Tuesday, January 28, 2014

Is Xi Jinping China’s Brezhnev?

Xi may be following the former Soviet leader’s path to peril

Is President Xi Jinping destined to become a Chinese version of the former Soviet boss, Leonid Brezhnev? If so, history may look back on January 2014 as Xi’s “Brezhnev moment.”

In 1964, Nikita Khrushchev, the leader who had begun the de-Stalinization process a decade earlier, was overthrown in a Kremlin putsch masterminded by Brezhnev, who owed his rise mainly to Khrushchev. At first there was a show of collective leadership in place of Khrushchev’s sometimes erratic personal style and Brezhnev seemed to share power with then-premier Alexei Kosygin and others but in reality he was the senior leader and before long the sole leader until his death 18 years later.

The China succession process has certainly been more orderly – the once-in-a-decade transitions from Ziang Zemin to Hu Jintao and now to Xi. But there are some crucial similarities in the positions and problems of Brezhnev and Xi.

It is often forgotten that the 1950s and 1960s were a period of very rapid economic growth in the Soviet Union, propelled not just by reconstruction after World War II but by massive investment in new railways and heavy industries, and in opening the so-called virgin lands in the east – mostly in now independent Kazakhstan – to agriculture. An ebullient Khrushchev was pounding on the podium at the United Nations in triumph and promising to “bury” the west. Even foreign economists were suggesting that the Soviets could catch up with the US in a decade and leaders held out a US-style future of fridges and family cars – Fiat invested in a factory making the Lada, a variant of its own Fiat 124 family saloon.

As early as 1964, however, economic growth was beginning to falter and Brezhnev blamed Khrushchev. Nevertheless the late 1960s saw a continuation of strong growth but left a legacy of disaster. Some modest liberalizations introduced by Khrushchev were ended and the economy simply failed to shift from one led by investment in defense and heavy industry to one that could grow on the back of consumer demand. Even more was spent on military and space projects as Brezhnev backed a rigid foreign policy with a military machine and space program that could match the US.

If the Cuban Missile crisis, which occurred under Khrushchev, is now seen by many as the apogee of the Cold War it was the years under Brezhnev that saw stasis accompanied by massive defense spending in both East and West, which did not shift until Gorbachev came to power. In between came the 1968 crushing of the Prague Spring in Czechoslovakia and the invasion of Afghanistan in 1979.

Military spending not only stood in the way of a shift to a more consumer based economy but also led to gradual degradation of the environment by pollution and ill-considered policies such as the zeal for growing cotton, which drained Kazakhstan’s Aral Sea. The virgin lands also saw their output decline drastically after an encouraging start.

Politically, the Brezhnev era was one of rigid state control and retreat from the modest promises of more liberal attitudes that flowered briefly under Khrushchev when poets such as Yevgeny Yevtushenko engaged with and became popular in the west. Instead, Moscow put dissidents and writers on trial and suppressed any views that might cast doubt on the Communist Party.
So how can this be relevant to China, a nation which has avoided so many Soviet mistakes and relied on markets, foreign trade and investment rather than state planning to propel its stunning growth?

First, the years of easy, fast growth are at an end for a complex set of reasons, including demography, over which the government has little control. Xi faces the need both to adjust to lower growth at the same time as making reforms that can maximize future potential.

Although there has been much talk of reform and new market forces, especially in finance, the evidence to date is meager. Indeed this week’s decision to provide a behind the scenes bailout for China Credit Trust, one of a number of large players in the huge trust business that shadows and is also protected by the banking industry, is evidence that real financial discipline is still a step too far.
Former Premier Zhu Rongji, who served alongside President Jiang Zemin from 1998 to 2003, might have had the guts to let China Credit Trust fail regardless of any domino effect just as he ruthlessly closed inefficient state industries and allowed millions to lose their jobs. But Xi clearly lacks the nerve or inclination and his premier, Li Keqiang, has never shown Zhu’s toughness. 

Besides, Li’s position has been eroded by Xi’s desire to take charge of the economy himself.
As for the political agenda, Xi is clearly following Brezhnev’s footsteps. The crackdown on the media and silencing those who would question role of the Communist Party has escalated under Xi. Indeed, this week’s four-year prison sentence given to anti-corruption crusader Xu Zhiyong exemplifies the mix of intolerance and fear that seems to reside at the center of power. Xu has simply been calling for a serious anti-corruption campaign backed by the requirement that officials declare their assets. That is hardly a crime under any interpretation of the law and supposedly accords with Xi’s own anti-corruption rhetoric.

But Xi knows he cannot survive if he tries to force official disclosures that would expose the family riches of many senior party and state industry officials even though he also knows that in the long run the party itself cannot survive the current level of corruption. The difference with Brezhnev’s Soviet Union is that party leaders there had to be satisfied with power and privileges rather than money itself.

Xi also appears gradually to be building a small cult of personality based on his smiling countenance and easy bonhomie. How far this will go is anyone’s guess. At present it may just be the contrast with his dour predecessor that brings it to notice. Nonetheless, his downsizing of Li Keqiang’s role does seem significant, as is his increased focus on nationalism, a ready bedfellow of personality cults.

The fact that the last two Communist Party “reigns” were 10 years does not preclude a longer stay at the top for Xi.

Xi’s broader economic agenda is as yet hard to determine. But to date there seems little change in the dominance of key sectors by state owned industries, with their easy access to credit and other goods accompanied by a squeeze on foreign companies. Party and state remained as intertwined as ever. If this remains the case, as in the Soviet Union, one can expect continued excess investment and decline in returns on that investment. Meanwhile water and pollution problems, plus poor demographics, which contributed to the stagnation of the Soviet economy, will hold China back for a couple of decades, probably starting soon.

There are also echoes of Brezhnev in Xi’s foreign policy – confrontation with Japan, aggressive posturing toward Southeast Asia. These are unlikely to lead to all-out war but they will result in more spending on arms and space as Beijing seeks parity in East Asia with the combined might of the US, Japan and their regional allies.

Flag-waving may satisfy the masses for a while. Chinese love to hear about a largely mythical past when they lorded it over their “barbarian” neighbors. But sooner or later misallocation of scarce resources into weaponry undermines the economy and hence the rule of the party. In Brezhnev’s case the party’s rule lasted for less than decade after his death.

History may not repeat itself. But instead of focusing on the “mistakes” of Gorbachev’s glasnost and perestroika, Chinese leaders – and China watchers – might learn something from the mistakes of Brezhnev. ‘Asia Sentinel’

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