China is at risk of repeating the chaos of 1960s

China is at risk of repeating the chaos of 1960s

By M.D. Nalapat | 15 April, 2012
An elderly Uighur man crouches in front of a wall painted with healthcare slogans in Keping county, China on 13 April. REUTERS
High interest rates and constricted money supply to the private sector can ruin China’s economy and push its people to a state of joblessness.

Karl Marx wrote that history repeats itself, the first time as tragedy and next as farce. However, Marx may have been a bit offbase. For there are numerous instances when history begins as farce, but repeats itself as a tragedy. Premier Wen Jiabao warns that his country is at risk of a "second Cultural Revolution" because of the increase in influence of "left" elements seeking a return to the idiosyncratic ways of Mao Zedong. A second Cultural Revolution would upend the three decades of economic progress that the country has experienced since the 1980s, and would therefore create fissures within Chinese society that may lead to violent outcomes.

The "capitalist road" reforms of Deng ensured first a doubling and then a quadrupling of China's growth rate in the 1980s and beyond. In the next wave, during 1998-2003, then Prime Minister Zhu Rongji implemented reforms that concentrated on state-owned enterprises (SOEs), causing more than 30 million employees to lose their jobs, most temporarily, as the expanding economy ensured that most found alternative employment. Had present Prime Minister Wen Jiabao made use of the 2008 financial crisis in Europe and the United States to remove the monopolies enjoyed by state enterprises, the resulting boost to Chinese entrepreneurs may have ensured that they overtake competitors in the US and elsewhere within a decade. However, Wen did little beyond tinkering at the edges.

Worse, he has gone by the advice of (US-educated) "experts" who nudged him to implement in China the same ruinous policy of high interest rates and constricted money supply to the private sector that has killed business expansion in India, a country where advice from those working in foreign financial enterprises get adopted with alacrity by policymakers, even though such views are tailored to reflect solutions that serve the interests of these few institutions rather than the economy or the people. In China as well, those with foreign degrees have much greater cachet than those from local institutions, even though the former often push views that favour the country that trained them rather than the country which they are supposed to serve.

Incoming Premier Li Keqiang favours chopping away at state-sector monopolies to ensure greater freedom of action to the Chinese private sector. 

However, reports from Beijing indicate that incoming Premier Li Keqiang has more (domestically produced) steel in his spine than "Grandpa Wen", and that he favours chopping away at state-sector monopolies to ensure greater freedom of action to the Chinese private sector. Much will depend on the nine-member Standing Committee of the Politburo that gets chosen by the National Peoples Congress. Should Li have a reformist majority within this all-powerful body, he would be able to face down any efforts to slow down or reverse the 21st century reforms that China needs to continue on its high-growth trajectory. One obstacle that he faces may be the military. As during the days of Mao Zedong, and in contrast to the Deng period, the PLA has once again become very influential in state policy. Should the military side with "leftists" and succeed in blocking a fresh wave of economic reform, it would act in as retrograde a way as it did in the 1960s, when under then Defence Minister Lin Biao, the PLA acted as a shield for the hooligans let loose by Mao against his critics.

The military-inspired flexing of muscles by China over the South China Sea, for instance, is costing Beijing the goodwill of two countries it needs geopolitically, Russia and India, both of which have signed oil prospecting agreements with Vietnam, a third country angered by China's claim that any territory supposedly held by emperors in the past now belongs to the PRC. If this were taken as a valid ground for sovereignty, India could claim much of SE and Central Asia, as these were administered by the Vijaynagar, Chola and Mughal empires. Growth and tranquillity in Asia need a Deng-style rather than a Mao-version policy from Beijing. The years ahead will show if this is indeed the case, or if history will repeat itself, thereby throwing China into the same chaos as was witnessed during the years of the Cultural Revolution.


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