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The Effects of Economic Growth and Globalization on Democracy in China: An Empirical Analysis ABSTRACT This paper is a case study examining the effects of economic growth and globalization on democratization in China. This serves to fill a gap in the literature where an empirical case study is needed to either prove or disprove theories for democratization in China. I begin by reviewing the prevailing studies on this relationship and segue into a research model that will provide an empirical evaluation for testing the hypotheses summarized in section one. This data is then subject to analysis where I conclude that traditional beliefs of the globalization theory, the modernization theory and the functionalist argument do not apply to China. Sustained economic growth and continued expansion of the middle class in China coupled with increased trade openness (among the highest in the world) have not had a positive effect on the case for democratization in China. I offer some explanation for the status quo as found in regime stability theory, then conclude with predictions about how democracy could come to China. Introduction: In the 21st century, the Western world is becoming less and less significant as this century is radically living up to the name that many are giving it: The Pacific Century. In this new global order, Asia is becoming the economic center of the world; Asia is home to the fastest growing economies. In the heart of this emergent region is China. China is the world‟s most populous country with over 1.3 billion people 1. It has the globe‟s second largest economy in terms of 1 World Bank Development Indicators: "China | Data." Data | The World Bank. 2009. Web. 29 Nov. 2010. <http://data.worldbank.org/country/china>. 1 GDP; second only to the United States2. The Chinese economy has sustained rapid growth since it began reforms in the late 70‟s and early 80‟s. It has moved from a lower developed country into a level of medium development as defined by the Human Development Index (HDI) 3. China‟s growth has come mainly from embracing the world market, thus becoming a true product of globalization. There is no doubt in saying that China has experienced some great and remarkable changes over the past few decades. What impact have these changes had on the government of China? Specifically, has China become more democratic? I: A LOOK AT THE CURRENT LITERATURE ON THIS ISSUE I am not the first to look for patterns between market liberalization, economic growth and political liberalization. Scholars have long examined these issues. Before I endeavor to provide my own answers to these questions, it is customary and appropriate to review the literature on this issue and to note prominent theorists and their respective theories. Some of the literature focuses on the relationship between economic growth and democratization. However, a newer trend in the field has been the relationship between globalization and democratization. In this literature review, I will first target theories claiming a relationship between economic growth and democracy in which the modernization theory of democratic development and the functionalist model for democratization will be highlighted. Secondly, I will focus on arguments concerning the impact of globalization on democracy. Before we endeavor to summarize the major contending theories in this subject area, it is necessary to define some relevant terms. Economic Growth, in this paper will be taken in its 2 Barboza, David. "China Passes Japan as Second-Largest Economy." NYTimes. 16 Aug. 2010. Web. 22 Nov. 2010. <http://www.nytimes.com/2010/08/16/business/global/16yuan.html>. 3 Human Development Index attached: "China: Country Profile of Human Development Indicators." International Human Development Indicators - UNDP. Web. 22 Nov. 2010. <http://hdrstats.undp.org/en/countries/profiles/CHN.html>. 2 literal sense to mean an increase of the wealth in a country. This wealth is typically measured in terms of Gross Domestic Product (GDP). This paper will remain consistent with the literature by using GDP growth to represent economic growth. The phenomenon popularly known as globalization is also discussed in this project. This term is used to describe the “comprehensive world-wide process of the internationalization of communication, trade and economic organization.”4 In this project, the part of globalization that will be focused on is the economic element. The definition for democracy/democratization is not as straightforward as economic development. This concept is certainly more complex, but generally is summed up in its traditional sense as “government by the people.” The term democracy is a broad term that describes different types of regimes where the populous has control over the administration of the state‟s affairs. This control is typically exercised through popular elections. When “democracy and democratization” is discussed in this paper, the above notions are being considered. The Modernization Theory The “modernization theory” is a blanket term given to the types of arguments that claim that economic growth or development will produce favorable conditions for democracy. The modernization theory is very similar to the “optimist model” of globalization, described later. However, it does not identify globalization as the initial cause for growing economic wealth, but is rather simply concerned with what happens after procurement of wealth that leads to democracy. The logic behind these types of arguments is as follows: a growing economy leads to a higher standard of living, with higher educational standards and the rise of the middle class. This new and empowered middle class of capitalists will start demanding more freedom and 4 Online Dictionary of the Social Sciences: Globalization 3 representation thus bringing about democratic political reform. This argument does not blatantly suggest that the growth of free markets, the expansion of private ownership and greater wealth directly create democracy. Instead, the central idea of the modernization theory of democratic development proposes that economic reforms and economic growth simply help create the social conditions necessary to promote a democratic transition: conditions such as an educated, politically assertive middle class. Observers are split on how exactly this pattern plays out. Some claim that the general wealth of the country will encourage people to revolt. Larry Diamond (1999) writes “…sooner or later, economic development will generate growing pressures (and possibilities) for China to make a definite regime change to democracy.” 5 Hu Shaohua agrees with Diamond and contends that “The growing economy (in China) will bring higher living standards, a higher level of education and a more complicated socioeconomic status in its wake. Under these circumstances, more people will demand for freedom and democracy.” 6 The modernization theory is then further split into structural explanations and volunteerist approaches. The structural claim can be simplified as follows: Democratic change is based on structural transformations in the economy and in the society. Because changes that favor free markets also favor democracy (i.e. rule of law and free flow of information), it is reasonable to expect a democratic transition to follow economic liberalization. Proponents and supporters of this theory include Bellin (2002); Koo (2001); Moore (1966); Reuschemeyer, Stephens and Stephens (1992) 5 Diamond, By Larry. "The Global Prospect." Hoover Institution. Web. 07 Feb. 2011. <http://www.hoover.org/publications/hoover-digest/article/7731>. 6 As Cited in Tsai, Kellee S. Capitalism without Democracy: the Private Sector in Contemporary China. Ithaca, NY: Cornell UP, 2007. P 2 4 Volunteerist approaches claim that disgruntled business elites that arise out of economic success will join forces with other elites to promote political change. This argument, as one would guess, claims that as more entrepreneurs become active in the market, they will realize that the current political system is not conducive towards private enterprise and thus demand political change: the standard “no taxation without representation” claim is thus relevant here. This argument does not necessarily stem from the notion that the entrepreneurs will be/are the most inconvenienced by the status quo, but rather wield the financial means and influence with which to promote the necessary and desired transition towards a democracy. Zheng (2004) contends that “Chinese business classes are likely to play a role that their European counterparts did in the past. Capitalism is creating a Chinese bourgeoisie. It is a class with teeth.” Another approach (besides that focused on the bourgeoisie) that falls under the umbrella of volunteerist arguments is the claim that a better educated population is also a byproduct of modernization that will positively contribute towards an environment conducive towards democracy. The educated public will be more aware of their suppressed circumstances and seek to better these circumstances by calling for representation in a reformed government. Others supporting this argument are Colomer (2002); di Palma (1990); Diamond (1999) Hagopian (1990); Kirchheimer (1988) O‟Donnell, Schmitter and Whitehead (1986) and Przeworski (1991). Although structural and volunteerist approaches vary in their explanation of how exactly and by what means economic growth and market liberalization will influence a transition toward democracy, they none the less agree that there is/should be a linear relationship between economic growth/privatization and democratization. Therefore, for the purpose of my argument, I will not distinguish between them. I will refer to these arguments in the future as the “modernization theory of democratic development.” 5 This idea of a correlation between markets and democracy is not a novel one (nor does it only apply to the situation in China). Political scientists, economists and journalists among others have been discussing the link for decades. One of the first to argue that free markets and growth were essential to democratic transition was S. M. Lipset. In his 1959 publication in the American Political Science Review, entitled Some Social Requisites of Democracy, Lipset lays out what he believes to be the essential “requisites” for democracy. They are as follows: an open class system, economic wealth, an equalitarian value system, a capitalist economy, high literacy rates and high participation in voluntary organizations. 7 As evident in this list, two of these requisites deal directly with the economy and fit nicely into the modernization theory of democratic development. Barrington Moore Jr. also agrees about the relationship between economic growth and democracy. In his “Social Origins of Dictatorship and Democracy” (1966), Moore lays out the foundation for what is necessary for a successful transition of power in favor of democracy. In this work, Moore makes the famous conclusion of “No Bourgeois no Democracy” 8 Joseph Schumpeter also recognizes the relationship between capitalism and democracy. He asserts that “modern democracy is a product of the capitalist process.” 9 Xia Li Lollar writes optimistically about this very subject concerning the relationship between the free market and democracy in China. She writes (in 1997 mind you) that China is in the middle of a transition from a totalitarian regime toward a democratic regime and that it could be classified as an authoritarian regime (as defined by Huntington10). She argues that the Chinese government is helping to establish the social conditions necessary (i.e. an educated middle class 7 Lipset, S. M. "Some Social Requisites of Democracy: Economic Development and Political Legitimacy." The American Political Science Review 1st ser. 53 (1959) p. 105 8 Moore, Barrington. Social Origins of Dictatorship and Democracy; Lord and Peasant in the Making of the Modern World,. Boston: Beacon, 1966.p 418 9 Schumpeter, Joseph Alois. Capitalism, Socialism, and Democracy. New York: Harper & Row, 1976 p296-297 10 A totalitarian regime strives to control aspects of society; An authoritarian regime attempts to maintain lesser control and a democratic regime. As described in Lollar p 78 6 and a private sector) for democratic transition by creating economic reform and transferring decision-making power from the central government down to individual firms. By relinquishing some power, Lollar believes that the economic reforms will help to create democracy in China. 11 The Functionalist Theory Other arguments of democratic transition fall under the umbrella of the “functionalist explanation.” The functionalist approach basically argues that democracy is the best form of government suited to function in the modern world. From here the argument progresses to declare that sooner or later, any state that wishes to participate in international affairs/ commerce will develop a democratic system in order to successfully do so. Proponents of this argument claim that “sooner or later, China will adopt a democratic system, because democracy is the most feasible system in modern society. 12 Ronald Glassman (1991); Gordon White (1994) and Bruce Gilley (2004) generally agree with this logic. Francis Fukuyama posits a famous, but controversial, version of the functionalist explanation in his 1989 essay and subsequent 1992 book entitled The End of History and the Last Man. Fukuyama‟s central claim is that the fall of communism in the Soviet Union proves that there is no other legitimate form of government. Throughout the majority of the 21st century there were two contending models of governance and economics: the Soviet state directed plan and the Western liberal market orientation. The implosion of the soviet state exemplifies it as a failure. Free market capitalism and liberal democracy have brought about an “end of history” in that there are no more legitimate competitors and that freedom and security have been realized under this new world system. Following this logic, all other forms of political and economic 11 Lollar, Xia Li. China's Transition toward a Market Economy, Civil Society, and Democracy. Bristol, IN: Wyndham Hall, 1997 12 Hu, Shao-hua. Explaining Chinese Democratization. Westport, CT: Praeger, 2000 p. 156 7 organization have become/ are becoming extinct simply because they are no longer suited to function in today‟s world. Globalization and Democracy Since the term globalization has come into fashion, there have been many predictions on how this phenomenon will affect world politics. Democratization of developing countries is one area of contention. The idea that globalization (referring to international free-market liberalization) leads to increased democratization has great rhetorical appeal for politicians, particularly in the United States, who wish to pursue open market policies. These policies are often lined with humanitarian and human rights language in order to offer a moralistic rationale for pursuing free market policies. We have seen this tactic used when politicians push policies like NAFTA and more open relations with China such as China‟s admission to the WTO. Economic globalization has also been debated as a factor affecting democratization. The question here is “what is the effect of economic globalization on democracy?” The literature offers empirical and theoretical approaches to answering this question. These can be classified into three conclusions: economic globalization has a positive effect, globalization has an obstructive effect, and globalization has no apparent effect on democratization. Globalization promotes democracy This argument suggests that globalization does indeed cause government to pursue liberalization for one or all of the following three reasons. Democratization logically follows open economic markets. Globalization increases communication and the spread of information, thus the pressure is put on governments by international humanitarian organizations to respect human rights. Or that in order for a country to become attractive to a multinational corporation, it 8 must first adopt certain qualities such as open markets and private property laws as well as maintain stability; all of which are conducive to democracy. The simple logic behind the first argument can be presented in the following progression explained by Ronda E. Howard-Hassmann in a 2005 edition of Human Rights Quarterly: globalization markets liberal economic order democracy13 The above provides a logical sequence of globalization leading to democracy. Globalization creates free markets across the globe. These free markets, in order to exist and be sustained promote a liberal economic order. Following the same logic, in order for a liberal economic order to exist and be sustained, democracy must exist. This logic seams straightforward; each of the links in the chain creates the appropriate conditions for the next link to exist and each link reinforces the one before. The more complicated stance that claims that globalization promotes democracy (and then human rights) can be summed up using The Optimist Model. This model takes into account all of the steps that should occur once a Multi-National Corporation (MNC) enters a country that is non-democratic and does not respect human rights. MNC‟s, according to this model, directly cause the following effects: “Job Opportunities, Tax revenue, Rule of (corporate) Law and New Business Opportunity.” These effects, in turn, then cause such outcomes as “growth of the middle class, increased education, liberal democracy and then finally, economic, political and social rights.” 14 The most obvious and clear effect of foreign investment is evident in the new jobs created by the MNC. However, these new jobs, the ones that come directly from the MNC, are not the only jobs that will be created, according to the optimist model. The MNC will cause 13 Howard-Hassmann, Ronda E.. "The Second Great Transformation: Human Rights Leapfrogging in the Era of Globalization." Human Rights Quarterly 27.1 (2005): Figure I (c) P.15 14 Supported by the quantitative analysis performed in: Meyer, William H.. "Human Rights and MNCs: Theory Versus Quantitative Analysis” Human Rights Quarterly 18.2. (1996), 368-397, 9 communities to grow around its new establishment. Entrepreneurs will take advantage of these new settlements and set up new businesses and service industries, this action in turn, plants the seeds for a new, robust entrepreneur/middle class. 15 Tax revenue paid by the new workforce and by the MNC itself will also be collected by the host government, thus giving it the ability to function at a higher capacity. 16 This will allow the empowered government to spend money on education, and perform other public services. The increase in education creates a perpetuating cycle with the growth of the middle class, which in turn contributes to higher levels of education. The rise of the middle class has also been contributed as the base for democratic and social reform. 17 As more and more people in a society become comfortable with their financial standings, education will increase. Becoming aware of their own interests and their current political situations will cause the new middle class to be dissatisfied with the oppressive, nondemocratic rule that suppresses their rights. Robert Inglehart, in his post-materialist hypothesis, centralizes his argument around the notion that advancements in one‟s physical security, brought about by increased wealth, will lead an individual to become more concerned with “post-materialist values.” These values include things like human rights, political rights, the environment, etc. Inglehart furthers his hypothesis by making it specific to the phenomenon of globalization/modernization. In his 2005 Thesis, Inglehart states: 15 Howard-Hassmann, Ronda E.. "The Second Great Transformation: Human Rights Leapfrogging in the Era of Globalization." Human Rights Quarterly 27.1 (2005): P.21 16 Proves this relationship: Pritchard, Kathleen. "Human Rights and Development: Theory and Data." Human Rights and Development-David Forsythe edition (1989): 329 17 Richards and Gelleny in Is It a Small World After All?: Globalization and Respect for Human Rights in the Third World." Cite: Lerner 1958, Lipset 1959, Nelson 1987, Dahl 1989, Huntington 1991 etc. 10 “Modernization is a process of human development in which economic development triggers gradual cultural changes that put increased emphasis on the values of self expression, gender equality, tolerance of homosexuality and democracy. More advanced democracies are more tolerant and all for greater individual autonomy.” 18 Scholars believe that there are other reasons why globalization increases pressure on governments to liberalize. One such argument revolves around the view that: Globalization is caused by the great advancements in communication and transmission of information. This phenomenon makes it possible for international live news coverage, instantaneously from virtually anywhere on the planet. According to Wesley T. Milner, “As a result of new communication technologies and increasing interdependence, governments are finding it increasingly difficult to violate their citizens‟ human rights without attracting the attention and ire of interested individuals, governments and international organizations around the world.”19 Governments cannot, according to this argument, do anything that would anger the international community and thus draw unwanted and unfavorable attention to their regime. Transparent democracy is the best way to avoid international scrutiny. Proponents of this model and the third argument, also base their position on the assumption that governments must make certain adjustments to their policy in order to attract foreign investment. They must, for instance, privatize certain aspects of the economy so that the investors will be able to see a profit motive. They are also required to have liberal trade laws, once again appealing to the desire to profit. Stability in a government is also a favorable 18 Inglehart, Robert “Post Materialist Hypothesis” Milner, Wesley T.. "Economic Globalization and rights: an empirical analysis in Globalization and Human rights by Alison Brysk (2002), 77-97, (accessed April 4, 2010). P.78 19 11 condition that MNC‟s look for when shopping for a potential expansion site. Several regime changes or drastic policy alterations would be a sign of instability and thus make that given country unattractive. All of these changes have been attributed to democratization. The main country that proponents of this model often focus on as a “success story” of globalization improving government respect for human rights is Taiwan. In the chapter entitled “Is it a Small World After All?: Globalization and Respect for Human Rights in the Third World,” found in Coping with globalization: cross-national patterns in domestic governance, David L. Richards and Ronald D. Gelleny state that: “… as Taiwan‟s economy grew, so did its middle class”20 and that this new middle class called for the ability to participate in the government and for better governmental respect for human rights. In response to their demands, the government conceded and liberalized electoral policy and paid more careful attention to the issue of human rights. Globalization is detrimental to the development of democracy The other side of the argument is that globalization is not indeed an apparatus that enhances democracy and that free trade and globalization do not increase government incentive to liberalize. The main factors of this argument are: Globalization causes governments to favor the will of the MNC‟s and at the same time neglect the rights of the citizens. Free trade and the endless search for labor cause discrepancies between rich and poor, income gaps and class conflict. And, the reckless flow of “hot money,” encouraged by international monetary organizations such as the International Monetary Fund, has a negative effect on the advance of 20 Richards, David L., and Ronald D. Gelleny. "Is It a Small World After All?: Globalization and Respect for Human Rights in the Third World." in Coping with Globalization: Cross-national Patterns in Domestic Governance and Policy Performance. London: F. Cass, 2002 12 effective free markets and the establishment of liberal democracies in developing third world countries. Those that claim that Globalization and International trade deteriorate governmental incentive to democratize note the following progression: globalization poor) market economies liberal economic order class society (rich vs. rightlessness. 21 Between this model and the one described above, there is no disagreement up until the point of liberal economic order. This is the crucial difference as those that believe that globalization undermines human rights do so because the liberal economic order perpetuates class cleavage, thus leading to the further exploitation of the poor working class by the rich industrialists or by the MNC‟s that invest in foreign countries and seek inexpensive labor. They argue that globalization is the cause for the increase in the income gap between the world‟s wealthiest and the world‟s poorest individuals. 22 Although capitalism and free market values seems to be the only way for a country to successfully add to its wealth, (solidified by the collapse of the Soviet Union and the failure of the British socialist system discussed later in the Functionalist argument) there is no guarantee that capitalization will warrant a fair or reasonable distribution of this wealth and that the poor continue to lose out. The endless search for cheap labor causes this further exploitation: so called “race to the bottom.”23 21 Howard-Hassmann, Ronda E.. "The Second Great Transformation: Human Rights Leapfrogging in the Era of Globalization." Human Rights Quarterly 27.1 (2005): Figure II(b) p 17 22 Wallerstein (1974), Bollen (1983), Tarkowski (1989), Przeworski (1991), Gill (1995), Amin (1996), Cox (1996), Im (1996), Kummell (1998) 23 Drucker (1994), Muller (1995), Bryan and Farrel (1996), Beck (1996), Cox (1996), Moran (1996), Marquand (1997), Rodrik (1997), Martin and Schumann (1997), Longworth (1998) 13 Joseph Stiglitz, a prominent economist, is famous for his criticism of international financial organizations such as the International Monetary Fund and the World Bank. Stiglitz believes that in the era of globalization, these organizations recklessly encourage the flow of “hot money” into third world developing states where this money has a detrimental effect on that country. His criticism revolves around how the “hot money” has a tendency to leave a country as quickly as it came in, causing „capital flight.‟ Multinational corporations also seek short term monetary gains and do not attempt to invest in the host nation‟s infrastructure or policy issues outside of those that affect them directly. Since their goals are only short term, the MNC and its investors are likely to pull the plug if the initial profits do not present themselves immediately. Also, in order to attract foreign investment, a government must tailor its policy around the desires of the prospective industry, often times at the expense of the citizens. 24 The implications of what would happen once foreign investment leaves the host country are devastating. The departure will cause an economic and political vacuum. Any business growth or development of the middle class that might have occurred as a result of the foreign investment is now in jeopardy of dying out due to the reflux of capital. Any democratization that had taken place is also at risk of collapse once it does not have the support of the MNC and that MNC‟s sender government. The money that had been infused into the country would immediately dissolve causing job loss and distrust of the government (because citizens perceive government betrayal). These factors would snowball until the country returns to the same position that they were in prior to foreign investment or they may possibly find themselves in a worsened state of affairs. This argument is referred to as the Pessimist Model.25 24 Stiglitz, Joseph E. Globalization and Its Discontents. New York: W.W. Norton, 2003. Print. Found in: Howard-Hassmann, Ronda E.. "The Second Great Transformation: Human Rights Leapfrogging in the Era of Globalization." Human Rights Quarterly 27.1 (2005): 1-40. and at <http://muse.jhu.edu/journals/human_rights_quarterly/v027/27.1howard-hassmann.html#REF64> 25 14 Globalization has no effect on democracy There are more researchers that do not fall into either of the aforementioned categories. These researchers or theorists cling to the claim that the extent of globalization (whether positive or negative) is exaggerated or that its effects vary by country. Hypotheses: Now that the theories have been explained, I will conduct an empirical analysis to determine how they apply to China. Due to successful implementation of economic reforms, followed by three decades of consistent growth, I expect to see a positive relationship between GDP growth as well as GDP per capita growth and democracy. Similarly, China‟s decision to end decades of isolation and fully embrace the international market should have an affirmative effect on democracy and this effect should be visible in a linear relationship between trade openness and democracy in addition to a FDI inflows and democracy. Research Model This section will serve as an empirical analysis to answer the following questions: Has China‟s incredible economic growth had an effect on democracy? And: Has China‟s increased trade openness and exposure to the rest of the world through the phenomenon of globalization had an effect on democracy? I will answer these questions by examining the patterns of economic growth namely GDP and GDP per capita and compare this data with indexes of democracy to see if there is indeed a relationship. I will use the same approach for the issue of globalization in China implementing indicators of globalization; specifically trade openness and 15 foreign direct investment (FDI) flows into China. I also will analyze the effect of education on democracy, as higher education has been noted as being conducive to democracy. From this data, I should be able to conclude whether or not economic reform, including the embracement of the international market, has had a positive impact on democratization in China. The data spans the 26 years between 1982 and 2008. Independent Variables: As mentioned at the beginning of this paper, economic growth is synonymous with an increase in GDP. Therefore, GDP will be the independent variable used to represent economic growth. I will also use GDP per capita as a measure for economic growth in order to control for population size. Information on GDP and GDP per capita used in this project was borrowed from the World Bank Data sets.26 27 Globalization is a more complex variable to measure, as it is more abstract. However, the focus of this project is on the elements of globalization concerning China‟s involvement with the international market. The best measure to encompass the notion of international market participation is “trade openness. This is a combination of imports28 as a percentage of GDP and exports29 as a part of GDP. In short, trade openness describes total trade as a portion of the entire economy. I chose to use trade openness because it is an effective way of measuring exactly how much of a country‟s economy is related to international markets. The numbers for this variable are lifted from the World Bank Database. FDI inflows are also an effective measure of how 26 "GDP (current US$) | Data | Table." Data | The World Bank. Web. 17 Feb. 2011. <http://data.worldbank.org/indicator/NY.GDP.MKTP.CD>. 27 "GDP per Capita (current US$) | Data | Table." Data | The World Bank. Web. 17 Mar. 2011. <http://data.worldbank.org/indicator/NY.GDP.PCAP.CD/countries>. 28 "Imports of Goods and Services (% of GDP) | Data | Table." Data | The World Bank. Web. 17 Mar. 2011. <http://data.worldbank.org/indicator/NE.IMP.GNFS.ZS/countries>. 29 "Exports of Goods and Services (% of GDP) | Data | Table." Data | The World Bank. Web. 17 Mar. 2011. <http://data.worldbank.org/indicator/NE.EXP.GNFS.ZS>. 16 open a country is to foreign investment as they indicate how willing a country is to receive foreign investment. This measurement describes the yearly amount of money invested by foreign firms into firms located in China. These numbers, like those above, were compounded from the World Bank databases. 30 Higher education is also a byproduct of the above two variables and as mentioned in the literature review, is correlated with development of democracy. Therefore this is also a variable of interest. I will use adult literacy rates to measure growth of education in the population. The adult literacy rate is the percentage of the total adult population (15+) that is able to read and write short simple statements. This also comes from the World Bank. 31 Dependent Variable The focus of my research is to determine how the above variables affect democracy, so I needed an appropriate measure for democracy. Just as democracy is difficult to define, it is also hard to measure. Of the available indexes and measures for democracy available, I have settled on the Freedom House Civil Liberties and Political Rights Scores. I have chosen this index because it adequately measures the most fundamental requirements for democracy including freedoms of expression and allocations of civil liberties. To achieve a good score on the Freedom House scales, a country must be a liberal democracy. According to the Freedom House website, “Political rights enable people to participate freely in the political process, including the right to vote freely for distinct alternatives in legitimate elections, compete for public office, join political parties and organizations, and elect representatives who have a decisive impact on 30 "Foreign Direct Investment, Net Inflows (BoP, Current US$) | Data | Table." Data | The World Bank. Web. 17 Mar. 2011. <http://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD/countries>. 31 "Literacy Rate, Adult Total (% of People Ages 15 and Above) | Data | Table." Data | The World Bank. Web. 17 Mar. 2011. <http://data.worldbank.org/indicator/SE.ADT.LITR.ZS>. 17 public policies and are accountable to the electorate. Civil liberties allow for the freedoms of expression and belief, associational and organizational rights, rule of law, and personal autonomy without interference from the state.”32 Freedom House claims that their observations of “freedom in the world” are not bound by culturally constrained conceptions of freedom or liberty. Rather, they base their comparisons on “basic standards” of freedoms. They derive these standards from the Universal Declaration on Human Rights. In order to turn these observations into comparable scores that can be used in either cross-comparison or time-series analysis, Freedom House rates each country on a scale from 1 to 7. A score of 1 is indicative of FULL respect for freedom, while a score of 7 signifies NO respect for freedoms.33 For ease of analysis, I combine the scores from Civil Liberties and Political Rights to create a single index ranging from 2 to 14; 2= full respect, 14= no respect. To test whether or not the dependent variable is affected by any of the independent variables, I run simple correlations. 32 "Freedom House Scores: Methodology." FreedomHouse.org. 2010. <http://www.freedomhouse.org/template.cfm?page=351&ana_page=363&year=2010> 33 For more details on Freedom House scoring criteria visit freedomhouse.org 18 Results: Economic Growth Indicators: Graph 1: GDP in China Between 1982 and 2008 GDP $5,000,000,000,000 $4,500,000,000,000 $4,000,000,000,000 $3,500,000,000,000 $3,000,000,000,000 $2,500,000,000,000 $2,000,000,000,000 GDP current USD $1,500,000,000,000 $1,000,000,000,000 $500,000,000,000 $0 Graph 2: GDP per Capita in China between 1982 and 2008 GDP per Capita $3,500 $3,000 $2,500 $2,000 GDP per Capita (current USD) $1,500 $1,000 $500 $0 19 Globalization Indicators: Graph 3: Foreign Direct Investment (FDI) inflows in China between 1982 and 2008 FDI inflows (current USD) 160,000,000,000 140,000,000,000 120,000,000,000 100,000,000,000 80,000,000,000 FDI inflows (current USD) 60,000,000,000 40,000,000,000 20,000,000,000 0 Graph 4: Trade Openness (imports plus exports) in China between 1982 and 2008 Trade Openness 80 70 60 50 40 total trade as a percent of GDP 30 20 10 0 20 Education Indicators: Graph 5: Total Adult Literacy (% of 15+ population) in China between 1982 and 2008 Adult Literacy Rates 100 95 90 85 80 75 Adult Literacy Rates (% of 15+ population) 70 65 60 55 50 1982 1990 2000 2008 Democracy: Graph 6: Democracy trends in China between 1982 and 2008 Aggregated Freedom House Scores 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 China (2= full respect for rights 14= no respect) United States 21 Table 1: Correlations between the variables Correlations Freedom House Aggregated GDP -0.02736 GDP per Capita FDI Inflows -0.02606 0.196478 Trade Openness 0.069795 Adult Literacy 0.386652 Discussion of the Data The first six graphs are the independent variables and the dependent variables over the years between 1982 and 2008. To best illustrate the Freedom House aggregated score, I have compared China to the United States. The indicators for Economic Growth: GDP and GDP per capita grow consistently between 1982 and 2008. Similarly, the indicators for Globalization: FDI inflows and Trade Openness show a definite and constant upward trend. However, the indicator for democracy: the aggregated Freedom House score does not show much variation, certainly nothing that can be considered a positive trend. The correlations between the variables (table 1) are all far from a score of 1.0, indicating a null relationship. It is clear from examining the correlations and the graphs that there is no relationship between the independent and dependent variables. China persists in resting democratic transition in spite of increased economic growth and embracing globalization. IV: The Government is Still Strong: Liu Xiaobo, a case in point The data shows that despite sustained growth and openness to the world market, China has remained authoritarian with minimal to no respect for political rights or civil liberties. But, what exactly does a score of 13 or 14 look like? What is life like in a country with a government that does not respect the rights of its citizens? 22 As if the data does not speak loudly enough for itself, it will be useful to point out a specific case in order to illustrate exactly to what extent the Chinese government represses the Chinese people. This can be witnessed in no better a case than that of Liu Xiaobo, the human rights activist and Nobel Prize winner who was unable to receive his award due to the fact that he was imprisoned as an enemy of the state. I will be brief in explaining Liu‟s situation. Liu Xiaobo has a history of human rights activism that goes back to the June 4 th incident in Tiananmen Square, where he organized a hunger strike and sit in, calming the crowd and preventing a violent confrontation. His human rights activities have continued ever since, including the publication of several political criticisms of the Chinese government. He has spent most of the years since 1989 either in prison, under house arrest or in “reeducation camps.” Despite this, Liu continued in his activities. The action that has gained him the most notoriety is his involvement with Charter 08, a declaration in the style of Czechoslovakian Charter 77, which was initially signed by over 300 Chinese dissidents (many of which are individuals of high status within and outside of the party) on the 60th anniversary of the Universal Declaration of Human Rights. Liu was a contributing author to this 2008 declaration which called for governmental respect of human rights in China as well as a multi-party democratic system, privatization of state industries among other demands related to political liberalization. Although this demand is certainly troubling for the CCP, the Chinese government has not made a public comment about Charter 08. Instead Liu Xiaobo was arrested before the official online release of the Charter. His role as a human rights activist calling for political liberation and reform in China has earned Liu international acclaim, culminating in the award of the Nobel Prize for Peace in 23 October 2010. Liu was unable to attend the ceremony as he continues to serve his eleven year sentence for “spreading a message to subvert the country and authority.” The case of Liu Xiaobo is just one of countless examples of how the Chinese government has suppressed the freedom of one of its citizens. This just goes to show that the CCP will go to any length to ensure its predominance at the top of China‟s political hierarchy goes unchallenged. IV: Analysis: Why no relationship? It is clear from the data that there is no noticeable relationship between the independent and dependent variables. Neither economic growth nor embracing the global market has caused China to politically reform. It is news to nobody that China continues to have one of the most restrictive and powerful states on the globe. This begs the question: Why has China (the CCP in particular) been able to successfully embrace economic reform while still maintaining strict authoritarian rule over the political system? How is it that China is a country fully embracing the international free market and also run by a “communist” party? The answers to these questions lie in an examination of regime stability theories. Rather than observe all regime stability theories in an exhaustive manor, I will try to be brief in hitting the key points that best explain why the CCP maintains control in today‟s modern China. It is not an uncommon argument that the reason why the CCP continues to maintain control in China is because they have chosen security and continuity over liberty. Under the Party, China has quickly entered the modern world bringing about positive changes in the quality of life that the Chinese people enjoy. Since the initial years of reform, leading up to the 1989 24 Tiananmen Square Incident, there have been no mass demonstrations calling for political liberalization. This may be because of the massive government censorship apparatus, discussed in the case of Liu. Others argue that there are deeper reasons, and that the Chinese people feel that political change will not better their quality of life. This idea can be broken down further into various explanations. One approach claims that China has an authoritarian political culture that extends back centuries. Therefore, the Chinese people have never lived under a healthy democracy (save for a few years under the Nationalist Kuomintang which later developed authoritarian attributes.) Another angle argues that there is almost a type of “social contract” between the government and the people that says: „we will continue to provide economic growth and stability if you allow us to maintain absolute political control.‟ These ideas are refined by several scholars. Here are a few: Andrew Walder in a September 2009 Current History titled “Unruly Stability: Why China‟s Regime Has Staying Power,” endeavors to answer the very questions posed above. His central thesis is that “The overall political situation in China is far more favorable for the regime than it was during the relatively tumultuous and strife-torn first decade of economic reform.”34 This is true for four reasons: China‟s gradual approach to modernization has been successful; China‟s political path looks good for the CCP, especially compared to other post-communist regimes; China‟s educated youth are optimistic and patriotic; And, Chinese leaders are united on the goals for the future of China 35 Walder points out that the situation that China is in today is vastly different compared to the end of the first decade of reform: the 1980‟s, where tensions between reformed minded 34 35 Walder, Andrew. "Unruly Stability: Why China’s Regime Has Staying Power." Current History 108 (2009): p 257 Ibid p.257 25 students and their sympathizers clashed with conservative party elders culminating in the Tiananmen Square Massacre. He notes that all of the four points mentioned above: uncertainty about economic reform, political unrest, a disenfranchised youth and fragmentation within the CCP were all at a peak by 1989. These issues, according to Walder, are simply no longer significant or noteworthy. He also points out that the kinds of protests that China experiences today are fundamentally different from the protests in the 1980‟s. Now, protests are rurally based and scattered across the country. They arise from discontented workers, upset about the privatization of state firms or local corruption cases; there is no call for change on the national scale. This is different from the protests in the 1980‟s which were located in major cities and focused at the total political reform and liberalization of the national government. Walder also takes an interesting perspective in comparing China to the other 29 countries that experienced a communist takeover in the early to mid 20th century. He noted that of these 30, only 4 are still communist. Two are still isolated and have failed to embrace the market: Cuba and North Korea. The other two: China and Vietnam have fully accepted the free market system while successfully maintaining (communist) regime stability. What is also interesting is that of the 26 that experienced a regime change, only half have managed to emerge as multiparty democratic states (all of which, save for Mongolia are in Eastern Europe). However, of all 30, China and Vietnam have managed to maintain the highest and most stable growth in per capita GDP. 36 In Capitalism without Democracy: the Private Sector in Contemporary China, Kellee Tsai directly refutes some of the major claims of the modernization theory. She argues that the CCP maintains control because the entrepreneurs in today‟s China are not a unified class and 36 Ibid p. 260 26 have no desire to rebel against the system that has allowed them to prosper. Her in depth analysis of the entrepreneurs in China focuses on a national survey of registered private enterprises in the country as well as an extensive set of hundreds of interviews spanning several years in the early 2000‟s. She concludes that there are several factors impeding the entrepreneurs in China from becoming a unified class that has the capacity to jointly call for political change in the form of democratic transition. Regional constrains as well as employment background and size of the firm causes entrepreneurs to have different political preferences. These variant types of entrepreneurs also have diverse interactions with the political apparatus. This, in turn, prevents them from forming collective organizations to petition for political reform. Tsai states that although her surveys suggest that many of these entrepreneurs have favorable views of democracy (in theory); they are not likely to use their economic influence to incite democratic reform and rather prefer to do business in China while moving their families overseas. Beyond refuting the modernization theory, Tsai offers a very sophisticated explanation as to why the central government has been so good at adapting its institutions to allow for free markets while resisting total regime change and maintain absolute control. She claims that institutional changes have taken place in China in order to better accommodate capitalists into the political system (and thus ease their ability to operate). These changes are not proactive choices by the central government but rather reactive decisions to what Tsai calls adaptive informal institutions. According to the definition repeated in her book, an adaptive informal institution exists when entrepreneurs devise habits for operating outside of formal institutions or legal framework in order to pursue their interests. An example is the case of peasants abandoning the collective farming model prior to it being legal to do so (1978). The central government‟s decision to abandon the collective model, 27 Tsai argues, thus was in reaction to the success of the previously illegal family farming model. Perhaps a better example would be how it was initially illegal to operate a private business with more than eight employees prior to 1988. Private entrepreneurs got around this by simply declaring that their private enterprises were “collective enterprises;” an adaptive informal institution which Tsai refers to as “wearing a red hat” (戴红帽子 dai hong maozi) The decision to allow private business owners to join the CCP in the early 2000‟s is also a form of government reaction to something that was already going on in China. (many party members ran “red hat enterprises”) Stefan Halper enters the argument on an even more pessimistic tone. In his recent book The Beijing Consensus: How China's Authoritarian Model Will Dominate the Twenty-First Century, he directly refutes Fukuyama‟s claim that democracy is the only legitimate form of government. Due to the successful modernization of China under the Communist Party‟s leadership, Halper foresees a future where not only does the CCP maintain control in China, butwhere China‟s authoritarian capitalist model becomes the new model for developing countries around the world. V: Conclusion: How might democracy develop in China? To conclude, it is fair to say that the pattern that is exemplified by the empirical data is likely to continue. Unlike the countries in the Middle East that are entering another period of instability, the government in China remains strong and in total control. Therefore, it is likely that China will remain a one party authoritarian state without political liberties while continuing to embrace free market reform. Since the progression of economic growth and trade openness 28 have not, as of yet, produced the favorable conditions for democracy to flourish, I will end this paper by suggesting, theoretically, how democracy might begin in China. Given that the Chinese Communist Party‟s predominance in the government is so solidified, it is extremely unlikely that a smooth transition to democracy would take place without the consent of the Party. Therefore, if any transition were to take place it would occur under one of two conditions: ONE: a section of society becomes discontented with the party and rebels, calling for political liberalization. TWO: the party decides to lead the way in slowly opening up to political reform. I will explore both of these scenarios in depth in this conclusion. As a small disclaimer, the following is a departure from traditional literature and embarks upon the shaky ground of developing predictions. I anticipate disagreement and will try to note where this may occur. Yet, only history can be the judge. The First Scenario: A Violent Uprising In the situation in China today it is possible to find several fissures in society where the populous could become discontented and call for political reform on the national scale. I will only mention the most troublesome of these problems. The first, and possibly most significant, is the growing income gap between rich and poor in China. Several observers have noted the disparity in wealth between those that have benefited from market reform and those that have become victims of it. Those that have benefited are the most obvious to observers in the outside world: the new middle class and upper class elite that have taken full advantage of the economic situation. However, those that have been overlooked are the many that have suffered under economic transition: millions of migrant workers from central and western China that have been exploited by the new changes. Here is where the problems lies. These former peasants had been 29 among the first to benefit from the initial relaxation of state control, which began with the agricultural sector: abolishing collective farming and allowing families to farm their own land as they saw fit. This plan was a great success, creating crop surpluses and bettering the quality of life for these peasants. However, this success in agriculture also meant a labor surplus due to efficiencies in farming. These surplus workers are among the estimated 700 million migrant workers who travel to major cities to get jobs in construction and other labor intensive industries. These men (and women sometimes), leave their family behind to seek employment in Special Economic Zones (SEZ‟s) where the economy is booming. Unfortunately, the conditions for these migrant workers in the cities are less than favorable: these migrants, due to strict residency standards, are temporary residents, and are unable to enjoy the benefits that the cities permanent inhabitants benefit from (education, property ownership, etc). Therefore, this is a major sector in society where discontent can be anticipated. On top of the income gap, disparities exist in the difference between coastal and inland provinces. All of the significant growth is located in coastal provinces, where the SEZs are positioned, while inland provinces (home to the majority of the dying state owned industries) are suffering from stagnation and inefficiencies. Needless to say, this situation is also a point of concern and could play a part in a call for systemic political transition towards democracy. Aside from inconsistency and disparity caused by economic transition, one other problem that continues to exist (that could add fuel to the fire, so to speak, in the event of a democratic uprising) is continued chaffing under state repression, as exemplified in situations such as Liu Xiaobo, discussed above and many more. All of these activists have powerful sympathizers and supporters around the world, including non-government human rights organizations and various liberal democratic governments. Furthermore, there are many people in China that feel 30 inconvenienced by government intervention in areas like censorship and repression, but do not act out on their dissatisfaction. They have the potential to act if they felt that they could make a difference. To combat my point, some observers, such as Tsai and Walder, think that these issues are not significant enough to bring about demonstrations on the scale of 1989. Additionally, if such protests were to take place, the government is in a good position to endure due to the fact that their position is so solidified. This may be true, but I can image a scenario where these problems could be exacerbated and become truly troublesome for the CCP. As of now, the Chinese people have a favorable opinion of their government. They have a utilitarian view of politics: if it works, it is a “good government.” In the past decades of reform the standard of living and the quality of life for the majority of Chinese people has risen drastically. If the government somehow failed to continue to offer favorable conditions for economic growth which resulted in a downturn, mass political unrest would be sure to follow, as people would be less excepting of political repression without economic benefits for doing so. At any rate, if these problems did result in mass demonstrations calling for democracy, and said demonstrations were somehow able to break the grip of the Chinese Communist Party on society, the outcome would be very messy and a successful transition to democracy would be uncertain. The Second Scenario: a Peaceful Transition If the above problems do not culminate in a democratic revolution, then is it still possible for China to transition to democracy through other mean? Theoretically, yes. But this is unlikely. It might be possible for a transition to democracy with the CCP at the helm. If the Party leadership does decide to loosen its grip of control, it is possible for the CCP to lead the way in 31 reform. One could argue that this has already happened to some degree. The Party has already implemented changes to better incorporate capitalists into the party and the communist system by making private enterprises legal and by allowing capitalists to become Party members. Tsai argues that such decisions are simply reactive responses to situations that have already happened. (a perfect example of her “adaptive informal institutions.”) So what does the future of democracy look like in China? As of now, the Chinese Communist Party maintains ultimate control over all aspects of society. Elections only exist at local and village levels and are relatively trivial as Party members are all but appointed by their superiors. Civil liberties and basic human rights continue to be violated, as exemplified by the data and in the extreme case of Liu Xiaobo. Although China is quickly entering the ranks of the modern world in terms of economic strength, it simply does not resemble anything close to a democracy. This is the status quo, and as Walder notes: it is likely to continue this way. Furthermore, The CCP seems intent on staying and they are aware of the problems discussed in the first scenario and intend to address them. The focus of the 12 th Five Year Plan in China (2011-2015), drafted on March 14th 2011 is to combat the issues of income inequality and direct investment away from the coastal provinces toward inland provinces. By paying attention to these problems, the CCP is proving that it is conscientious and willing to make necessary changes to fix the problems caused by the economic growth. 32 Sources and Further Reading Diamond, Larry. Democracy in East Asia. 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The End of History and the Last Man. New York: Perennial, 2002. Print. "GDP (current US$) | Data | Table." Data | The World Bank. Web. 17 Feb. 2011. <http://data.worldbank.org/indicator/NY.GDP.MKTP.CD>. "GDP per Capita (current US$) | Data | Table." Data | The World Bank. Web. 17 Mar. 2011. <http://data.worldbank.org/indicator/NY.GDP.PCAP.CD/countries>. Howard-Hassmann, Ronda E.. "The Second Great Transformation: Human Rights Leapfrogging in the Era of Globalization." Human Rights Quarterly 27.1 (2005): 1-40 Hu, Shao-hua. Explaining Chinese Democratization. Westport, CT: Praeger, 2000. Print. "Imports of Goods and Services (% of GDP) | Data | Table." Data | The World Bank. Web. 17 Mar. 2011. <http://data.worldbank.org/indicator/NE.IMP.GNFS.ZS/countries>. Li, Quan, and Rafael Reuveny. "Economic Globalization and Democracy: An Empirical Analysi." British Journal of Political Science 22 (2003): 29-54. Print. Lipset, S. M. 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