The Beijing Consensus: How China's Authoritarian Model Will Dominate the Twenty-First Century [Hardcover]

Stefan Halper's "The Beijing Consensus" summarizes how China's ('The People's Republic of China' - PRC) non-confrontational strategies are changing the world order. For decades the U.S. used its military and economic strength to leverage developing countries into economic and government reform. This worked fine, as long as we were the only game in town. The PRC, however, has now entered the arena and provides a welcome non-judgmental alternative to many struggling nations. This new approach to foreign aid, combined with admiration for China's economic success, is boosting its world influence, as well as access to energy and other natural resources. Meanwhile, China's autocratic leadership is now setting the foundation for future economic successes, and shows no sign of liberalizing; ironically, U.S. economic progress seems hindered by its vaunted democratic processes.

Some Americans have fixated on growing PRC expenditures, now second largest in the world, for modernizing its military. Halper believes this should not be a concern. China is avoiding direct confrontation with the U.S., even though it remains committed to re-unification with Taiwan and the U.S. to preservation of Taiwan's defense. The first reason to not worry is that China does not want the budgetary strain of a military arms race with the U.S., nor the foreign policy atmospherics that would result. Halper sees China's modernizing military as simply motivated via 'just-in-case' Americans get too aggressive, and centers on high-tech, close-in defensive weapons. Halper's second reason for discounting a military threat from the PRC is that Taiwan is no longer the flash-point it once was. The is due to China's confidence that re-unification is inevitable, and its willingness to wait. Meanwhile, trade between the two was $108 billion in 2007 (up 16% from 2006), over one million Taiwanese now live and work in the PRC, contacts have increased through regular mail and commercial flights between the two, and China's economic successes have made it more attractive to those living on Taiwan.

Halper, however, is very much concerned about China's growing soft power. Per Harvard's Joseph Nye, when competing for influence "It's not whose Army wins, it's whose story wins." China sees foreign aid as an important part of the contest of stories. Nations clamoring for aid during the latter half of the 20th-century had little choice other than the U.S. led World Bank and the IMF. However, both soon demonstrated a lack of ability to reliably help other nations, sometimes causing more harm than good. Reasons included their numerous ideological 'one-size-fits-all' economic requirements that assumed recipient nations had strong domestic industries, legal systems, and administrative cadres. Despite aid recipient nations often being in recession, IMF and World Bank mandates for cutting government spending worsened the economies of many aid recipients. Directed to eliminate trade barriers, recipients likely found their domestic industries overwhelmed (African food and clothing producers), while corporations in advanced nations enjoyed a windfall. IMF and World Bank-required elimination of barriers to foreign investment often brought inflation, and forced privatization frequently brought fraud as as former state sectors were taken over by political cronies (Russia). Then there was the obvious hypocrisy of our often propping up ruthless oil and anit-Communist dictators while espousing American-style democracy, ignoring Israel;s abuse of Palestinians, and subsidizing American agriculture at the same time the World Bank and IMF prevented developing countries from doing the same. Then came our own problems - the [...] crash, 9/11, our Katrina response, wars in Iraq and Afghanistan, ballooning trade and federal deficits, realization of an inadequate and dated infrastructure, a failing education system, crippling health care and defense costs, inability to aggressively address global warming, deindustrialization, our 2007 Wall Street collapse, and quixotic quests to play the role of world's policeman (Iran, Korea). Each served to undermine America's former soft power aura of competence and success.

Halper attributes recent U.S. economic problems, as well as its ineffectual aid to others, to an inflexible economic ideology that developed in response to problems caused by powerful American labor unions of the 1970s. Faced with both rising unemployment and inflation, Milton Friedman and the 'Chicago school' sold Republicans on the assertion that government involvement didn't solve problems, rather it made them. Deregulation (transportation), reduced regulations, free trade, privatization of state-owned enterprises, and cutting taxes became de rigueur. At first, everything came up roses - American icons such as Coke, Nike, McDonald's, and then Microsoft, sprung up all over the globe, America's 20% inflation was stopped cold, and then the Russian empire collapsed in 1991. We even deluded ourselves into thinking Americans were "special people" with an assignment to evangelize others in democracy and freedom, per God. Reality, however, was that America had reached the peak of its 'soft power,' and was headed downhill.

China, meanwhile, talked little and accomplished much, thanks to its high savings rate, emphasis on and respect for education, flexible economic ideology, protected domestic markets, enormous supply of low-cost labor, and an autocratic government that permitted no 'great debates' - instead taking fast, consistent actions and learning from nearby Hong Kong, Taiwan, Singapore, South Korea, and Japan. On the political side, rather than accept conventional wisdom that economic success required a more democratic government, and sensitive to its revolt-prone past, the PRC government instead concluded that Russia had erred in permitting democratic reforms to outrun economic progress. In addition, China also determined that Russia had suffered from an overly aggressive foreign/satellite policy, a too-large military, a lack of market mechanisms, and a failure to ensure that key industries supported national interests. Incorporating all these lessons, the PRC elected to use strong, intelligent government power to accelerate economic growth; in turn the improved economy would serve as a means of maintaining the Communist Party's power. The new economy offered considerable economic freedom, while retaining government leadership of key industries such as telecommunications, banking, metals (steel, aluminum), and transportation. Pros included fast action, and consistent direction that wasn't subject to reversal every election cycle, continual media-fed industry-led fighting over economic direction, and the ability to immediately link business decision-making with political goals (eg. banning American firms selling arms to Taiwan from selling to the mainland; sometimes slowing the use of mechanization as a means of boosting employment). Cons - local officials' corruption, very limited democracy, and incredible pollution. (China's corruption problem, however, should be evaluated in the context of American business lobbying and 'buying elections.')

Thirty years later, China has accumulated some $2.4 trillion in currency reserves (could reach $13.4 trillion by 2020), increasingly used to fund aid projects on its own and provide a path around the West. Six billion is now committed to funding a media campaign to tell China's story. Chinese 'industrial policy' decisions have also brought the economic benefits of clustering (simplifies marketing and support efforts, intensifies knowledge distribution and competition), minimized contradictions (eg. not buying G.M.'s fuel-wasting Hummer brand in an increasingly resource and pollution-conscious world), and avoided undermining key values (eg. allowing banks to promote credit cards, instead of encouraging savings). Resource-rich nations (eg. OPEC) now emulate China - using their natural resources to avoid levying taxes and the subsequent demands for democracy, while using state capitalism to develop the economy, keep the populace happy, and leverage their own foreign policy etc. goals. (The world's thirteen largest oil companies are owned and run by governments; Saudi Arabia 'invented' political use of economic resources with its 1970s Oil Embargo; Gazprom periodically threatens to freeze large areas of Europe by turning off natural gas supplies.)

The weak U.S. economy is now less able/willing to provide large foreign aid projects, and the Bank of China is 6X the size of the World Bank. Turns out, we're not missed. Halper quotes an African leader comparing the World Bank's slow (five years) contracting and often patronizing support processes, vs. China's three months and few restrictions. In turn, China has lots of new friends supporting its aims in Taiwan, Tibet, and within China itself. Ironically, while Americans have been fighting and dying in Afghanistan for nearly nine years, China is investing $3 billion to gain access to its huge copper reserves - first building roads, a $500 million power plant, a national railway, a coal mine, and eventually creating as many as 10,000 jobs for Afghans. Paradoxically, its investment is protected by American soldiers, and President Karzai is threatening to join the Taliban. Nearby, in Iran, China has $120 billion worth of oil deals - undoubtedly motivation for opposing U.S. goals there, and is busily also helping Iraq develop its oil resources.

China's recognizes that operational effectiveness in the role of offshore producer is not a long-term strategy for either maximizing profits nor full employment within China. Neither is the long-term holding of huge amounts of potentially depreciating American financial assets good for China. In response, the PRC has undertaken its own 'Buy American' campaign - acquiring American and other consumer product companies (Lenovo, Volvo, portions of the Blackstone Group and Morgan Stanley) and starting its own (egl Geely automobiles), using political and economic leverage to acquire American (and others') technological capabilities in tomorrow's industries, acquiring access to raw materials around the world, recruiting skilled science and math expatriates to return, increasing its own R&D capabilities and expenditures, and boosting education expenditures - especially at the university level. Some of these moves also serve to position it for marketing to the less developed world - the projected location of most future economic growth. China is also focusing on expanding internal demand for goods and services, thereby becoming less dependent on exports, less vulnerable to protectionism by other nations, and requiring less resources and generating less pollution/GDP growth than increasing basic industries.

Halper ends with the obligatory section on recommendations. Unfortunately, they lack any likelihood of success (eg. establishing a 'China section' within the National Security Council).

Bottom-Line: China's 'miracle growth' economy has not required emulating American democracy - in fact, China's economy has benefited from government remaining autocratic, and has added autocratic capitalism to its list of exports. Further, it's a mystery why we (or Google) care about developing democracy in China - polls show a preference for social order and economic progress over Western liberal democracy, a finding consistent with Maslow's needs hierarchy. Halper believes "China is set to have a greater impact on the world in the next two decades than any other country" - not because of its increased military spending (much lower than the U.S.) but because it has become a beacon of management/government ideas about making capitalism more effective. Halper also concludes that given China's concern with 'face' (the reason for torpedoing President Obama's request for emissions verification), and U.S. politicians' inability to get beyond media-reinforced rabble-rousing about China, there is little possibility of the PRC and the U.S. becoming a team. Meanwhile, U.S. democracy has become paralyzed, unable to overcome outdated ideological baggage on economic policy (unrestrained free trade, minimal regulation) and foreign policy (dictating and preaching, portraying differences as 'good vs. evil,' preemptive military strikes, unwavering support for Israel) to reverse our weakening economy and international standing.

Forget about the military threat from China, risks of war in the Taiwan Strait, Beijing's purchase of US debt or its dislocating effect on jobs at home -- all are manageable challenges that have been blown out of proportion by pundits and government officials.

So argues Stefan Halper in The Beijing Consensus, a timely little book that turns conventions on the "China threat" upside down and argues instead that the real challenge from Beijing -- one that the Obama administration has so far unwisely neglected -- lies in the transformative forces, operating at the global level, associated with China's rise.

China is undoing the West, Halper writes, not by a calculated strategy that seeks such an outcome, but rather as a result of its authoritarian model and the Chinese Communist Party's (CCP) need to maintain a high level of economic growth at home to ensure its legitimacy and survival. In so doing, it has turned to every corner of the earth for natural resources and energy to meet its growing domestic requirements.

While there is nothing unusual, or even alarming, in this development, Beijing's policy of non-interference in the domestic affairs of other countries means that it has no compunction in dealing with the world's worst human rights offenders, as long as they have certain commodities to offer. As Halper rightly argues, the West -- from big oil companies to George W. Bush's "war on terrorism" White House -- has its own checkered past from turning a blind eye to abuse when it is convenient to do so, but in recent years a certain consciousness has arisen that imposes limits on how Western firms and governments can and will engage serious human rights abusers.

One unforeseen consequence of China's rise and Western conditionality is that rogue states, as well as a large swathe of the developing world, now have an alternative. While in the past states wishing to sell their natural resources or seeking financial assistance had no choice but to turn to the West or Western-dominated institutions like the IMF and the World Bank, they can now turn to Beijing. Given the choice between the painful economic restructuring and democratization imposed by Western institutions and Beijing's no-questions-asked type of engagement, a growing number of states are "learning to combine market economics with traditional autocratic or semi-autocratic politics in a process that signals the intellectual rejection of the Western economic model."

The implications for the ability of the West to influence development on its own terms and traditions are dire, Halper says, especially as trade between groups of developing countries such as Brazil, Russia, India and China, along with other emerging markets, now oftentimes surpasses trade with major Western economies. In other words, China's substantial financial resources and willingness to trade and provide loans, added to the preference of a number of developing economies to adopt the semi-autocratic model espoused by Beijing and perfected by Singapore -- stability through economic development, while the public stays out of politics -- are creating large zones where the West's appeal is quickly dropping. It is also weakening the ability of Western institutions, such as the UN or rights NGOs, to influence policy. In a number of cases, this translates into rising authoritarianism and human rights abuses.

The author argues that the eight years of George W. Bush administration, with its invasions of Iraq and Afghanistan and rejection of international consensus, dealt a severe blow to US credibility in many circles, thus creating a moral vacuum that China quickly managed to fill by playing the equivalency card.

At the same time, Western sanctions against rogue regimes like Iran, North Korea, Sudan and Zimbabwe allowed China, which had no qualms about dealing with them, to step in and take advantage of their untapped resources.

Despite what alarmists want us to believe, this isn't some grand Chinese design to undermine the West. It is, rather, the outcome of a domestic process that forces the CCP to seek access to natural resources and markets wherever it can find them. Beijing's fear of instability is such that it cannot afford to be discerning in who it deals with. It is, ironically, locked in a cage of its own making.

This, in turn, has implications for the school of international politics that believes that by engaging Beijing economically and encouraging it to integrate into the global community, the West will be able to foster democratization in China. In Halper's view, such beliefs are misguided and ultimately naive, because China plays by different rules that emphasize stability over liberalization, in which economic growth is divorced from political freedoms, as Premier Wen Jiabao's rejection of the Western democratic model in 2007 clearly showed. In that regard, Beijing learned the lessons of the Soviet collapse, which in its view resulted from Mikhail Gorbachev's failure to rein in politics just as he was promoting economic liberalization, a mistake that the CCP will not repeat.

The Western model, whereby a growing and increasingly affluent middle class will eventually demand more political freedoms, meanwhile, also fails to apply to China, where the leadership has succeeded in co-opting that segment of society by making its economic welfare increasingly dependent on the central authority.

For the time being, Beijing appears to have beaten the West at its own game, using capitalist techniques perfected over the decades to ensure its ascent while slowly transforming a system that, not so long ago, pundits claimed represented the "end of history." If the process of China's inadvertent reconfiguration of the international order is to be stopped, a reassessment of how we engage Beijing -- it is not either a competitor or a partner, friend or foe, but all these things simultaneously -- is in order. Thankfully, the contradictions that compel Beijing to act the way it does, its need for constant domestic growth, its focus on stability, fear of confrontation and aversion to humiliation, offer some leverage by which to influence its policy choices. At the same time, Halper argues, the West must also give some serious thought to how it engages the developing world and, just as China did, adapt to the new realities.

Panda bashers and panda huggers alike will likely dislike this book, which for those in between offers a refreshing new way of looking at the "China threat."

(This review was originally published in the Taipei Times on Sunday, May 30, 2010, p. 14.)

Stefan Halper, educated in Britain (PhD's at both Oxford and Cambridge) and a professor at Cambridge, draws on a classical education to make his case, but does so in a powerful, provocative, no holds bared manner. As the New York Times said, his book, "The Beijing Consensus" is a game changer--it challenges the parameters of the China debate. Long overdue, Halper has cast the cat amongst the pigeons in what will surely tease out both critics and advocates.

Halper's book offers a fresh, badly needed perspective on China, US-China relations, and how US policy (as reflected in the Washington Consensus) in the developing world has eroded the prospects for democratic government and the progressive civic culture needed to support it. The book captures the subtle, non-confrontational quality of China's global rise--"it arrives on little cat's feet". It draws the Chinese dynamic together by making the crucial link between the Communist Party's fear of chaos, China's need for 8% growth, and China's mercantile policies that exploit the Third World...and here Halper draws both on his experience in Africa and in China. I found the comments of President Wade of Senegal and President Museveni of Uganda both amusing and credible illustrations of the frustration of dealing with the West in general, and the World Bank and IMF, in particular.

Unlike other recent books examining China's rise, Halper, to his credit, does not seem overly excited about either China's growing military prowess or its rapidly expanding economy which he sees linked to the US in a "Marriage of liabilities" in which a difficult but symbiotic relationship will continue. He believes both the military and economic dimensions of the US-China relationship are critically important and require the president's priority attention, but should be approached as "problem management "questions, not crises.

Instead, Halper points to a "battle of ideas" about governance and makes the point that the global information space will provide the context for confrontation. Both China and the US have, Halper believes, concluded that conflict over territory is less likely than confrontation over different models of governance: China's "market-authoritarian model" versus the "Western "market-democratic" model. Thus, he quotes Harvard's Joe Nye, saying "It's not whose army wins, its whose story wins".

This sets up a contest revolving around values and presentation. Halper makes the point that Washington's China policy today does not address the critical contest unfolding in the global information space where China recently launched a $6.6 billion program in 56 languages to frame unfolding events to its liking--and thus the US is posed to lose where it really counts. He urges a fresh look at China policy to meet this challenge.

China's impact on world affairs in the century ahead raises critical policy and resource questions for the US and the West. Not only will quality of life in the West be affected, but we can expect China's policies to impact economic growth, employment, stability and the idea of liberal market democracy as a model for governance.
This book advances a number of particularly innovative arguments on China, continuing a broad theme--the political function of information-- found in two of Halper's previous books, "America Alone" and "The Silence of the Rational Center".