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The Puzzle of the Chinese Middle Class

On a recent trip to New York, I interviewed on of the world’s pre-eminent experts on China, Professor Andrew Nathan of Columbia University.

Nathan has an uptown role as a China specialist at Columbia, but downtown, he is a human rights advocate and is on the board of the National Endowment for Democracy.

Apart from the United States, China is likely to be important in determining the global advancement of democracy because of its population, perhaps a quarter of humanity.

Another reason for China’s importance is its economic and military strength, but also its advancement of the so-called “China model.”

The China model is the combination of authoritarian government with capitalism.

As Nathan points out, China has offered its model as an attractive alternative to the Western model of liberal democracy to undemocratic regimes around the world.

The Chinese proclamation of its discovery of a new way to harness the energies of capitalism with a top-down government is the subject of multiple works over a period of decades by Professor Nathan. This piece is a small slice of the analysis.

I like to think of American entrepreneurial-ism in terms of bubble-up creativity. It is a cliché that one can observe in everyday life. Street fashion finds its way to the runways of top designers creating couturier lines for rich clients.

Two guys in a garage invent a machine that a venture capitalist invests in and a revolution in technology occurs.

Creativity bubbles up from the bottom. This is the basic concept of democracy, the one person, one vote, one time. Wisdom resides in the people.

In the Chinese model, entrepreneurial-ism is limited and must compete with state-owned enterprises.

Nathan speaks of the analysis by intellectuals in China going back a century searching for the reason why China remained backward and poor, and why innovation lagged behind the West. The structure of the traditional Chinese government may have been the answer but there is a more practical dynamic at work.

Ideas, which may be defined as intellectual capital, and the exploration of ideas in research and development, these are controlled from above.

This is the reason why innovation rarely comes from China. Design comes from China because of its long history of excellence in the arts, a history of thousands of years.

Why else would it be a matter of state policy to steal intellectual property from American technology companies and other industrial companies.

It is as though the Chinese system, past and present, had a blind spot. The concept of where genius resides prevents the genius of the people from coming to fruition.

At the present time, while touting the new Chinese model of authoritarian capitalism, to compensate for the great fallacy in the system, China has to steal from Western liberal democracy. In other words, the liberal democratic system has as a by-product a well of creativity. The Chinese system may well need to harness decision-making in order to play catch-up, but it has not yet explained how to maximize the creative and productive energies of the people. You can't get bubble up if you insist on top down. This is a classic contradiction.

(Yes, the Chinese are stealing intellectual property. It is a scandal. It is an outrage. For a full discussion of Chinese cyber-espionage, please see my blog post on the Mandiant Report on this website. This is the result of multiple interviews with Richard Bejtlich, then Chief Cyber Security Officer at the Mandiant Company, which was acquired by FireEye. Full citations available.}

With this week's tanking of the Chinese stock market, the China model is starting to look shaky. Not for the first time. Late last year, the market took a nose dive.

In my first interview with Professor Nathan, I explored the concept of democracy as it is understood by contemporary Chinese citizens, both on the mainland and on Taiwan, which has had an electoral democracy for more than a decade.

My first Nathan blog post answered the question, “What do the Chinese mean when they think of democracy?” and the excellent statistical research by a colleague of Professor Nathan’s provided the raw material.

This blog post is reportage and analysis of a lecture given by Professor Nathan at the National Endowment for Democracy. The link to the lecture “The Puzzle of the Chinese Middle Class”, is cited below.

The policy of constructive engagement is based on the idea that with the emergence of a Chinese middle class because of the creation of wealth caused by the reform of the Chinese economy, there would naturally come about a demand for more voice in the government and therefore a multi-party system rather than one-party rule by the Communist party.

The idea was that with the emergence of a middle class in China, that there would be a demand for liberal democracy in China.

Is the term “middle class” the same for China as it is for the United States. What is the Chinese middle class? What does the Chinese middle class want?

In classic Western analysis, the middle class is seen as a critical element fin the search for free and stable governments. In the West, this goes back to the time of Ancient Greece.

The belief in the West is that the middle class tends to prefer democracy because the middle class owns property and is educated. It therefore has dignity and tends to want a government that respects its dignity. This class wants government to create policies in keeping with its interests.

The assumption underlying the emergence of a middle class in China is that the middle class will be the engine that causes the transition from one-party rule to democracy. To the contrary, those who harbor this belief are doomed to disappointment. The Chinese middle class is not the same as the middle class of the United States and Europe. Therefore, the hoped for and longed for transition to democracy in China is not automatic and here is the reason why.

The impulse and demand for democracy in China as going back a century to the beginning of the reform movement under the last of the Chinese dynasties, even before the Chinese revolution of 1911 that resulted in republican government.

Nathan together with Perry Link has written the most important work on the Tienanmen Protests in 1989. He characterizes Tienanmen as a democratic movement, where students were joined by workers from 300 other cities.

There are other pushes for democratic participation in the system which can be observed in the Not in My Back Yard protests. These are mostly local in nature, where citizens make demands on local government. This is “rightful resistance.”

The citizens are saying to the local government: Don’t put that chemical plant in my suburb and poison my air.

But this is not a demand for democracy. This form of protest is a demand for quality of life rather than opposition to the regime. It does not constitute a challenge to the one-party system.

What about the emergence of a middle class?

The Chinese middle class is about thirty per cent of the population of China or about 300 million people. Surveys by scholars in China’s social scientist organizations who that the middle class supports the regime and their satisfaction with the central government is about 7.58 on a scale of 10.

80% of the Chinese middle class trust the institutions of the central government but mistrust local governments and reserve their greatest mistrust for NGOs, which they think encourage the selfish interests of small segments of the population.

In other words, China has a middle class without the push for change to democracy. They are more supportive of the one-party state than the lower classes.

This can be explained by the fact that the composition of the Chinese middle class is not the same as the composition of the middle class in Europe or the United States, where the emergence of a middle class occurred two or more centuries ago.

The definition of the middle class in the West is usually by income level. This statistic is difficult to compile in China, so Chinese sociologists focus on the profession or line of work for social analysis and surveys.

Professor Nathan lkes to point out that Chinese sociologists do not use the term “class” because of its traditional usage in the formulations of Marxism and Maoism.

In the use of the term in the written and spoken works of these ideologies, the speeches of leaders, the word “class” has connotations of class struggle and bad class.
The social science professionals use the term “stratum” which means the same thing.

The middle class in China are people who do mental labor, with relatively high incomes, a good working environment and disposable income for leisure and consumption.

Perhaps the important factor in any analysis of the Chinese middle class is that they are likely to be the professional and technical staff of state and party offices and enterprises, such as state-owned enterprises. They may be white collar administrative employees and workers or owners of small entrepreneurial operations, small scale private and commercial enterprises.

Whereas the middle class in the West might be professionals such as doctors, lawyers, architects and professors, in China they are as likely to be employees of the state.

In other words, if there were a shift to democracy, perhaps because of the failure of the economy to perform, the middle class might support it, but it is not likely to push for that change nor to demand it as in its interests. The Chinese middle class is a dependent middle class. This becomes all the more clear when one considers that hospitals and universities in the Chinese system belong to the regime.

This is a relatively new middle class, perhaps most are first generation middle class. Although there was a middle class in China in the 1920s to the 1940s, it was destroyed by Mao when the People’s Republic of China came into existence. In 1979, when Deng Xiaoping instituted the economic reforms, there was no middle class.

So most of the middle class today are first generation. Only a small percentage are second or third generation, and as such they are coming to terms with their own identities rather than pushing for class interests.

In other words, the Chinese economic miracle has created wealth, it has created it mostly at the very top, and the creation of a middle class is not likely to create democracy at any time in the near future.

For a further examination of other characteristics of the Chinese middle class in the context of China’s rise, my readers will have to wait for my forthcoming book, "The Lamborghini and the LaoGai: The Two Faces of China’s Rise."

To see Andrew Nathan’s video lecture, please go to:
http://www.ned.org/events/the-puzzle-of-the-chinese-middle-class/
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