Chaos after a CCP collapse? Not so much

Posted: August 22, 2011 in Economics, Politics
Tags: , , , , , , , , ,

Today, as Libyan rebel forces close in on Tripoli, it seems yet another nation will overthrow their authoritarian rulers in the Jasmine Revolution. Since the movement broke out in December, political forecasters have devoted plenty of ink to speculation over if and when China’s authoritarian government will collapse.

For the record (and anyone at the Ministry of Truth who may stumble upon this), I don’t at all wish for a collapse or overthrow of the Communist Party. Gradual reform leading to real public accountability would be much better than the abrupt dismemberment they’re setting themselves up for with the current iron fist approach.

But in the fairly-likely event that they do dig their own grave, where does that leave a post-Communist Party China?

The Party would have you believe that the country would dissolve into absolute chaos; that they’re the Elmer’s glue holding the whole rickety apparatus together. Without them, people would take to the streets to pillage, rape, torture, kill, etc.  Plenty of foreign observers share that bleak outlook too.

But a few weeks ago I spoke with Uri Dadush, former World Bank director of international trade and author of the book Juggernaut: How Emerging Markets Are Reshaping Globalization. He said China’s GDP is projected to grow at around 5% annually for the next 40 years. “Even if there is a political crisis, that doesn’t mean that China will not grow,” he said.

In economic terms, revolutions aren’t as catastrophic as they appear to be, especially in recent history. This chart maps Egypt’s annual GDP growth for the past 50 years. This measure shows how much the GDP grew in a given year compared to where it was the previous year. It’s good for highlighting economically disruptive events.

Clearly, Egypt has always been a fairly turbulent country capable of enduring crises and quickly bouncing back, never dipping below 0% growth. But the most significant part is if this chart were extended to today. It would show a dip to 2% growth in the fiscal year ending this June, which included the Jasmine Revolution. Before the revolution, it was predicted to grow at around 5%. The government overthrow may have very briefly slowed growth and had some opportunity costs, but it was hardly chaos. Now Egypt’s economy is humming again and will probably hit 5% growth again by year’s end.

Here’s China over the past 50 years:

The two largest dips were during government directed campaigns; the Great Leap Forward being especially catastrophic. Then in 1987-1988 there was massive (over 20%) inflation of the Yuan which partly enabled the Tiananmen Square uprising. The crackdown did scare away some investment. Growth slipped a bit but remained positive and quickly rebounded.

An even better indicator of national well-being is per-capita GDP, because this shows how the wealth of the average person is growing or stagnating. A flat line here is bad; people aren’t getting any wealthier. A downward slope is very bad; people are becoming worse off. If you look at China by this measurement the story is very promising.

There’s a very gentle negative slope during the 60’s and the power struggle of the late 70’s, then it’s all upward. Tiananmen didn’t even leave a mark.

Let’s look at another country’s per capita GDP growth and see if you can spot when the revolution took place:

There’s a sharp decline beginning in 1996 ravaging the average person’s net worth by over 33%, but if you think that’s where the political upheaval was, guess again.

The Asian Financial Crisis devastated Thailand, but when a military coup a decade later overthrew the ruling Prime Minister after a year-long political crisis, there wasn’t even a blip. Per capita income continued to grow to its highest levels ever.

These economic charts don’t tell whole story, but they do tell a lot of things. They tell that, even in the midst of political crisis, people still buy things and people are still working at the store to sell to them. Then there’s a whole network of manufacturing and investment behind those people that continues to expand. So the idea that a political crisis throws the country into violent chaos is greatly exaggerated. And what may have caused a serious disruption even 30 years ago might be hardly noticeable now thanks to globalization.

Mr. Dadush explained, “The drivers of economic growth are very fundamental. They are much deeper than even big political developments. They have to do with technologies and ideas that have already been invented. Once they’ve been invented it’s very difficult to stop their spread. If you have more or less the conditions and you have educated people you can absorb these things and you will have economic growth. Educational openness to the world, the absorption of ideas and technology are very fundamental forces. They can be delayed by political disaster but they cannot be stopped.”

There are plenty of non-political things that can tank the economy, like a housing bubble, demographic decline, foreign financial collapses, protectionism, environmental catastrophe, natural disasters, etc. But contrary to what the Party would like everyone to believe and what all those (totally existent) foreigners who dream of seeing China in chaos believe, political upheaval doesn’t seem to be a serious threat to the economy or the common person’s well-being.

This doesn’t necessarily apply to developed countries as strongly though. Once they’re developed they rarely see more than 5% growth in a given year and become more vulnerable to market and political fluctuations, as you can see in this chart of the US and Japan:

But it will be a long time before China gets to that point as a nation; around 40 years according to Dadush. So China could bounce back much more easily from any political crisis than these nations could.  A prolonged civil war might be different, but that’s very unlikely. Even then, it wouldn’t be as destructive as one would imagine thanks to the fundamental global business presence.

Whatever replaced the CCP would certainly have significant long-term economic impacts, but the simple act of a power switch (non-violent or otherwise) would hardly knock growth and the institutions supporting it out of place. Even in a country that, as we all know, has its own “special circumstances.”

I’m sure economists (which I am not) and others can poke holes in this theory. Tunisia isn’t bounching back quite like Egypt, but it wasn’t growing as much to begin with either. And Libya is still in a drawn out civil war (again, extremely unlikely in China) and its recovery is yet to be seen. But none of these countries come close to having the business apparatus and distribution network in place that China does, which are both hedges against “chaos.”

However, the most important thing these economic charts don’t address is happiness during and after a revolution, which obviously doesn’t equate with economic stability. Economic growth still allows for unchecked corruption, wealth inequality, trampling of human rights, perversion of justice, unfair trade practices, arbitrary violence and wholesale withholding of important information. It would indeed be a shame if the Chinese people were ever subjected to that.

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Chart Sources: World Bank data powered by Google Public Data Service (a great resource for comparing countries’ economic and social aspects)

Comments
  1. […] 中国立场博客:共产党垮台会带来混乱吗?不一定——假如中共真的自掘坟墓,那么中国会如何?这个老外对数据的分析也许可以提供一个视角。 […]

  2. TTK says:

    “It would indeed be a shame if the Chinese people were ever subjected to that.”–shame? Sorry, it is a word you just can never find in most Chinese ordinary people’s dictionaries today, actually what they care about is either MONEY or MONEY despite of they industriously reiterating “behave morally”, “be honest” and all sorts of sheer hypocritical nonsense.

  3. […] 原文:Chaos after a CCP collapse? Not so much 时间:2011.8.22 星期一作者: sinostand本文由”译者“志愿者翻译并校对 […]

  4. GUH says:

    CCP collapse?

    They may rule forever. Time is good for Lingdaos to loot the nation and its people, while people are allowed to loot and cheat at other. This is a nation of suicidal bombers all tied together, everybody is pulling other’s fuse. Clearly, it’s unsustainable.

    On the international scene, US and China are two suicidal bombers bundled together, each of which with one hand pulling its own fuse, while the other hand pulling strategic competitor’s fuse. Clearly, a stalemate like the cold war. However, Uncle Sam may blink first and collapse by itself, then, the entire world economic order would change in China’s favor, despite its insurmoutable and unsustainable economic and political model.

    CCP is a nine lives cat, originated as iliterate petty peasants to taday’s goons and thugs.

    CCP is unlikely to collapse, but may change name with the same thugs glued to the same seats ofpower.

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