Bad bet against China's leaders
The Beijing Consensus by Stefan Halper
Reviewed by Paul Wiseman

The Beijing Consensus isn't the book Stefan Halper set out to write. He intended to argue that China's rising consumer class was challenging the Communist Party and nudging the country toward democracy, an argument that might have reassured Western readers. Alas, he writes, "The original argument didn't survive the first draft."

What the Cambridge University political scientist ended up writing isn't reassuring at all.

The harder Halper looked at China, the more he became convinced that its ruling party would endure. And more: that China

was emerging as a threat to the global dominance of Western and specifically US ideas and values, if not necessarily to US military and economic might. Unless the strategic challenge from Beijing is met, he warns, "The United States will be left in a world unsympathetic to the democratic values and principles that have guided Western progress for three centuries."

Packing US$2.4 trillion in foreign exchange reserves and no scruples whatsoever, China has barged into the developing world, offering aid and weaponry to regimes the West finds too unseemly to deal with. To the rulers in many poor countries, China offers a welcome alternative to Western aid and investment that come with strings attached - demands for political openness and free-market reforms. "Naturally, this is very attractive to autocrats, proliferators and madcap, monarchical personality cults that have raw materials to sell or the money to buy Chinese consumer goods," Halper writes.

In some ways, the United States has itself to blame. Exhilaration turned to hubris in the heady days after the fall of the Berlin Wall and the collapse of the Soviet Union. The West had won. History had ended. For a triumphant United States, it was a time to lecture less-fortunate countries on the superiority of its system, not to listen to their concerns or to question its own assumptions about the way the world works. And by the mid-1990s, US assumptions were built around the laissez-faire philosophy of Milton Friedman.

Free-market ideology captured the bureaucracies of the World Bank and the International Monetary Fund, the US-dominated dispensers of global economic aid. They demanded that poor countries seeking emergency loans and other credit abide by a set of rules called the Washington Consensus - or go home empty-handed. Among the Washington Consensus' commandments: reduce or eliminate budget deficits even in times of economic stress; privatize state-run firms; expose domestic markets to foreign competition, financial systems to foreign investment and currencies to the judgments of global markets.

Halper doesn't dismiss the Washington Consensus completely. Some of its strictures make sense in some countries, some of the time. But Washington was imposing the same solutions on everyone, all the time. The results could be catastrophic to the intended beneficiaries. Halper describes how free-market reforms crushed Mozambique's cashew industry - destroying thousands of jobs, while yielding farmers the not exactly princely sum of $5.30 in extra annual earnings - and sowed unrest everywhere from Argentina to Zambia.

The Washington Consensus, already in tatters, was finished off by the hypocritical refusal of the US to follow its own advice in the financial crisis of 2008-2009. It bailed out its bankers after the deregulation they demanded blew up in their faces; pushed interest rates to zero; nationalized the mortgage packagers Fannie Mae and Freddie Mac; and flooded the economy with taxpayer dollars, ignoring the impact on an already sizeable government deficit.

At least China isn't hypocritical - because it doesn't preach. "China does business with the good, the bad and the ugly - as long as they pay," Halper writes. In return for its largesse, Beijing demands access to natural resources and new markets and unwavering loyalty on issues that don't require much sacrifice in Caracas or sweltering Khartoum: opposing independence for Taiwan and helping isolate the island diplomatically; condemning the "splittest" Dalai Lama when necessary; and hushing up about China's human-rights record in international forums. In capitals around the world, the China model - combining strong economic growth with political control - looks like something worth studying and imitating.

"Beyond everything else that China sells to the world," Halper writes, "it functions as the world's largest billboard for the new alternative of 'going capitalist and staying autocratic'. Beijing has provided the world's most compelling, high-speed demonstration of how to liberalize economically without surrendering to liberal politics."

China's rising influence has real-world consequences, and one of the many virtues of The Beijing Consensus is the way that it describes exactly what they are. In 2008, for instance, the World Bank revoked financial assistance to Chad after President Idriss Deby broke his promise to invest in healthcare, education and agriculture - things that might have improved the plight of his impoverished people. Instead, he used the money to arm his own security forces, standard operating procedure for an African autocrat.

Whatever leverage the international community had over the Chadian despot vanished when China stepped in to support him financially. Not coincidentally, Chad supplies China with oil. Versions of the same story - Chinese financial support allowing autocrats to plunder their treasuries and repress their people with impunity - recur over and over, in Angola, the Central African Republic, Myanmar, Sudan and Uzbekistan. "The most serious human rights abusers in the world have a new sugar daddy," Halper writes.

The problem goes even deeper than it first appears, Halper argues, because China doesn't just need pariah states for these country's resources; it needs them to remain pariahs. "Once 'cleaned up', illiberal countries and malcontents would have more options, such as partnerships with Western companies and governments," he writes. "Transformations of this kind would threaten China's competitive edge in the developing world."

Which brings us to Halper's most original argument: Beijing isn't making mischief in the developing world to undermine the United States or to forge a Sino-centric world order. "China hasn't deliberately set out to diminish the power of the Western bloc or the appeal of its brand," he writes. Its main motive is far more basic: survival. China's leaders, their country's history of peasant rebellions and political turbulence hard-wired in the back of their minds, have been remarkably agile in the post-Soviet era, managing to stay in power despite the destruction of communism as a legitimate governing ideology. They've deftly replaced Karl Marx with a mutant version of Adam Smith - what Halper calls "state capitalism".

They've made a bargain with their people: we will keep the economy roaring, giving you jobs and money and access to consumer goods your parents or grandparents could only dream of; in return, you will not question the governing arrangements - at least not in any public, organized way.

It's worked: the opaque mix of government, party and private interests has somehow fueled astonishing rates of economic growth going on three decades now. But it's created some toxic byproducts: widespread corruption; environmental destruction; the exploitation of migrant labor; a yawning gap between rich and poor. "China's leaders are therefore caught in a Faustian bargain," Halper writes. "The more China grows, the more it generates the side effects of miracle growth."

How to prevent discontent over those side effects from curdling into social unrest that could threaten the regime? Why, by stoking the growth machine even more. "The legitimacy of the Chinese Communist Party hinges on its ability to deliver economic growth at an unforgiving tempo," Halper writes. Thus, the need to stay on good terms with even the most reprehensible regimes in order to ensure the inflow of raw materials that keep the growth machine churning.

Halper means to issue a ''clarion call" to the Barack Obama administration and its successors "to assert and sustain the primacy of Western values". He offers a two-step program to counter China's rising influence. Step one: Washington must realize that it "can't house-break China" to behave responsibly on the global stage and therefore must jettison any ideas of nurturing a special US-China relationship - what he dismissively calls a "G2 love-hug".

Step two: the United States must rally the support of the rest of the world. Washington does not have the power to do anything it wants, Halper argues, but it does retain the power to lead. He suggests building international partnerships - on issues such as climate change and energy security - and then inviting Beijing to join, "exploiting China's intense desire to be included in the top-table discourse of major powers".

Even if Beijing says no, Washington would have the "added advantage of actually getting American policymakers, bureaucrats and diplomats back out into the hub of international talking-shops after a long hiatus focused on military unilateralism in the Middle East". And the United States could learn from China's policy of "expanding quietly across the international sphere, one communique or photo-shoot at a time" and "showing smaller powers that you're listening and you care". A small example of China's success: the way it won hearts and minds by building soccer stadiums across football-mad Africa.

Can Washington rise, creaky and grunting, to the China challenge? There's reason for skepticism. America's vigor has been drained by the ongoing economic and financial crisis. "Washington's financial crisis has allowed Beijing to set the terms of today's US-China relationship, limiting America's voice on a range of issues, including human rights and Tibet, in return for continued economic cooperation," Halper writes. Perhaps it's easier to continue to believe in the "myth" of a special US-China relationship than to man the barricades in defense of three centuries of Enlightenment thought.

Moreover, as recent events have shown, America's political system is deeply dysfunctional: US politicians would rather search for pseudo-outrages to fire up their infantile supporters than to reach consensus on anything, especially when the issues are as divisive as combating climate change and reducing agricultural subsidies (to take two steps Halper mentions as ways to build international trust and support).

As Halper demonstrates in some detail, the United States has long struggled to get a clear view of China, seeing the country instead through the distorting lenses of single-issue lobbyists: activists advocating autonomy for Tibet and support for the Dalai Lama; unions demanding trade barriers against Chinese imports; business groups, seeking cheap labor or access to the China market, urging closer and closer ties to Beijing; neo-conservatives, in search of a new Cold War adversary, exaggerating the military threat from Beijing. Without understanding what they're really up against, how can US policymakers respond to the China threat?

Perhaps Halper is overestimating China's leaders, their "seemingly magical" ability to maintain economic growth and political control domestically and to expand their influence internationally. For one thing, the maneuverings inside Beijing's Zhongnanhai leadership compound and in the provincial capitals beyond are unknown to outsiders. Maybe Beijing's grip on power isn't as sure as it seems. Maybe some Machiavellian bureaucrat, idealistic reformer or provincial schemer is already plotting the moves that will send the whole house of cards tumbling down. Truth is, it is remarkable that China's leaders have maintained control as long as they have, given the contradictions inherent in their bastardized combination of Marx and Smith and the social tensions already boiling in the streets.

Perhaps there will be an international backlash against China's rise. Already, some Africans resent China's predatory form of capitalism in their markets. "Large Chinese corporations and state-owned enterprises are often followed by an influx of Chinese trading shops and small retailers providing a full range of services, from clothing emporiums to restaurants to bordellos," Halper writes. "These supporting networks frequently undermine the local economy and drive out traditional suppliers with low-cost, low-quality goods."

Moreover, repressing dissent at home and supporting cruel regimes abroad can come back to haunt you - as the United States can attest from experience in Iran and elsewhere. It's surprising, for instance, that Beijing hasn't paid a higher price in the Islamic world for its ruthless oppression of Muslims in western China's Xinjiang Uyghur Autonomous Region.

But betting against the Chinese leadership has been a losing strategy for the past three decades. And Halper is undeniably a sure-footed guide to modern China and what its rise means to the world. In brisk, readable prose - enlivened by pop culture references to Bruce Springsteen, Tom Clancy and Star Trek - he sees through China's confounding contradictions, the way its imposing strength is balanced by surprising fragility. It's a state of affairs maybe best summed up by something former US ambassador to China Winston Lord told Halper:

You want to argue that China is an economic juggernaut, that's true; but if you want to argue that China is wrought with serious economic weaknesses and the ruling party feels constantly vulnerable, that's also true. You want to argue that the military is growing at a colossal rate that causes concern, that's true. But if you want to argue that China's military is a joke, that can also be true. You can argue that the Communist Party has total political mastery over the Chinese people, and you can just as easily argue that another Tiananmen Square is potentially waiting right around the corner.
Halper's view of China is similarly nuanced. But he doesn't hesitate to describe the stakes surrounding China's rise in starkly moral terms:
We have reached a critical point. Beijing's challenge, which, if not met, will alter both the substance and the tone of global affairs for decades. The United States has no choice but to revitalize the American story to make American values and the American brand again synonymous with innovation, progress and fair play - most importantly, we must rekindle the drive among others to acquire and preserve democratic freedoms ... To fail is to surrender the moral authority and Western inheritance that has animated America's appeal for two hundred years.

The Beijing Consensus: How China's Authoritarian Model Will Dominate the Twenty-First Century by Stefan Halper. Basic Books (April 6, 2010). ISBN-10: 0465013619. Price US$28.95, 312 pages.

Paul Wiseman reports on US economic policy in Washington DC. From 1998 to 2009, he was based in Hong Kong and covered Asia.