One of the more profound challenges that faced the global economy at the end of World War II was how to bring prosperity to the people of Asia and Africa (Latin America, while nominally independent was less poor than Asia and Africa and although a laggard in terms of development was generally ignored) as colonial subjects of European powers or as citizens of newly independent, self-governing countries. The subject of development economics was itself an unknown territory in 1945. The policy approaches that came into being in the immediate aftermath of World War II gave the State a major if not a central role in driving development forward. Planning came into vogue following the success of the USSR in seeing off German aggression in World War II and was not frowned upon as it is today. In the Western developed countries and in the institutions that the victorious powers of World War II set up for this purpose, such as the UN, IBRD, and IMF, there was no explicit recommendation either about the economic model to be followed or about the form of government that would be most appropriate to the pursuit of development. But it was tacitly assumed that a mixed economy and Western-style democracy would be the best at delivering the goods.
By the 1980s, however, there was a palpable sense that neither mimicking the West nor following the mixed economy approach had successfully driven development. The rise of China was still to come. Across the developing world high levels of poverty continued to persist and governments had been captured by corrupt elites and were marked by dysfunction, unable to cater even to the basic needs of their citizens. State capture by tiny self-aggrandising elites meant that most countries had acquired an internal colonial structure, very similar to the apartheid regime in South Africa. Elections, such as they were, resembled carnivals with little or no debate on the underlying issues.
Against this background, it should be stressed that China was still a poor country as recently as 1978, though with significant achievements to its credit, such as increased life expectancy and a huge increase in literacy following the Communist take-over in 1949. By the 1980s it, too, had to grapple with its internal upheavals and structural shortcomings in the economy. Standards of living within an extraordinarily egalitarian dispensation were marked by severe austerity and rationing, a state of affairs that could not continue indefinitely. Under Deng Xiaoping, the Chinese Communist Party boldly changed course and initiated a far-reaching process of opening up, including a bigger role for the private sector, and greater engagement with the outside world. However, there was no equivalent opening-up on the political front and the entire reform process was firmly anchored within the parameters of a State-led political economy. Basic decisions remained in the hands of the State but the allocation of resources was increasingly determined by the price mechanism and the nascent private sector was allocated real estate, retail trade, and the development of new technologies.
China’s GDP has multiplied by a factor of 20 in real terms between 1980 and 2020 and not only have 800 million been lifted out of poverty but extreme poverty has been eliminated. At $10,000 China, from being one of the poorest countries in the world in the 1970s, is comfortably in the ranks of middle-income economies
China’s achievements are enveloped in the expression ‘Chinese model’ that is different from both the mixed economies of the developing countries and from the capitalist developed countries. China’s model has utilised its high saving rate and quality education and together with FDI driven a remarkable surge in growth in the economy. The model has worsened inequality and has damaged the environment but on the plus side has combined rising incomes with amazing progress in the delivery of public goods. It has, in the process, turned conventional wisdom on issues like democracy and accountable government, as prerequisites for success, on its head. By any measure, GDP growth, quality of life, investment in infrastructure, physical and institutional, ideological flexibility, decentralisation, and the stress on the long term, China outshines all others over the period 1950-2020, but more especially from 1980 to 2020. Indeed, China’s achievements over this period are acknowledged to be without parallel in recorded human history.
On the economic front, China’s GDP has multiplied by a factor of 20 in real terms between 1980 and 2020 and not only have 800 million been lifted out of poverty but extreme poverty has been eliminated. At $10,000 China, from being one of the poorest countries in the world in the 1970s, is comfortably in the ranks of middle-income economies and a quarter of its population that lives in the coastal areas enjoys standards of living equal to those in the developed countries. While making this progress China has achieved nearly 100 percent literacy while life expectancy at 78.2 years is higher than that of the US. Especially striking are its achievements in building a physical infrastructure that is the envy of the rest of the world: 144,000 km of expressways and 44,000 km of high-speed railways, 200-plus airports, 34 ports, with Shanghai the busiest in the world, and 55 cities with metro systems.
As this has been built, China has been diversifying its economy from being the world’s workshop to a world leader in a variety of technologies. In electric vehicles, e-commerce, fintech, and renewable energy China is at or near the frontier. In 2024, the Australian Policy Research Institute, a globally respected think tank, estimated that in a list of 64 critical technological areas, China leads the world in all but 11. The country is number one in 5G and 6G communications and in bio-manufacturing, nanomanufacturing, and additive manufacturing (3D Printing). It is also out in front of drones, radar, robotics, sonar, and cryptography. The Global Innovation Index, published by the World Intellectual Property Organisation, combines 80 indicators spanning infrastructure, regulations, patents, and citations, China is just outside the top ten countries in the world. The question arises: how has all this been made possible? To answer this question we must delve briefly into Chinese history, both ancient and more recent, i.e. of the last 100 years.
Just as Christianity has been at the centre of European civilisation China’s civilisation is Confucian. Confucius lived in the 6th century BC but his philosophical and ethical precepts have heavily influenced Chinese thinking and governance for more than two Millennia. The essence of Confucianism can be described in the more modern expression ‘humanism’ whereby the Chinese people have been taught to develop harmony between themselves and their fellow humans, between themselves and their physical environment, and between their rulers and themselves. These traits find practical expression in giving priority to the needs of the community rather than that of individuals and in serving notice to China’s rulers that their rule is conditional. Harmony between rulers and ruled, encompassed in the term ‘mandate from heaven’, means that China’s rulers must enable the ruled to live in happiness. Hence, from about the 9th century AD the method of administration that evolved in China was the creation of a merit-based bureaucracy and not, as in Europe and elsewhere, by the nepotistic giving of gifts of jobs to courtiers and favourites. Thus, effective governance became the guiding principle for Chinese rulers as they felt that without it their mandate from heaven could be withdrawn. This can be seen in the way that the Chinese have tackled the problem of poverty, not for the sake of winning elections but as an ethical imperative.
From 1950 to 1966 China isolated itself from the outside world and its government concentrated its efforts on ending mass poverty while building up the People’s Liberation Army (PLA) to prevent outside intervention, especially from the US where the ‘loss’ of China had been deeply felt. Resources were scarce and the danger of famine and starvation was ever-present. Even so, the Communist Party carried out radical reform programs both in the rural economy and in the cities. The nationalisation of all land, housing, and commercial property enabled the government to provide essentials to all its citizens through a strict system of rationing of food, clothes, and living space. The administration was an amalgam of the old State bureaucracy, the Communist Party, and citizens’ committees.
The fact of the matter is that the Chinese government, despite these alleged failures, enjoys an approval rating of around 80 percent, far higher than in any Western or developing country today. If we are in search of the secret of effective governance then there can be no better case study than China
One of the programmes that enabled this feat to be accomplished was the ‘barefoot doctor’s scheme’. Under this programme, the government was able to provide childhood vaccinations, practical guidance for domestic hygiene, and treatments for everyday ailments by ordinary citizens with minimal training without having to invest in hospitals staffed by fully trained doctors. Such innovations were accompanied by huge programmes in schooling and adult literacy. For the latter, the complex characters of classical Chinese were simplified and government programs and announcements were composed with the new characters. Adult literacy was achieved within a decade. More recently, i.e. since the year 2000, China has made further large investments in rural health, cut agricultural taxes, and introduced rural pensions. As rural life became more comfortable millions of peasants could migrate to the cities and work in the factories that were soon churning out goods to make China the number one exporting nation in the world by 2010. That is not all. In May 2024 it was announced that the central bank will offer cheap loans to 21 banks to on-lend the money to firms that will buy finished but unsold housing that can be then either sold or rented at below-market rates to low-income buyers. The West has written much about China’s housing crisis but has remained curiously silent about innovations of this nature.
The mammoth effort involved in effectively abolishing poverty did not happen by itself. It has happened within an ethical framework laid out by the Communist Party with the responsibility to ensure its implementation devolved to teams that are part of a vast bureaucracy. This ethical framework, enshrined in the concept of harmony, has been practiced and preserved in the virtually uninterrupted history of China over nearly three Millennia, a period unequaled anywhere else in the world. Over this long period, the unofficial cult of Confucianism has dominated not just religious practices but the behaviour of the whole of Chinese society and, relevant to the functioning of modern China, the way it is governed with consensual decisions emerging from constant discussion at different levels of society. It is also visible in its intellectual life and the importance given to learning and education in its day-to-day affairs. Thus, more recently, following the overthrow of the Manchu Qing dynasty, the establishment of a Chinese republic in 1911 did not constitute a break with China’s ancient past but manifested a continuation of these values. Indeed, many outside observers think that the formation of the Communist Party was also an expression of Confucian Marxism with Mao Ze-dong elevating the Chinese peasantry above its industrial working class, contrary to how European Marxists had interpreted the teachings of Marx. This is what the notion of harmony amounted to in real life. Today, it manifests itself in Xi Jin Ping’s battle against corruption.
What the Chinese Model refers to in layman's terms is the combination of autocracy concentrated in the Communist Party (membership over 100 million) that interacts with the lives, ambitions, and values of people from the lowest levels, village and street committees, to the national level Central Committee and the Political Bureau. The Communist Party is the Catholic church, the Chambers of Commerce and Industry, the Rand Corporation, and the Rotary Club rolled into one. What it prizes is political stability and a streamlined decision-making process; what it takes great pains to avoid is the instability of the electoral cycle endless discussion and argument after a course of action has been decided and, above all, the emergence of multiple power centres. While it is true that China has established aspects of a free-market economy the state through the Chinse Communist Party (CCP) has kept ultimate control at the strategic level. In practical terms, China has a three-tier economy consisting of large SOEs, such as banks, hybrid local and foreign firms, and a private sector that operates in areas such as information and computer technology as the third leg of a tripod. Within this overall structure, the Communist Party experiments with pilot projects and limited roll-outs as part of a learning process that outsiders can only marvel at.
The view that democracy is the best possible political system is also held in China, except that democracy has an entirely different meaning in China. In China, unlike in the West political rights do not have primacy; economic rights do and democracy’s merits are weighed against its demerits. In China, the view is that to assume that inexperienced decision-makers would do a better job than experts chosen based on a rigorous selection process is untenable. The Chinese are baffled by Western attitudes towards the exercise of political power in which a leader can be voted into office with no prior political or administrative experience, merely based on his or her electoral appeal. Indeed, Chinese scholars express amasement why electoral democracy with its short history has acquired the status of religious belief in the West despite its many and serious failures. The relevant question for the Chinese is whether democracy can usually, if not always, lead to desirable consequences and if it does not, how can its mistakes be rectified? In China the answer is self-evident: that democracy based on one person one vote has theoretical merits but does not work in practice. In support of this point of view they point out democracy’s soft under-belly – the capture of the State by the rich, the reluctance or inability of the State to deliver public goods, the vast recent increase in inequality and polarisation, the growing indifference shown towards problems such as poor housing, inadequate jobs and increasing social disharmony and the built-in, short time horizon of its decision-making.
China, by its very success, and its outward manifestation of justified pride invites envy and outrage in equal measure. In the West, it is summarily denounced as a ruthless, one-party dictatorship where no opposition is tolerated while its achievements are minimised as having been obtained through ‘stealing’ Western knowledge and technology. Since the year 2000, the US in particular has made no secret of its desire to ‘stop’ the rise of China. The fact of the matter is that the Chinese government, despite these alleged failures, enjoys an approval rating of around 80 percent, far higher than in any Western or developing country today. If we are in search of the secret of effective governance then there can be no better case study than China. The Communist Party has ameliorated the country’s backwardness and poverty; now it is in the process of creating a new ethical framework: to affirm freedom but also to shape it as a collective good.
So, what conclusions can be drawn from the aforesaid analysis about Western-style democracy and the accountability it achieves through elections? The short answer is that even on the test of legitimacy, on balance, its benefits are exaggerated; on the test of effectiveness, it fails completely. The practice of elections every four or five years, far from allowing the public to choose the best in the ‘marketplace of ideas’, sows division and confrontation as politicians jostle to get the attention of the public. Many of those who seek office are unconstrained by the values of decency and honesty; it is the winning of elections that overrides all else. The political process reduces the complex issues facing societies to binary choices and, as a result, those issues remain not only unresolved but, in practice, ignored. This is the model of governance that has achieved a quasi-religious status in modern Western societies. The results are there for all to see.
Western-style democracy extolled not so long ago as one of humanity’s greatest achievements, has turned out to be a Faustian bargain, marginalising the poor while concentrating power in the elite
One of the solutions being suggested today in the West is to do away with elections and parliaments and replace them with citizens' assemblies chosen by lottery. These assemblies are less likely to be influenced by money or lobbying and the process of decision-making will replace the ‘top-down’ currently in practice with ‘bottom-up’. Where such assemblies have been tried in Europe, they have performed much better than the existing political institutions. By 2023, Europe had 160 citizens’ assemblies in which problems like homelessness, urban planning and renewal, and climate change have been more intelligently discussed than in the relevant countries’ elected bodies. All participants have been treated with respect and with the help of experts, consensus has been achieved on issues that previously appeared to be unresolvable. However, it is unlikely that ruling elites even in Europe will accept citizens’ assemblies without resistance.
In her book Economic Philosophy the great British Economist Professor Joan Robinson asks, in the context of policy-making by governments, what are the rules of the game? Economics is the discipline that policy-makers turn to for guidance. Joan Robinson asks ‘With all these economic doctrines … jostling each other, half understood, in the public mind … what rules of policy can be derived from them?’ She then goes on to quote another eminent British economist Professor James Meade that for a market-based economy to function with equity ‘it is necessary to achieve a fair distribution of income and property as inequality makes the system not only inequitable but also inefficient.’ A model of democracy, however laudable in the abstract, built on the shifting sands of markets, as is the case today, will thus deliver neither democracy nor an efficient, dynamic economy. Indeed, when you consider the challenges facing the global economy, with the ecosystem and global warming requiring the most urgent attention and where the precepts of neoliberal economics glorifying profits over sustainability are singularly inappropriate, the question arises whether the value system whereby the world has created systems of governance that have been discussed in this article is equal to the task. Western-style democracy extolled not so long ago as one of humanity’s greatest achievements, has turned out to be a Faustian bargain, marginalising the poor while concentrating power in the elite. We have a representative government but only after a fashion, accountability also only after a fashion, and a whole range of ‘freedoms’, such as freedom of speech, that are anything but. The UN, supposedly the collective voice of humanity, struggles in the shadows to be heard.