Jack Ma and the Bean Counters
Jack Ma climbed the economic ladder until he reached the pinnacle where he met and fought against regulators backed by political giants. He lost the battle and his company’s bid to become the largest IPO ever, but that’s not the end of the story.
The story not only has moral implications but also historical meaning. What the Chinese Communist Party (CCP) did to Jack Ma was morally reprehensible, justified only by every despot’s claim that it’s for the good of the overall system, to prevent systemic risk, for the good of the people. I predict that it has instead opened up China to multi-party political competition. This is a bold prediction and can be easily dismissed as mere “speculation”, but allow me to explain.
More than four decades ago, the CCP’s wise leader then, Deng Xiaoping, ditched communist precepts and embraced the idea of granting vast economic freedoms to the Chinese people. In less than a decade, the results astounded even die-hard communists.
Today, China has become an economic powerhouse, in direct competition with the U.S.A. to be the largest economy in the world. However, throughout this process of “market economy reforms”, the CCP kept its iron rule over China. The people have so far been largely silent except for a few large outbreaks of discontent during the Tiananmen Square incident and more recently the HongKong protests. It appears that the people are allowing the CCP to continue their despotic ways because they are now much better off than before, but may be it’s more accurate to say that the system has so far been successful in repressing discontent, and will continue to be so.
Milton Friedman once surmised that if economic power is kept separate and relatively available to anybody who would have to deserve it, then it can serve as a check against political power. In the case of despotic, one-party rule as exists in China, those who gain economic power from the economic freedoms granted would eventually come in conflict with the political class. The political class would have to assert their authority to prove that the wealthy class are not as formidable as they seem to be. The new wealthy class would then realize that the system is rigged against them and would therefore attempt to reform it for the better.
The wealthy class are not as organized as the political class, of course; and they tend to curry favor with the politically most powerful. After all, in China, success does not consist of market success alone — it is pretty obvious that any entrepreneur has to keep the rulers happy also. We therefore can not rely on the wealthy class alone to reform the system. They nevertheless have an important role to play in developments still to come.
Throughout the history of the CCP, power struggles among leaders have been its most salient feature. Before and during the Cultural Revolution, for example, Mao Tse Tung kept his power by claiming that all those who were against him were not true communists and must be put down. In the end, the leader he explicitly handed over his powers to, before he resigned, could not keep his power long enough, after Mao died. In almost every case, communist bona fides had been used to justify assumption of the highest office. (Not much different from how kings, in the European continent, long ago justified their rule by divine assignment.)
Nowadays political power in China is consolidated by keeping others who would also claim it, in check, by charging them with corruption. In other words, rather than communist bona fides, the leaders are now justifying their rule by declaring the purity of their intentions. The problem for the CCP is that it is very difficult not to be influenced by money (corrupt) and yet be pure at the same time. At some point, somebody claiming to be the presumptive leader would have to challenge the current leader to a free general election outside of the current electoral process, which is tightly controlled by the CCP — after all, only the leader chosen directly by the people has any legitimate claim to be the ruler. The current ruler would have to agree to change the election laws in order to accept the challenge.
One-party rule is not sustainable in general elections. Two leaders vying for power cannot use the same campaign machinery. Any challenger therefore would have to be backed by at least part of the wealthy class in order to mount a viable campaign.
A single exercise in general elections would spell the end of one-party rule, but it is inevitable given that it is the only sustainable way of justifying the presumption of political power.
Here in the U.S., we’ve just seen how a very strong leader like Trump cannot subjugate the other half of the population who are against him, because an arduous but essential general election process has not legitimized continuance of his rule. We’ve also just witnessed how a free press can sway an election, but that the people always has the final say every four years. Chinese intellectuals will eventually see the virtue of a free press and free elections. The current U.S. system of government has lasted for more than 230 years; the CCP has just turned 100 years old.
The CCP will fight a general election tooth and nail. The 3,000 member National People’s Congress will initially vote it down, as a matter of course. However, in due course, with corruption rampant, the influence of money and the difficulty in tightly controlling social media will gradually cause a sea change in the intellectual climate in China, and eventually lead to a free general election.
Speculation? I am not spelling out any detail about how this will actually occur, but the outcome I am predicting is very clear: one-party rule is unsustainable once economic freedom is unleashed. Let’s see how this will actually play out in less than a decade.