Acton Commentary

China's Morally Hollow Economy


In recent weeks, China has been consumed by an unprecedented internal debate concerning a subject bound to make its Communist rulers nervous. At issue is the moral health of Chinese society.

Widespread Chinese discussion of this most un-politically correct subject was triggered by the October 21 death of a two-year old girl in the city of Foshan in Guangdong province. She died of internal injuries sustained after being run-over not once, but twice in a local market.

Accidents happen. But what made little Wang Yue's death a matter for intense public discussion was the fact that nearly 20 people simply walked by and ignored her plight as she lay bleeding in the gutter.

What, hundreds of Chinese websites, newspapers and even state media outlets are asking, does this say about Chinese society? Have Chinese people lost all sense of concern for others in the midst of the scramble for wealth unleashed by China's long march away from economic collectivism? One local official summarized the collective angst by stating: "We should look into the ugliness in ourselves with a dagger of conscience and bite the soul-searching bullet."

The problem, from the perspective of China's party-government-military elites, is such soul-searching may lead increasing numbers of Chinese to conclude that the circumstances surrounding Wang Yue's death are symptomatic of deeper public morality problems confronting China, some of which could significantly impede its economic development.

One such challenge is widespread corruption. By definition, corruption doesn't easily lend itself to close study. Its perpetrators are rarely interested in anyone studying their activities. Few question, however, that there's a high correlation between corruption and widespread and direct government involvement in the economy. The more regulations and "state-business" partnerships you have (and China has millions of the former and thousands of the latter), the greater the opportunities for government cadres to extract their personal pound of flesh as the price of doing business.

Back in 2007, for example, a Carnegie Foundation study of China reported that approximately "10 percent of government spending, contracts, and transactions is estimated to be used as kickbacks and bribes, or simply stolen." The situation has since become even worse. In late 2009, for example, China's state anti-corruption watchdog admitted that 106,000 officials had already been found guilty of corruption that year -- an increase of 2.5 percent from 2008.

From an economic standpoint, high corruption levels are a powerful disincentive for foreign investment. And if corruption grows to sufficient levels in China, there's a strong possibility it may start cancelling-out the attraction of the lower labor costs that are one of the biggest magnets for foreign investment in China.

The ethical predicaments corroding China's economy, however, go beyond everyday corruption. They also touch on China's willingness to tell the truth about what's really going on in the Chinese economy.

While hardly anyone questions China's economy is growing, doubts are continually expressed concerning the veracity of its growth figures -- including by some members of China's elite. In 2010, for instance, Wikileaks revealed that China's present Vice Premier Li Keqiang had expressed little confidence in his own country's GDP numbers during a 2007 conversation with the American ambassador.

The causes for such uncertainty are several. But one that has consistently plagued China since the 1980s has been outright fudging and lying on production and growth numbers by local officials eager for political advancement.

Why does this matter? It's important because domestic and foreign businesses need reliable data if they're going to be able to make prudent investments. Conversely, misleading GDP data helps generate a cycle of expectations, risk-assessment, investments, production and exports that is built on lies. And if the falsehoods are big and systematic enough, they will severely undermine business confidence and leave a legacy of distrust of China among foreign investors and international markets.

Many members of China's Communist party elite -- but especially its younger set -- are very conscious of these problems. Their concerns were vented in an unprecedented fashion at an informal October 6 meeting held at the China World Trade Centre which gathered together the children of those party leaders who ended the anarchical insanity associated with the "Gang of Four" 35 years ago.

Instead of being a gathering during which preparations were supposed to be made for next year's Party Congress, young apparatchik after young apparatchik stood up and slammed the state of Chinese society. Some spoke of the "rapid decline of moral standards." Others referred to "rampant corruption." Still more expressed their disgust at the perks enjoyed by party and government officials. One well-connected cadre even insisted: "The Communist Party is like a surgeon who has cancer.… It can't remove the tumor by itself, it needs help from others, but without help it can't survive for long."

And herein lies the dilemma for those members of China's elites who are aware of the threat that widespread corruption, nepotism, and all the usual phenomena associated with one-party states represent to China's economic and political future. The ideology that still (at least theoretically) justifies their leading place in society and politics -- i.e., Communism -- has literally nothing to offer by way of serious moral counsel.

Communism is, after all, based on a materialist conception of life, and materialism can't generate any coherent ethic, beyond recourse to appeals to speeding up the so-called "dialectics of history" or the mailed fist of raw power. That's why Marxists typically dismiss concerns for objective morality as "bourgeois false consciousness."

Nor does the other force that increasingly serves to legitimize the rule of China's elites -- old-fashioned nationalism -- have much to offer by way of moral guidance. Indeed, nationalist regimes are invariably associated with widespread corruption because of their propensity to meddle widely and deeply in every aspect of economic life.

Either way, if China's rulers are going to confront some of the looming moral problems threatening to compromise China's economic progress (not to mention the present elite's power-monopoly), then they need to find some alternatives -- and quickly. Revolutions have, after all, started on far less.

This column first appeared on The American Spectator.