Harry Harding. Brookings Review. Volume 8, Issue 3. Summer 1990.
The wave of political change that cascaded across Eastern Europe at the end of last year produced both amazement and satisfaction in the United States. Totalitarianism and tight central planning seemed to have lost their appeal, especially to those who had lived under them for more than four decades. Reform, moving in the direction of democratic politics and market-oriented economics, looked to be inevitable. The process of change, as it spread from country to country, appeared to be as irreversible as it was unexpected. American analysts understandably discussed these developments in epochal terms, describing them variously as the “end of the Cold War,” the “end of communism,” or even the “end of history.” The contemporary era was said to be over, and a less threatening age was seen dawning before us.
The Tiananmen Incident in Peking last June should temper this optimism. In China, too, economic and political reform appeared to be an irreversible process, tracing an upward spiral toward greater liberalization and pluralism throughout the 1980s. The mass demonstrations that swept Peking between mid-April and early June of 1989 dramatically illustrated the extent of popular demands for even greater economic and political change. And the initial reluctance of the Chinese government to use force against its own citizenry appeared to prove that the demands for a more responsive government could not be resisted.
But the tragic night of June 3-4 has shown us that political and economic reform is not irreversible, at least in the middle term. Despite brave predictions that the hard-line government that emerged in Peking would stay in office for only a few weeks or months, China has subsequently witnessed a sustained suppression of dissent, a reactivation of political education, and a tightening of administrative controls over the economy. Moreover, as a direct result of these developments, U.S.-China relations, which appeared in 1987-88 to have entered a period of great maturity and stability, are now experiencing their most serious crisis since the establishment of formal diplomatic ties in 1978. In China, at least, both Leninism and central planning have gained an unexpected reprieve.
These recent developments in China bear some general lessons both for the process of reform in Communist countries and for American policy toward Communist states. Four lessons are particularly germane:
- Attempted reform may be inevitable, but successful reform is not. Although reform may score impressive achievements during an early honeymoon period, turbulence, crisis, and retrogression are all possible at later stages.
- The breakdowns in the reform process may be dramatic—even violent—events, serving to exacerbate the degree of retrogression at home and to magnify the impact on the international community.
- Breakdowns in reform present the United States with troubling foreign policy dilemmas, particularly regarding the appropriateness and effectiveness of sanctions against hard-line leaders in retrogressive Communist states.
- Finally, even if periods of retrogression and repression prove temporary, successfully liberalizing Communist systems may continue to pose challenges to their neighbors, albeit in a significantly different way than in the past.
The Dilemmas of Reform
Much of the Communist world now seems to believe that political and economic reform is necessary. From Mongolia to Hungary, and from Poland to Vietnam, there is consensus on the need for less central planning and greater political openness. But there has been much less agreement on how to design the reforms: how fast to proceed, what sequence to adopt, and how far to advance.
For much of the 1980s the Chinese experience appeared promising. Under the leadership of Deng Xiaoping reform produced significant increases in growth rates, spectacular improvements in living standards, more intensive interaction with the international economy, and noteworthy gains in civil and political rights. But the balance sheet turned less favorable in the latter part of the decade, with increasing corruption, inflation, and inequality fueling sharp dissatisfaction among urban Chinese. Indeed, the Chinese case suggests that even after a strong start, economic and political reform can engender increasingly serious contradictions that can jeopardize the entire effort. Why is this so?
- Reform causes both pain and envy. Clearly, the purpose of reform is to improve the performance of the economic and political systems by increasing their efficiency, productivity, and responsiveness. But these long-term benefits are accompanied by some sobering short-run costs. Eliminating subsidies and price controls will create strong inflationary pressures, at least until supply catches up with demand. Subjecting enterprises to more intense domestic and foreign competition and imposing greater financial discipline on them will most likely lead to bankruptcies and unemployment. Providing greater incentives for greater productivity and allowing the emergence of private and collective enterprises will generate new inequalities that can be perceived as unjust. And dismantling or deactivating old mechanisms of political control can lead to crime, corruption, and social disorientation, just as increasing opportunities for political participation will encounter resentment and resistance from entrenched party and government elites.
- Agriculture is no panacea. The Chinese case has been frequently said to show the wisdom of starting economic reform in the countryside. And it is true that the decollectivization of Chinese agriculture in the late 1970s and early 1980s provided a great boost to the overall reform effort by stimulating economic growth, providing more consumer goods for the cities, and building a firm political base in rural areas. But the Chinese experience also shows that such benefits may be relatively short-lived. The increases in agricultural production in the early 1980s were largely achieved through a series of one-shot initiatives that cannot be repeated: dismantling the communes, dividing the land, and reinstituting family farming. Sustaining the gains over time will require stimulating investment and production by increasing the prices paid to farmers for their agricultural output. This, in turn, requires either that price increases be passed along to the consumer (thus exacerbating urban inflation) or that government subsidies be provided to either peasants or city dwellers (thus increasing the financial burden on the state treasury). once the engine of reform, agriculture can soon become a brake.
- Stopping reforms halfway only intensifies the contradictions. In the 1980s Chinese leaders succumbed to the understandable temptation of implementing those aspects of reform that would produce political and economic benefits while delaying those that would impose costs. Thus, they approached the conundrum of price reform by maintaining two sets of prices for critical commodities: a lower planned price (as a subsidy for favored consumers) and a higher market price (as an incentive to stimulate production). But as the gap between the two sets of prices widened, this halfway measure gave corrupt officials an irresistible invitation to buy cheap from the plan and sell dear on the market. Similarly, Chinese leaders gave factory managers greater autonomy over investment without making them responsible for the profitability of their decisions. At the same time, they decentralized the banking system without maintaining controls over the money supply. The result: vast quantities of unprofitable projects, an overheated economy, and growing government subsidies for enterprises in the red. once again, halfway measures selected in hopes of painless reform generated serious economic and political contradictions.
- Incrementalism may prolong the agony. Chinese leaders approached restructuring in an experimental and incremental manner, trying out different strategies in local areas and phasing in reforms over a long period of time. At first, outside observers believed that such a cautious approach was wise, for it would impose the necessary pain of reform gradually and would allow a more accurate determination of the most effective techniques of reform. Increasingly, however, the risks of such an approach became clear. Incrementalism permits the contradictions inherent in halfway measures to grow and fester. By extending the costs of reform over time, such an approach may also dissipate the political support that reform may enjoy when it first begins. This is particularly true when, as in China, an incremental strategy involves distributing the gains of reform before imposing the costs. In such a case the public may gain the false impression that reform will be a relatively easy and painless process. Alternatively, rumors of impending price hikes and layoffs may create chronic unease and confusion. The Chinese experience therefore seems to support those who argue that economic reform should be conducted quickly, during the honeymoon period that a new government committed to restructuring may temporarily enjoy.
- Reform requires restructuring of both the economy and the political system. one of the central issues in reform strategy involves the sequencing of political liberalization and economic restructuring. The Soviet Union under Mikhail Gorbachev illustrates the danger of undertaking political liberalization before launching significant economic change. In a more open political system, continued economic stagnation invites protest, and yet opponents of painful reform are simultaneously given greater ability to mobilize to oppose or obstruct.
China, on the other hand, exemplifies the danger of economic reform without adequate political change. The contradictions and pain inherent in economic reform produced serious social grievances. At the same time, the partial relaxation of political control and the growing independence of workers from their place of employment made it possible to turn those grievances into political action. But the political system remained authoritarian, without adequate institutions for absorbing and responding to the wave of new demands coming from urban society.
In short, the Chinese case suggests the wisdom of instituting reform rapidly and comprehensively, taking decisive action along several fronts simultaneously. Even so, the process of political and economic restructuring will still be painful. There is no guarantee that the economic situation will respond smoothly or quickly to new market forces. Nor, despite political reform, is there any assurance that reforming Communist regimes will enjoy the legitimacy they need to persuade their publics to accept economic sacrifice for a long period of time. It is very possible, therefore, that the process will bog down midway, as the growing costs of reform steadily erode its base of political support.
Possibility of Dramatic Breakdown
Before Tiananmen, it appeared that breakdowns in reform would likely occur in relatively quiet ways, such as they did in Hungary in the early 1970s. Inflation, inequality, and corruption might eventually compel a government to suspend economic reform and reimpose administrative controls over the economy. Unorthodox new ideas might lead to a reactivation of political education, and political dissent might spark the reassertion of political controls over society. But it seemed that this sequence of events would happen gradually and with restraint. In fact, China’s own tortuous experience with reform—its economic austerity programs of 1980-81 and 1985-86, its campaign against “spiritual pollution” in 1983-84, and its suppression of student demonstrations in 1986-87-suggested that periods of retrogression would be relatively muted and short-lived.
Subsequent events in China showed that breakdowns in reform can also be dramatic. Indeed, what was unexpected about the Tiananmen Incident was not the severity of the dilemmas that reform had encountered, nor the degree of retrogression that those dilemmas provoked, but the scale of the demonstrations and the brutality with which they were suppressed. The Chinese experience suggests that accumulated grievances—first from years of political repression and economic stagnation, then from the unrealistic expectations generated by the inauguration of reform—can be much larger than outsiders forecast. Partial political relaxation, especially if the national leadership is obviously divided, can encourage the expression of those grievances in intense and explosive ways. The inability of public security forces to cope effectively with large-scale demonstrations can then require the use of inexperienced military units, possibly with devastating consequences.
As dramatic as the events in China were, their international implications were further magnified by television coverage. The presence of a large international press corps in major Communist countries means that demonstrations, particularly in the capital, will be the subject of immediate and extensive reportage. The revolution in telecommunications technology—the prevalence of small videocameras, the portability of videotape, and the availability of direct-dial international telephone and facsimile service—makes it extremely difficult for Communist leaders to completely cut off news accounts to the outside world. Demonstrations for further political and economic reform are thus likely to find sympathetic audiences overseas, and any suppression of protest by the authorities will be swiftly and graphically reported.
The impact of the Tiananmen Incident on American perceptions and policy was also exacerbated by the presence of tens of thousands of Chinese students and scholars in the United States, a large proportion of whom were passionately committed to economic and political reform. The most active and articulate of them quickly learned to play a prominent role in the American political process, writing op-ed essays for major newspapers, testifying before Congress, and appearing on television news programs and radio talk shows. To be sure, no other Communist country has as many nationals in the United States as does China. But the impact of retrogression may still be magnified by the visitors who are here, as well as by the large emigre and refugee communities who settled in America in earlier years.
In sum, the Chinese case suggests the possibility that breakdowns in Communist reform movements may be sudden and violent, in ways that magnify the impact both at home and abroad. Domestically, a dramatic collapse increases the possibility that the Communist regime, now fighting for its life, will respond with sustained retrogression rather than marginal adjustment. Internationally, it increases the pressure on the United States government to respond in ways that embody the public’s frustration at seeing its expectations for peaceful and constructive change so brutally dashed.
Dilemmas for the United States
Much of the discussion of the reform in Communist states has focused on the opportunities it presents to the United States. How can the United States facilitate political and economic reform in Eastern Europe? How can Washington take advantage of the new possibilities for arms control agreements with the Soviet Union? How can the West encourage the remaining hard-line Communist states, such as North Korea and Cuba, to join the trend toward economic and political liberalization?
These questions remain important and deserve continued and careful attention. But the Tiananmen Incident also suggests the need to consider an additional, more sobering issue: How should the United States respond to breakdowns—particularly violent ones—in the troubled process of economic and political reform?
For major Communist powers, such as China and the Soviet Union, the United States must weigh its interest in promoting human rights against its interest in ending the Cold War. There is, of course, the possibility that a breakdown in reform could produce a hardline regime that initiated a more confrontational policy toward the United States. But what if the new leadership still wished to maintain a conciliatory stance abroad, even as it pursued a retrogressive policy at home? With some exceptions, this has been the foreign policy of the Chinese government, which insists that it wants to maintain normal relations with the United States even as it represses domestic dissent. It could also be the foreign policy of a conservative leadership in the Soviet Union, preoccupied with maintaining control over restive minority republics and assertive urban intellectuals. In such a case, it might well be American policy that would be responsible for a return to international confrontation. As one Soviet intellectual recently asked incredulously, “Do you Americans really believe that Lithuanian independence is more important than maintaining a friendly relationship with the Soviet Union?”
Even if sanctions were deemed appropriate, what form should they take? The Chinese case suggests the wisdom of limiting relationships—especially symbolic ones—with hard-line readerships in post-break-down regimes. Restricting some kinds of contacts clearly signals American repugnance at the repression of dissent and the abandonment of political reform. But the Chinese experience also suggests that attenuating cultural, academic, and economic relationships is unwise. Indeed, it is through these channels that pressures for change and ideas about reform can enter a Communist country undergoing restructuring. That explains why few intellectuals and reformers inside China are currently in favor of further American sanctions. on the contrary, they warn that substantive sanctions could enable the hard-line leadership to appeal for support on nationalistic grounds, blame economic difficulties on foreign intervention, and provide an ideal pretext for reducing further cultural and economic exchanges with the United States.
Finally, in confronting a post-breakdown Communist leadership, how effective can American sanctions be? The Chinese experience indicates that they will have an impact only if they are multilateral in character, enjoying the support of a broad range of Western nations. otherwise sanctions will simply illustrate the isolation of the United States and will divert economic relations to countries willing to carry on business as usual with regimes where reform has been sidetracked. But the Chinese case also warns that even multilateral sanctions may not have an immediate positive effect on a regime that is fighting for its own political survival. Formal sanctions, therefore, must be sustainable for long periods of time, in the absence of any renewed movement toward economic and political reform.
Perhaps the most effective sanctions are to be found not in formal government action, but in the natural response of the marketplace. As a country experiences instability, repression, and retreat from economic reform, it becomes a less attractive partner for foreign lending, foreign investment, and even foreign trade and tourism. The net impact of these private and institutional decisions can be more severe over the longer term than the consequences of official actions taken by government.
Prospects for Renewed Reform
Given the widespread conclusion that totalitarianism and central planning are ineffective and illegitimate systems, it is tempting to assume that breakdowns in reform are temporary phenomena that will ultimately give way to renewed liberalization. In China’s case, for example, many analysts predict that the deaths of Deng Xiaoping and the other octogenarians now in power will be the occasion for the resurrection of reform, perhaps in a more thoroughgoing manner than appeared possible before Tiananmen. once again, a closer look at the situation in China evokes greater caution.
It is indeed possible that reform will revive, after the political and economic costs of retrogression became more apparent and when new leaders emerge on the political stage. But the obstacles will remain substantial. Reform will still impose significant economic, political, and social costs on powerful sectors of society. The most effective strategies for undertaking reform will remain elusive and controversial. And the difficulties China’s reform encountered in the late 1980s mav have weakened the political base for further restructuring. For these reasons, a mixed economy coupled with a renewed authoritarian system may endure for a long time. And if reform does revive, it may prove no more successful the second time than it was the first.
Even if reform does resume and prosper, the implications for the United States will still be mixed. It may be that successful reform in Communist systems will mark the end of the great ideological divide between capitalism and communism that characterized international politics throughout most of the 20th century. But to describe this outcome as the “end of history” is dangerously misleading. It may be more accurate to describe the implications as the “resumption of history,” in which global geopolitics is once again characterized by a complex balance of power among many countries with competing claims for economic and strategic influence. A reforming China, Soviet Union, or Vietnam may no longer present an ideological or subversive threat to its neighbors, but it may continue to pose more conventional security challenges and may even provide an increasing degree of economic competition as well.
Thus, although the world is changing, it is not smart for us to engage in premature self-congratulation. Reform in Communist systems will be a difficult process, in which crises and breakdowns are highly likely. Periods of retrogression will present serious challenges to the United States and its allies. And, even if reform succeeds, the historical struggle for political influence and economic advantage among nations will not be completely abated.