The growing appeal of China's model of authoritarian capitalism, and how it threatens the West
Niv Horesh says the West is blind not just to the draw of China's system, but also the faults of its own
Under President Xi Jinping , China is succeeding in creating an alternative vision for global leadership designed to challenge Western, and in particular American, dominance. Momentum is gathering behind the Asian Infrastructure Investment Bank, a US$100 billion initiative officially launched by China last month, in the face of US opposition, to finance Asia's infrastructure needs. It is the first time the US is without a role in what will be a leading financial institution in the world.
The rise of the AIIB comes months after the British government became the first in the Western world to issue a sovereign bond in renminbi, reigniting the debate over whether the renminbi can eventually supplant the US dollar as the leading global reserve currency. And the extent of China's programme to build artificial islands in disputed waters in the South China Sea has been revealed; the latest in a long series of assertive Chinese moves to counteract US influence in the region.
Meanwhile, China's economic rise is seen as incrementally undermining US global leadership.
The message from China is clear: it is supremely confident in its own governance model and is committed to pursuing an alternative path of development to Western-led neo-liberalism.
Until now, the Chinese brand of authoritarian capitalism has remained largely unpersuasive to the majority, although it has gained traction in developing economies like Vietnam and Venezuela. But the West needs to recognise the growing appeal of the China model in the eyes of the developing world, especially as Western economies struggle to recover from the global financial crisis.
When developing countries look to the West, they see growing disillusionment among its electorates, austerity and rising inequality. The West's uncertainty about its own future serves to magnify, even glorify, the Chinese success story for developing economies in Asia, Africa and Latin America. It will not come as a surprise if more turn to China for lessons in economic development.
The West has been painfully slow to react. Instead of using the financial crisis as an opportunity for reflection, and to identify those elements of its economic system that simply are not working, leading Western economies continue to promote neo-liberalism as the only way forward.
The consequence of inaction threatens the future of democracy. The West is losing the argument, while the China model, despite its widening wealth gap, human rights abuses and disregard for the democratic process, is gaining credibility. The developing world sees that a Chinese leadership, unbothered by the inconvenience of elections and true public accountability, can create a long-term economic plan and follow it through uninterrupted.
While opening up its economy to the outside world, the government has retained a high level of control over strategic industries: energy, telecoms and banking, to name three. The developing world sees the fundamental advantage of this type of government intervention: business and trade can be used to bolster the regime and strengthen China's position in the international community.
As US journalist Joshua Kurlantzick notes, when China sees an investment opportunity overseas, it can compel its major banks to boost lending to Chinese companies operating in that area. "In short, the China model sees commerce as a means to promote national interests," he observes.
By contrast, a widening gap between the rich and poor is causing many to doubt the validity of the Western model. Many Westerners are increasingly insecure about their own values and the health and sustainability of their societies. And many Western governments are unwilling to accept that present levels of inequality harm, rather than promote, innovation and entrepreneurship.
At the very least, the West needs to acknowledge the huge damage that neo-liberalism has inflicted on democracy over the past 30 years. Many economists, not just on the far left, now indict the Reagan-Thatcher project of neo-liberalism for reversing the great postwar, baby-boom march towards equal opportunity.
Neo-liberalism has become so pernicious that the accepted belief, promoted by advocates of free market fundamentalism, is that the West came to dominate the world because it embraced small government and privatisation. In fact, economic historians Robert Allen and Michael Lind have demonstrated that unfree markets and big-government designs typified not only the East Asian path to industrialisation, but also America's rise in the early 19th century.
They argue that wealthier countries started preaching to poorer countries about the need for free trade - that is, to reduce tariffs designed to protect nascent industries - and the need to reduce government size - that is, allow foreigners to buy up vital sectors of the economy - only after they themselves had completed industrialisation on the back of very protectionist measures.
Equally dangerous is the myth perpetuated in the West that China has grown so rapidly because it has embraced the neo-liberal model. This is patently false.
China has succeeded, thus far, because it reformed on its own terms, picking and choosing elements of development models around East Asia - those of Japan, Singapore and Taiwan - and adapting them to its own context. The Chinese model is, in fact, intended as an antidote to Western neo-liberalism.
So what should the West do to counter the rise of the illiberal Chinese model? It must demonstrate some candour about its own developmental path - in the past and in the future - before it preaches to the developing world. It must invest more in education and in improving infrastructure to avoid being overtaken and left behind by China. It must swallow its pride and accept that it can learn some lessons from China in terms of long-term economic planning and market intervention. Narrowing the inequality gap in the West is essential so the China model does not gain further credibility on the back of purely economic success.
And it must truly acknowledge the fragility of democracy itself in order to realise what is at stake here. As Israeli historian Irad Malkin noted: "Democracy existed for about 200 years in the ancient world and has existed for about 200 years in the modern world, and other than that there has been no democracy in the whole of human history. Oligarchies have always existed."
Niv Horesh is professor of modern history of China and director of the China Policy Institute, University of Nottingham