Randy McDonald (rfmcdpei) wrote,
Randy McDonald

[BRIEF NOTE] Is China about to democratize?

I thought I'd follow my previous pot about rumours of a coup in China with this one, starting with a Daniel Drezner post, "Wen, Tiananmen, and the democratization football". There, Drezner deals with speculations that premier Wen Jiabao might be interested in revisiting the official verdict on the Tiananmen Square student protests in 1989 before his tenure is up, quite possibly triggering China's democratization.

Now, a few notes of skepticism. First, we've heard this song-and-dance routine about Wen before. He's talked about political reform a lot, and every time he does it gets covered in the foreign press and squelched in the domestic Chinese press.

Second, while the CCP elite might be in agreement on not wanting to return to the chaos of the Cultural Revolution, it's quite a stretch to go from that consensus to an agreement to revisit 1989. I have every confidence that a large swatch of the CCP elite looks at Tiananmen as identical to the Cultural Revolution in terms of instability and chaos.

So this seems like yet another CCP episode of Lucy yanking away the democratic football from hopeful liberals... and yet.

[The Financial Times' Jamil Anderlini] makes two persuasive points and omits an even more persuasive argument. He correctly observes that Wen is approaching lame duck status and that his primary political impediment has been removed. So maybe he is less constrained than in the past.

The omitted argument is a bit tangential, but bear with me. It relates to this Keith Bradsher story in the New York Times about China's relaxation of foreign capital strictures[.]

Both the inward rush of capital and the capital flight by affluent Chinese are interesting. They could force the central government to start making credible commitments with respect to property rights. Only such commitments will ensure that the locally wealthy Chinese will not immediately have their capital move to the exit whenever possible. Oddly, Wen deciding to open up Tiananmen might be a way of signaling to investors that Beijing intends to be a bit kinder and gentler than it's been over the past decade.

The international diversification of China's wealthy elite has another effect. Via Erik Voeten, I see that John Freeman and Dennis Quinn have a new paper in the American Political Science Review that concludes, "financially integrated autocracies, especially those with high levels of inequality, are more likely to democratize than unequal financially closed autocracies." Why?

[M]odern portfolio theory recommends that asset holders engage in international diversification, even in a context in which governments have forsworn confiscatory tax policies or other policies unfavorable to holders of mobile assets. Exit through portfolio diversification is the rational investment strategy, not (only) a response to deleterious government policies. Therefore, autocratic elites who engage in portfolio diversification will hold diminished stakes in their home countries, creating an opening for democratization.

Freeman and Quinn might as well be talking about China right now. Soo.... maybe the "princelings" are less worried about democratization than they used to be.

Discussions about the relationship between a country's system of government and its level of development are common. A rule of thumb is that the speed of a country's economic growth is less relevant than the level of GDP per capita achieved. Broadly, the wealthier the country the most likely it is to be a democracy. Sebastian Tong noted last year that the critical threshold seems to be about $US 6000. China just breached that threshold three years ago.

Looking at 150 countries and over 60 years of history, [Russian investment bank Renaissance Capital] found that countries are likely to become more democratic as they enjoyed rising levels of income with democracy virtually ‘immortal’ in countries with a GDP per capita above $10,000.

” Only five democracies above the $6,000 income level have died. Even democracies above the $6,000 level have a 99 percent chance of sustaining their political system each year. The only exceptions were the military coups in Greece in 1967 ($9,800), Argentina in 1976 ($8,180) and Thailand in 2006 ($7,440), and the events in Venezuela in 2009 ($9,115), as well as Iran in 2004 ($8,475),” RenCap global chief economist Charles Robertson writes.

The $6,000 per capita GDP seems to be a crucial level, marking the point where a country is likely to shift to democracy. Tunisia, which early this year triggered the wave of uprisings against autocracy across the Arab world, recently crossed that threshold.

Conversely, democracy is most fragile at the lowest income levels and when incomes are shrinking. The world’s populous democracy, India, is a notable exception as its per capita income was under $800 from 1950-1967, and only exceeded $2,000 in 2003.

By this criteria, Nigeria’s democracy is safer than it has ever been. However, RenCap also notes that wealthy energy exporters tend to resist the democratization trend since their low levels of taxation give their people less incentive to demand political accountability.

These findings suggest that the best way to overthrow an autocratic regime is to trade and invest heavily in the country.

“Tourists intent on fermenting revolution should smoke cigars in Cuba, party in Belarus, dress like Indiana Jones at Petra, in Jordan, visit ‘Tatooine’ in Tunisia, and buy t-shirts in Swaziland,” Robertson writes.

And while democracy has become entrenched in major emerging economies such Brazil, Mexico and South Korea, the world’s biggest emerging economy remains far from politically free.

According to Robertson, China has just entered a most dangerous political period, with per capita GDP at $6,200 in 2009. Even assuming 9 percent annual growth in per capita GDP, the country will remain in the most dangerous $6,000-10,000 range until 2014.

“The Communist Party of China is right to fear a revolution, and history suggests it will be lucky to avoid democracy by 2017, assuming per capita GDP has reached $15,550 by then,” he adds.
Tags: china, democracy, economics, politics
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