Courtesy Reuters A Chinese one yuan coin and a Chinese 100 yuan banknote.
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Austerity with Chinese Characteristics

Why China's Belt-Tightening Has More To Do With Confucius Than Keynes

This year, to the consternation of the world’s luxury-goods producers, “austerity” became one of Beijing’s most prominent political buzzwords. Since becoming head of the Chinese Communist Party last November, Xi Jinping has announced a steady stream of belt-tightening measures: government officials have been barred from hosting lavish banquets and wearing designer watches, and the construction of government buildings has been banned for five years. It’s only natural that Western commentators have been quick to interpret China’s austerity drive in terms of their own long-running debate about macroeconomics: from Athens to Dublin to Washington, D.C., politicians and economists are arguing the economic merits and drawbacks of budget-cutting and deficit spending. 

But it would be a big mistake to interpret Xi’s ban on shark-fin soup as an extension of what Paul Krugman describes as the West’s “turn to austerity” since 2010. Whereas Western austerity has been an economic policy tool, in China its essence is primarily political. China has a long history of turning to frugality not to stimulate business confidence but, rather, to combat the disease of corruption. It’s safe to say that Xi has been thinking less of Milton Friedman or John Maynard Keynes than of China’s own political reform tradition, stretching from Confucius to the Communists.

In the formative period of Chinese politics, some 2,500 years ago, Confucius crafted a philosophy of government and social ethics that left a profound imprint on East Asian civilization. He admonished rulers to keep both taxation and spending to a minimum. The enlightened ruler, Confucius and his followers said, should embody a certain kind of moral austerity in his personal behavior and fiscal austerity in matters of state. The people -- most of them farmers -- would then follow the emperor “like grass bends in the wind.” In other words, demonstrating one’s political virtue through austerity, frugality, and simplicity would ensure popular legitimacy and dynastic stability.

The Confucian approach to ensuring virtuous government through frugality has been a consistent thread in Chinese politics well into the modern era. One early-eighteenth-century emperor, for example, declared a permanent freeze on tax rates as a show of Confucian thriftiness. (Although this policy eventually backfired: the tax ceiling hampered the government’s ability to generate revenues for the remainder of its 200 years in power.) Campaigns against corruption -- including arrests of senior ministers -- were a regular feature of late imperial times. Even the major political upheavals of the twentieth century turned on questions of corruption and frugality. The Nationalist Party of Chiang Kai-shek, who took over as head of state of the Republic of China after Sun Yat-sen’s death in 1925, quickly earned a reputation for corruption. Chiang responded by promoting neo-Confucian values as part of what he called his New Life movement, which made “simplicity and frugality” one of its core virtues. But he ultimately fell to Mao Zedong, who promoted an even more radical notion of the austere state. Mao demanded that Communist Party cadres reject the slightest hint of bourgeois comfort, including by wearing a uniform of a nondescript Mao suit. Although Mao ended up living more like a Roman emperor than a Spartan soldier, he was effective at creating the perception that the Communists were incorruptible, in stark contrast to the Nationalist Party’s reputation for graft. As Confucius would have predicted, this helped the Communists win the “hearts and minds” of the people.

The old Confucian paragon of the “clean official” still resonates powerfully in today’s half-capitalist, half-Communist, pseudo-Confucian China. The current austerity program is best understood as Xi’s attempt to put his own stamp on that traditional notion of good governance. In particular, there are clear traces of Mao in Xi’s program. Xi even recently praised Mao’s list of “six nos” that barred officials from squandering the people’s wealth, and he promised to renew Mao’s old fight against “formalism, bureaucratism, and hedonism and extravagance.”

But Xi has also been drawing on the unique language of the progressive reform tradition in Chinese political thought, which traces back to the nineteenth century. Its standard-bearer, Feng Guifen, called upon his countrymen to study Western countries’ “techniques of wealth and power,” including the democratic political system that ensured “closeness” between ruler and ruled. That influence is especially clear when Xi explains the goal of austerity in terms of preserving harmony between the Communist Party and the Chinese people. “If we don’t redress unhealthy tendencies and allow them to develop,” Xi cautioned earlier this year, “it will be like putting up a wall between our party and the people, and we will lose our roots, our lifeblood and our strength.” This is a standard trope among Chinese reformers going back to Sun Yat-sen and Feng Guifen, who argued that elections and representative assemblies would reduce the distance between the people and the government, and thus tighten the bonds of the nation. Xi too wants to keep the people close to the Party, but to do so through austerity, not democracy.

It is clear, then, that Xi sees a lot more at stake than mere GDP growth; austerity implicates the very future of the polity. The Communist Party wants to win the “people’s trust” with top-down anti-corruption campaigns based on austerity exhortations, as well as punishments for high-profile officials who get caught with their hand in the cookie jar. The most prominent conviction so far in the Xi Jinping era was of former Minister of Railways Liu Zhijun, and the much-awaited trial of disgraced leader Bo Xilai is expected soon. Xi is hoping that traditional forms of frugality and discipline of this sort can obviate the need for bottom-up political empowerment. To put it bluntly, whereas in the EU and United States the alternative to austerity is stimulus, in China austerity’s alternative is democracy.

In this light, it is worth remembering that the last major challenge to Communist Party rule -- when millions of Chinese occupied Tiananmen Square in the spring of 1989 -- centered on two popular demands: more democracy and less corruption. When those two goals become intertwined, the pillars of CCP legitimacy start to rattle and shake. This helps to explain the real significance of Communist Party austerity, and why Xi has made fighting corruption from the top down a centerpiece of his agenda.

In the short run, it may be easier for the party to try to discipline itself, and to regain public confidence by catching the “tigers and flies” who abuse power at the people’s expense. But in the long run, Xi might find that the burdens of this top-down, self-policing approach are too much to bear for Beijing's most powerful. The only sustainable solution for deeply rooted corruption will likely be to strengthen democratic mechanisms and civil society organizations, and empower the media and the courts, so that top-down discipline is matched with bottom-up accountability. Whatever austerity's merits as an economic policy, as a method of political reform, it will probably soon reach its limits.

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