In the past few weeks, events in Beijing, Washington and Taipei have added considerably to the debate on how much weight should be given to the economy when plotting a country's future. Beijing is pushing its economy full steam ahead despite enormous dangers. Washington seems to be going full steam ahead on security regardless of the uncertain implications for its economy.
Taipei continues to struggle to find a balance between security and the economy in dealing with the cross-strait relationship.
Though most observers in China have noted the problems that lie ahead in that nation's mod-ernization projects, the potential continues to make the gamble worthwhile -- for China and for the rest of the world. It still seems that way, but lately there have been more questions in the international media on just where this policy is leading the country.
The favorite descriptions of the future are crony capitalism or authoritarian capitalism. Some articles speculate on the differences within the leadership over whether this is where China should go. Others write about whether the result might be state capitalism, which prevents political reform, or an increase in open-market capitalism that could result in more open political systems. Some even see China following the Taiwan model.
To my mind that is a bit far-fetched. Taiwan developed from an agricultural economy to a labor-intensive industrial one, to one based on advanced technology in almost textbook fashion. At the same time, economic resources were transferred from the public sector into the private sector. An authoritarian regime in a small country could, and did, manage this economic transformation effectively. This is less possible in a large country such as China.
When it comes to political reform, the differences are even greater. The late president Chiang Ching-kuo (蔣經國) lifted martial law and legalized other political parties. That was the beginning, though we will never know where he wanted to take the country thereafter. The direction was established by his successor. Historians will doubtless differ, but in my view, the handling of the student riots in Taipei in 1990, starkly different from those in Tiananmen, presented an opening for change. The National Affairs Conference that resulted from it, though strongly resisted by many of the political elite, steered the future course of Taiwan's democracy. Government was to allow change and the opposition was to pursue it under the law.
I believe it is unlikely China could follow that path. Its size alone makes an enormous difference on how it is governed. Even now the handling by force of discontent, such as from the Falun Gong, has been counterproduc-tive, and promising more money to unemployed laborers and peasants can be only a temporary measure. Public political diversity, now prohibited, would be far more difficult to control if liberalized.
The party and the government are committed to an economy that is open to the world. There's no turning back, as they both must continue on this path of continuous high growth to maintain power. This policy cannot be sustained for long, however. The inevitable labor and peasant discontent that will follow is not likely to be silenced by the promise of a conference, nor can the government manage a truly open national debate. China is not Taiwan.
Some time ago, in a previous article, I asked what was more important -- security or economics. In the US, the recent midterm elections gave a clear answer to this question.
The US economy has been sluggish, and in the campaign the opposition tried to focus the voters on this problem. The old saying in the US is that people usually "vote their pocketbook." The Republicans and especially US President George W. Bush, however, focused heavily on the war on terrorism, Iraq and security in general. Bush took this risk even though he faced not only the historical tendency for voters to "vote their pocketbook," but also the conventional wisdom that the ruling party almost always suffers a setback in midterm elections. Bush won big.
With his victory shortly after in getting a tough UN resolution on Iraq, Bush is clearly on a roll. He used that momentum to get a new Cabinet agency -- a Home Security Department -- established. The need to address the economy is still there, however, and it is next on his agenda. This sequence of priorities ensures that the economic proposals put forth, and the debate that will follow, are shaped with the needs of security already established.
In Taiwan, this sequence is reversed. Last year, there was enormous pressure on the government to increase economic exchanges with China. Some of the leaders of the largest private companies insisted that Taiwan's weakening economy could only be strengthened by a greater opening to China. The falling stock market and rising unemployment were being blamed on resistance to opening up the economy to China.
The Economic Development Advisory Conference was established to provide advice for the administration and bolster confidence in the economy. Such a conference had been successfully used by the previous administration on other issues, though the members were more broadly chosen to represent a wider spectrum of interests. The economy has improved, but there is still a great deal of pressure on the government to open still wider to China in the form of direct links. In the meantime, concerns about security have grown.
Perhaps by accident, Bush may be ahead of both China and Tai-wan in coping with the need to establish his nation's priorities in addressing both security and the economy. His most pressing danger is dealing with the evolving means of conducting war. By first gaining support for how he intends to address this problem, plans to stimulate the economy can gain support with security needs already broadly understood.
In China, the main danger is social unrest. Continued economic growth, of course, would lessen the problem, but that depends entirely on continuous foreign investment and foreign markets. This in turn depends on how well foreign economies perform. How to balance domestic security with its need to grow economically is still an open question. In China, security (both domestic and external) is not a problem to be shared with the people but is determined behind closed doors.
In the US and other democracies, decisions on security have to gain the support of the people. Free people do not lightly approve the danger and the money that might be required. Leaders must convince the people that the sacrifice is necessary. On security matters, change usually must be generated by the government; on economic matters, in an open society, changes are generated by market forces and the government is less of a player. Taiwan's experience in its recent democratic past has been more on managing economics, less on security.
There is an added dimension for Taiwan. While maintaining the capability to defend itself, many in Taiwan also expect the US to intervene in a cross-strait conflict. But the US leadership would have to convince the US people of the merits of doing this. That is difficult under any circumstances, but if it is seen that the people of Taiwan are not willing to pay the cost of defending themselves, it makes a favorable US response much less likely.
The cost of restructuring the economy is substantial. The need for this restructuring, however, is put in terms of employment, social welfare and better standards of living, all of which are important goals. But seldom is the strengthening of the economy put in terms of security, which is even more important. Generating a sense of civic duty among the people to set aside some goals to pay for the needs of security in their country and for their freedom would strengthen them and their country. It would help put economic reform and stronger security in a better equilibrium.
Nat Bellocchi is the former chairman of the American Institute in Taiwan and is now a special adviser to the Liberty Times Group. The views expressed in this article are his own.
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