What China Can Learn from Latin America

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March 20, 2010What China Can Learn from Latin America
ByMariano Turzi

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This past Monday, China's highest governmental legislative body, the National People's Congress (NPC), wrapped up its annual meetings in Beijing. While these meetings are mostly considered to be rubber-stamp assemblies, they can reveal something of the Chinese Communist Party leadership's policy priorities, as well as some of the various interest groups within the party. And as the statements and declarations emerging from this year's meetings make clear, the party leadership has identified consolidating the institutional move toward "inner-party democracy" as the key to curbing corruption and preventing concentration of power at the local levels of government.
This "democratic centralism" takes on added importance for the central party leadership in a post-stimulus scenario: Now that reasonable growth is apparent, Chinese economic policymakers will have to start dealing with the special interests that the stimulus package has created. Beijing's vision of a "harmonious society" requires the state to defend its population against the inequalities created by these modern roving bandits. But to successfully accomplish this, the CCP will have to overcome significant challenges. The political forces and interest groups that benefit from the central government's patronage will not give up their privileges easily, even if that means undermining stability and the power of the state.
In this sense, Latin America's experience offers useful insights into the impact of this kind of rent-seeking behavior on the state. Historically, Latin American states have been parceled out, to varying degrees, between competing clienteles. Most of these states lacked established, clearly understood rules and regulations -- whether formal or informal -- regarding the interaction of actors as well as discretionary behavior on the part of state officials. As a result, alliances arose between private interests and public officials to carve up pieces of the state administration for their own benefit.
The result was chronic institutional weakness that undercut state capacity. In the typical scenario, policy was defined in narrow terms and formulated to accommodate interest groups, perpetuating patterns of social exclusion and economic inequality. When rent-seeking became pervasive, policy uncertainty raised socioeconomic tensions and, with it, the likelihood of conflict. Moreover, markets became nervous, negatively impacting the country's economic organization, investment decisions, and the productive process as a whole -- ultimately hampering overall economic performance.
When policies and norms became terribly unpopular, they disenfranchised sectors of the population from the political process, generating the initial conditions for populist leaderships to denounce the whole system as inherently exploitative and illegitimate. The institutional structure and policy environment then became unstable and eventually collapsed under the pressures of social demands that the system could not adequately process.
In the People's Republic of China, the basic blueprint for aligning organizational and personal incentives is constituted around the national goal of sustaining high growth. This system, known as tiao-kuai, is based on hierarchical control. Central political organizations control social order, while local political institutions and authorities are incentivized to comply with this decision-making structure. Because the benefits of compliance exceed those of innovation, Chinese bureaucrats are discouraged from taking initiative or fostering change.
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Mariano Turzi
China

So with regard to the discussions at this year's meetings of the NPC, the question for party leaders becomes how to foster political renovation that adheres to the principle of top-down party control over cadres. In other words, is it possible in such a system for political change to be driven by something other than institutional collapse or overwhelming popular pressures?
Again, hegemonic Latin American political parties, like Argentina's Peronist Justicialist Party (PJ) or Mexico's Institutional Revolutionary Party (PRI), can serve as interesting points of comparison. The structures of power and promotion within these parties rewarded compliance with orders from the immediate superior echelon in the party hierarchy. As a result of this refusal to accept any constraints on vertical decision-making -- in the form of decentralization of power, for instance, or delegation of functions -- the potential for institutional responsiveness in the face of corruption and social tension was extremely limited, even when threatened with loss of power.
For a political system like that of China, which seems to be succeeding on its own terms, it is hard to envision the incentives that could get leaders to change course, short of heightened social tension or political instability. The CCP has demonstrated extraordinary durability and adaptability. It has managed to push through adaptive measures and reforms even in spite of structural rigidities, demonstrating a resilience that has proven critical to the economic success of the People's Republic of China.
Ironically, it is this very success that has created today's powerful special interests. If the CCP wants to avoid the fate of Latin America's rigidly centralized parties, it must move forward with the governance reforms identified last week. This may imply letting go some degree of control, but from the leadership's perspective that would be preferable to being forced to do so by social upheaval or collapse.
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Mariano Turzi is a professor in the Torcuato Di Tella University's Masters in International Studies program (Argentina). This article first appeared inWorld Politics Review.
Page Printed from: http://www.realclearworld.com/articles/2010/03/20/what_china_can_learn_from_latin_america_98868.html at April 02, 2010 - 12:09:24 AM CDT