Chapter 11:
The Viciously Toxic Economy of “Red” Capitalism in Communist China
by Wu Huilin
A “Harmonious society” is a society filled with happiness. Even the leaders of the Chinese Communist Party (CCP) know that. To create a harmonious society thus becomes the common objective for policymakers. Then, what exactly is a harmonious society?
The Real Meaning of a Harmonious Society
The word for “harmony” in Chinese is written as “和諧.” The character “和” includes the character for food, “禾,” and the character for mouth, “口,” suggesting that there is food available for every mouth. The character “諧 includes the character for speech, “言,” and the character for all, “皆,” suggesting that everyone has freedom of speech. In order for everyone to have enough food, it is necessary to implement a “free economy, a private property economy or market economy.” In order for people to have freedom of speech, a “free democratic system” is the prerequisite.
After almost 100 years of communism, we have no evidence that this system of government has contributed to a harmonious society, and it has to progress to “economic freedom” and “political freedom.” The next question is: do we need to implement both at the same time, or one after another? Since the former will cause trauma in a short time, the latter was used more often. Then which one should be implemented first: “economic freedom” or “political freedom?” Creating material wealth, after all, is a much simpler and better manageable prospect than developing programs to further and sustain human rights. Therefore, many governments tend to implement economic freedom first and then practice democracy. Yet, choosing to expand the economy does very little for strengthening a harmonious society, so progress tends to be slow. The CCP of course, follows the “economy first” model, so democracy is far below what one would expect from the second-largest economy in the world. The world is not lacking of successful cases such as Taiwan and Chile.
It was well known that by implementing the policy of “decentralization of power and transfer of profits” at the end of 1978, then-premiere of the CCP Deng Xiaoping, along with leaders of the Soviet Union and various Eastern European countries, tried to transform state-owned properties into private ownership. At the beginning, the policy was successful and Zhao Ziyang, China’s third premiere under CCP leadership, was the true person behind the wheel. Before rising through the ranks to act as premiere of the Party, Zhao was the Secretary of the Party Committee in Sichuan Province in 1975. At that time, the lives in Chinese villages were quite impoverished due to the Cultural Revolution. Zhao hence adopted the “ease of restriction” policy, which allowed peasants to freely plant commercial crops, renewed the policy to allow household sideline production, allowed them to have their own land to grow crops for their own consumption and promoted the reform policy of “the privatization of farm output quotas for individual households.” Motivated by these incentives, the peasants worked hard and Sichuan enjoyed several years of prosperous harvests. Because his economic reforms were so successful, Zhao was acknowledged by Deng Xiaoping and other leaders, and was accordingly appointed as Premiere in the early 1980s.
Along with then-Communist Party General Secretary Hu Yao- bang, who was also well-known for his liberal style, the two formed the so-called “Hu-Zhao system” under Deng’s leadership, and vigorously promoted agendas for both economic and political reform. Generally speaking, Zhao was in charge of economic reform, and applied what he had learned from his achievements in Sichuan to the whole country.
The dilemma of Zhao Ziyang’s economic reform
In short, Zhao’s reform was intended to achieve privatization. However, it would prove to be neither an easy nor quick process. Zhao had to make a choice: either promote the ideological agenda of his stakeholders, the Party, or resist their pressure and meet the needs of the people. In addition, despite Zhao’s recent accomplishments in Sichuan, his limited experience—he only received a high school education and never lived beyond the restrictions of a communist state—caused people to doubt his capability in fulfilling such an enormous task. However, on the afternoon of September 19, 1988, after a decade of economic reform in China, Zhao had a two-hour conversation with Noble laureate and liberal economist Milton Friedman (1912-2006), on the topic of “the issue of economic reform in China.” It was indeed surprising to know that after the conversation, the well-known Chinese economist Steve Cheung commented that both Zhao and Friedman shared a “similar” point of view.
Cheung’s observation is illustrated in a “Christmas letter,” the only one written by Friedman and his wife to one of their relatives in more than a decade. In this letter, Friedman described Zhao as: “We are very impressed with Zhao’s wisdom and his leadership in bringing China to a more market-oriented economy. He has a very deep understanding about the economic issues, is determined to expand the market [and is] willing to try and learn. He is humble and sincerely listens to recommendations and comments from others. In the meantime, he also has to safeguard the highest authority of the CCP. If he is to succeed, this requires very subtle tactics. At the moment, he is facing some real problems, mainly that the acceleration of inflation will slow down the pace of economic reform.”
Accordingly, the economic reform implemented by Zhao was indeed effective in the early stages. However, as his goal to safeguard the highest authority of the CCP conflicted with that of an expanding market, it was inevitable that he would be faced with a serious dilemma. In addition, Cheung worried that the economic reform would lead China toward the Indian-like “classified management” that occurred in the early stages of Indian reform. As expected, the reform ended up in that direction. Although Zhao was under house arrest after the 1989 Tiananmen incident, his approach of progressive economic reform, combined with maintaining the highest authority of the CCP, was still followed by the CCP. As a result, conflicts finally happened and the situations of “institutional corruption” and “curse to the latecomers” plainly appeared in China.
“June 4th, 1989” and “April 25th, 1999”: two turning points of democratization in China
The “June 4th student massacre” of 1989 was a turning point for China’s transition to democracy. Unfortunately Zhao, who firmly believed in the CCP’s internal reform, dared not challenge the student suppression, orchestrated by such leaders as Deng Xiaop- ing, Li Peng, and Jiang Zemin. Instead, with tears in his eyes, he persuaded students on Tiananmen Square to cease their protests. Shortly afterwards, army tanks rolled in without any hesitation, leaving behind the bloody bodies of innocent students. Zhao was later purged and put under house arrest. The democratization attempts in China ended in vain.
The “June 4th Incident” sparked global outrage, with countries worldwide adopting economic sanctions against China. The nation’s economy, already in an impasse because of monetary failures, plummeted to dangerous levels. Due to economic stagnation, the unemployment rate kept increasing and social unrest continued to escalate.
In 1992, the spiritual, self-cultivation system Falun Gong (also known as Falun Dafa) was introduced to the public. With its easy to learn gentle exercises and emphasis on improving one’s moral character, the practice had attracted 100 million adherents within a few short years. Falun Dafa, an ancient form of qigong, teach- es practitioners to first look inward when encountering conflicts and to practice the principles of truthfulness, compassion, and tolerance to transform hostility into harmony.
With one in 12 Chinese people improving themselves through Falun Dafa, many social problems throughout the country, resulting primarily from unemployment, easily dissolved. For several years, the Chinese government praised the benefits of Falun Dafa for improving social well-being, but their position gradually turned more hostile before the official crackdown on July 20, 1999.
On April 25, 1999, about 10,000 Falun Dafa practitioners from all over China gathered at Zhongnanhai, the government compound in Beijing, to appeal to the central government for justice for their fellow practitioners who had been detained and the recent defamation of the practice. With a calm mindset and respectful behavior, they held a peaceful, quiet appeal that is unprecedented in Chinese history.
Then-Premier Zhu Rong Ji met with Falun Dafa representatives during their protest and gave them a reasonable response to their complaints. Afterwards, the practitioners left in an orderly manner without leaving a single scrap of litter on the assembly site.
CNN and every other foreign media present at the scene were stunned by the peaceful demeanor of the practitioners and offered high praise for their efforts. Journalists reported that it was the largest group of demonstrators in China since the 1989 student protests and recognized the gathering as a pivotal moment in furthering democracy in China. Leaders of many foreign governments and those in the legal and political fields also considered the demonstration a model for China’s responsiveness to its citizens; a second chance for the CCP’s reform towards liberal democracy. However, subsequent developments deeply disappointed the international community.
Suppression of Falun Gong brings serious disaster
Three months after the April 25 peaceful appeal, the CCP initiated the “bloody repression against Falun Gong” on July 20, 1999, sabotaging any possibility for a harmonious society. To persecute Falun Gong practitioners, the CCP established the 610 Office and spent a lot of money to force police and all citizens in China to report Falun Gong practitioners. Practitioners were subject to arrest, imprisonment, torture and to having their organs forcibly harvested. In addition, to cover up the facts of its bloody suppression, the CCP has not only monitored media and built up a strong cyber army to defame and slander Falun Gong but also offered economic bribes in exchange for Western politicians’ silence. To support the abundant resources needed for the suppression, the CCP had to retain a high GDP growth with minimal production costs.
The consequences of the government’s misdeeds include the following:
- Escalation of sweatshops appearing throughout China.
- Cheap consumer goods, which have contributed to global deflation.
- Considerable consumption of natural resources by Chinese production, raising the price of electricity and other resources, leading to “imported inflation.”
- Domestic and international inflation, due to depressed export prices of Chinese goods so that the government can acquire huge amounts of foreign exchange; such depression also creates a money bubble with manipulative financial risk, which can induce global financial disasters.
- The emergence of environmental crisis, air pollution, and poisonous haze as natural resources are exhausted.
- Low quality and even poisonous products sold locally and exported to foreign countries, resulting in illness, injury, and even death.
- Human rights are neglected as foreign policymakers are intentionally distracted by China’s financial incentives.
- Chinese society is increasingly corrupted as morality declines and people are led by greed and the desire for personal gain.
The negative impacts of China’s high growth rates have prompted serious concern among experts in a variety of different fields since the beginning of the new millennium. Leaving aside the authenticity of these economic figures, the high growth rate in a totalitarian state is achieved by consuming and wasting natural resources. Paul Krugman, the recipient of the 2008 Nobel Prize in Economic Sciences, clearly pointed out in his article “The Myth of Asia’s Miracle” published by Foreign Affairs in 1994, that speedy economic growth in communist countries is based on an increase of input rather than the increase of output-per-unit-of-in- put. Such actions will eventually lead to diminishing returns and slowed growth by a wide margin. Hence, since the year 2000, the economic development in China has been described as “outwardly strong but inwardly weak,” “a castle in the air,” “a rotten interior beneath a fine exterior,” and “about to collapse.”
It is well known that the CCP is skilled in the manipulation of human resources. As the government has narrowly pursued economic growth in China, Chinese workers are exploited and their salaries are depressed. The consequence of which is worldwide “deflation” (overproduction, low prices, and poor quality). Other countries, being dissatisfied with China’s tactics, take actions to boycott, retaliate, and even riot against the CCP. An example was the furious public burning of Chinese shoes in September of 2004 in Spain.
Cheap and adulterated goods are poisoning ordinary people
“A farmer bought plump rice seeds and planted them. However, nothing grew out of those seeds because they were fake seeds. The angry farmer tried to kill himself by taking poison. But he did not die because the poison was bogus. His wife bought wine to celebrate his survival. However, they both lost their lives because the wine was poisonous.”
The above joke was circulating on the internet…. Of course, China’s maltreatment of human resources and cheap, defective products is no joke. Economically robust countries around the world, including the U.S., are threatened by low-priced goods made in China. In the quarterly issue of Journal of Economic Perspectives in September 2004, P. A. Samuelson (1915-2009), the recipient of the 1970 Nobel Prize in Economic Sciences, coined the term “polemical untruth” to denounce outsourcing production, widely recognized at the time as a useful option in promoting growth. Cheap goods such as “shoes Made in China,” he noted, are the result of outsourcing and negatively impact the employment of low-level workers in the US.
It is understandable if Chinese workers, of their free will and informed consent, voluntarily compromise their well-being to labor under poor working conditions while earning low wages. The Chinese government, however, is an authoritarian regime which is not ruled by law but by party guidelines. The majority of its workers have no choice but to be exploited. For instance, the Lanzhou Zhenglin Farming Foods Company, established and funded by Taiwanese enterprises in 1992, exported its “exclusively created AAA grade hand-selected large melon seeds” to many countries. The melon seeds were produced by about ten thousand detainees who were forced to crack melon seeds with their teeth and open them with their bare hands. The detainees were not paid. In winter, their hands succumb to frostbite and scabies. As they labored without any medical care, blood dripped from their hands onto the melon seeds. Their teeth and nails were destroyed (EpochTimes report on September 13, 2004).
Following the reports of defective China-made tires, toothpastes, and toy trains, a New York Times report on June 29, 2007, listed five types of seafood (catfish, sea bass, shrimp, dace, and eel) which were found to contain harmful antibiotics and were included in the list of poisonous goods by the U.S. It is worth noting that these reports are not just isolated incidents but have continued to surface around the globe, one after the other. Many reports from Western media have observed that China, as the world’s production factory, poses serious threats to global health.
When will the catastrophe of global resource depletion end?
Before the public was made aware of China’s poisonous products, the government’s emerging economy garnered positive praise from almost every corner of the globe. A few warnings did appear but were ignored. The more China’s growth rate grew, the more local and international markets consumed; the government made sure demand was met no matter the environmental or human consequences. Social inequity and distress in Chinese society—problems once hidden to the international community have become increasingly serious and blatantly obvious as reports of slave workers emerge and the disparity between rich and poor becomes more extreme. The CCP has used its financial power as a means of coercion and inducement in exchange for advanced technological products, forcing some companies like Yahoo! to assist the CCP in conducting domestic surveillance. As a result, free speech, human rights, and political freedom in China have worsened. Moreover, the CCP’s bribes to silence foreign politicians has resulted in the entire international community remaining mute in the face of the CCP’s human rights violations. Some have even become accomplices.
The impact of China’s rapid growth on the global environment and natural resources has attracted attention from all over the world. A report by the Greenpeace organization on October 19, 2005, pointed out that China has become the largest contributor to the destruction of rainforests: “Nearly five out of ten tropical hardwood logs” from the world’s threatened rainforests were being shipped to China that year. In addition to causing global deforestation, China’s demands for grain, meat, iron, and coal have exceeded that of the U.S., making China the world’s largest consumer. It will not end until we quickly change the mode of development in China. Without doing so, the disasters in the world will be extensive and devastating.
In addition to the export industry, large-scale infrastructure, i.e., construction projects, throughout China consume even greater amounts of resources. Such projects are vehicles for collision—and potentially corruption—between the private and the public sectors. While China moves forward with these massive projects to build its GDP, the supply and investment excess and the enormous demand shortage of their actions have created serious problems which will inevitably contribute to huge unaffordable debt and idle buildings.
By developing its economy at the expense of precious resources, the CCP has led the world to a critical point. The naked reality of diminishing returns has occurred in the wake of the competition for resources between China and other countries. The economic growth of China will be decreased deeply in the near future, which will harm both the Chinese people and the rest of us. Hence, for the sake of all humankind, we sincerely hope for an immediate change of China’s economic development model. Only through democracy, freedom, and open markets can we be saved.
In conclusion, the CCP must disintegrate, China’s red capitalism must become a pure market economy, and China must become a democratic country. Otherwise, human disasters will escalate and the destruction of civil societies will be inevitable.
