Fiscal Cliff

When China's collective vision meets America's individual voice

Nicolas Berggruen and Nathan Gardels say both have much to learn from the other's strengths

PUBLISHED : Monday, 04 February, 2013, 12:00am
UPDATED : Monday, 04 February, 2013, 3:02am

The governing systems of the world's two largest economies are in crisis. As the United States has been grappling with a fiscal cliff, China faces a social cliff. Without major reform, both will falter.

The deal in Washington may have saved the US from a fall over the edge into recession for now. But its wildly partisan politics is unable to find anything resembling a consensus on how to reduce defence spending or reform the costly entitlements of America's maturing welfare state. By 2025, Medicare, Medicaid and social security are expected to eat up 40 per cent of the federal budget.

China, by contrast, is flush with surplus reserves. It is buying up resources and assets all over the world. It is massively investing in the future, not least by spending US$250 billion a year to expand its higher education system.

But China's modern mandarinate faces simmering discontent over a whole host of social issues. Its new leadership must now figure out how to negotiate the rocky path of a middle income transition, shift towards domestic consumption instead of exports for growth, build a safety net and reduce the growing chasm between rich and poor.

At the same time, the rising middle class is demanding a renewal of political reform stalled over the past decade. Rule of law and an independent judiciary are at the top of the list; China's 600 million weibo users are demanding more freedom of expression.

In early December, the new Communist Party chief, Xi Jinping, gave a speech calling for full adherence to the constitution - which guarantees free expression and rule of law. Yet, in early January, party censors cracked down on journals and websites when they echoed that call to "protect the constitution" in their articles. This, in turn, incited an online revolt.

In a sign that the roiling internet is not about to be tamed, Yao Chen , an actress with a reported 31 million followers on her microblog, quoted Aleksandr Solzhenitsyn: "One word of truth shall outweigh the whole world."

The strength of an autocracy with meritocratic aspects, like China's, is its ability to forge a consensus and unity of purpose with the institutional capacity to implement long-term policies.

But, lacking accountability, transparency and free expression, it has become hidebound and corrupt, giving way to the power of vested interests and risking all it has accomplished in lifting hundreds of millions from poverty in only 30 years. For many, China today has ended up with the evils of the capitalist road Maoists always warned about.

The strength of a democracy like the US is that everyone has a voice and can contend for power. But the inability to forge a consensus out of cacophony has created gridlock and paralysis. Its adversarial political system has decayed into partisan rancour and divided the public against itself.

The short-term mentality of the voters and special interests have captured the formal accountability mechanism of "one person, one vote" elections. Given this experience, it is surely understandable that so many Chinese are wary of the Western notion that democracy can only be defined as engaging in multiparty elections.

Behind this dysfunction, there is a larger reality. The industrial democracy that once saved more than it spent, invested in the future and financed the safety net has given way to a consumer democracy.

In a consumer democracy, all the feedback signals - the media, the market and politics - steer behaviour towards immediate gratification. We've become a Diet-Coke culture in which people seem to want consumption without savings and government without taxes, the way we want sweetness without calories.

The conventional, but also correct, wisdom in the West is that China's system is not self-correcting, and reforms would usher in more responsive feedback mechanisms, democratic accountability and the rule of law.

The uncomfortable realisation we now face is that democracy, as it is practised in the US today, is unable to fix itself. After the financial crash of 2008-2009, many came to recognise that financial markets are not self-correcting and tend towards disequilibrium, instead of equilibrium. Now we are also coming to suspect that democracy itself, despite the formal exercise of "one person, one vote" elections, is no more self-correcting than financial markets.

Without political reforms that strengthen consensus-building practices and institutions, and enable the long-term implementation of sustainable policies, democracy will fail.

In many ways, China's and America's crises are the mirror image of each other - and so are the solutions. Our two political cultures are as distinct as our economies are intertwined. Yet both have much to learn from each other's strengths as well as weaknesses.

China needs to lighten up. America needs to tighten up.

Nicolas Berggruen and Nathan Gardels are co-authors of Intelligent Governance for the 21st Century: A Middle Way Between West and East