Take the Back Seat: On Chinese Consumerism
How has this happened? The government has launched numerous programs to promote consumption, but their influence on the economy has been overwhelmed by more powerful state policies dictated by the interest groups clustered around the party elite. The transformation of China in the past three decades owes much to the animal spirits of the ordinary Chinese, many of whom have grabbed the chance to make money and spend it for the first time in their lives. Much less understood is how the Communist Party has unleashed the state's animal spirits at the same time, with a force few anticipated. In the early 1990s, Beijing worried about keeping the largely bankrupt old-style state-owned companies afloat. Early in the new century, the restructured enterprises, many of which had been rebuilt from scratch, became so big, wealthy and ambitious that the problem was not how to keep them alive but how to keep them in line.
In China, the state either controls or owns outright the oil, mining, banking, insurance, electricity, ports, aviation, transport and healthcare sectors. Once written off as dinosaurs of a crumbling Communist system, the giants of Communist industry are generating billions of dollars in profits, courtesy of government protection from competition, surging economic growth, cheap capital and efficiencies wrenched out of the companies during their overhaul. In 2007, which marked the historic high point of fast economic growth in China, the combined profits of state enterprises reached about $222 billion, compared with close to zero a decade previously. By 2007 the Fortune 500 list, which grades companies according to revenues, had Chinese enterprises near the top where they once were also-rans. But if China was getting rich, the Chinese were not. From 1997 to 2007, a period that traversed an economic boom, the share of workers' wages in national income fell, from 53 percent to about 47 percent of output.
The transformation of the state sector had far-reaching benefits for the Communist Party. The swelling profits eased the burden on the fiscal budget, strengthened the state banks' balance sheets and gave the companies—and by extension, the state—the leverage to buy resources around the world. But the preferential policies meted out to government companies—cheap land, resources and energy, and protection from domestic competition—have ensured that the profits of China's boom are captured and kept by the state, at the expense of the population at large. Chinese consume relatively little compared with the size of their economy, for the simple reason that they don't have much money. And much of the money they do have is set aside to pay for the things that the state used to provide free, such as health and education.
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Despite the gaps in its arguments, As China Goes, So Goes the World offers a vivid portrait of contemporary China. One reason Gerth was able to write a book so rich in anecdote and detail is that China's consumer economy is there for the world to see and record. The political system that guides the economy, however, remains deeply opaque and still operates largely backstage. When I was researching a book on China's Communist Party in early 2009, I took some time off to read The Inheritance, a lengthy tome about the foreign policy of George W. Bush. I devoured it with great interest, and also, frankly, a touch of jealousy. Written by David Sanger of the New York Times, The Inheritance is full of the detail that insider accounts of Washington politics routinely offer. The most senior members of the administration jump off the pages in their own voices. One moment, you are in the White House with the president. The next, you are transported into Pakistan on CIA drones, which is quite a journalistic feat, as the planes are pilotless.
Seen from overseas, the United States is wonderfully open. By comparison, the top echelon of politics in China is closed to outsiders and, I would venture, to about 99.9 percent of the Chinese people as well. Journalists in Beijing, even Chinese ones, must creep carefully around the edges of the political system to glean morsels of information. If I had gathered for my book even a fraction of the insider information contained in The Inheritance, I joked to friends at the time, I would have needed to leave China before I wrote any of it down.
China retains many formal institutional trappings—such as an executive government, a parliament and courts—that give it a superficial resemblance to a pluralist system. But the party's pervasive backstage presence means the front-stage role of these bodies must be constantly recalibrated against the reality of the power that lies largely out of sight, behind them. The Ministry of Finance frames a budget each year amid age-old jockeying between rival claimants for limited funds. Ministers meet collectively as a cabinet to battle over their policy priorities, which in recent years have always included exhortations to lift the livelihoods of ordinary people. The many fine scholars in Chinese think tanks produce voluminous, and often influential and incisive, research reports. The courts deliver verdicts on the matters before them. The universities teach and dispense degrees. Journalists write stories. And the priests in the state-approved churches solemnly say Mass and administer the sacraments. But it is backstage, in the party forums, where the real stuff of politics is transacted.
Under the Politburo sits a vast and largely secret party system, which controls the entire public sector, including the military and state businesses, and the lives of the officials who work in all of China's five levels of government, starting in Beijing. The party staffs government ministries, related agencies and state companies through an elaborate and mysterious appointment system; instructs officials on policy through behind-the-scenes committees; and guides their political posture and public statements through the propaganda network. Should an official be accused of bribery, fraud or any other criminal conduct, he or she is investigated by the party first and only turned over to the civilian justice system on its say-so. Even then, any punishment meted out by the courts is at the behest and direction of party organs, which ultimately control the judges, directly, and the lawyers, indirectly, through legal associations and licensing. The tentacles of the state, and thus the party, extend beyond the government: party departments also oversee the courts, key think tanks, the media, all approved religions, and universities and other educational institutions, and they maintain direct influence over NGOs and some private companies.
For the past three decades, Communism and consumerism have confounded the critics by coexisting quite happily. The surfeit of consumer goods in a society that once suffered from chronic shortages of everything from kettles to basic foodstuffs has helped boost the legitimacy of the political system. But can this marriage last? The answer, I think, lies in the ability of the system to continue to deliver economic growth and the promise, if not the reality, of higher living standards, which returns us to the central question that stalks Gerth's book: how can the world sustain a country the size of China with an appetite for the good things in life on par with America's?
Gerth touches the heart of the issue in the last line of his book and, in a way, undermines his thesis that Chinese consumers will determine the fate of the earth. He coins what he calls a "New Golden Rule": "consume unto the world as you would have the Chinese consume unto it." Seen from a different angle, this rule underlines how the developed Western world, particularly the United States, still dictates the global debate on consumption. The complaints in Western countries about the growing and ravenous appetites of the Chinese sound deeply hollow as long as China's citizens insist on maintaining their own lifestyles. "We want what you want." And why shouldn't they? The Chinese might gobble up the world, but if they do so, they will only be following the example that continues to be set by the overfed denizens of the West.