Mandate from Heaven?

Author:Babones, Salvatore

When Chinese leader Mao Zedong died in 1976, Chinese communism perished with him. Mao had always suspected his successor, Deng Xiaoping, of being a "capitalist roader." In a sense, he was right. It took a couple of years for Deng to cement his place at the top, but he ultimately emerged victorious at the famous "Third Plenary" meeting of the Communist Party's central committee in December 1978. On December 18, the meeting opened in Beijing. On December 19, Coca-Cola held a press conference in Atlanta to announce it had signed an agreement to reenter the Chinese market. On the same day in Seattle, Boeing announced the sale of three 747s to Air China.

By the time the Third Plenary closed on December 22, the leadership of the Chinese Communist Party (CCP) had formally committed to "conscientiously transforming the system and methods of economic management" by giving "local authorities and industrial and agricultural entetpnses ... greater power of decision in management"--though of course all "under the guidance of unified state planning."

The 1978 Third Plenary launched China on a forty-year trajectory of reform, opening and epic economic growth. The Chinese economy grew by a factor of thirty-five times between 1978 and 2018, according to official data. If you don't trust the official numbers, scale that down to thirty times or twenty-five times. Lop a layer off the top to account for the simple remonetization of the economy in the first two decades of reform, as social services like food and housing that were once provided for free came to be bought on the market (and thus included in GDP). Make any adjustments you want; it doesn't make any meaningful difference. The U.S. economy grew by a factor of 2.9 times over that period; large developing countries like Mexico (2.6) and Brazil (2.3) even less, according to data from the International Monetary Fund. China's arch-rival India grew by a factor of twelve. By any measure, and despite many caveats, reform-era China has been the world champion of economic growth.

After four decades of unprecedented growth though, China's economy is finally leveling off. Officially, the Chinese economy is still growing at a very respectable 6.5 percent, but no one who seriously studies it really believes that. Growth probably stalled at the end of 2015, when exports were falling, value-added tax receipts were flat and the purchasing managers' index (PMI) was pointing toward a recession. Faced with a slew of bad statistics, the CCP took the easy way out: it fired the statistician. The director of the National Bureau of Statistics, Wang Bao'an, was charged with corruption and removed from office. The new director, Ning Jizhe, just happened to be the person in charge of setting China's economic targets in the first place. The PMI immediately shot back up and China's wobbly GDP statistics leveled off.

But falsifying statistics does not shift stock or sell cars. China's smartphone sales were down 15.5 percent in 2018, according to official data from the China Academy of Information and Communications Technology. Sales of passenger vehicles were down 4.1 percent, according to the China Association of Automobile Manufacturers. China's trade surplus fell by 16.8 percent. Bad loans are mounting, housing units are sitting empty, the university graduate job market is sluggish and Western entrepreneurs--professionals and charlatans alike--are leaving China in droves. None of this sounds like an economy growing at more than twice the rate of the United States.

In a desperate attempt to keep the economy growing, China is rapidly inflating the mother of all credit bubbles while hoping for a miracle to deliver it from the inevitable reckoning. China's leaders refuse to face reality and accept that, after forty years of seemingly effortless economic growth, the party has finally come to an end. The CCP seems deathly afraid of facing up to even a mild recession. But why? It's not like the end of the economic party means the end of the Communist Party.

The strange thing is that many people within China, and even within the CCP, believe that it just might. Hampered by ideological blinders and haunted by their own family histories, CCP leaders have bought into the mythology of their extraordinary skill as economic managers. They have relied on economic growth to justify Communist Party dictatorship for so long that they don't think they can stay in power without it. They have enthusiastically embraced the doctrine of "performance legitimacy": the idea that economic success legitimizes one-party rule in China, and that without it the country could break out in some kind of spontaneous combustion like the Cultural Revolution of Mao's final years or the Tiananmen Square protests of 1976 and 1989. The performance legitimacy theory is accepted by figures as diverse as maverick Peking University law professor He Weifang, American China-hawk Gordon Chang, British China-booster Gideon Rachman and, according to China politics expert Bo Zhiyue, Chinese president Xi Jin-ping himself. But is it true?

Performance legitimacy is one of those ideas that finds its place in history and seizes it. No one in particular seems to have invented it or originally defined it, much less demonstrated that it really exists. It has always been used with the more or less common sense understanding that a government is legitimate if it delivers the goods. The term first began to bubble up in academic books and journals in the 1980s, but it teally took off after Samuel Huntington made it a centetpiece of his 1991 book, The Third Wave: Democratization in the Late Twentieth Century. In a related article for the Journal of Democracy, Huntington applied the idea to the Asian Tiger economies and the often authoritarian parties that governed them:

Western democratic systems ate less dependent on performance legitimacy than authoritarian systems because failure is blamed on the incumbents instead of the system, and the ouster and replacement of the incumbents help to renew the system. The East Asian societies... had unequalled records of economic success from the 1960s to the 1980s. What happens, however, if and when their 8-percent growth rates plummet... ? In a Western democracy the response would be to turn the incumbents...

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