The Varied Faces of Liberty in China: Economic, Civil, and Religious1

The Varied Faces of Liberty in China: Economic, Civil, and Religious1 By Charles Wolf I. Preamble It is a standard practice to end talks or papers by highlighting a few so- called “takeaways”---3 or 4 salient points that the speaker or author wishes the audience or reader to remember, retain, and perhaps cite in further discussion of the subject. I’ll return later to the takeaways, but will start with what I’ll call “bringalongs”: a few points to keep in mind throughout the discussion of economic, civil, and religious liberty in China. The bringalongs may help clarify some of the discussion. The “bringalongs” are these: First, “Liberty and Freedom”: English is richly endowed with two nearly synonymous terms: freedom, of Saxon origin, think of the German Freiheit--- an unencumbered openness and easiness in daily living that is more or less taken for granted in the U.S. and other democracies; and liberty, of Norman origin, think of the French Liberté---a more formalized and institutionalized concept, in which any limits imposed on its exercise must be enacted through duly-constituted legal processes (i.e., the rule of law). Differences between liberty and freedom are nuanced and somewhat arbitrary, but may nonetheless be important. My Mandarin-fluent friends inform me that, in Chinese, there is only a single word which treats liberty and freedom as synonyms (zi you, 自由). In discussing economic freedom in China, my principal referent is freedom from (or absence of) restrictions affecting free and competitive markets, free enterprise, and freedom from excessive regulation. I will also 1 Presentation for Hillsdale College Free Market Forum, “Markets, Government, and the Common Good”, Hilton Omaha, October 15-17, 2015. I am indebted to colleagues Harry Rowen, Richard Solomon, Eric Larson, and Wang Hu for helpful comments on an earlier draft. Of course, none of them shares responsibility for any errors I may have made in facts, interpretations, or judgments. 1 refer to freedom to do---to take various actions in support of free markets, free enterprise, and competition. In addressing civil and religious liberty in China, I mainly have in mind what can or cannot be done---that is, what is explicitly proscribed and unacceptable in the civil and religious domains, hence is deemed “politically incorrect”, in contrast to what is, at least implicitly, allowed or even encouraged. In China’s authoritarian system, economic restrictions of various sorts are important (e.g., forming joint ventures with foreign partners, accessing bank credit by private enterprises vs. state-owned enterprises (SOEs), raising equity capital in domestic and foreign stock markets). Exemptions from these restrictions may also be important. The restrictions affect incentives and transaction costs, how the economic system works, and how well it’s likely to work in the future. Restrictions on civil and religious liberty are extensive---some explicit, others implicit. They also vary in significance, as well as in the extent of their enforcement and of compliance with them. Toward the end of this essay I will address the relationships among economic, civil and religious liberty by formulating several hypothetical scenarios reflecting how these liberties interact now and how their interactions may evolve in the future. The second “bringalong” is what I’ll call the “3 T’s and 1 S”---issues that are forbidden in public and even private discourse in China. The forbidden T’s are “Tibet, Taiwan, and Tiananmen Square”; the forbidden “S” refers to the student protest movement in Hong Kong (sometimes called the “umbrella movement”), which has erupted and been quelled during the past several years. This “bringalong” is more specific than the preceding bringalong about freedom and liberty. The first T, Tibet, constrains religious as well as civil liberty because the Tibetans are devout Buddhists, as well as advocates of greater autonomy for Tibet as a province of China. The Communist Party of China (CPC) is not anti-Buddhist so long as Buddhism is practiced in a decentralized, localized manner. But the CPC is severely anti-Buddhist if Buddhism is, or when it appears to become, a centralized, organized religious movement. In this latter incarnation, Buddhism is viewed by CPC leaders as unacceptably divisive because it may be an object of loyalty and commitment inimical and contrary to China’s national interests and the interests of the CPC. 2 The other T’s are Taiwan and Tiananmen. They are off-limits because deemed as conflicting with the core unity of China over which the CPC presides. A similar proscription applies to the unacceptability of the S---the student protest movement in Hong Kong. In sum, the 3 T’s and 1 S are “bringalongs” that relate specifically to civil and religious liberty. To a degree, they are separable from economic freedom in China. I turn now to consider the meaning and scope of economic freedom in China. II Economic Freedom---“freedom from”, and “liberty to do” The respective roles of free and open markets (both domestic and foreign), free enterprise, and private ownership, on one hand, and of central planning, state-owned enterprises (SOEs), and extensive government control via regulatory policies and other means, on the other hand---these are subjects of continuing debate in China. In some respects, the China debate is a counterpart to the continuing debate in the U.S. on the appropriate roles and scale of the private sector versus the government sector. However, in the Chinese debate, advocacy of free markets and private enterprise is sometimes characterized as “reformist” and “rightist radicalism”, while advocacy of government control and the dominance of the state sector and SOEs is characterized as “leftist traditionalism”. Ironically, the U.S. political debate often views free markets as rightist traditionalism, and expanded government intervention as leftist radicalism. I am cautiously optimistic that the Chinese debate will be resolved in favor of free markets. Herewith, the reasons: (1) In November 2013, President Xi Jinping convened the Third Plenum of the Party’s 18th Central Committee meeting. The meeting culminated in a 60-point Plan for “economic, social and legal reforms” aimed at achieving for China the status of a developed nation by 2049.2 The Plan affirms China’s aim to transition to an economy that is less dependent on government investment, and is “more driven by 2 see knowledge.wharton.upenn.edu (2013), for a summary of the Plan 3 consumption, innovation, and market forces”.3 Of course, plans are easier to formulate than to implement, and the Plan is notably inexplicit about implementation. Moreover, other parts of the Plan were eloquent in praising the state’s central role in guiding China’s dramatic growth over the past 3-decades, and in acknowledging the major contribution made by SOEs to this achievement. So, the Plenum’s emphasis on free markets is partly balanced by praise accorded to centralized state control.4 (2) China’s private sector as a share of GDP is 60%, while the state’s share is 40%. Urban employment by the private sector also exceeds that of the state. Furthermore, the private sector’s annual growth rate since 2008 has been twice as high as the state sector (18% vs. 9%). Accompanying the differing GDP growth, employment growth in the private sector has sharply exceeded that in the private sector.5 If and as China continues to experience a significant slowdown from its remarkable growth during the past three decades, I opine that the leadership will favor the private sector because of a compelling interest in limiting if not reversing any further slowdown, and sustaining at least moderate economic growth and maintaining or increasing employment. Consequently, policies are likely to be designed to assist the private sector by freeing it from excessive rest regulation and excessive taxation, while encouraging more open markets both at home and abroad. The private sector is likely to be strengthened by 3 ibid, p.2 4 Paradoxically, there has been some pushback from the SOE’s (e.g., China’s National Overseas Oil Company, China’s National Petroleum Company, China’s Chemical Company), with occasional indications they may prefer to be freer from government influence, and hence more flexible and agile in their investment, employment and other decision-making. The pushback may also reflect the remarkable success achieved by several private companies and the wealth realized by these companies’ senior executives---for example, Alibaba and its founder, former CEO and principal owner, Jack Ma (one of China’s richest billionaires), and the privatized electronics giant, Hua Wei and its top executives. Mr. Ma’s assertion of differing priorities from those of U.S. capitalism---namely, customers and employees ranking above shareholders in Mr. Ma’s priorities---may also find resonance among CPC leadership (see theamericanceo.com, October, 2014) 5 The cited data are from Nicholas Lardy, “Markets over Mao: The Rise of Private Business in China” (Peterson Institute for International Economics, 2014). See also, The Economist, “Unstated Capitalism”, December 2014; Ronald Coase and Ning Wang, “How China Became Capitalist”, (Palgrave Macmillan, 2012); Yasheng Huang, “Capitalism with Chinese Characteristics”, (Cambridge University Press, 3008); and Charles Wolf, r., “Puzzles, Paradoxes, Controversies, and the Global Economy”, Chapter 6, “A Truly Great Leap Forward” (Hoover Institution Press, 2015). 4 these considerations. (Recall the first “bringalong” about freedom and liberty, “freedom from” and liberty “to do”). (3) However, the 4th Party Plenum in 2014 did not fully dispel uncertainty about the respective future roles of the private and state sectors in China’s economy. While the Plenum’s final communiqué strongly and unsurprisingly re-asserted the dominance of CPC authority, it did so without clarifying whether this authority will be exercised in favor of free markets and private enterprise, or of the state sector and SOEs.

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