Pranab Barnhan writes: The recent dizzying plunge in the Shanghai and Shenzhen stock exchanges has posed a unique test for China’s Communist rulers. So long as the markets were rising, the paradox of vigorous capitalist development overseen by the world’s largest and strongest Communist party confounded only academics and old-school Marxists. As the Chinese Communist Party elite and their relatives, foreign financial institutions, and some Chinese small investors made money on stocks, no one bothered to comprehend the mutant creature they were milking.
The CCP is taking desperate, if clumsy, measures to control the correction. All new initial public offerings have been halted, and much trading has been curtailed; the central bank has been asked to help the China Securities Finance Corporation induce investors to buy shares and thus stabilize the market. Indeed, even the country’s sovereign wealth fund has gotten into the act.
But, unlike other capitalist economies, money is not the only tool at the authorities’ disposal. If your brokers in China advise you to sell shares, they must be careful not to appear to be rumormongers, subject to official punishment. And there are reports that sales of large holdings may trigger investigations by the authorities. Causing public disorder or financial instability can be a serious offense in China, where conspiracy theories about foreigners’ efforts to undermine the economy abound.
What Chinese officials desire is a capitalist stock market without the possibility of large losses that can shake confidence in the CCP’s credibility and control. But that is a market that no one has yet invented.
The spectacle of a communist regime trying to jack up a casino-like capitalist market is just one of the many contradictions that have been accumulating in almost every corner of China’s economy and politics. And now, their weight is perhaps becoming too heavy for the Party hierarchy to bear.
Indeed, the composition of the CCP is itself a contradiction. The revolutionary party of peasants and workers is now dominated by businessmen, college students, and professionals.
Of course, President Xi Jinping’s recent drive against corruption high and low has made many Communist Party plutocrats jittery. But questions abound as to whether the corruption charges being brought against the so-called “tigers” are a fig leaf for an old-fashioned purge of Xi’s rivals in the Party and the military.
Ordinary Chinese generally support the anti-corruption drive; it is they who usually initiate protests and point fingers at dishonest officials. But, if such protests attract too much attention, it is more likely that they will be quashed and their leaders repressed than that the corruption will be stopped.
What the CCP refuses to recognize is that corruption cannot be rooted out as long as the Party maintains its monopoly on political power; with no organized opposition or functioning civil-society institutions, officials will continue to use their positions of public authority as a vehicle to generate personal wealth.
Under Xi, the CCP has repeatedly insisted that the rule of law is a “core socialist value” and has pledged to promote the authority of the constitution. Yet the rule of law in the Party’s eyes is a law that it dictates, interprets, and enforces.
Mao famously speculated on the nature of contradictions: “The law of contradiction in things, that is, the law of the unity of opposites, is the fundamental law of nature and of society.” One wonders, though, if even he could have grasped, much less managed, the contradictions of communist capitalism.
