Living on the edge

<strong>The Writing on the Wall: China and the west in the 21st century</strong>

Will Hutton <em>L

Between the time that The Writing on the Wall was commissioned in 2004 and its completion two years later, Will Hutton tells us, China's GDP grew by one-third. Fixed investment has tripled in six years; exports have quintupled. The speed and scale of China's growth, the impact on the way we do business and conduct diplomacy, the implications for our future and climate change - all are now such common currency in public discussion that they are becoming clichés, frequently invoked but insufficiently analysed. The central questions for us about China's spectacular growth are: can it continue like this and, if not, what might happen?

Most big upheavals in China in the past, from the Taiping rebellion to the Tiananmen Square occupation, came out of the blue for outside observers, so Hutton can be forgiven for providing less clarity in addressing the second question than the first. His headline conclusion about the likely prospects of China's growth continuing as it has in the past two decades is an emphatic "No". Since many will disagree, it is a claim worth exploring.

The case he lays out is stark and well argued. (Hutton pays warm tribute to three researchers - one in London and two in China - and he marshals their facts vigorously.) The limits to growth on the current Chinese model, he argues, derive ultimately from the tyranny of big numbers and the rule that says: that which is unsustainable is not sustained.

Much of the material is familiar: the Communist Party is a revolutionary party that gave up communist revolution in the 1980s and can no longer justify its monopoly of power in ideological terms. It relies, therefore, on delivering ever-rising living standards and the fastest possible growth to stave off political challenge. Stick with us, the party tells the citizens, because only we can make China great again, to your individual and collective benefit.

But without what Hutton terms "Enlightenment institutions" - a free and independent press, an independent and honest judiciary, autonomous civic organisations - the party's rampant corruption cannot be controlled, despite periodic anti-corruption campaigns conducted by the party itself. Without well-founded financial institutions, low-cost crony loans from state banks to state industries encourage inefficiencies and distortions and destroy any impulse to improve accountability or transparency. The party's style of Leninist corporatism, staggeringly wasteful of raw materials and energy, is propped up by technically bankrupt state banks that use the peasants' savings, just as Mao did, to fund rapid, but not necessarily productive, industrialisation and urbanisation.

Without civic, political or legal controls, the party appeases its own constituency by allowing local officials, their snouts in the economic trough, to get rich at the expense of the population on whom they feed. In just 20 years, this has led to staggering inequalities of wealth, opportunity, health, education and life expectancy, as well as to environmental degradation on a scale that the Chinese deputy environment minister calls catastrophic.

Growth of this kind and at this speed cannot continue, he argues, because everything is insufficient to support future growth at current rates: there are not enough raw materials, energy, credit, ships, ports, western companies willing to transfer production to China or markets to absorb the goods. Something different has to happen.

At the same time, the party cannot slow growth down without conceding a more equitable distribution of the spoils and some form of political power-sharing. Many commentators, including Hutton, argue that this means democratisation, which the party resists. From this vicious circle, he argues, derives the vulnerability of the Chinese system to shock and the inevitability, sooner or later, of forced political change.

Thus far, most informed commentators - and many inside the Chinese Communist Party - would agree. The argument is over how and when political change must come. For Hutton, the case is urgent and the outlook unpromising. At a similar stage of development, the earlier generation of Asian tigers had begun to create more plural societies, allowing them to innovate commercially and industrially and to develop global companies that carried them to the next stage of development. But China's record in this respect, cushioned as it has been by the vast pool of savings built up by a rural population as a hedge against the new insecurities, is unimpressive. An innovative society requires political freedom, a stable legal system and genuine corporate accountability to allow entrepreneurs to take risks. And all of that returns us to the immovable object that is the Communist Party's continuing grip on China's political and economic life.

The Writing on the Wall starts out as a book about China, but Hutton's core argument is that Enlightenment values are the necessary foundation of successful capitalism everywhere. Having laid out his case on China, Hutton turns to a lament for the wider condition of a world that has strayed from the foundations of all that is virtuous and productive about modern life - capitalism and social justice and the orderly and rational societies that he argues result from them. Chief among those that have strayed is the world's only other continental economy, the United States.

The world's two continental economies, with their vast populations and huge military means, are, he argues, squaring up for a potential clash. This might seem a surprising conclusion, since each, by now, is heavily dependent on the other - China depends on exports to the US and the US is now in hock to China, which holds one trillion dollars of American debt. But it is in this frantic embrace that Hutton sees the seeds of conflict. Their real interests dictate continued co-operation, but both are on an unsustainable path and each faces a potential crisis that could produce chaos and ugly nationalism in China, and protectionism and ugly nationalism in the US.

America's trajectory is unsustainable for slightly different reasons, though elements of China's corruption, short-termism and lack of regard for the public realm have echoes there. Hutton's case against the US will be familiar to readers of his earlier work: the steady impoverishment of the working and middle classes in favour of a tiny elite of super-rich; the capture of the political process by private financial interests; the retreat of rational debate in the public realm; the decline of the media. By the end of the book, it is hard to avoid the conclusion that, in some respects at least, China and the US are converging.

Hutton's case will not be popular among the ranks of China optimists - the constituencies that have invested in the proposition that China's growth is both benign and sustainable. And there are many of them: the university vice-chancellors who see funding solutions in the continuing flow of Chinese students; the businessmen who continue to dream - as their predecessors have since the 19th century - of the fortunes to be made in potentially the world's biggest market place; the new cold warriors, whose next conflict scenario depends on a China growing stronger and nastier; and the various bandwagon-jumpers in search of a contemporary utopia who see in China the latest chance to believe that economics, politics and even human nature can somehow be different.

Many take their cue from the remarkable changes of the past 30 years - the shining cities of the east coast, the raw entrepreneurial energy and the frontier spirit of Chinese development. Beneath the surface, though, there is anxiety - even fear, as the party struggles to build a new, post-communist national story that will maintain China's unity and its own power. In Beijing, too, it is understood that political change must come. How to get from here to there without disintegrating is the dilemma. This book makes uncomfortable reading in Beijing - and for the rest of us whose fate is now bound up with the gamble that they can pull it off.

Isabel Hilton is a London-based writer and broadcaster, and editor of http://www.chinadialogue.net and http://www.opendemocracy.net