Time to stop believing that capitalism will liberalize China's society

01/19/2010 8:30 am EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

The last few months haven’t been kind to those who think that if we just bring China into the world economy Western-style political democracy and legal rights will follow.

I think you have to be in deep, deep denial to continue to believe that political liberalization automatically will follow upon China’s economic development after recent events: China’s open refusal to follow through on pledges it made when it joined the World Trade Organization to open its economy to foreign goods (including foreign media) and to protect intellectual property, it’s insistence during the Copenhagen on the world according it the status and respect that a Great Power deserves while still demanding compensation from the West as a developing nation, and, most recently the revelations from Google (GOOG) that Chinese-based hackers have systematically attacked its Gmail system and the computer systems of two dozen U.S. companies.

The belief, James Kynge, the Financial Times’ long-time Beijing correspondent wrote in a piece in the January 16/17 issue of the paper, fails to recognize just how effectively the Communist Party has moved to assert control over China’s brand of capitalism.

For example?

For example, in 1991 only 7% of entrepreneurs in China were party members. By 2003 the percentage was up to 34%. Hard to see a loss of control or the development of an economic sector independent of the party in those numbers.

But if the belief that democracy would inevitably follow capitalism is a myth, what’s the alternative for developing a realistic policy toward the world’s second largest economy? Kynge’s piece is a thoughtful summary of the ideas that look like the best bet for a foundation of a new policy.

Unfortunately, there’s not a magic bullet in the bunch. Most likely forecast: increasing economic and political tension between China and the United States and the rest of the liberal democracies of the West over the next few decades.

Worth signing up for the paper’s electronic edition just to read this piece.

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