THE GOVERNANCE GAP

And the (final) fall of the Roman Empire

The Chinese State runs capitalism to serve the interests of most people and … policymakers won’t let the sensitivities of those in the capital markets and rich capitalists stand in the way of doing what they believe is best for the most people of the country. Rather, those in the capital markets and capitalists have to understand their subordinate places in the system or they will suffer the consequences of their mistakes. For example, they need to not mistake their having riches for having power for determining how things will go.  Ray Dalio, Chairman of Bridgewater Associates, who has operated in China for 36 years.

China is out-governing us–as it has done for most of the past 2000 years–and Martin Jacques explains why:

The reason the State enjoys a formidable legitimacy in the eyes of the Chinese has nothing to do with democracy, but can be found in the relationship between the State and Chinese civilization. The State is seen as the embodiment, guardian, and defender of Chinese civilization. Maintaining the unity, cohesion, and integrity of the Chinese civilization-state is perceived as the highest political priority, the sacrosanct task of the Chinese State. Unlike in the West, where the State is viewed with varying degrees of suspicion, even hostility and regarded, as a consequence, as an outsider, in China the state is seen as an intimate, as part of the family, indeed as the head of the family. – When China Rules the World.

When in Rome

For 2000 years the primary responsibility of politicians in Roman governments like ours, has been to maintain the status quo on behalf of their wealthy sponsors by using rhetoric to disguise their disinterest in our wellbeing. ‘Politics’ has always taken precedence over governance and still does:

Using data drawn from over 1,800 different policy initiatives from 1981 to 2002, Gilens and Page conclude that rich, well-connected individuals on the political scene now steer the direction of the country, regardless of–or even against–the will of the majority of voters. "The central point that emerges from our research is that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while mass-based interest groups and average citizens have little or no independent influence.”

China, lacking politicians, has always been led by geniuses (the cutoff for government officials is a 140 IQ) accountable to the emperor who was, in turn, accountable to the people. In 500 BC Confucius proposed a progressive model of governance which, he claimed, held sway in an early Golden Age. To retain legitimacy, compassionate governments promoted the people’s prosperity and society’s harmony and those that did not were deposed. His disciple, Mencius, summarized it thus:

The People are supreme. The State is secondary, and the Ruler is least important. Only those who please the people can rule. The people are to be valued most, grain and land next, and rulers least. Hence by winning the favor of the common people you become Emperor. Mencius.

Idealists have proposed such schemes since the dawn of time but, remarkably, the First Emperor adopted it wholeheartedly and established the pattern of compassionate governance to which the PRC conforms:

Mao refined Confucian governance by adding democratic oversight, local experimentation, and endless surveys: the Academy of Social Sciences, CASS, has fifty research centers covering two-hundred sixty social disciplines and employs four-thousand full-time researchers who use questionnaires and grassroots forums to both initiate and evaluate all legislative outcomes.

Planners tour the country, hold meetings, listen to local opinions and formulate proposals which specialists evaluate and budget, then twenty-seven levels of bureaucrats responsible for implementation submit feasibility analyses. Says a CASS planner, “Computers have made huge improvements in collecting and analyzing the information. Still, thousands of statisticians, actuaries, database experts and technicians with degrees in urban, rural, agricultural, environmental and economic planning invest thousands of hours interpreting and analyzing this vast trove of data, statistics and information. Needless to say, for a continent-sized country with over a billion citizens, it takes hundreds of thousands of people to develop a Five-Year Plan". 

The State Council, the country’s Brains Trust, publishes draft Plans and solicits feedback from employees, farmers, businesspeople, entrepreneurs, officials and specialists. The Finance and Economics Committee analyzes budgets and, after the State Council signs off, Congress votes. When two-thirds of congresspeople agree, discussion is suspended and implementation begins. The process resembles Proctor & Gamble more than Pericles of Athens, says venture capitalist Robin Daverman: 

China is a giant trial portfolio with millions of trials everywhere: innovations in everything from healthcare to poverty reduction, education, energy, trade, and transportation are being trialed in different communities. Every one of China’s 662 cities is experimenting: Shanghai with free trade zones, Guizhou with poverty reduction, twenty-three cities with education reforms, Northeastern provinces with SOE reform, pilot schools, pilot cities, pilot hospitals, pilot markets, pilot everything. Mayors and governors, the Primary Investigators, share their ‘lab results’ at the Central Party School and publish them in State-owned media, their ‘scientific journals.’ 

Significant policies usually begin as ‘clinical trials’ in small towns, where they generate test data. If the stats look right, they’ll add test sites and do long-term followups. They test and tweak for 10-30 years, then ask the 3,000-member People’s Congress to review the data and authorize national trials in three provinces. If those trials are successful, the State Council [China’s Brains Trust] polishes the plan and takes it back to Congress for a final vote. It’s very transparent, and if your data is better than mine, your bill gets passed, and mine doesn’t. Congressional votes are nearly unanimous because reams of data back the legislation. 

This allows China to accomplish a great deal in a short time because your winning solution will be quickly propagated throughout the country. You’ll be a front-page hero, invited to high-level meetings in Beijing and promoted. As you can imagine, the competition to solve problems is intense. Local governments have a great deal of freedom to try their own things as long as the local people support them. Various villages and small towns have tested everything from bare-knuckled liberalism to straight Communism. 

Thousands of Trial Spots generate immense volumes of data, says author Jeff J. Brown,

“My Beijing neighborhood committee and town hall are constantly putting up announcements, inviting groups of people–renters, homeowners, over seventies, women under forty, those with or without medical insurance, retirees–to answer surveys. The CPC is the world’s biggest pollster for a reason: China’s democratic ‘dictatorship of the people’ is highly engaged at the day-to-day, citizen-on-the-street level. I know, because I live in a middle class Chinese community and I question them all the time. I find their government much more responsive and democratic than the dog-and-pony shows back home, and I mean that seriously". 

In the next article in this series, we’ll look at implementation.

Godfree Roberts is the author of Why China Leads the World: Talent at the Top, Data in the Middle, Democracy at the Bottom, and publishes the weekly newsletter, Here Comes China.