government. For years many of the common people had long made up their minds and believed that the only way to solve their problems was to create a disturbance. The smallest thing, the pettiest grievance, was enough to set off a collective protest.
“If mass protest riots broke out at the same time all over the country, and all the criticism and resentment were aimed at the government, the machine of state would have collapsed.
“On the other hand, as long as all the complaints were not aimed at the government, mass protests would be difficult to start. A few lawless elements stirring up trouble would be insufficient to start a series of mass protests.”
“So what did the leadership do to prevent the popular masses from aiming all their resentment and criticism at the government?” asked Fang Caodi.
“Well, after considering the situation from every angle, the leadership decided to allow the Chinese people to frighten themselves, let them be afraid of the government abandoning them, afraid of anarchy. The condition of anarchy is what Thomas Hobbes called ‘the war of all against all.’ In an anarchic state of nature, to quote his book
“Now you’re talking about having a government
“It’s fruitless to argue that,” said He Dongsheng. “The government and the Party are one and the same.”
“After you created a state of anarchy,” asked Little Xi, “and fooled everyone so that even the people of Beijing filled the streets to welcome the People’s Liberation Army into the city, what did you want to do then? Why did you have to have a crackdown? Do you know how many people die every time there’s a crackdown?”
“I was almost executed in that crackdown,” said Fang Caodi.
“In good faith, I also hope that this was our last crackdown,” said He Dongsheng. “But the government in power at the time had no other choice but to take a hard line in the face of the upcoming transfer of power.
“With the global economy in a deep freeze, China had to save itself. That required administering strong medicine to the economy, but the government might lose control of society, its orders might be distorted, and the people might protest. The government had to have complete control over society and tame the masses; everybody had to be submissive to government orders. But how does the Chinese government usually tame the masses? In 1983, when the market economy experienced turmoil, didn’t Old Deng order a crackdown? And June 4, 1989, was another big crackdown. Do you see? Sacrifices are inevitable if we want to accomplish something big and important.”
Little Xi and Fang Caodi felt He Dongsheng was being unreasonable and they were anxious to refute his arguments, but he motioned for them to let him finish first.
“In 1816, the year after the end of the Napoleonic Wars,” He Dongsheng went on, “the effects of the war faded and Britain suffered an economic recession; its national debt was two and a half times its GDP. Most unfortunately, in 1815, the Mount Tambora volcano in Indonesia erupted, the worst eruption in history, and spread volcanic ash all around the world. The next year was called ‘the year without a summer’ and there was virtually no agricultural harvest in Europe. The British prime minister at the time was Lord Liverpool, and who do you think his adviser was? None other than the celebrated economist David Ricardo. In the face of an imminent economic depression potentially leading to great social unrest, they instituted a program of crisis management. And what was it? Liverpool got Parliament to agree to a suspension of habeas corpus, Britain’s protection of personal freedom. The government could round up and imprison anyone who caused trouble or didn’t do what they were told, without following the law or legal procedures. In modern language, the government could trample human rights at will. The result of this policy was that during the entire period of economic decline, the usual troublemakers didn’t dare start anything, and in one year the national economy recovered. Wasn’t that pretty amazing?”
Little Xi and Fang Caodi sat grimly with their arms folded.
“Of course the people were going to suffer and be hungry during this crisis, and, besides, such recessions have always been a cyclical phenomenon of capitalism in the past; they would last a year or two, and after getting through them, everything would return to normal. But this latest crisis was like the great depression of the 1930s, and it might have lasted for a decade or more. The government couldn’t just ride it out; they had to go into action. My main point is that stability is always the number-one priority, but stability is not the ultimate goal-we need stability in order to accomplish great things. Therefore, in extraordinary times or emergency situations, we have to order a crackdown. We have to beat the grass to frighten the tigers. After that, while the effects of the crackdown are still in play, we are free to implement new policies.”
The Chinese model
According to He Dongsheng, the crackdown was the second phase of the “Action Plan for Achieving Prosperity amid Crisis.” The third phase was to put forth a set of five new policies.
The Chinese people’s excessive savings were one of the reasons for insufficient domestic demand. Personal savings equaled more than 20 percent of the nation’s annual GDP, and business savings were more than 30 percent. When the foreign economic environment was bad, people with surplus cash held on to their money and spent even less. With everyone doing this, how could the economy avoid recession? Merely lowering bank interest rates and moral suasion were no longer enough to make the Chinese people spend their money. The government had to rely on coercive measures of the sort Western countries would not dare dream of.
The greatest thing about this government order was that it was so simple to enforce. All the banks are computerized, so it was easy to cut into the savings accounts. The second virtue of this policy was that it affected only people who had money. It primarily impacted the urban middle or moderately well-off classes who had “got rich quick” in the Reform era. These included civil servants, professionals, white-collar workers, staff in government enterprises, small-business entrepreneurs, and pensioners. The government could easily get away with making them spend 25 percent of their savings on themselves in order to stimulate the national economy and help China make it through the crisis. Consumers and businesses all started spending money.
The third benefit of this policy was that it did not need the National Treasury to allocate major funds or follow Keynesian “job creation” to turn the recession around. At the very least it would successfully jump-start the engine of an economic growth driven by domestic demand. This policy was estimated to have increased the GDP by at least five percentage points. The urban population with savings was busy trying to decide where to spend the vouchers and on what commodities or services.
At the same time, the function of government was transformed in accordance with the slogan: “The officials retreat and the people move in.” The government removed the restrictions on all businesses except those involving national security and government monopolies.
“Now anyone can start a publishing company,” said He Dongsheng, looking straight at Lao Chen. “You can just publish your books without a government-issued book number.”
“But all books still have to be sent in for approval,” countered Lao Chen, “and many subjects are still forbidden.”
“But at least today there are private publishers everywhere,” said He Dongsheng. “There are even Chinese and foreign joint-venture publishing companies, all in complete accord with WTO requirements.”
