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Center for International Private Enterprise
The debate on whether a market economy can exist without democracy is ongoing, and many think that at least two countries in the world are good examples of how the former can exist without the latter: China and Singapore. The question is whether such systems can be models for development without democracy in other countries. But a closer look at the nature of China’s and Singapore’s economic transformation highlights some important political and social factors as well that hardly make their models universal.
Deng Xiaoping, the Chinese leader who came to power in 1978, moved China toward a market orientation and integration with the world economy. Reforms under his leadership allowed the country to start building institutions meant to strengthen private property, provided motivation for savings and investment, and gave China the ability to become the export powerhouse it is today. Those reforms also helped to create an innovative urban middle class and abandon the inefficient dependence on agriculture that had dominated the Chinese economy since the period of Mao Tse-Tung’s leadership.
In the two decades of China’s pro-market reforms, businesses developed rapidly from SMEs to large renterprises. However, economic liberalization also brought differences in income and social relations that are increasingly hard to reconcile with the country’s communist ideology of egalitarianism. Today, a typical Chinese city like Shanghai demonstrates all the features of a typical capitalist city with its dynamic economy, consumer culture, and contrasts between rich and poor. But the government cannot conceivably limit the ability of domestic businesses to operate by nationalizing or closing them down since it would have disastrous consequences for further economic progress – and for the government’s political survival.
Even though the government continues to closely control information flow, Chinese citizens have more and more exposure to the outside world. For one, many children of Chinese entrepreneurs study abroad and bring back not only knowledge but also a different way of thinking. China’s impressive economic transformation increasingly satisfies the basic needs of its population, providing ordinary Chinese with time and resources for self-actualization and greater confidence to complain about things they don’t like – such as corruption.
Singapore is another example frequently used to argue that a market economy can exist without democracy and that such a model can be replicated in developing countries. But in reality most leaders who claim that by holding dictatorial power they can be the next Deng Xiaoping or the next Lee Kuan Yew are just engaging in a desperate attempt to believe in the illusion of eternal preservation of their own power. Most counties don’t have China’s vast population and economic potential that would allow for equally dynamic growth and development even under the worst of leaderships. And the small city-state Singapore can almost be considered a private company with very good management that cares about its workers who in turn are generally happy with the status quo.
But history shows that such good “managers” are hard to find when given unchecked political power – it’s much more likely that unchecked power will lead to corruption, cronyism, and economic stagnation rather than economic growth and development. The more relevant story to watch from China and Singapore is that economic liberalization and a high level of integration with the world economy can be catalysts for broader change.
Almas Kusherbayev is a Kazakh journalist working in Central Asia.