China's looming populist problem

It's right out of 1880s America:

In China, less than 1% of households control more than 70% of private financial wealth.

So noteth the WSJ.

In the US today, we're talking somewhere between 40 and 45 percent.

Globally, says, John Bussey in the WSJ, the number is "nearly 40%," so America's not much off the norm.

But here's the biggest problem for China: a great deal of the wealth is connected to people with political positions (aka, the princelings like Bo Xilai and his now imprisoned wife).  In the US, if you want to get rich, you need to stay out of government (or get rich before you go in, aka, the "fuck you money" that allows you to behave yourself while in power and quit on principle if need be).

For China to truly advance and become a genuine competitive threat, the political system has to decide to divorce wealth from political power.  Otherwise we're looking at decay and decline and a very short "Chinese century."

US hit that moment and launched itself into a multi-decade progressive era that cleaned up a lot of things but government most of all.

As I have said many times, the world needs a small army of Teddy Roosevelts right now - but China most of all.

Comments

[David Dunn]

You totally nailed this one Tom. However, this thesis doesn't square with your thought that the Communist Party could stay in power another 20 years. They might have been able to make it much longer had they continued to allow the private sector to grow in and shrunk the public sector and in so doing continued the rapid growth for much longer but they've done the opposite under Hu Jintao and rapid growth is now probably over because of this policy. Also much of the government investment has also become so incompetant. Prestige investment in barely used high-speed rail, while traditional normal speed rail forordinary people and fuel for power plants (coal) is wholly insufficient. I see this misinvestment all over China. Unused rail, roads to nowhere, unused convention centers, airports and sports stadium, most of which will not be fully repaid and will eventually trigger hyperinflation. That is when the Communist Party's rule will be threatened. We won't be waiting 20 years for this.

[Tom Barnett]

What I say is that, when I look at history and East Asian history in particular, I detect about a 50 year pattern of single-party rule as a country opens up to the outside world. I'm not going to tell you it's hard and fast - just a discernible pattern.

I think the pressures are already boiling up from below, but I also think the CCP is plenty strong, so another 20 years of slowly losing that struggle strikes me as about right, in large part because I believe the key tipping point is generational turnover.

Current leadership forged in Cult Rev: they will be loathe to open things up too much.

But next will have to. It will just unfold as gradually as they can make it.

Nobody does well with democracy that comes too fast, and we must remember that China's middle class is small relative to the rural poor, so Blue-v-Red state dynamics will hold there too.