China’s Dilemma

China’s dilemma is that continued reform will threaten the Party’s hold on power as an emerging middle class demands political representation while stalling reform will harm the growing nonstate sector and further deteriorate public support for the Party. In either case, the Party’s future looks bleak.

The Party can survive only by its ultimate reliance on the use of force to prevent competition from those who would contest single‐​party rule. The recent crackdown on the founders of the first opposition party in the history of the People’s Republic, the Chinese Democratic Party, attests to the insecurity of the ruling elite.

Yet, even in the face of an oppressive government, the Chinese people have made substantial economic progress since 1978. They have done so because brave individuals have been willing to challenge the planned economy and because the CPC under the leadership of Deng Xiaoping recognized the failure of planning and the value of a market system.

It is not enough, however, that China has permitted the market to develop, China must now recognize the futility of trying to plan the market and to control the lives of 1.3 billion people. A better way is to increase freedom within a constitutional setting that establishes general rules to constrain government and let people be free to choose.

What China needs is not a “socialist market economy” that is engineered by the CPC but a true market system based on a government of limited powers that respects the life, liberty, and property of each individual. Jiang Zemin’s recent call for 100 more years of communist rule and public ownership is an echo of the failed policies of the past not a vision for China’s future.

In considering what steps to take next, China’s leaders should rediscover the principle of spontaneous order — the central principle of a true market system. In the Tao Te Ching, written more than 2,000 years before The Wealth of Nations, Lao Tzu instructed the sage (ruler) to adopt the principle of noninterference (wu wei) as the best way to achieve happiness and prosperity:

“Lao Tzu Thought,” not “Mao Zedong Thought,” is the beacon for China’s future as a free and prosperous nation.

The truth is, the basic Party line is inconsistent with a spontaneous market order and a free society. When push comes to shove, the Party, not the individual, rules, and no dissent is tolerated. Until that totalitarian mentality is contested, China’s future will be plagued by uncertainty, and the nascent market economy will be in constant danger.

The right to dissent — that is, to be different, to think, to choose — is the hallmark of a free and civil society. The CPC’s increasingly harsh treatment of dissidents, including the sentencing of Zhang Shanguang to 10 years in prison for “informing” Radio Free Asia of the protest by 80 farmers in Hunan’s Xupu County against excessive taxes is yet one more egregious example of how the Party’s quest for stability is, in reality, a ploy to protect their monopoly power.

It is time for the CPC to abandon its top‐​down model of “stability” and allow the forces of freedom and individual responsibility to create a new constitutional order from the bottom up — based on the consent of the people and a respect for their natural rights to life, liberty, and property. Only then will the institutional incompatibility that now exists in China’s socialist market economy disappear and a true market‐​liberal order emerge — based on liberty and justice for all.