Joshua Kurlantzick: Will the financial crisis bring down Russia and China?
[Joshua Kurlantzick is a senior correspondent at The American Prospect and a special correspondent at The New Republic. He is also a scholar at the Carnegie Endowment for International Peace and the author of Charm Offensive: How China's Soft Power is Transforming the World.]
... Modern autocracies are very different from those of the past. Rather than ruling by strict ideology, ruthless internal police, and tight control of information, authoritarian regimes like Beijing and Moscow have remained in power primarily by making an implicit bargain with their most critical middle-class citizens -- you might not have freedom, but you will have money. As long as the broad middle class, which is where the most dangerous dissent would take hold, is gaining ground economically, the regime is safe.
So while in the West, leaders worry that the global economy faces a second Great Depression, such an economic crisis poses a major threat to some of the world's most resilient autocracies. A strong economy was their only backstop. Now, starved of the growth that keeps them in power and unable to repress their people as old-fashioned dictators did, these autocracies may have nothing left to fall back on.
Over the past decade, authoritarian capitalist countries built impressive economic resumés. China has grown by over 10 percent in most years, and some of its biggest cities, like Shanghai, now boast per-capita incomes of more than $7,000 per year, the same level as a middle-income nation. Russia, all but bankrupt in the late 1990s, has delivered strong enough growth that it now boasts the third-largest capital reserves in the world and has built its gas companies into such powerhouses that they now dominate the markets of Europe. The authoritarian capitalists proved so successful, in fact, that some in the West began wondering whether their model of development had surpassed liberal democratic capitalism. Israeli political theorist Azar Gat argued in Foreign Affairs last year that the most significant challenge to liberal democracy today "emanates from the rise of non-democratic great powers: the West's old Cold War rivals China and Russia, now operating under authoritarian capitalist, rather than communist, regimes."
Constant growth kept the populations quiet. In Russia, Vladimir Putin promised to save the country from the ruin of the 1990s, a time when Russians enjoyed a more open society but incomes and wages fell sharply. True democracy, he implicitly suggested, might result in disorder in such a large and unwieldy nation. And in return for higher growth rates and greater disposable income, Russians allowed Putin to slowly strangle their freedoms. "Putin does provide stability of sorts, which the middle classes cherish," says Dmitri Trenin of the Carnegie Endowment's Moscow Center. "Even those [Russians] who oppose authoritarianism in principle fear that the likely alternatives are worse -- outright chaos, populist nationalism, much harsher authoritarianism than Putin's."
In China, the regime made a similar bargain, if not with the masses, at least with its urban middle classes. The regime's investment and largesse was slanted toward the big cities. As Deng Xiaoping vowed when he opened China's economy, "Some will get rich first" -- and those nouveau riche would appreciate who paid for their cars, homes, and glittery new mobile phones. In recent years, according to China expert Jonathan Unger, the government has made a deliberate policy of favoring this population.
In a poll by the Pew Research Center, over 80 percent of Chinese said they were satisfied with conditions in their country, among the highest of responses in the world. Even after two terms in office, Vladimir Putin enjoyed popularity ratings that would be the envy of any Western leader. When I traveled across urban, eastern China two years ago asking young Chinese their view of the government, I found what seemed like a striking amount of political inertia among young elites. "We don't have any control over these things," one middle-class young woman told me in Shanghai, before asking if I'd seen the latest episodes of The Wire on DVD.
The true test of any government, though, comes not in good times but in bad. The autocracies are particularly poorly prepared for a global economic crisis because they have weak domestic consumer markets and rely upon exports to survive. Powerful authoritarian regimes like Russia and the Persian Gulf states are dependent on exports of petroleum or one sole commodity. In Venezuela, energy accounts for some 95 percent of all export revenue. In Iran, it provides some 80 percent of revenues. But the price of oil has dropped by more than half in the past six months. And China, which depends largely on exporting manufactured goods to wealthy nations, will also suffer from the financial crisis as consumer spending drops in the U.S., Europe, and Japan. Exports constitute nearly 35 percent of China's gross domestic product -- far too high a figure to be considered a balanced economy. (U.S. exports account for about 10 percent of GDP most years.)...
Read entire article at American Prospect
... Modern autocracies are very different from those of the past. Rather than ruling by strict ideology, ruthless internal police, and tight control of information, authoritarian regimes like Beijing and Moscow have remained in power primarily by making an implicit bargain with their most critical middle-class citizens -- you might not have freedom, but you will have money. As long as the broad middle class, which is where the most dangerous dissent would take hold, is gaining ground economically, the regime is safe.
So while in the West, leaders worry that the global economy faces a second Great Depression, such an economic crisis poses a major threat to some of the world's most resilient autocracies. A strong economy was their only backstop. Now, starved of the growth that keeps them in power and unable to repress their people as old-fashioned dictators did, these autocracies may have nothing left to fall back on.
Over the past decade, authoritarian capitalist countries built impressive economic resumés. China has grown by over 10 percent in most years, and some of its biggest cities, like Shanghai, now boast per-capita incomes of more than $7,000 per year, the same level as a middle-income nation. Russia, all but bankrupt in the late 1990s, has delivered strong enough growth that it now boasts the third-largest capital reserves in the world and has built its gas companies into such powerhouses that they now dominate the markets of Europe. The authoritarian capitalists proved so successful, in fact, that some in the West began wondering whether their model of development had surpassed liberal democratic capitalism. Israeli political theorist Azar Gat argued in Foreign Affairs last year that the most significant challenge to liberal democracy today "emanates from the rise of non-democratic great powers: the West's old Cold War rivals China and Russia, now operating under authoritarian capitalist, rather than communist, regimes."
Constant growth kept the populations quiet. In Russia, Vladimir Putin promised to save the country from the ruin of the 1990s, a time when Russians enjoyed a more open society but incomes and wages fell sharply. True democracy, he implicitly suggested, might result in disorder in such a large and unwieldy nation. And in return for higher growth rates and greater disposable income, Russians allowed Putin to slowly strangle their freedoms. "Putin does provide stability of sorts, which the middle classes cherish," says Dmitri Trenin of the Carnegie Endowment's Moscow Center. "Even those [Russians] who oppose authoritarianism in principle fear that the likely alternatives are worse -- outright chaos, populist nationalism, much harsher authoritarianism than Putin's."
In China, the regime made a similar bargain, if not with the masses, at least with its urban middle classes. The regime's investment and largesse was slanted toward the big cities. As Deng Xiaoping vowed when he opened China's economy, "Some will get rich first" -- and those nouveau riche would appreciate who paid for their cars, homes, and glittery new mobile phones. In recent years, according to China expert Jonathan Unger, the government has made a deliberate policy of favoring this population.
In a poll by the Pew Research Center, over 80 percent of Chinese said they were satisfied with conditions in their country, among the highest of responses in the world. Even after two terms in office, Vladimir Putin enjoyed popularity ratings that would be the envy of any Western leader. When I traveled across urban, eastern China two years ago asking young Chinese their view of the government, I found what seemed like a striking amount of political inertia among young elites. "We don't have any control over these things," one middle-class young woman told me in Shanghai, before asking if I'd seen the latest episodes of The Wire on DVD.
The true test of any government, though, comes not in good times but in bad. The autocracies are particularly poorly prepared for a global economic crisis because they have weak domestic consumer markets and rely upon exports to survive. Powerful authoritarian regimes like Russia and the Persian Gulf states are dependent on exports of petroleum or one sole commodity. In Venezuela, energy accounts for some 95 percent of all export revenue. In Iran, it provides some 80 percent of revenues. But the price of oil has dropped by more than half in the past six months. And China, which depends largely on exporting manufactured goods to wealthy nations, will also suffer from the financial crisis as consumer spending drops in the U.S., Europe, and Japan. Exports constitute nearly 35 percent of China's gross domestic product -- far too high a figure to be considered a balanced economy. (U.S. exports account for about 10 percent of GDP most years.)...