Bryan Caplan  

Tiananmen Square Hypothetical

Data Bleg on Post-WWII Transit... We Don't Know...
Suppose the 1989 Tiananmen Square protests ended not in a bloodbath, but in the collapse of Chinese Communism and the establishment of multi-party democracy.  What would have happened to the Chinese economy between 1989 and today?  Would it have done better, worse, or about the same?

Fans of democracy will probably insist that Chinese growth would have been even higher. Censorship and fear make it hard for China to fully integrate with the world marketplace.  And democracy would probably put an end to internal migration restrictions and the one-child policy.  Internal migration restrictions seem clearly anti-growth; and while the short-run effect of the one-child policy is pro-growth (though less than the zero-child policy!), in the long-run China is merely ensuring a demographic crisis even worse than Japan's.

Most economists, I suspect, will take the opposite position: Growth would have been worse.  Even if they are sharply critical of the current regime, they'll appeal to probability: Chinese growth was so high during the last two decades that it's hard to believe that any realistic alternative could have out-performed it.  They might even add that the Communist leadership stifled misguided populist policies.

The last position, of course, is that growth would have been about the same.  By 1989, China's entrepreneurial energy was chomping at the bit.  Only severe repression could have stifled it.  And for all its flaws, democracy almost never leads to severe repression.

My view is that all three scenarios are roughly equally plausible.  So in the absence of clear-cut proof that democracy would killed two decades of growth in the cradle, the non-collapse of Chinese Communism in 1989 - and the massacre of thousands of peaceful protesters - was a great moral tragedy.   In fact, even if economic growth would have been much lower under democracy, the track record of Chinese Communism is so awful that peacefully wiping it off the face of the earth would have been a great blessing even from a purely consequentialist perspective.

What's your answer?

Comments and Sharing

COMMENTS (17 to date)
Pietro Poggi-Corradini writes:

I lean towards the second option (growth would have been worse): it seems the ex-communist countries that did better were places like Czech Republic, East Germany or the Baltic states, that somehow already had an institutional past to fall back on. The risk for China would have been to fall back on an even more autocratic past.

Kurbla writes:

If you track record all crimes attributed to American capitalism (genocide over Indians and Africans, slavery, racism, totalitarianism ...), you might conclude that peacefully wiping it off would be great blessing. I wouldn't defend Chinese "Communist" leadership either. They are mass criminals. I don't think they are - or were - communists. These days, China is fascist society, similar to Pinochet's Chile.

Growth would be worse in democracy; workers would have more rights, crime and corruption would be even higher without firmly established hierarchy. But, growth is not that important.

david writes:

Didn't the urban workers who wanted a reversal of liberalization outnumber the students who wanted more democracy by, well, a lot?

A collapse of the existing order is one thing, multi-party democracy to substitute it is another. Almost certainly the Communist hardliners would have dominated free elections anyway.

Hyena writes:

Internal migration restrictions, hukou, probably aren't anti-growth. They're part of the interlocking system of arbitrary and subjective laws used by central and provincial governments to remove economic troublemakers.

Economic growth would likely have been worse under a democratic system. The current regime is tightly focused on the economy because it's their sole source of legitimacy. So the organs of the state are largely geared towards development. I doubt this would be true in a more democratic context.

Yngvar writes:

How did Taiwan do? They left a dictatorship and should be the perfect control group.

david writes:

But Lee Teng-Hui dismantled the dictatorship from inside out; it wasn't felled by the street protests. Teng-Hui met with the protesters and then peacefully spearheaded the democratization of Taiwan over a number of years.

Also it was much richer than the PRC in 1990 already.

marko writes:

I believe that you would have to take into account the probability of a civil war in order to partition the country. With democracy, keeping western provinces (Tibet most notably) could be very difficult.

I do not know enough, but I find Soviet-style or Yugoslavia-style separation of China somewhat likely if democracy ever comes.

James A. Donald writes:

The lesson most people have drawn from the difference in outcomes between China and the Soviet Union is that democracy is an economic disaster.

Democracy prevents you from dismantling the most economically destructive aspects of socialism.

Democracy gives you capitalism without markets, and socialism without a central plan - the US medical system being a good example.

Patrick L writes:

How about a fourth possibility:
China splits into 9 countries.

Chris Koresko writes:

@James A. Donald: The lesson most people have drawn from the difference in outcomes between China and the Soviet Union is that democracy is an economic disaster.

This might not be the right lesson to draw from the post-Soviet experience. If I understand the history correctly, the collapse of European Communism had a lot to do with the failure of their economies to produce the economic growth that was a major source of their perceived legitimacy.

Nor was the end of Communism followed immediately by the creation of fully fledged democratic institutions in Russia. In Central European countries where clear memories of those institutions were available to build upon, economic progress resumed with the rise of democracy. Is it not true that Poland, Hungary, et al. are among the faster-growing European economies?

I'm on the fence with regard to China. On the one hand, its current government is strongly pro-growth, to the extent of arbitrarily redistributing property when it sees an opportunity to create wealth. But my read on Chinese culture is that it's very entrepreneurial, and that the best thing any government could do there to spur growth would be to get out of their way. It's an open question what kind of policies the Chinese people would settle on, if they were free to choose.

Nathan Smith writes:

Perhaps there was a third scenario, namely:
(a) street protests were tolerated, but
(b) fizzled out, or continued in a low-key way, and didn't lead to a fall of the regime, but just to more tolerance within the framework of continuing "Communist" rule?

Just because murder is bad doesn't mean murder victims should have been given lots of power instead.

8 writes:

You have your test case: India.

In democracy, I think corruption would have been much worse and growth lower, if only because the government would not have built as much GDP padding infrastructure. Unemployment would be much higher and China would be an improving basket case. It would have fallen under greater Western influence and this would have effected its capital markets and currency for the worse.

China went through rapid inflation in the early 1990s that was solved by revaluing the currency to 8 to $1. It did not weaken its currency in 1997. Under democracy, the currency gets weakened and the Asian crisis goes through round 2. Not even the Committee to Save the World could have "saved the world" if that was the case.

Blackadder writes:

Based on India, I would say that China would have had lower growth in the short term if it had democratized, but that it's long term prospects would be rosier (if nothing else, the continuation of the one child policy means that China is in for a rude awakening).

Chris T writes:

Almost certainly worse between 1989 and today. The political transition wouldn't have been anywhere near seamless and more effort would have likely gone into keeping the country together than creating economic prosperity. Past today, possibly better and more stable, but who knows?

LXJ writes:

> establishment of multi-party democracy

Yeah, right. Just like the fall of soviet and yugoslav communism resulted in the establishment of multi-party democracy. There's a reason the Warring States, the Three Kingdoms and many other periods of disorder remain strong in Chinese cultural memory. For that matter the disintegration of the qing dynasty in the second half of the nineteenth century didn't exactly usher in a period of prosperity either.

Wars are very bad for growth - unless you're American and you get to grow your GDP while the destruction happens somewhere elese.

Scott Sumner writes:

I think China would have grown faster with democracy. The reformers wanted faster political and economic reform. We know that the parts of China that reformed faster, grew faster (e.g. Zhejiang province.) And we know the crackdown at Tiananmen led to the hardliners getting the upper hand. They not only opposed political liberalization, they opposed economic liberalization. As a result China's growth rate slowed after 1989, as reforms were put on hold.

In addition, the growth that did occur in measured GDP would probably have been much more favorable toward consumers, and thus result in higher utility.

India should not be compared to China, but to less democratic parts of "India" (Pakistan, Bangladesh) which are also less economically dynamic. Political liberalization in China during the 1980s led to faster economic growth. And of course China's much poorer than Taiwan.

China is ethnically very homogeneous (92% Han, and most of the rest are scattered minorities in eastern and central China), and will not split up as the Soviet Union and Yugoslavia did.

nykos writes:

I think growth would have been worse. Conservatism, loyalty and social stability and harmony are extremely important components of Confucianism and Chinese culture - which is also why the Chinese have had no democratic tradition whatsoever in the last century (except for Western colonies like Hong Kong, Macau, and the vassal-state of Taiwan). A libertarian living in China even claims that the Chinese government is more liberal that the people it governs:

The establishment of democracy in China, in the absence of massive Western influence that is taken seriously (like in Taiwan, dependent on the US for defense), would lead to a dictatorship of the majority in which human rights are largely ignored and the tendency towards loyalty and clan egotism would result in massive nepotism, corruption, and economy-crippling superstition. Modern Russia is another country that failed to democratize itself because of no history, no cultural memory of political freedom - and Russian culture was and is nowhere near as remote from that of Western Europe.

I think that any economic analysis of this situation without carefully looking into the tenets of Chinese culture is a major mistake - people who visited China should instinctively know this.

I think that most people living in the West suffer from "Western cultural bias", i.e. the belief that all human beings on Earth live their lives according to Western values (like human rights, altruism as virtue, etc). This bias, I suspect, is very common in people advocating unlimited, unconditional immigration from other cultural regions of the world into the West, without taking into consideration the fact that the Western culture values inquisitiveness, truth and prosperity (leading to the Enlightenment and the Scientific Revolution) above social harmony, experience and evidence above authority, individualism above collectivism far more than any other culture on Earth today.

Democracy is only stable and can work reasonably well in countries of Western culture, or those heavily influenced by it through proximity (Eastern Europe), occupation, colonization or vassalization. I admit, though, that this theory of mine has 2 holes in it that it can't explain properly, namely Mongolia and, to a far lesser extent maybe, Botswana. Otherwise, it seems to hold pretty well on an inspection of Freedom House's map of freedom.

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