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Columns

Three Wise Men

Andrea G

Moisés Naím / Foreign Policy

That Confucian ideas persist in the minds of Chinese politicians should not surprise us. Confucianism began as a means of bringing social order out of [political] chaos…. It has been a philosophy of status and consequently a ready tool for autocracy and bureaucracy whenever they have flourished.” John King Fairbank, the noted China scholar, wrote these words in 1948. Half a century later, many hope that he is still right. After all, China’s current leaders may need to tap whatever Confucian instincts remain in the population to contain the social upheaval that is coming with the country’s rapid modernization. According to a recent article in the Washington Post, 58,000 major incidents of social unrest took place in China in 2003 — an average of roughly 160 a day and 15 percent more than the year before. The same article reported that “as police battled to suppress deadly ethnic clashes in Central China, tens of thousands of rice farmers fighting a dam project staged a huge protest in the western part of the country. The same day, authorities crushed a strike involving 7,000 textile workers… The Communist Party has indicated it is worried that these outbursts of discontent might coalesce into large-scale, organized opposition to its rule.”

Widespread political chaos, often sparked by economic failure, is all too common in Chinese history. For example, the brutal politics of Mao Zedong’s Cultural Revolution were driven in part by his desire to neutralize critics of the Great Leap Forward, his botched attempt to impose massive agrarian reforms and accelerate industrial growth that led to a famine that may have killed 30 million Chinese. Like China’s leaders today, Mao wanted to unleash his nation’s enormous economic potential and lift its people out of poverty as quickly as possible. He got it wrong and millions died.

So it is only natural that Beijing is wary of making decisions that might unleash social unrest and escalate into massive political upheaval. After all, if social discontent is rising when the country is the world’s top recipient of foreign direct investment and its economy is growing at 9 percent a year, then protests could explode if its performance ever sags. A sharp spike in unemployment, a drastic cut in social services, or a widespread banking failure wiping out people’s savings could all lead to millions of Chinese taking to the streets in protest.

If China were to enter such dire economic straits, the leadership’s Confucian impulses would urge caution. Indeed, up until now, that appears to be the approach it has followed, favoring Confucian patience over Maoist boldness. But in the wake of a widespread economic crisis, some Chinese leaders may argue for a quick fix to appease the masses. Sure, none of today’s party apparatchiks have Mao’s stature, but they might be tempted to take a page out of his Little Red Book and push for populist policies that buy the regime more time.

So who should Chinese leaders listen to — Confucius or Mao? The answer is neither. They should instead look outside their own culture and history and seek the counsel of Stanley Fischer. A former top official at the International Monetary Fund (IMF), he is probably the world’s best-informed person about the mistakes policymakers in emerging markets tend to commit when faced with economic imbalances. He had a first-person look as the IMF’s point man for the financial turmoil in Argentina, Brazil, Mexico, Russia, and, of course, Asia, during its financial crisis of 1997-98. His decisions have been controversial, and some critics even blame him for mishandling the crises. But even his detractors would agree that he has seen it all.

If asked, Fischer would almost certainly advise Beijing to steer a course somewhere between the precepts of Confucius and Mao. Despite what Confucian principles may hold, when trying to head off an economic crisis, time is of the essence. All of the governments in the 1990s that watched their economies crash thought they had more time to take preventive action than they did. But, though Fischer would probably tell China’s leaders to act right away, he also probably wouldn’t suggest that they blindly pursue one-size-fits-all policies that ignore the particular roots of the crisis. The governments of the embattled economies of the 1990s claimed — as current Chinese leaders do — that their country’s institutions and circumstances were unique. During the 1990s, the bitter medicine each country was required to take was different and the effects varied. But, despite their differences, all of the countries that suffered financial crashes followed a predictable pattern: first denying the need for painful economic adjustments and then, after accepting that corrections were needed, postponing execution until it was too late.

In today’s global economy, living with massive economic imbalances like those China now faces is dangerous. They must be reined in — quickly. If China’s leadership waits too long, neither Confucius, Mao, or Fischer will be able to save them.