien.

Fourth, "it is," as Hutton remarks, "a truth universally acknowledged that a great power will never voluntarily surrender pride of place to a challenger." Yet that fundamental source of friction, described almost two and a half millennia ago by the Athenian historian Thucydides, is far from the only one. Objective sources of conflict also exist.

China's mercantilism or, more neutrally, its vast current account surplus and soaring foreign currency reserves is among these. Competition for valuable resources, above all oil, is a second. Taiwan is a third. China's search for supremacy in east Asia and influence in the rest of the world is a fourth. The combination of a more nationalist China with an assertive US could well lead to a breakdown in international order as dangerous as that of the first half of the 20th century.

Finally, argues Hutton, only if China and the US appreciate the enlightenment values of reason, pluralism, freedom and equality can these dangers be managed both domestically and through international co-operation. In the 20th century China succumbed to the west's bastard intellectual child, Marxism. It is impossible, however, to create a modern society that does not recognise the enlightenment's greatest truths: the case for a variety of competing institutions, for freedom of thought and expression, and for a legal system that curbs the executive. Somehow, China must graft these shoots on to its native Confucian stock.

Taiwan and Korea are two great role models for China : they are countries which started out with pretty gruesome authoritarian governments, but managed to make the transition into freedom and democracy. By the 1980s, these two countries were in the virtuous cycle of `enlightnment infrastructure' feeding economic growth and vice versa, and they add up to a great success story of the `Capitalism and Freedom' thesis. There was a huge welfare cost for the generations which lived with brutality, but in a generation or two, these two countries got out of it. But then, neither of these countries had the equivalent of a Chinese Communist Party, and the depth of its demand for perpetual political control of the country. In this respect, the CCP has been in charge from 1949-2007 and as yet shows no signs of fading away.