Former US Policy-Makers Encourage China To Extend Economic Liberalization This is just wishful thinking. Genuine economic liberalization presumes real political freedom

By Paolo von Schirach

June 5, 2013

WASHINGTON – As Chinese President Xi Jinping is about to have an important  meeting in California with President Obama, American luminaries offer their advice on how best to improve bilateral China-US relations. Former Goldman Sachs chief and former Secretary of the Treasury Henry Paulson provided his list in a WSJ op-ed piece. Former World Bank President, (who previously served as United States Trade Representative and then as Deputy Secretary of State), Robert Zoellick did the same in the FT.

China encouraged to implement more economic reforms

Predictably, these two establishment personalities gave a nice laundry list of all the good things that both leaders should do, especially when it comes to improved cooperation in the economic and trade spheres.

Still, something should be noted. Both writers go into some details on China’s need to really free up the economy. The Chinese government should liberalize services, open up new sectors, de-regulate, encourage private sector growth and welcome foreign investors. Wouldn’t that be nice?

Of course all this makes sense. But in reality the wish lists created by both former policy-makers amount to empty and truly meaningless blah, blah. For one simple reason. In China economic liberalization, while welcome, would collide with the desire on the part of the Communist Party leadership to retain ultimate control over the  economy and the society.

A real market economy?

Yes, China did open up in the last 30 years. No questions about that. However, do all these reform mean that China is truly on its way to become a true market economy? This would be most welcome, but we have no real evidence to support this conclusion. The fact is that economic freedom and autocracy do not mix well, neither in China nor anywhere else. You cannot have both at the same time.

No economic freedom without political freedom

And this is no detail. Indeed, it should be clear to all observers that it is impossible to have a genuine market economy when political power is concentrated in the hands of a few self-appointed leaders. And this is because true economic freedoms presume political liberty. In fact they cannot exist without it. This is what we get from history. Indeed, America’s own journey exemplifies this. The government exists in the USA for the purpose of preserving freedom. And freedom of course includes economic freedom. The American economy grew and prospered precisely because America was and is a genuinely free society in which economic activities, while regulated by laws and procedures, are not subject to arbitrary restrictions.

Will China eventually embrace democracy?

Now, are China’s leaders intent on promoting genuine economic and social growth –something that would have to include granting real liberties–  or are they mostly concerned with retaining power? I have no idea what their long term thinking may be. Still, if the latter is true, expect only few and reluctant steps towards genuine, as opposed to cosmetic, opening and transparency.

Again, genuine economic decentralization and promotion of a modern private sector presume political freedom. And this is true in every country and in every society. Without that there will be no genuine decentralization, no lifting of controls, and last but not least, there will be no independent judiciary that can and will adjudicate all matters fairly, with true impartiality.

Of course, it is for China to determine if and when it wants to embrace these fundamental political reforms. Still, let it be clear that without them the polite suggestions expressed by US luminaries about furthering economic liberalization will be just wishful thinking. Nice things said at the appropriate time of a high profile state visit, with full knowledge that this ideal agenda will not be implemented.


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