China One-party Capitalism

The evolution of cloud computing had been more and more inseparable from the emergence of China as a completely alternative social system, what one can call neither pure communism nor pure capitalism. Reports on this trend-tracking site, especially those two highlighted, had already provided ample evidence for that:

– IMT-Advanced (4G) for the next-generations of interactive mobile services, China is triumphant,
– Cloud Computing Strategy for Digital China: Taiwan is leading the way except IOT,
– Be aware of ZTE et al. and white-box (Shanzhai) vendors: Wake up call now for Nokia, soon for Microsoft, Intel, RIM and even Apple!,
– Microsoft’s huge underperformance on mainland China market,
– SOEs and state coexistence in China,
– China becoming the lead market for mobile Internet in 2012/13,
– The new, high-volume market in China is ready to define the 2012 smartphone war,
– China-based second-tier and white-boxed handset makers targeting the emerging markets,
– Lowest H2’12 device cost SoCs from Spreadtrum will redefine the entry level smartphone and feature phone markets,
– Huawei the “misterious”,
– China’s HW engineering lead: The Rockchip RK292 series (RK2928 and RK2926) example,
– $48 Mogu M0 “peoplephone”, i.e. an Android smartphone for everybody to hit the Chinese market on November 15,
– China: going either for good quality commodities or the premium brands only,
– STMicroelectronics and Texas Intruments are exiting the mobile market as there is no chance to compete with aggressive SoC vendors from PRC and the market #2 MediaTek from Taiwan,
– ‘Live book’ on the ‘Allwinner phenomenon’,
– Labor shortages in China as young people are much less willing to work under harsh working conditions–all this “compensated” for the time being with compulsory student labor required to get the graduation certificates,
– Spreadtrum is to be acquired by a Chinese high-tech investment enterprise owned by the state and also belonging to the leading Tsinghua University with microelectronics research interests

So it is time to put proper political science behind that, otherwise our traditional perceptions about communism and capitalism will confuse us to such a degree in the future that we won’t understand the cloud computing events in China either:

Eric X. Li: A tale of two political systems [My note: China is not any of them]
[TEDtalksDirector YouTube channel, recorded on June 13, published on July 1, 2013]

It’s a standard assumption in the West: As a society progresses, it eventually becomes a capitalist, multi-party democracy. Right? Eric X. Li, a Chinese investor and political scientist, begs to differ. In this provocative, boundary-pushing talk, he asks his audience to consider that there’s more than one way to run a succesful modern nation. TEDTalks is a daily video podcast of the best talks and performances from the TED Conference, where the world’s leading thinkers and doers give the talk of their lives in 18 minutes (or less). Look for talks on Technology, Entertainment and Design — plus science, business, global issues, the arts and much more. Find closed captions and translated subtitles in many languages athttp://www.ted.com/translate

LIVE FROM TEDGLOBAL 2013: A tale of two systems: Eric X. Li at TEDGlobal 2013 [by Karen Eng on TED Blog, June 13, 2013]

Born in Shanghai in 1968, at the height of the Cultural Revolution, Eric X. Li grew up hearing a story: All human societies develop in linear progression, beginning with primitive society, moving through capitalism to socialism and, finally, Communism. Sooner or later, all of humanity, regardless of creed or culture, will reach that final stage of political and social development. The world’s peoples will be unified in this paradise on Earth and live happily ever after. Meanwhile, we are engaged in a struggle between the good of socialism and the evil of capitalism. One third of the world’s population lived under this meta-narrative, distilled from the theories of Karl Marx. The story was a best-seller. “We were taught that story day in day out,” says Li. “It was part of us, and we believed it.”

But then, he says, showing a slide of Gorbachev and Yeltsin, the world changed overnight. “Disillusioned by the failed religion of my youth, I went to America and became a Berkeley hippie.”

There, as he came of age, Li was told another story, one where all human societies, regardless of creed or language, develop in linear progression, progressing from traditional societies where groups form the basic units to modern societies in which atomized individuals are the sovereign units. And they all want one thing — the vote. With the vote, they produce good government and live happily ever after — paradise on Earth. Sooner or later, electoral democracy will be the only political system for all countries and all peoples, with a free market to make them all rich. Meanwhile, we are engaged in a struggle of good against evil. Good belongs to those who are democracies, charged with the mission of spreading it around the globe — sometimes by force — against the evil of those who do not hold elections.

This story was also a best-seller: according to the Freedom House, the number of countries practicing electoral democracy grew from 45 in 1970 to 115 in 2010. Today, says Li, Western elites endlessly trot this prospectus around the globe as the path to salvation for the long-suffering developing world.

Li, now a venture capitalist based in Shanghai, considered these meta-narratives and compared them to his experience of childhood in China, living on food stamps, versus his experience in the city now — entrepreneurship booming, a fast-growing middle class. In 30 years, China has gone from one of the poorest agricultural countries to the world’s second largest economy — and 80% of the world’s poverty alleviation during this period happened in China.

“So I asked myself, what’s wrong with this picture?” According to the metanarrative, none of this should be happening, Li says. “So I did the only thing I can do: I studied it.”

What he found punches holes in our assumptions about China’s limitations. People think that the one-party system must be operationally rigid, politically closed, morally illegitimate. In fact, he argues, the opposite is true: what defines China’s one-party system are adaptability, meritocracy and legitimacy.

1. Adaptability: Political scientists say that one-party systems are incapable of self-correction. Li counters this with the fact that the Party has self-corrected dramatically in the last 64 years, more than any other country in recent memory. The Party’s policies encompassed land collectivization, the Great Leap Forward, the Cultural Revolution, Deng Xiaoping’s market reforms, and Jiang Zemin opening Party membership to private businesspeople — “something unimaginable during Mao’s rule.” And the Party self-corrects in dramatic fashion. New rules get enacted to correct past mistakes, such as term limits with mandatory retirement rates. We also often hear that China is in dire need of political reform, but Li argues this is rhetoric — even if critics don’t see the reform they want to see, political reforms have never stopped. Chinese society is unrecognizable today as compared to 30 years ago. In fact, Li says, “I would venture to suggest that the Party is world’s leading expert in political reform.”

2. Meritocracy Another assumption is that one-party rule leads to a closed political system in which power gets concentrated in the hands of the few, leading to bad governance and corruption. Li argues that actually, the Party is one of the most meritocratic political institutions in the world. Only one fifth of Politburo members come from privileged backgrounds, and in the Central Committee of more than 300, the percentage is even smaller. This is thanks to a body little known to Westerners — the Party’s Organization Department system that guides candidates through integrated career tracks for Chinese officials, recruiting college graduates into entry-level positions and promoting them through the ranks, including high officialdom — a process requiring up to three decades. While patronage plays a role, merit is the underlying driver, says Li. “Within this system,” Li says, “and this is not a put-down – merely a statement of fact: George W. Bush and Barack Obama, before running for president, would not have made small-county chief in China’s system.”

3. Legitimacy Westerners assume that multiparty elections with universal suffrage is the only source of legitimacy. When asked how the Party justifies legitimacy, Li asks, “How about competency?” He cites the fact that since 1949 when the Party took over, China was mired in civil war and foreign aggression, and its average life expectancy was 41. Today, it’s the second largest economy in the world, an industrial powerhouse, and its people live in increasing prosperity. Pew Research polls of public attitudes suggest consistently that citizens are highly satisfied with how the country and nation are progressing. A Financial Times survey recently released suggests that 93% of China’s Generation Y are optimistic about their country’s future. Says Li: “If this isn’t legitimacy, I don’t know what is.” Contrast this, he suggests, to the dismal performance of many electoral democracies around the world: “Governments get elected and then fall below approval a few months later and stay there or fall until the next election. Democracy is becoming a perpetual cycle of ‘elect and regret.’”

Of course, Li concedes the country faces enormous challenges: pollution, population, food safety, and on the political front, corruption, which is widespread and undermines moral legitimacy. But the argument that the one-party system causes corruption doesn’t hold water. According to the Transparency International index of corruption, China has recently ranked between 70 and 80 among 170 countries and moving up, while India, the largest electoral democracy in the world, is at 95 and dropping.

Li is not out to condemn democracy. He acknowledges its role in creating the modern world. He’s not speaking against its ideals but its universal claim — the hubris — at the heart of the West’s common ills, he says. He suggests that if the West spent less time pushing their meta-narrative on others and focusing more on political reform at home, democracy might have a better chance of success.

China’s system does not pretend to be universal — it cannot be exported, says Li. But that’s the point. Neither is an alternative to supplant the other, but simply a demonstration that alternatives exist. “Let us draw to a close this era of meta-narratives,” he says. “Let’s stop telling our children there is only one way. It’s wrong, it’s boring. Let’s let universality make way for plurality. Perhaps a more interesting age is upon us.”

Eric X. Li’s venture capitalist company: chengwei.com
Eric X. Li’s background on ‘TEDGlobal 2013: Speakers A-Z’ site

A venture capitalist and political scientist, Eric X Li argues that the universality claim of Western democratic systems is going to be “morally challenged” by China.

A well-connected venture capitalist in Shanghai, where he was born, Eric X. Li studied in America (and even worked for Ross Perot’s 1992 presidential campaign) before returning home, where he started doubting the idea that China’s progress could only follow the path of the West’s free-market principles.

In a much-discussed op-ed he wrote for the New York Times in February 2012 [see below, copied here] and in other writings, he has put forth the idea that China needed a different development framework, around a different idea of modernity. The Chinese system, he says, is meritocratic, highly adaptable despite the one-party rule, long term-oriented, pragmatic and non-individualistic. As he writes: “The Chinese political system … comes close to the best formula for governing a large country: meritocracy at the top, democracy at the bottom, with room for experimentation in between.

While some criticize him as a cheerleader of the Chinese government and a champion of Chinese exceptionalism, Li is comfortable in the role of provocateur. He is the founder of Chengwei Capital in Shanghai, serves on the board of directors of China Europe International Business School (CEIBS) and is a Fellow of the Aspen Institute.

Why China’s Political Model Is Superior [The New York Times, Op-Ed, Feb 16, 2012]

Shanghai

THIS week the Obama administration is playing host to Xi Jinping, China’s vice president and heir apparent. The world’s most powerful electoral democracy and its largest one-party state are meeting at a time of political transition for both.

Many have characterized the competition between these two giants as a clash between democracy and authoritarianism. But this is false. America and China view their political systems in fundamentally different ways: whereas America sees democratic government as an end in itself, China sees its current form of government, or any political system for that matter, merely as a means to achieving larger national ends.

In the history of human governance, spanning thousands of years, there have been two major experiments in democracy. The first was Athens, which lasted a century and a half; the second is the modern West. If one defines democracy as one citizen one vote, American democracy is only 92 years old. In practice it is only 47 years old, if one begins counting after the Voting Rights Act of 1965 — far more ephemeral than all but a handful of China’s dynasties.

Why, then, do so many boldly claim they have discovered the ideal political system for all mankind and that its success is forever assured?

The answer lies in the source of the current democratic experiment. It began with the European Enlightenment. Two fundamental ideas were at its core: the individual is rational, and the individual is endowed with inalienable rights. These two beliefs formed the basis of a secular faith in modernity, of which the ultimate political manifestation is democracy.

In its early days, democratic ideas in political governance facilitated the industrial revolution and ushered in a period of unprecedented economic prosperity and military power in the Western world. Yet at the very beginning, some of those who led this drive were aware of the fatal flaw embedded in this experiment and sought to contain it.

The American Federalists made it clear they were establishing a republic, not a democracy, and designed myriad means to constrain the popular will. But as in any religion, faith would prove stronger than rules.

The political franchise expanded, resulting in a greater number of people participating in more and more decisions. As they say in America, “California is the future.” And the future means endless referendums, paralysis and insolvency.

In Athens, ever-increasing popular participation in politics led to rule by demagogy. And in today’s America, money is now the great enabler of demagogy. As the Nobel-winning economist A. Michael Spence has put it, America has gone from “one propertied man, one vote; to one man, one vote; to one person, one vote; trending to one dollar, one vote.” By any measure, the United States is a constitutional republic in name only. Elected representatives have no minds of their own and respond only to the whims of public opinion as they seek re-election; special interests manipulate the people into voting for ever-lower taxes and higher government spending, sometimes even supporting self-destructive wars.

The West’s current competition with China is therefore not a face-off between democracy and authoritarianism, but rather the clash of two fundamentally different political outlooks. The modern West sees democracy and human rights as the pinnacle of human development. It is a belief premised on an absolute faith.

China is on a different path. Its leaders are prepared to allow greater popular participation in political decisions if and when it is conducive to economic development and favorable to the country’s national interests, as they have done in the past 10 years.

However, China’s leaders would not hesitate to curtail those freedoms if the conditions and the needs of the nation changed. The 1980s were a time of expanding popular participation in the country’s politics that helped loosen the ideological shackles of the destructive Cultural Revolution. But it went too far and led to a vast rebellion at Tiananmen Square.

That uprising was decisively put down on June 4, 1989. The Chinese nation paid a heavy price for that violent event, but the alternatives would have been far worse.

The resulting stability ushered in a generation of growth and prosperity that propelled China’s economy to its position as the second largest in the world.

The fundamental difference between Washington’s view and Beijing’s is whether political rights are considered God-given and therefore absolute or whether they should be seen as privileges to be negotiated based on the needs and conditions of the nation.

The West seems incapable of becoming less democratic even when its survival may depend on such a shift. In this sense, America today is similar to the old Soviet Union, which also viewed its political system as the ultimate end.

History does not bode well for the American way. Indeed, faith-based ideological hubris may soon drive democracy over the cliff.

Eric X. Li is a venture capitalist.

His other major media appearances:
– Counterpoint: Debunking Myths About China [The New York Times, Op-Ed, July 18, 2011]
– ACT II 2011 An Insider’s View on China and Its Impact on the World [AspenInstitute YouTube channel, July 9, 2011]

Eric Li interviewed by Anand Giridharadas

– China’s political system is more flexible than US democracy [The Christian Science Monitor, Oct 17, 2011]
– ‘China and Democracy’ Debate 中国与民主现场辩论: Minxin Pei VS. Eric Li (video [embedded]) [Asia Pacific Watch, Nov 5, 2012]
– In defence of how China picks its leaders [Financial Times, Nov 11, 2012], if you have no FT subscription than read a copy of that HERE
– The Life of the Party: The Post-Democratic Future Begins in China [Foreign Affairs, Jan/Feb 2013], if you do not intend to buy this premium article than read a copy of that HERE, or the freely available Chinese version

His blog entries (only related ones) on The Blog of Huffington Post:
– Globalization 2.0: A Century for Sale, Any Taker? [Dec 12, 2011]
– Globalization 2.0: China’s Parallel Internet [Jan 20, 2012]
– Globalization 2.0: Democracy’s Coming Demise [Feb 16, 2012]
– Globalization 2.0: Democracy the Beautiful [Feb 21, 2012]
– Bo Xilai and China’s Future [April 2, 2012]
– Toward a New Equilibrium – China Before the 18th Party Congress [April 7, 2012]
– Democracy Is Not the Answer [May 16, 2012]
– From Renaissance to Renaissance [Dec 6, 2012]