Inflation threatens China’s social compact and elite unity

Is the prospect of inflation-induced political and social instability behind Chinese officials raising the possibility of compensating victims of the 1989 Tiananmen massacre?

“After all, it was concerns about spiraling prices that first stirred protests in the run-up to the 1989 occupation of Tiananmen Square,” one analyst noted recently.

Police have discussed a financial settlement, but only with individual families, according to the Tiananmen Mothers, a support group for relatives of those killed during the brutal June 4 crackdown in Beijing.

“Why now?” asked Joshua Rosenzweig, an activist with the Dui Hua Foundation, an NGO which supports political prisoners. “It seems an unlikely moment for the state – even in this limited way – to address this legacy.”

The gesture may be designed to divide the Mothers at a time when the regime appears nervous about potential instability.

“They only raised the question of how much to pay, emphasizing that this was meant for that individual case and not for the families in the group as a whole,” said the group’s annual open letter to mark the June 4 anniversary.

“It is afraid that the situation in the Middle East and North Africa will spread to mainland China, and worried that it will give rise to events similar to the 1989 Democracy Movement,” they said, in the letter released through Human Rights in China, the U.S-based advocacy group.

Rights advocates are gauging the political rationale for the gesture at a time when the regime has launched its fiercest crackdown on dissent since 1989.

“We know the communist party has tried to get people to remain silent on this issue by using carrots as well as sticks,” said Nicholas Bequelin of Human Rights Watch. “I doubt that this will lead to acknowledgement of government responsibility, though the fact that the Tiananmen Mothers are not in jail is an unspoken recognition of the legitimacy of their case.”

Some analysts believe that the recent clampdown on dissidents reveals the regime’s awareness of the fragility of its rule, evident in internal party battles between modernizers, conservatives and nostalgic Maoists.

The regime is preparing for a summer of discontent, others suggest:

China is currently a kingdom of extremes: too little water; too much inflation in the housing sector; too few overseers of food quality; too many power shortages — the list goes on. Even previously trumpeted triumphs are being called into question. Already, this early summer seems like the start of a season of more than the usual discontents.

Inflation is threatening to undercut the social compact underpinning the ruling Communist party’s political monopoly.

“It is only natural the party should worry about inflation,” notes an FT analyst:”

The price of food, which accounts for one-third of the disposable income of the average Chinese household, is again rising much faster than headline CPI. Food prices are galloping along at about 11.5 per cent annually. That could quickly make millions of families feel poorer in a country where the state’s implicit contract with its people is to raise living standards each year.

Inflation generates social and political instability through two mechanisms, writes Minxin Pei. First, while it is relatively easy to suppress small-scale, localized protests, inflation performs the function of political coordination.

“High inflation sends out a signal to many disparate groups, each of which are unhappy with the status quo for different reasons and at different times. Galloping inflation makes such groups unhappy at the same time,” he writes. “The result is easy to imagine: when inflation is higher, social disturbances can grow larger, attract different groups, and become more intense.”

The second mechanism functions at the elite level where inflation fractures the unity of competing key constituencies, such as state enterprises, local government, or private enterprises, and politics becomes a zero-sum equation in which each faction is desperate to protect its interests and avoid blame for policy mistakes:

Had the Chinese Communist Party not been gearing itself up for the leadership transition in autumn 2012, a little shake-up at the top might not turn into a political earthquake. But as we all know, succession politics in China is entering its most delicate and tricky phase. Any infighting among the ruling elites—over anything—could upset the balance of power and throw an otherwise orderly process into turmoil.

The ruling Communist party is struggling to resolve an inherent tension between elite interests and its need for popular consent and legitimacy.

“The great lesson of the Eastern Europe and Soviet revolutions was that authoritarian regimes that become irrelevant to elites do so at their peril,” according to a recent report. As the exclusive dispenser of economic, professional and social opportunity, the Communist party “has not just co-opted but created the country’s middle class elites.”

According to one estimate, only 1.5% of China’s population account for 45% of all bank deposits and 67% of managed assets. It is these elites who comprise over four-fifths of the CCP’s 85 million members, a narrow and fragile base on which to rest a social compact.

The Dui Hua Foundation and Human Rights in China are supported by the National Endowment for Democracy.

Inflation threatens China’s social compact and elite unity

Is the prospect of inflation-induced political and social instability behind Chinese officials raising the possibility of compensating victims of the 1989 Tiananmen massacre?

“After all, it was concerns about spiraling prices that first stirred protests in the run-up to the 1989 occupation of Tiananmen Square,” one analyst noted recently.

Police have discussed a financial settlement, but only with individual families, according to the Tiananmen Mothers, a support group for relatives of those killed during the brutal June 4 crackdown in Beijing.

“Why now?” asked Joshua Rosenzweig, an activist with the Dui Hua Foundation, an NGO which supports political prisoners. “It seems an unlikely moment for the state – even in this limited way – to address this legacy.”

The gesture may be designed to divide the Mothers at a time when the regime appears nervous about potential instability.

“They only raised the question of how much to pay, emphasizing that this was meant for that individual case and not for the families in the group as a whole,” said the group’s annual open letter to mark the June 4 anniversary.

“It is afraid that the situation in the Middle East and North Africa will spread to mainland China, and worried that it will give rise to events similar to the 1989 Democracy Movement,” they said, in the letter released through Human Rights in China, the U.S-based advocacy group.

Rights advocates are gauging the political rationale for the gesture at a time when the regime has launched its fiercest crackdown on dissent since 1989.

“We know the communist party has tried to get people to remain silent on this issue by using carrots as well as sticks,” said Nicholas Bequelin of Human Rights Watch. “I doubt that this will lead to acknowledgement of government responsibility, though the fact that the Tiananmen Mothers are not in jail is an unspoken recognition of the legitimacy of their case.”

Some analysts believe that the recent clampdown on dissidents reveals the regime’s awareness of the fragility of its rule, evident in internal party battles between modernizers, conservatives and nostalgic Maoists.

The regime is preparing for a summer of discontent, others suggest:

China is currently a kingdom of extremes: too little water; too much inflation in the housing sector; too few overseers of food quality; too many power shortages — the list goes on. Even previously trumpeted triumphs are being called into question. Already, this early summer seems like the start of a season of more than the usual discontents.

Inflation is threatening to undercut the social compact underpinning the ruling Communist party’s political monopoly.

“It is only natural the party should worry about inflation,” notes an FT analyst:”

The price of food, which accounts for one-third of the disposable income of the average Chinese household, is again rising much faster than headline CPI. Food prices are galloping along at about 11.5 per cent annually. That could quickly make millions of families feel poorer in a country where the state’s implicit contract with its people is to raise living standards each year.

Inflation generates social and political instability through two mechanisms, writes Minxin Pei. First, while it is relatively easy to suppress small-scale, localized protests, inflation performs the function of political coordination.

“High inflation sends out a signal to many disparate groups, each of which are unhappy with the status quo for different reasons and at different times. Galloping inflation makes such groups unhappy at the same time,” he writes. “The result is easy to imagine: when inflation is higher, social disturbances can grow larger, attract different groups, and become more intense.”

The second mechanism functions at the elite level where inflation fractures the unity of competing key constituencies, such as state enterprises, local government, or private enterprises, and politics becomes a zero-sum equation in which each faction is desperate to protect its interests and avoid blame for policy mistakes:

Had the Chinese Communist Party not been gearing itself up for the leadership transition in autumn 2012, a little shake-up at the top might not turn into a political earthquake. But as we all know, succession politics in China is entering its most delicate and tricky phase. Any infighting among the ruling elites—over anything—could upset the balance of power and throw an otherwise orderly process into turmoil.

The ruling Communist party is struggling to resolve an inherent tension between elite interests and its need for popular consent and legitimacy.

“The great lesson of the Eastern Europe and Soviet revolutions was that authoritarian regimes that become irrelevant to elites do so at their peril,” according to a recent report. As the exclusive dispenser of economic, professional and social opportunity, the Communist party “has not just co-opted but created the country’s middle class elites.”

According to one estimate, only 1.5% of China’s population account for 45% of all bank deposits and 67% of managed assets. It is these elites who comprise over four-fifths of the CCP’s 85 million members, a narrow and fragile base on which to rest a social compact.

The Dui Hua Foundation and Human Rights in China are supported by the National Endowment for Democracy.

The great democracy meltdown?

Stopping the global democratic reversal, then, will require giving up the assumption that democracy will simply happen on its own — and instead figuring out what we can do to promote it. At the most basic level, the United States can be much less abashed in its rhetorical advocacy of democracy and much more consistent.

If you’re one of the many readers unable to access the full version of Joshua Kurlantzick’s article on The Great Democracy Meltdown previewed in the Digest last week, it is now available in full on-line at NPR.

The great democracy meltdown?

Stopping the global democratic reversal, then, will require giving up the assumption that democracy will simply happen on its own — and instead figuring out what we can do to promote it. At the most basic level, the United States can be much less abashed in its rhetorical advocacy of democracy and much more consistent.

If you’re one of the many readers unable to access the full version of Joshua Kurlantzick’s article on The Great Democracy Meltdown previewed in the Digest last week, it is now available in full on-line at NPR.

Brotherhood shows its illiberal tendencies

Egypt’s Muslim Brotherhood is not only at odds with the country’s democratic forces and alienating many of its younger members, its authoritarian impulses are leading it to “micromanage” the newly-formed Freedom and Justice Party.

While the Islamist group insists that the party is autonomous, leading members of the Brotherhood’s Guidance Bureau are drafting its policy platform, selecting candidates, and setting strategy, writes Nathan J. Brown, a professor of political science at George Washington University.

The Brotherhood insists that it is committed to a civil state, but recent statements suggest that it can’t quite shrug off its theocratic leanings.

The group’s general guide recently explained that it only supports democracy and freedom within an Islamic frame of reference, he notes, and that “democracy cannot make permitted what is forbidden, or forbid what is permitted” in Islamic terms, “even if the entire nation agrees to it.”

The new party’s declared aims also give cause for concern, Brown suggests:

The party aims to “reform the individual, the family, the society, the government, and then institutions of the state.” Reforming political institutions is standard stuff. But it takes a very special kind of political party to tell voters that it wants to reform them and their families as well.

Many liberals fear that the Brotherhood will exploit the religious convictions of the country’s rural majority to establish an Islamic state or, at best, an illiberal democracy. Others aren’t so sure.

“Although the religious discourse has had a strong impact on Egyptian society, I believe that the majority of Egyptians would not approve of a religious state,” said Amr al-Shobaki, an analyst with the Al-Ahram Center for Political and Strategic Studies, “because the religious state has proven to be a failure.

“Egyptians have seen how the religious state led to secession in Sudan and foreign occupation in Afghanistan. In the meantime, Egyptians do not feel comfortable with the Iranian or Saudi model.”