In order to understand China today and where it is headed, two important ideas can help, big-time.

A number of difficult issues become easier to understand if you talk about Chinese rule separately from talk about the Chinese people.

1 — It can help to think about the Chinese as an occupied people – taken over by the CCP Dynasty.

2 —  It is useful to realize that CCP no longer is really communist.

What follows is a bit long. These are probably best considered as notes to myself, but I hope you find it useful. This is part of the two dozen or so “Chineseness” posts I will be sending over the next few months.

The Model    5

Occupation in history – and a definition   8

Debin Ma’s balancing of interests model   14

The Xi un-reform movement    18

Class consciousness     20

           The imperial household and literati

            Literati then and now

            Modern literati benefits    27

            Ruler – peasants    31

            Literati-peasants … I mean, citizens 34

Some results    35

            Light central taxation – in the old days 35

            … heavier local taxation    37

The exception that proves the rule – – results of a lesser occupation    39

The modern economic argument for occupation    40

How to understand savings and investment                                                                    

            Colonizers want trade – occupiers want stability   45

Occupation according to law                                                                                         

           More on occupation now – moral freedom   47  

           De Tocqueville on China   52    

           Moral freedom 

          Occupation then and now   57

In order to understand China today and where it is headed, two important ideas can help, big-time.

A number of difficult issues become easier to understand if you talk about Chinese rule separately from talk about the Chinese people.

1 — It can help to think about the Chinese as an occupied people – taken over by the CCP Dynasty.

– the ruling dynasty and the literati and gentry who ran the country have always existed apart from the masses. This tradition continues today under CCP.

– there is no direct representation in governance – remember, its not “the squeaky wheel gets the grease,” but “the nail that sticks up gets hammered down.”

China is an occupied state. This is not such a wild idea.

China has been “occupied” for much of its history. Chinese people were never represented by government in the way we understand representation, or cared for despite Confucian exhortations to the contrary.

I suggest CCP is only the latest in the two millennia string of Chinese dynasties. It brooks no opposition to its rule. At midlevel and above, CCP members do see themselves as an elite, not unlike the dynastic literati, and special privileges are just part of the deal. There is some truth in that characterization as an elite – educated, sophisticated, thoughtful. They serve and advise their leaders as the literati did for centuries. They are in many ways apart from the vast majority of Chinese people.

CCP has lasted for more than 100 years as a party and has been in control of mainland China for more than 70 years. It is the longest living authoritarian regime in modern times. And CCP is only the latest in the two thousand year string of occupying hegemons.

2 —  It is useful to realize that CCP no longer is really communist.

– no one fears CCP promoting proletarian revolutions in the world

– Jiang Zemin let capitalists and landowners into CCP. Where is the class struggle?

– Xi Jinping has told us that the principal contradiction facing CCP now is unbalanced development within China (at 19^th National CCP Congress, 2017) … although with all the marvelous change in the last forty years and development of a large middle class, that was the contradiction in 1949 as well. Xi’s references to contradictions and the need for struggle are mouthed by other senior officials and at lower levels and in publications, but it feels too much like performative declamation.

Sure, the Chinese Constitution tells us that CCP follows a Marxist-Leninist model, and the CCP Constitution is certainly clear about its Communist origins and intentions. But the days of revolutionary zeal, still promoted in the CCP constitution, are over.

I taught hundreds of Chinese government officials in Chicago over a period of seven years. I was a professor at Zhejiang University of Science and Technology for another eight. Most of my government students and colleagues are classified in China as having mid-level positions, some higher, some lower. They are foot soldiers of CCP in Liaoning, Zhejiang, and Yunnan provinces. They are smart, thoughtful, dedicated to their work and many are as sophisticated as anyone you can find in New York or Chicago. They are resolutely middle or upper middle class.

I venture to say there is hardly a communist among them, although all are CCP members. In private, one can get private thoughts. In public, they know which side of the bread is buttered by CCP.

Xi Jinping does claim communism – and international communism at that – as the highest goal of CCP. I do think Xi is a dedicated communist. But while Mao could forcefully turn hundreds of millions of peasants to collectivism in 1949, Xi will not be able to do so with hundreds of millions of middle-class Chinese, CCP members or not, and the upper echelon is not going to give up their tegongzhi benefits 特 供 制  special supply regulations. (A bit more on that below).

No one in the west is worried about CCP sponsoring class revolutions in the third world. In 2010 I could still find copies of the Little Red Book in a Shanghai bookstore. Now, admittedly, that was a different era. But the Little Red Book was in the kids section with the picture books and comic books.  

Jude Blanchette from the Center for Strategic and International Studies analyzed CCP now in his 2021 presentation What’s communist about the Communist Party of China?  He defined what a practical communism should look like –

As to purpose –

– is CCP pursuing the realization of communism?                                                                         – are the ideas of Marxism or Marxism/Leninism animating the orientation of CCP?                          – is the actual existing policy agenda of the ruling CCP oriented toward a sufficiently robust level     of material equality?

As to structure –

– is the domestic political orientation of CCP sufficiently in keeping with 21^st century communist states?                                                                                                                                                 – are the basic means of production owned by the state, and/or in “public ownership”?

As to outcomes –

– do levels of material and income equality exceed those of capitalist or mixed economy states?

A realistic answer to any of these is either a firm “no” or a decidedly mixed “well, maybe, ok, sort of.” The new 2022 CCP constitution pushes hard on ideology and sticking to the overall communist goals. But it feels like pushing on a string. If anything, Mr. Xi uses a Stalinist model for rule of China now. He is the core of CCP, the people’s leader, dare I say it, the prime mover. He may have the people’s words when they extoll CCP, but he hasn’t their hearts and minds.

China is obviously the only large remaining communist state. North Korea, Cuba, Laos and Vietnam are the others. And, to be fair, none claim to have achieved communism. All are in some transition state of socialism. CCP claims it will remain in a primary stage of socialism for a hundred years (nice out, by the way).

Now CCP has said that it will be the definer of what communism is for China, and I suppose that is fair. But if one considers answers to the remaining questions in Blanchette’s list, CCP does not seem to be struggling very hard toward the goal. Where is the anger? Where is the organizing of the workers?

Blanchette’s own summary answer to the main question is not a resounding yes or no, but by answering the questions one can gauge progress, particularly with the answer to the “outcome” question. In 1980 incomes across China including those of CCP members were quite similar. Income and wealth inequality in China now far exceeds that in the US, which itself is an outlier among western democracies for level of inequality. Not a good look for the followers of Marxism-Leninism or Mao Zedong Thought.

The middle class in China is … roughly … 300,000,000 people, or more. These are people who have steady jobs, can send their kid(s) to decent schools, can go on vacations and buy cars and maybe more than one apartment. They have some disposable income. The number of CCP members is about 100,000,000. With some overlap in two CCP-member families, but toss in a kid and a couple of grandparents … well, you can do the math about who is the middle class in China.  Not all CCP members are middle class, many are retired, and not all middle class people are CCP. But the overlap is significant. None of these people see themselves as proletarians needing to be led. Nor do most of them see themselves as a vanguard of anything but a solid future for their kid. The CCP are the bourgeoisie.

As to the ideas of communism animating CCP – well, Xi’s speeches are certainly loaded with CCP historical references and encouragement to struggle. There just doesn’t seem to be any goal worth struggling for. We should make no mistake – Xi himself appears to be an unreconstructed Marxist-Leninist. Xi’s view of CCP occupation of China and interest in world domination is described by Matt Pottinger, Matthew Johnson, and David Feith in their November, 2022 Foreign Affairs article. Within Party confines, Xi pulls no punches on the need for dictatorial control techniques.

As for CCP, the hundred million or so of them – well, remember the Shanghai bookstore.

Blanchette says that Xi’s own speeches on Marxism-Leninism are a banal, stripped down version of communist thought seen as a pledge of allegiance to CCP necessary for its preservation against the ever encroaching views of democracy, capitalism, and free thought. It’s the CCP version of the school song – fight, team, fight.

The gap between rhetoric and reality remains large. We should remember that Bloomberg has been blocked in China since 2012 for reporting on the $376 million wealth of Xi Jinping’s family. The fabulous wealth of thousands of senior CCP officials was not accumulated from their official salaries of about $1500 per month. Desmond Shum provides insider details in his 2021 Red Roulette: An Insider’s Story of Wealth, Power, Corruption and Vengeance in Today’s China.

One can consider CCP as an occupying force over the 1.4 billion Chinese people. And CCP is only the latest in the two thousand year string of occupying hegemons.

A model and its justification are below. It is too much to attempt a summary of Chinese history in a few pages. For any of my observations there are counterexamples. Still, there are some tendencies we all must use to tell any story of ”history.”

The model

I want to propose a model for understanding the relationship of Chinese rule to the Chinese people. Through history, for more than two thousand years, rulers have operated almost without regard for the welfare of the people, despite claims to the contrary. There was enough concern for the general welfare to provide some public goods in the form of roads, granaries for times of crisis, and defense against the barbarians. These concerns were at the margin. Mostly, central government had a light touch on the general populace, accompanied by a light concern for people’s  welfare. When there was too much disinterest – when local officials became too rapacious – there was rebellion. When the rebellion was put down, the model repeated, emperor after emperor, dynasty after dynasty.

The model that seems to fit is to consider the Chinese people as occupied by an elite of scholar-officials and the reigning imperial house. This is similar to the “stationary bandit” model proposed by Mancur Olson, but with an added element of domineering culture – in part, Confucianism – to keep the literati loyal and the peasants subservient if not loyal.

Mancur Olson. Dictatorship, Democracy, and Development. American Political Science Review, 87:3 (September, 1993). Available at https://edisciplinas.usp.br/pluginfile.php/4276329/mod_resource/content/1/Olson_DictatorshipDemocracyandDevelopment.pdf

Olson posits two kinds of oppressive domination, one short term and one longer term. In the short term, bandits (or in a China case, Xiongnu raiders) come into a town or village, steal what they can quickly, caring not for the people or infrastructure, and disappear before help can arrive. It is home invasion on a community scale. A more sophisticated bandit can come into a town or village and settle down, using force to extract enough to be satisfied but not take so much that sons and family cannot remain to still inherit the benefits when the original invader is gone. A stationary bandit uses enough force to remain in control. One can think of a house burglar on the one hand and on the other a local grandee who owns most of a town in Mississippi, including the store and mill and bank.

Preeminent China scholar Geremie Barme makes a similar claim about CCP. He sees a powerful, highly secretive and successful oligopoly, run by families with billions of dollars obtained through secretive deals, bribery and outright theft. The oligopoly is completely opaque, unaccountable and free from any scrutiny. When CCP does arrest a senior official for corruption, he is usually charged with theft of the people’s money. In that, CCP is right. The billions should have remained in the economy rather than hidden in the form of unused apartments, gold, diamonds, and cash.

The oligopoly can bend any Chinese tradition or constitutional provision to suit the demands of the one salient political party. The fundamental assumption is no different now than it was at the end of  the Warring States period – that Chinese desire order rather than chaos and order comes from a single all-powerful leader.

Chinese historian Qin Hui has a similar take on CCP as the new dynasty. In “Looking at China from South Africa” he sees similarities between apartheid in South Africa and the hukou in China. Economic development was built on systematic discrimination against blacks and peasants.

The hukou is a place registration system that restricts where a peasant and family can permanently live. It serves to keep cities free of poor peasants, keeps rural labor cheap, and restricts education and health care to the county of one’s birth (or one’s mother’s birth). There have been improvements in the hukou and rural economic conditions in the last decade, but farmers still do not control their land in China. Actual ownership of farmer land is a bit fuzzy but by my analysis the village still technically owns farmer land. That is how one or two village leaders acting on behalf of the entire village can privately sell all the village land to developers and make huge profits, not moral but not illegal either. The hukou is ancient; so is farmers owning their own land before 1949.

David Ownby translated Qin Hui’s work. Ownby comments that China’s economic development model is a standard exploitation model –

Instead, the basic components of the China model are: China’s “low human rights advantage,” which allows capital, with the consistent help of the state, to exploit Chinese labor through low wages, docile unions, land expropriation and urban-rural status barriers; and the logic of globalization, which opens China to outside investment and at the same time makes available the markets of the world to China’s formidable productive capacity…. China’s success has nothing to do with “socialism with Chinese characteristics” unless we understand the most basic of those characteristics to be brutal exploitation of its own people, especially of its rural population. Qin, … notes the many parallels between China and South Africa, all based on the construction of systems of status barriers that create groups of people without rights or political power.

Qin describes South Africa apartheid system as one in which blacks worked according to their abilities and whites earned according to their needs. Similarly, he says the greatest class conflict in Chinese history is not that between peasant and landlord but that between peasant and local official. There are striking parallels between dynastic China and the 70-plus years of CCP rule. It appears like a non-military occupation to me.

I have to repeat again – this is such a broad overview of history that it can only capture a rough flavor of developments. There were thoughtful and helpful emperors. The occupation that I envision is not military and not necessarily deeply oppressive. It can demonstrate features of benevolent authoritarianism, secular rationalism, and meritocracy (Ma and Rubin, p 7). Private land ownership was widespread, and generally respected. Property taxes from the central government were low. Slavery continued into the Qing but peasants were generally treated fairly, if poorly. The central government kept expanding the land boundaries of the empire (Jiangnan, Guiyang, Tibet, Xinjiang, Mongolia) not for glory or revenue but to accommodate demands of an increasing population. Nevertheless, when there was a chance for peasant lives to significantly improve – as in the Song, or parts of the Qing – the dynastic system eventually intervened to tamp down invention and general economic progress.

Debin Ma and Jared Rubin. The Paradox of Power: Principal-Agent Problems and Fiscal Capacity in Absolutist Regimes. Chapman Economic Sciences Working Paper, 2017, p 25.  Available at https://ideas.repec.org/p/chu/wpaper/17-02.html

The dynastic occupation model – keeping most Chinese relatively poor and everybody living in some uncertainty of the arbitrary power of the state – does need some updating in 2023. For two thousand years, peasants were constrained mostly in their economic relations. Apart from the destruction of rebellions, border incursions, famine, floods, droughts, typhoons, tsunami, the Little Ice Age, and rapacious local leaders, farmers were generally able to product sufficient surplus to feed themselves and keep the imperial family in sufficient luxury. They might have been free to trade locally but incentives to become more capitalist – expand production through invention or credit – were stymied by imperial edict or merchant restrictions. Those who passed the imperial exams to become an official or merchants who could purchase an official status joined the club of literati and gentry, but those numbers were consciously limited. To most peasants and merchants it was a bit of, “this far and no further.”

Intellectual concerns were quite a bit above peasants’ pay grade.

That was then, and this is now. Many millions of Chinese now live comfortable middle class lives. Greater economic freedom has come to at least half the population. The element of occupation that is now more salient is the lack of moral freedom – ability to think, speak, and act freely, according to conscience. The arbitrary power of the state hangs over every conversation, every action. It is as Perry Link described in 2002, ironically a much more open time,  The Anaconda in the Chandelier.

Occupation in history – and a definition

A caveat on occupation – Many historians and economists have described dynastic China as feudal in nature. This suggests an emperor somewhat beholden to regional rulers who ran their own fiefdoms. The literati and gentry ruled provinces and cities and counties for their own benefit. To be sure, many farmers alienated themselves to great landlords – as vassals did in Europe – for tax reasons as well as for security. But Chinese generally were not tied to the land or prevented from relocating at their own whim. In any case, one could object that current communism cannot be thought of as feudal, so a model that attempts to account for millennia of development up to present times is flawed from the start. I suggest that current governance retains aspects of a feudal system, particularly in the independence of local leaders or leaders of government departments. I am aware of departments of local government that owned hotels, resorts, restaurants, not for the benefit of the government in which the department was located, but for the benefit of the individual department and its employees. Fiefdoms in oil and gas exploration and production were part of Xi’s case against Zhou Yongkang in 2013.

I want to suggest a model for understanding Chinese rule – that one consider the Chinese people as an occupied people for two thousand years. Of course, one can make such an argument for the dynasties ruling all or part of China that were not ethnically Chinese – Jurchen, Yuan and Qing are the primary examples. And one could probably make a similar argument for people in Europe prior to the 18^th century. They had no voice in governance and their oppressors lived rather opulent lives from the sweat of peasants.

I am not a political science scholar. There are technical definitions of occupation, annexation, and colonization. Occupation is usually considered to be military in force. I do think the term has salience in China for civilian governance. One description –

Military occupation is effective provisional control by a certain ruling power over a territory which is not under the formal sovereignty of that entity, without the violation of the actual sovereign. Military occupation is distinguished from annexation by its intended temporary nature (i.e. no claim for permanent sovereignty), by its military nature, and by citizenship rights of the controlling power not being conferred upon the subjugated population….

The significance of the temporary nature of military occupation is that it brings about no change of allegiance. Military government remains an alien government whether of short or long duration, though prolonged occupation may encourage the occupying power to change military occupation into something else, namely annexation.

Peter Stirk. The Politics of Military Occupation. Edinburgh University Press, 2009, p. 44.

Stirk see military occupation as a form of government imposed by force or threat that establishes a kind of mutual obligation between occupier and occupied but without bringing any change of allegiance. I argue that the Chinese civilian occupation fits that definition as well.

The Chinese occupation was a natural collaboration between the imperial family and the literati, whichever dynasty was in power. Consider the relationship of the imperial family and literati to the vast majority of Chinese – no national or dynastic loyalty required; no citizen rights; local allegiances and taxes still primary; locals almost untouched by change in dynasty; perhaps an initial military occupation soon followed by civilian rule; allegiances remained local.

A modern American equivalent to Chinese dynastic change might be a corporate takeover. New owners, constancy in most administrators.

I think the term occupation has a greater salience in China. This occupation was largely civilian, not military, and distinguishable from colonization and annexation. Annexation and colonization suggest a desire to extract resources and impose culture. Chinese officials did little of either. Imperial officials might have lived among the people, in towns and cities, but for the most part they were manifestly not of the people.

Regardless of dynasty, the imperial system extracted enough in taxes to keep itself living in rather extreme comfort but otherwise tended to leave the locals alone, who were relatively unfazed by a change in dynasty. Loyalties of commoners were always local as well – to family, colleagues, then perhaps neighbors, the village, perhaps the town and city. At the extreme, the province. No imperial loyalty was expected from farmers and none was given. Extreme obeisance, yes.

In my mind, two ideas distinguish this “civilian occupation” concept from that of annexation or  “colonization.” First, colonization suggests that the ruling force undertakes investment to enhance its takings. There should be mines or great ports or roads. The Chinese dynasties did undertake some investments – the great walls of note and the Grand Canal, and the Song dynasty are notable exceptions. Opening substantial frontier areas to new farming cost the dynasty nothing, except in defense. Most irrigation or dam or port projects were left in local hands and local financing.

Certainly new areas were annexed in the sense of being made part of the empire over which the dynasty maintained the Weberian “monopoly on violence” – Sichuan, Mongolia, Tibet, Xinjiang. Although, as we see today, the native populations in Mongolia and Xinjiang and Tibet don’t necessarily see themselves as “Chinese.” CCP is certainly colonizing these provinces by sending thousands of Chinese to live there. I still think occupation is the better description of central-local political relations. Concentration camps and re-education camps are occupation tools, not  colonization tools.

Second, the occupying force – the central government and its literati administration – could always be flexible in its oppression. Control of local areas by local literati or gentry was always predominant. The ruling force – scholar officials – never intended to become one with the people, even if they lived in the same town or city. They were always apart, always special, always those to whom deference must be shown. Colonization would seem to suggest social mixing, intermarriage between classes, and eventual cultural unification. None of these describe imperial and literati control through the centuries.

Colonization suggests a long term intention to remain, and an Olson stationary bandit model suggests a long term commitment on the part of rulers. Dynasties from the Han did seek to occupy new areas, by way of providing additional land for Chinese farmers. This was a means of tamping down potential rebellions when hereditary subdivisions of land created farmer owned land too small for subsistence. Tens of thousands of Chinese farmers were moved in this way.

A stationary bandit model works at the level of the ruling house. Emperors expected to pass rule on to a son or close family member. Of course this applies as well to CCP at the top level.

A long term intention to remain did not apply to Chinese literati. Local officials were moved every few years, as is the case now, as a means of controlling corruption. That never worked very well, and meant that officials had little knowledge of or commitment to the areas under their control. The incentives for local officials were to extract benefits as best they could during their five year term in one locale.

For local officials the stationary bandit was not a useful model. They needed a much shorter time horizon. For local Chinese officials, incentives were anything but long term. Official titles could not be passed on to heirs, and for all its flaws, the imperial examination system limited the ability of immediate descendants to gain admittance to the elite club of officials.

Official tenures in any one location were short, usually five years, upon which an official would be relocated to another part of the regime. This gave officials incentives to monetize their position as quickly as possible, and as lucratively as possible, and then transfer money assets to real estate, the only long term asset that was stable. Officials could repeat this scenario in different locations. Real estate assets are always politically conservative – generation of rents from farming are the source of income, and investing in risk taking ventures in farming or apart from farming were not a priority. Even if the dynasty took a long term view, local officials did not. The trick for the local officials, then, was to keep the peasants sufficiently quiet while extracting as much as one could in the time available. (Leading Party officials are still moved every five years or less, more for seasoning than corruption prevention. A quite good idea, I think.)

The Chinese government did open new lands for settlement over the centuries, from the Great Wall construction and its reconstruction to relative unoccupied lands in the southwest and south in the Ming and Qing. These lands were colonized in the sense of not only pacifying existing farmers but importing thousands of Chinese farmers to settle. In some cases, newly opened lands became exclusive providers of food for the military garrisons protecting local farmers. Kent Deng says that in the late Qing, about 6% of the farmland in China was part of border agricultural “colonies” farmed by full-time soldiers and their families. Once installed, new arrivals were left alone except for tax collection and some efforts at defense.

But colonization, in my mind, also includes some intention to do resource extraction. Otherwise, what’s the point? This never seemed to be an important issue for dynasties. Simple occupation of the land seemed the primary goal. Lebensraum, one might say. Opening new lands for farmers helped alleviate the problem of equal division of farmer land among sons. After a generation or two, plots could be too small to support a family.

Kent Deng. Development and its deadlock in Imperial China 221BC to 1840 AD. London: LSE Research Online, February, 2006, p 37. Originally published in Economic development and cultural change, 51 (2), 2003. University of Chicago Press, pp 479-522. Available at: http://eprints.lse.ac.uk/archive/00000639; also available as Kent Deng (2003). Nation, state and the economy in history [online]. London: LSE Research Online. February, 2006, p 36. Available at: http://eprints.lse.ac.uk/archive/00000639

In China, the territory and its people could be occupied by an elite sharing most cultural values among themselves but living apart, thinking apart, and while concern for the peasants was a Confucian principle and a dynastic preservation strategy, the central elite retained a light touch on local values. Rebellion was always about removal of excessively corrupt local leaders, or poor economic conditions, rather than a larger concern for who governs. Occupation was easier and more profitable for the elite, a la a stationary bandit model, than colonization.

The frequency of local uprisings and rebellions adds to the occupation idea. In every dynasty there were constant local conflicts. Only a couple of times did they rise to the level of threatening the current dynasty but they happened frequently. Kent Deng –

…  the Chinese peasantry easily qualified as the most rebellious among all known farming classes in world history. From 210 B.C. to 1900 A.D. there were in all 2,106 major peasant rebellions in China, each on average lasting for seven years with 226,000 participants. Rebels were responsible for establishing at least 48 régimes. The sheer number of rebellions in China suggests that socio-political and socio-economic controls under the empire system were rather loose, enough to allow separate power centers to rise and attract large number of followers.

Kent Deng. Nation, state and the economy in history [online, 2006]. London: LSE Research Online, 2006, pp 36-37. Available at: http://eprints.lse.ac.uk/

One argument for the low tax, low concern system is that rulers could never trust local governors to send in proper amounts of tax and governors could never be free of the fear of expropriation. Local officials received salaries from the central government that could not possibly cover expenses. It was then a rational central decision to let local governors tax and manage as they will as long as they sent in sufficient taxes, and leave the local officials and the locals alone unless they rebelled. An excellent statement on the state of occupation is provided by Liang Qicao writing in 1896, and summarized by Debin Ma –

Liang summed up the weakness of the traditional Chinese system as rooted in distrust. As rulers cannot trust their officials, they set up multiple layers of bureaucracies to check up on each other. In the end, nothing gets accomplished as no one takes responsibility for anything. Moreover, the lower level officials were more interested in pleasing their superiors than serving their people. By taking wealth from the people to bribe their superiors, their posts became more secure even though their constituents were mistreated. Although in China’s age of antiquity, local officials were appointed from the local people, imperial distrust led to the rotation of officials and by Ming times they were rotated across North and South with appointees incurring debts and travelling thousands of miles to take up their posts. Not understanding local dialects and customs, their posts became a mere facade with real power vested in entrenched clerks and runners.

Debin Ma. Political Institution and Long Run Economic Trajectory: Some Lessons from Two Millennia of Chinese Civilization. CEPR Discussion Paper No. DP8791, January, 2012, p 17. Available at https://ssrn.com/abstract=1995975

The farmers were able to produce sufficient surplus to let the emperor et.al. live in splendor. From the Tang dynasty on, population grew more or less steadily. With extra labor working the land, farmers produced high yields from small plots. It is notable that as the population increased in the Qing, revenues to the central government remained stagnant and low. In the Qing, the central government refused to raise taxes even though the military suffered greatly as a result. Chinese fiscal revenues were a paltry share of those in other countries. Deng and Rubin, p 23 – The disparity in fiscal capacity was so great that the total taxes collected by the Qing in the latter half of the 18^th century were only about 3.5 times of those collected by the Dutch despite the Chinese population being about 143 times greater.

For much of its history, China was not a single unified state. Of the 2135 years since Qin, China was unified for only about 935 years. And nearly all of those years had some form of rebellion taking place.

When rebellions were salient merchants could gain power, as in the late Tang and Ming and part of the Qing dynasties. Merchants had money and resources when the state needed them. But commercial activities were regarded as low – in the classification of people, merchants were least, lower than peasants. Dynasties always wanted to keep merchants and traders until control. One way of exerting control was to co-opt merchant groups and clans to perform government functions, including tax collection and punishment of wrongdoers. Brandt, Ma, and Rawski (hereafter BMR) explain in detail.

Loren Brandt, Debin Ma, and Thomas G. Rawski. From Divergence to Convergence: Reevaluating the History Behind China’s Economic Boom. Journal of Economic Literature 2014, 52(1), 45–123, p 62. Available at https://sites.pitt.edu/~tgrawski/papers/Brandt-Ma-Rawski%20From%20Divergence%20to%20Convergence%20JEL%20v52%20no1.pdf

As in any occupation, one might see a great difference in incomes between occupier and occupied. This was certainly true in China, throughout its dynastic history. I have not found any sources on incomes of literati and landlords compared with incomes of peasants, but all the anecdotal data suggests a very large difference. Salaries of central government officials serving in the provinces were very low, and there were no expense accounts.  Officials were expected to supplement their incomes with local fees, taxes, and extractions of every kind. Officials employed many local runners, assistants, clerks, and other aides, whose salaries came from their own extractions from those needing services – a fee to physically bring a peasant’s request into the house of the local official, or a fee to arrange an audience. Extractions at the local level could be very finely tuned to an Olson stationary bandit model, and officials who were able to live extremely comfortably on tiny official salaries no doubt participated fully in the extractions. Centuries on, rapacious landlords were a key target in the early years of CCP, and peasants participated in the shaming and murders with some relish. Hundreds of thousands were murdered. The entire landlord class was wiped out over a period of less than ten years. Ma and Rubin –

… it was the informal, unregulated, and arbitrary nature of these extractions that help explain the apparent contradiction of a low official tax rate and the rapacious image of the Qing. …. Because the center could not commit to refrain from confiscating the known wealth of its administrative agents, it could not pay them a high formal wage. It could also not ask its agents to remit a high level of taxes, because in order to incentivize the agents to remit any taxes whatsoever, it had to leave enough for the agents to collect “off book”. In the end, the masses faced tax levels that not only exceeded the stated official target but were also arbitrary in nature, even though the center only saw a fraction of those taxes.

Debin Ma and Jared Rubin. The Paradox of Power: Principal-Agent Problems and Fiscal Capacity in Absolutist Regimes. Chapman Economic Sciences Working Paper, 2017, p 25.  Available at https://ideas.repec.org/p/chu/wpaper/17-02.html

Today, a standard citizen reaction to the government is to not want any interaction at all. Chinese really understand the fallacy of “I’m from the government and I’m here to help you.”

Debin Ma’s balancing of interests model

Debin Ma uses a model of tripartite relations among farmers, literati and gentry, and the ruling family that worked to preserve some balance in interests. Perhaps from social psychology, he sees a triangle of interests in which at any one time two sides will see an advantage in their cooperating against the third. One might characterize this as occupation with Chinese characteristics.

He defines a ruling house-literati-peasant symbiosis, excluding the merchant class, that created a generally stable political and economic equilibrium for centuries. This is not to say a peaceful equilibrium. This was a case of “just enough and not too much” oppression, with peasants who were free to migrate and grow what they wished, sell to whomever they wished, and make free judgments – as long as they stayed out of politics. The peasants had opportunities to move to new lands opened up on the frontier, and the taxation generally was light. When the oppression became too much, the peasants revolted. Revolts were pretty common, and formed the dynastic cycle.

Merchants were the class everybody could ignore until they were needed. They were denigrated in traditional culture as potential liars and cheaters. Merchants needed the central government for protection and a commitment to only moderate predation in the form of taxes and expropriations. They needed to help the central government keep the peasants at bay.

Debin Ma. Rock, Scissors, Paper: the Problem of Incentives and Information in Traditional Chinese State and the Origin of Great Divergence. London School of Economics, Working Papers No. 152/11, July 2011. Available at https://ideas.repec.org/p/ehl/wpaper/37569.html

On dynastic change via peasant rebellions –

The glorious Qin was the first to go. Indeed, all the main dynasties after the Qin – Western Han, Eastern Han, Jin, Sui, Yuan and Ming – suffered this fate. The rule of the Tang and Northern Song was seriously weakened by peasant rebellions, which greatly contributed to their collapses. In the Qing case, the Manchus only managed to save its neck under attacks from the Taipings and Nians thanks to military and financial aid from the West. All this demonstrates the effectiveness of peasant rebellions in Chinese history. (Kent Deng, Development and its deadlock, pp 36-37)

I think my occupation concept is supported by the locality and severity of peasant revolts.  Peasants used their power in the state-peasant symbiosis model to provide a check on oppression. The peasants were not rebelling because of religious oppression or central policies or a desire for voice in governance. They only rebelled to correct local mistreatment of an economic or administrative kind, when the occupation became too oppressive.

The ruling house and literati worked together much of the time, although absolutist tendencies became more pronounced after the Song. One of the functions of the Confucian scholars was to inform the emperor of difficulties ahead or comment on the wisdom of the emperor’s proposals. In any case, the administration had to run the government, regardless of what the emperor wanted, and sometimes the Chinese “deep state” had to follow its own impulses. Don’t forget that the emperor was administratively constrained from leaving the Forbidden City. He could leave, and occasionally did, but most of his information about goings-on came only from reports to him. Further, what was implemented locally could have little or no relation to what orders came from Beijing.

This form of absolutism had features of benevolent authoritarianism, secular rationalism, and meritocracy. One could not predict which feature would dominate in any situation. At any time, two of the three class divisions might join to work against the third. Merchants most often allied with the literati, much as businesses in the US now become friendly with their regulators in Washington.

One expects rulers to exercise their prerogatives. But that did not always work in implementation.  Chang Chung-li notes in his study of the Chinese gentry that the Confucian-inspired literati determined the whole destiny of China. The literati – in conjunction at times with the gentry, wealthy landowners or merchants – ran the government at every level.

Chang Chung-li.  ( Zhang Zhongli). The Chinese Gentry; Studies on Their Role in Nineteenth-Century Chinese Society, 1955, p xvi. Available at  https://archive.org/details/chinesegentrystu0000chan/page/n9/mode/2up

Farmers and merchants were not without power. Farmers and merchants were expected to pay taxes to support the imperial household and central administration, pay taxes or fees or bribes to support local literati, provide corvee labor, and military service.

The control exercised by the farmers was, of course, their ability to rebel in the face of excessive taxation, excessive corruption, or a ruling family that had lost the mandate of heaven as indicated by flood, famine, drought, or barbarian incursions. Control by merchants was  exercised through their clans or through their individual domination of local politics.

Kent Deng does not see farmers as an oppressed majority. He sees a tacit bargain between rulers and peasants, perhaps not unlike the bargain CCP made after 1978 – you let us rule, we will let you … prosper. Deng sees operating markets and private land ownership from the Warring States era. The power of the farmers lay in violence to restore some balance in the relationship. Recall the comment about Chinese – no people more rebellious, but less revolutionary.

If Deng’s characterizations are realistic, it remains that extractions from farmers, whether in the form of taxes, corvee labor, or limitations on ability to develop imposed by lack of access to capital, limits on education, limited extent of local markets, lack of public goods from government, or unfairness in dispute resolution, remained a constant over centuries. There was some ability for farmers to relocate of their own choosing, and private property rights in farmland were generally respected, from the Han. If land ownership were violated, it was carried out by local officials or merchant groups, rather than the central government. (This is still the case today). Farmers were not severely oppressed without some eventual violent reaction. We remember the Chinese proverb – “The Center is our benefactor, the province is our relative, the county is a good person, the township is an evil person and the village is our enemy.”

Today, CCP understands that proverb well. In 2015 I wrote an article published in the Zhejiang Province School of Administration journal (CCP Party school journal) suggesting ways for senior officials to avoid becoming involved in local land or environmental disputes.  I don’t know how well it was received, but the desire of senior officials to avoid having to get involved with the locals was certainly clear.

The state-peasant symbiosis actually worked well much of the time for the peasants and for the rulers. Peasants were constrained in what they could do, but central government taxes were not high and the central government was far away.

And still true today. Over the decades, hundreds of millions have moved out of poverty and into modernity. No one thinks Mr. Xi wants to reverse that progress. But there is also no question but that the state is advancing right now while the private retreats (an old Chinese saying – guotui minjin). Peasants now – and Chinese citizens – are constrained in what they can think and say, but otherwise are free to work and move as they wish.

Kent Deng might see the thirty years of CCP leaders Deng, Zhang and Hu as a period of somewhat more liberal rulers supporting the peasants against some strident leftist forces within the literati. Now comes Xi to correct the “reform and opening” that pushed too far. The problem for Xi is that the reform years benefitted everyone, including the literati. No one wants to go back to the old purer days of Mao.

The Xi re-reform movement

From the time of Deng Xiaoping, through Jiang Zemin and Hu Jintao, CCP policy was promotion of reform and opening up gaige kaifang. Progress slowed a bit under Hu, but generally China was moving toward more political openness and engagement with the world, not only in exports, but in culture, academic exchanges, art and writing. YouTube wasn’t available, but Google and the New York Times, Bloomberg and the Washington Post were.

The reform period is now over. China is veering close to totalitarian rule under a single narcissistic leader who has just had himself effectively declared emperor for life. We are long past the Leninism of the Mao days, when CCP was the vanguard leading the proles toward class consciousness and revolution.

Xi’s version of international communism is identified by Australian journalist John Garnaut in Engineers of the Soul – Ideology in Xi Jinping’s China – Xi’s project of total ideological control does not stop at China’s borders. It is packaged to travel with Chinese students, tourists, migrants and especially money. You’ve heard about the Chinese government “police stations” now located across the US, Australia and Europe. Ostensibly set up to help Chinese renew driver’s licenses (?), these serve as a front for CCP to harass, intimidate or kidnap  Chinese – and perhaps others – who have displeased CCP in some way. This is not the communism of worker revolution, but the communism of totalitarian government.

Using big data and artificial intelligence for facial recognition, social media scores, phone tracking and all the most modern tools of oppression Xi has been bending the Internet into a tool of omniscient control. Class revolution is no part of it. Rather than the workers of the world losing their chains, Xi is looking to impose them again.

In prior dynasties the imperial household and scholar officials tended to form a unified perspective against that of the commoners. There were mutual obligations, rulers to have some respect for the education and training of the literati and in turn, for them to be obedient to the ruler.  Han Fei made this point in his development of Legalism, the governing philosophy that mandated written laws and regulations and strict punishments for violations. In his view, officials were subject to the law just as were commoners, except when it served the interests of the ruler. This was closer to a rule of law than anything China has ever seen. Rulers and officials were opposed to a strict legalism, although they did not mind its application in practice to the general populace. Victoria Tin-bor Hui described general dynastic rule as “Legalism with a Confucian facade.” In other words, strict interpretation of the law for thee but not for me. This is still the case – rule “according to law” or “rule by law” rather than “rule of law” that would ensnare CCP as well.

Now Xi Jinping has promoted a political version of Confucianism that promotes subservience to officials and obedience to rulers, all the while using a strict interpretation of laws to snare officials in his anti-corruption campaign. This is unquestionably Legalist rule with a Confucian façade. Parenthetically, I was asked in 2015 to write an analysis of Confucian principles for use in a CCP Party School. I declined.

Just as dynasties in the past mostly ruled as “Legalist with a Confucian Façade” we can say CCP rules as an oligarchy with a communist façade. Stability maintenance for the ruler is always the fundamental value. With communism and its class struggle and class consciousness for the masses all a bit … outre … any ideology that is left is an ideology of power. We should remember the leftist Beida students in 2018 who wanted to push for a “real” version of Marxism with class consciousness and laboring for the masses. This was quite a shock to CCP, coming from students at the best university in China. These student “old Marxists” were shouted down by the “new Marxists” and arrested by the police. The new Marxists understood the rule of power retention – “In order to study Marxism, the Chinese Communist Party must be embraced; opposing the Party means opposing Marxism.” Now it probably fair to let CCP define communism for itself. Power is all that matters. But to Marx this CCP communism would have been anathema.

Any policy change, any flexibility should be fundamentally attributed to stability – that is, maintenance of CCP rule rather than benefit for Chinese people. Perry Link has an analysis at CCP’s Culture of Fear at the NYRB. He sees possibilities for a new Cultural Revolution. My Chinese government students told me the same thing in 2015. But we should remember the Cultural Revolution as a bit of lunacy inspired from the top that went out of control. Its going to be much more difficult for the peasants – sorry, Chinese citizens – to organize in an era of facial recognition and screening of phone calls and texts and social credit scores. Now, facial recognition is used to get access to the subway. There has never been a panopticon state before. China is first.

Xi has Legalist precedent for the crackdowns. Lord Shang, one of the originators of Legalist philosophy, told the Qin rulers to crack down hard on the peasants –

When the people are weak, the state is strong; hence the state that possesses the Way strives to weaken the people” (Shang jun shu 20: 121) 

Perry Link sees the term liumang zhengfu (gangster government) as now befitting Xi’s CCP. That works. But I see the old communist patriotic song Without the Communist Party, There Would Be No New China as misleading. CCP is not the herald of a New China but as just one more in a two thousand year old series of dynasties.

John Garnaut makes a similar point in Engineers of the Soul – Ideology in Xi Jinping’s China –  Communism did not enjoy an immaculate conception in China. Rather, it was grafted onto an existing ideological system – the classical Chinese dynastic system …. The Founding Fathers of the PRC came to power on a promise to repudiate and destroy everything about the dark imperial past, but they never really changed the mental wallpaper.  

It is instructive to briefly explore Debin Ma’s tripartite division of society and see how that is reflected today. Of course, we have to start with class consciousness.

Class consciousness

Briefly, the imperial household (now regular visitors to Zhonnanhai and high level officials in ministries, provinces, and businesses); the literati and gentry (the educated, well trained and professional midlevel workers in CCP and SOE and private business leaders); and the peasants (most Chinese, even those with an urban, not a peasant, hukou).

The imperial household and literati

In prior dynasties the emperor and his family, his extended relations including concubines, some eunuchs and advisors formed one element of society. These were the people who lived in or near the Forbidden City as the ruling dynasty and constituted the core of the dynasty. The gentry and literati formed another, some in Beijing and most outside. The peasants made up the majority of society, about 80% of the population.

The imperial household was no locus of heavenly peace. Kent Deng – From the 25 official histories of the empire, there are in total 224 monarchs whose dates of birth and death are traceable. It is known that a half of these monarchs were crowned under the age of 20, of whom a half were crowned under the age of 10. It is also known that their average life span was only 39. Thus, the policy input from emperors had to be very limited.

It was the norm that the empire was run by older bureaucrats.

Kent Deng. Nation, state and the economy in history [online]. London: LSE Research Online 2003, Note 145, p 69. Available at http://eprints.lse.ac.uk/

The tripartite division of society determined economic and political relations.  The ruling group depended upon the gentry for policy advice and administrative skills. The gentry depended upon the ruling group for leniency in questioning leader’s proposals and for continuation of the examination system, which ensured continuation of the literati networks. The gentry and literati depended on the ruling house for absolution from paying taxes and for some leniency in punishment for misbehavior, like bribery or theft of imperial property. Farmers had no political power other than the power to rebel. Chang Chung-li on the gentry –

The gentry’s relationship to the state was more complex than any simple formula of economic control would indicate. The gentry included the members of the bureaucratic officialdom which represented the state authority. This authority was, however, a rationalization of a broader and different compact of interests than those of the gentry group alone, either material or ideological.  On the one hand, the bureaucratic state depended on the gentry for social control and management and to provide its administrative staff. On the other hand, it placed an institutional check on the gentry through state control over admission to membership in this dominant group. This was accomplished by making admission to the gentry dependent on a state-controlled examination system with fixed quotas. This institutional check was paralleled by an ideological control which forced the members of the gentry into a constant preoccupation with the tenets of the authoritarian aspects of Confucian beliefs. The gentry’s relationship to the state was thus of a dual nature, sustaining it and controlled by it.

Chang Chung-li.  ( Zhang Zhongli). The Chinese Gentry; Studies on Their Role in Nineteenth-Century Chinese Society, 1955, p xvi.   Available at  https://archive.org/details/chinesegentrystu0000chan/page/n9/mode/2up

Albert Feuerwerker argues along this line of elite domination as well. Referring to the literati and the gentry, composed of wealthy landowners and merchants, he suggests –

This “ruling class,” so to speak, shared the common necessity to control sufficient amounts of the surplus produced by the agricultural labor force to permit it as a group (although the fate of individual families might be more precarious) to continue to dominate. 

Albert Feuerwerker. The State and the Economy in Late Imperial China. Theory and Society 13 (1984), pp 297-326, p 308.  Available at https://deepblue.lib.umich.edu/handle/2027.42/43641

Debin Ma and Jared Rubin explain why low central taxation was possibly a choice of the ruling house. Rulers couldn’t trust the local literati and the literati were afraid for their jobs if not enough taxes were sent or there was local insurrection. One could argue that central taxes were held low to avoid exploitation of the peasants, but also because the center could not trust the provincial administrators. The central government was content to let local officials rule and exploit as they wished – up to a point. Therefore –

… we explain this puzzle with a principal-agent model which reveals that absolutists, unconstrained by rule of law and unable to commit to not predating on their tax-collecting agents (and the masses), may find it optimal to settle for a low wage-low tax equilibrium, while permitting agents to keep extra, unmonitored taxes. Our analysis suggests that low investment in administrative capacity is a conscious choice for an absolutist since it substitutes for credible commitment to refrain from confiscation.

Debin Ma and Jared Rubin. The Paradox of Power: Principal-Agent Problems and Fiscal Capacity in Absolutist Regimes. Chapman University Economic Sciences Institute, 2017. Available at https://ideas.repec.org/p/chu/wpaper/17-02.html

Often, when pressed by financial exigencies, Ming and Qing rulers displayed few qualms about ad hoc extractions through the administrative hierarchy, the sale of official titles, forced contribution, outright confiscation or – as in the devastating

mid-19th century Taiping rebellion – massive monetary debasement. The irony here is that informal or extralegal taxation – being outside the official purview – became the most secure source of local finance.

Debin Ma. Rock, Scissors, Paper: the Problem of Incentives and Information in Traditional Chinese State and the Origin of Great Divergence. London School of Economics, Working Paper 52/11, July, 2011. Available at https://ideas.repec.org/p/ehl/wpaper/37569.html

Now under CCP we can posit Xi Jinping as the emperor, with other members of the Politburo Standing Committee as the advisors at Zhongnanhai adjacent to the Forbidden City. Some of these officials might choose to live at Zhongnanhai. Perhaps we can include in the ruling group the 5000 or so senior officials and business and media leaders who are selected by the opaque CCP Organization Department zu zhi bu process. This group does not live in the Forbidden City but let us postulate that these careers are tied directly to Xi’s longevity. They and the other 100,000,000 or so CCP members  constitute the modern literati and gentry. Not all are wealthy or powerful. All have taken the oath described in detail in the Constitution of the Communist Party of China –

It is my will to join the Communist Party of China, uphold the Party’s program,
observe the provisions of the Party Constitution, fulfill a Party member’s duties,
carry out the Party’s decisions, strictly observe Party discipline, guard Party secrets, be loyal to the Party, work hard, fight for communism throughout my life,
be ready at all times to sacrifice my all for the Party and the people, and never betray the Party.

The occupation now demands loyalty from the literati in several key areas, called out explicitly in an early Xi warning to cadres – and all Chinese. The now infamous Document No. 9 from spring of 2013 came from the CCP Central Office early in Xi’s reign. Seven deadly sins are described. Cadres must avoid all. They include discussion of constitutional democracy, universal values, civil society, neoliberalism, independent journalism, critical historical research and regime criticism.

It was a small step to the required study of Xi Jinping thought every night on cadre cell phones.

Victor Shih has an interesting take on the new (2023) PSC and the clear requirements of loyalty to Xi as necessary for promotions now. When there were factions and obvious jockeying for positions, it was possible for new ideas and new programs to come into discussion. There were incentives for policy innovation as an individual CCP member could tie his wagon to more  than one upper level official. Now the literati know their status is dependent on expressed loyalty to Xi as well as loyalties to Xi’s already appointed lieutenants. Policy innovation will come to a halt as literati – let us say, the next 20 or 30 thousand CCP members who might look to move up in the hierarchy – take no risks lest an idea run afoul of Xi or his people.

Literati then and now

Then – meaning any period since the Han – palace intrigue was always a consideration in policy. Immediate family, secondary wives, children of secondary wives, concubines, eunuchs with sometimes formidable power and deep outside relationships, Confucian officials, and various other advisors jockeyed for influence. Life Inside the Forbidden City was by no means serene. There were plots aplenty, fears of poisonings, and a career or a life might depend on some otherwise inconsequential phrase or bow.

The path to success and wealth for hundreds of years was through becoming a government official. The path required passing the imperial exams. Men studying for the exams began early – before the age of ten, and studied constantly up through their teens and twenties if they were attempting the highest degree. “Study” in this case meant memorization of the four Confucian classics, perhaps commentaries.

Degree holders were exempt from taxation and had legal immunity from prosecution.

The tight bonding among the elite is attributable to the need for clan support, unavailability of national measures (coinage, markets, legal system, commercial law, inability to borrow beyond the very short term); the deep commitment to education as the only path to success, but education with only Confucian study; and the necessity of relationship in the absence of general morality.  These all made elite behavior relatively constant over centuries. BMR, p 78 –

…  a common ideology and close alignment of incentives among the imperial household and overlapping bureaucratic, scholarly, commercial, and landed elites created a tight web of vested interests that, once established, proved extremely difficult to dislodge. Unfortunately, the same forces that promoted stability also militated against reforms that might threaten the standing, the incomes, or the future prospects of interlocking socio-economic leadership groups that dominated the imperial polity.

And Chang Chung-li on the separateness of the gentry –

The gentry of imperial China were a distinct social group. They had recognized political, economic, and social privileges and powers and led a special mode of life. The gentry stood above the large mass of the commoners and the so-called “mean people.” They dominated the social and economic life of Chinese communities and were also the stratum from which the officials came. They were the guardians, the promoters, and representatives of an ethical system based on the tenets of Confucianism which provided the rules of society and of man’s relation to man. Educated in this system, they derived from it their knowledge of management of human affairs which was the main qualification for their leading role in Chinese society. During the later dynasties the gentry’s position and qualifications became formalized. A system of examinations and degrees controlled by the government determined the membership of the gentry group, which thus came to be more easily recognized and defined. Protected by a ring of formal privileges, which relieved them from physical labor and gave them prestige and a special position in relation to the government, the gentry were all the more free to act in their dominant role.

Chang Chung-li (Zhang Zhongli). The Chinese Gentry – Studies on Their Role in 
Nineteenth-Century Chinese Society.  University of Washington Press, 1955, p xiii. Available at  https://archive.org/details/chinesegentrystu0000chan/page/n9/mode/2up

Central rule existed far from daily experience for most Chinese. The ruler was physically far away and mostly irrelevant, except when the imperial government wanted something – soldiers for warfare, taxes, or corvee labor. There was some ability for peasants to move up into the officialdom, but this was not likely. Gentry status was not hereditary, but wealth certainly was and the strict requirements of the imperial examinations meant that only families wealthy enough to pay for learning could send a boy into the examinations, with rare exceptions. Not quite, “once a gentry family always a gentry family” but there certainly was incentive to send boys generation after generation into the government service. Families kept logs of their successful candidates, going back generations. Even now, it is surprising how frequently one finds second or third generation mid-level CCP members. Relationships work in practice.

The constancy of gentry administration regardless of dynasty over hundreds of years is a unique feature of Chinese governance. The bonding between imperial house and literati and among the literati themselves, and between literati and commercial interests has made for an incredibly enduring system.  The ruling house – emperor and wives and concubines and eunuchs and senior administrators – and the scholar official, either in the capital or in the provinces, did not comprise a significant share of the population, so bonding was available. Even today, government officials are frequently off to meetings and conferences in their field of expertise, where they meet others at their own level or higher who can be of assistance at some point when needed later.

At any one time, the total number of literati and gentry in any dynasty up to the late Qing could not have been more than one million, ruling at the county, provincial, and national levels over hundreds of millions of people. For many centuries, the total gentry population at any one time was probably closer to half a million.  In any one province, the number of men with gentry status was usually not more than one-half of one percent of the total population, and usually much smaller than that. Adding in wives, concubines, and close family, this is much larger than the proportion of the total British population that occupied India under the Raj.

Chang tabulates the ranks of gentry, which in his study includes all holders of both earned and purchased examination degrees, at 1.09 million before (i.e. about 1850) and 1.44 million after (i.e. about 1870) the Taiping rebellion (1851-1864). Assuming an average of five persons per gentry household, he concludes that the gentry population amounted to approximately 1.3 percent “of the whole population … in the first half of the nineteenth century” and to “well over seven million. . . . [or approximately] 1.9 percent of the total population” after the defeat of the Taipings.

Chang Chung-li (Zhang Zhongli). The Chinese Gentry – Studies on Their Role in 
Nineteenth-Century Chinese Society. University of Washington Press, 1955, pp 111-112, 139-141. Available at  https://archive.org/details/chinesegentrystu0000chan/page/n9/mode/2up

In the late Qing, the proportion of gentry increased to about 1 to 2 per cent in most provinces, with the increased purchase of gentry status and relaxation of imperial exam standards. Since gentry were exempted from taxation, the increase in gentry numbers increased the tax burden on peasants. But per Chang (p 132) the number of gentry who were official office holders was about 125,000, about the same size as the British population in India at the time (Chang, pages 99-101).

The elite governed for its own benefit and governed as much as necessary to suppress rebellion, but otherwise took a hands-off approach to civil affairs.

This is not to ignore the presence of alternative thinking in the dynastic system. There will always be people who think differently, see more clearly, or are simply malcontents. The system has a way of sidelining such people, even though they may have superior intelligence or insights. All stable systems have a way of doing that, for successful functioning. Confucius sought high employment in some of the  Warring States polities. For all of his thoughtful advice to leaders and officials, he was never successful in obtaining an elite advisory position. One can see why. His promotion of benevolence and “putting the people first” might be good in the long term and work at the margin, but for any single official needing to “get what he can while the getting is good” the Confucian ideas are insignificant compared with a Legalist view. The Legalist advocates like Shang Yang , Han Fei, and Li Si guided emperors in the Qin and Han. Hui notes that preservation of the imperial family and development was all based on the construction of systems of status barriers that create groups of people without rights or political power.

Today there are about 100 million CCP members, working at every level from Zhongnanhai to village party chief. By no means are all in government or still actively working. Those who have government or CCP jobs rule over 1,400 million Chinese.

Separateness is still the norm. Party events go to some lengths to reinforce the notion of an elite, more than that, a family elite. There is some truth in that. CCP members of my acquaintance are mostly a cut above the norm in intelligence, sophistication, and thoughtfulness. They show up on time and are always prepared. They have already thought about what you might need. They are bonded, to one another and to CCP. They are, in fact, the modern literati.

I’ve been at more than one Party celebratory function with videos or slide shows of the attendees at some prior point in their lives. Undercutting the slides is the theme – We are Family.

Modern literati benefits

There are similarities of literati benefits with benefits to CCP members now. See my chapters Why no one wrote “decline and fall of the Chinese empire”?  and What Survived Gone with the Wind?

There are benefits to being a member of the government – decent pay, lifetime jobs, good pensions and health care – but benefits above certain levels – that of a vice mayor of a sub-provincial level city – are … well, a cut above. It is from that level – the top 5000 or so positions in China, party and government – that promotions to upper levels are handled by the Organization Department Zhongzubu. This includes university presidents, government ministers and vice- ministers, provincial governorships and party secretaries, and major city positions. If the US had an equivalent, then an office in the government would oversee appointments of

US state governors and their deputies; the mayors of big cities; heads of federal regulatory agencies; the chief executives of General Electric, ExxonMobil, Walmart and 50-odd of the remaining largest companies; justices on the Supreme Court; the editors of The New York Times, The Wall Street Journal and The Washington Post, the bosses of the television networks and cable stations, the presidents of Yale and Harvard and other big universities and the heads of think-tanks such as the Brookings Institution and the Heritage Foundation.

Richard McGregor. The Party Organizer. Financial Times, September 30, 2009. Available at https://www.ft.com/content/ae18c830-adf8-11de-87e7-00144feabdc0

These are some of the American literati and gentry.

Class consciousness in CCP persists. Today officials at a sub-provincial city vice mayor level and above receive special food and water (uncontaminated by heavy metals), special health care, special schools for kids, access to luxury goods and foreign travel. At the Zhongnanhai level, officials need not worry about breathing polluted Beijing air. There are air filters, even in the cars. The term for this is tegongzhi 特供制 – the “highly secretive work of the special agents” of CCP, or the special provisioning system for food, alcohol, and even air and water. (At home, I’ve had the special rice and vegetables for senior officials, and I’ve had plenty of the special provisioning of Maotai. No real difference, but in truth everyone feels safer eating and drinking).

Below that level are the millions of midlevel positions in government and party. These are the people who run the party and the government at all levels, down to the village party secretary. Many or most of these people are college educated. They continue training at Party schools when facing a promotion or new job and many are about as sophisticated as any upper middle class American. Perhaps more so.

BMR explain a piece of the current imperial-literati connection. I’ve observed plenty of such arrangements myself.

Access to investment opportunities, credit, and land are routinely used to buttress the current regime and its allies. Official approval (pizhun), an essential step in business formation and expansion, may be reserved for well-connected insiders, especially in sectors promising high profits. China’s state-owned banks specialize in lending to favored clients, particularly state-owned enterprises, at below-market rates and with lax repayment provisions. Allocation of land is similarly tilted in favor of official associates and clients. As in imperial times, the patronage
economy is much in evidence: relatives and associates of top leaders readily parlay personal connections into lucrative business positions. As in the past, private entrepreneurs invest in informal security umbrellas to deflect arbitrary disruption of commercial activity. (BMR p 71)

Desmond Shum provides details of the imperial-gentry connection in Red Roulette: An Insider’s Story of Wealth, Power, Corruption and Vengeance in Today’s China. He documents how private investors and real estate developers can benefit enormously from relationships with senior officials and their families.

In one personal instance of exceedingly minor importance, I was offered a chance to buy an apartment in a government-only development, at a significantly lower price than what the market price would be a few months later when the market was opened to others. Government employees were all offered this large discount, by way of selling units (of course) but also as a perk that never gets recorded or reported. Just business as usual in government. It is the essence of the culture. The plush lifestyle that evolved after Deng was curtailed significantly under Xi. It was common to receive excellent meals at lunch, government sponsored dinners, drivers for cars, and gifts or trips as part of the business of serving the people. Not so unlike the American corporate world, without the “serving the people.”

Xi Jinping has made his name in China with the anti-corruption campaign, and that is ostensibly a good thing. Thousands of officials have been arrested and reprimanded, demoted or jailed for bribery. But in a relationship society, access is the way business – and government – are done. Above a certain level and in some locations, it would be nearly impossible to function without participating in some action that was at base, illegal. How would you function as a minor mafia member?

More to the point, the term “constitutionalism” is blocked online in China. One would wonder why – China has a constitution; so does CCP. But constitutionalism in China refers to everyone having to abide by the law, CCP members included. That sort of decadent western liberalism cannot be abided. See the infamous Document No. 9, issued early in Xi’s rule. The first item that CCP members must guard against is “Promoting Western Constitutional Democracy: An attempt to undermine the current leadership and the socialism with Chinese characteristics system of governance.” If elite CCP members generally were made to live by rule of law, despite what it says in the constitution, the entire dynasty would collapse in short order. You remember the fabulous wealth of the families of Wen Jiabao and  Xi Jinping.

As befits the CCP family metaphor, misbehavior among CCP members is adjudicated first by an internal CCP process. If leaders and prosecutors are satisfied with that outcome, the government need not get involved – “saving the people’s money.” If a crime is quite serious, if bribe amounts are large, only then is a miscreant turned over to the public prosecutor. If a person is turned over to the public, the conviction rate in the courts is about 99%.  But this is one way for CCP members to avoid the embarrassment of a public trial.

That is why Xi is treading dangerous ground in his anti-corruption campaign. It is popular to do away with the tigers – a bit of sport on evening tv. For Xi, exposing the corrupt is a good way to eliminate rivals or opponents. But it is impossible to eliminate corruption in a relationship society. Relations are what trade is built upon, and relations with the government are as vital now as they were in any prior dynasty. In any case, the Chinese people are more affected by local corruption – the flies, in the popular term – than the tigers. Xi is looking to change the two thousand year old system.

The two thousand year old system includes local officials with unclear and overlapping portfolios. Overlap does not create accountability – it lessens it. Today, a professional in government has at least two leaders to report to. One is an immediate supervisor in the government. Another is in the profession one rung up in the government hierarchy. This is an excellent system for ensuring central, or at least upper level, control at all times when it is desired. Xi has made no moves to rationalize the system of reporting to multiple leaders.

Mystery and deceit remain important levers of official control. It is common for leaders to not communicate plans to subordinates until a last moment.  Sunzi told us in the Art of War –

VII.19. Let your plans be dark and impenetrable as night, and when you move, fall like a thunderbolt.

IX.35. It is the business of a general to be quiet and thus ensure secrecy; upright and just, and thus maintain order.

IX.36. He must be able to mystify his officers and men by false reports and appearances, and thus keep them in total ignorance.

In this way, power is preserved at the upper echelons and anxiety is preserved among the lower levels.

When Xi came to power in 2012 he remarked on the collapse of the Soviet Union – that there were no real men to stand up for the CPSU (Communist Party of the Soviet Union) when it needed internal support. Too much corruption, too much cynicism. China has been in a similar condition. So one can easily understand not only Document No. 9 but the anti-corruption campaign and the Xi’s demands for cadres to do Red tourism, attend Marxism conferences and study Xi Jinping Thought every day on their cell phones, with quizzes. Salaries and benefits work pretty well, along with potential loss of same, but come at the cost of moral freedom – thinking for oneself and becoming, as Confucius would say, fully human. Got to keep the troops in line and thinking – in the cold, cold CCP term – correctly. It takes a lot of cynicism to keep up the façade of belief, particularly when there is no there, there for CCP overriding philosophy now. Just what is it that CCP stands for?

In any case, provinces and cities and counties and villages have always operated rather independently from Beijing. Law was always local.

Ruler – peasants

The solitary nature of the emperor also meant that there could be times in which the emperor sided with the peasants against the interests of the literati or landed or commercial elites. The emperor, after all, was father to his people. Deng sees a symbiosis between emperor and peasants, father and children, that structured the development and political history of China over the millennia. Emperors were aware of the Confucian adage that water can float a boat, as well as overturn it. This informed the attitude of rulers to peasants who provided the surplus on which the ruling house depended.

Kent Deng would certainly not see the Chinese peasants as an occupied populace. He sees free markets in labor and protection of farmer land rights and when these were violated, peasants rebellions created a new dynasty. Chinese farmers were rebellious, but never revolutionary. They never sought to create a new system, always returning to Confucian rulership when food, tax or land issues were satisfied. But the dynasties continued to rely on low taxation of a large farming population for most revenues. This was part of the state-peasant alliance, with the literati as the third element in this ongoing dance of stability. In the Qing, as much as 92% of the registered land in China was privately owned.  Deng –

The truth is although the state-peasant alliance was in normal circumstances able to transcend power-abusive emperors/officials, things did go wrong. When a deviant state harmed the rural sector too much through, for example, excessive taxation (in kind, cash or labor services) affecting the critical mass of the peasantry, the seemingly docile peasants showed their original militia color and rose up in arms to topple unpopular régimes. The glorious Qin was the first to go. Indeed, all the main dynasties after the Qin – Western Han, Eastern Han, Jin, Sui, Yuan and Ming – suffered this fate.

Deng. Nation, State, p 36. Available at: http://eprints.lse.ac.uk/archive/00000639

Aristocratic and landed elites dominated in Europe as well. But private land ownership in China might actually have tied peasants to the land more than serfdom did in Europe. In China, oppressive burdens were mostly locally imposed, and occasional prohibitions on relocation made farmers eat bitterness (except when the ruler wanted to open new lands for taxation, and tens of thousands might be relocated). More than anything else, the legalization of private landholding, dating from the Warring States period, but periodically reinforced in the Tang, Song, and Qing, tied farmers to the land. Heirs inherited the land, where the ancestors were buried. In addition, division of inheritance among all children meant that economies of scale in farming could never obtain. No farmer could have sufficient holdings in one contiguous location to turn a farmer into landed gentry. Farmers remained farmers, over the generations. When a peasant’s son did manage to achieve some literati status, that status was not inheritable.

Central government rule did not usually take into account the concerns of the vast majority of Chinese. Emperors could not actively manage their empire. Some long-term permanent officials were necessarily important administrators and supervisors.

CCP started out as a rural peasants’ revolution, in distinction from Marx’s idea of an industrial proletariat that could be organized.  Since about 80% of the population consisted of poor farmers, this really was a prospective ruling house-peasant alliance, before 1949. But it gets quite complicated.

Perhaps the easiest way to see CCP as occupier rather than liberator or vanguard of the proletariat is to recount the real treatment of peasants since 1949.

In China Under Mao – A Revolution Derailed Andrew Walder suggests that the leadership – Mao in particular – exercised emperor-like – if not god-like – control over the Party and the people. Purges and jailings were common for Party elites who fell out of favor. Landowners and business people – the modern version of gentry – were systematically destroyed. The people were killed in mass numbers.

After 1949, one of the first policy steps was to kill peasant landlords. About a million were said to have been killed. Collectivization of the land was not a benefit to farmers, who knew better than Party leaders how to plant and harvest. The 1959-61 Great Famine killed about 40,000,000 Chinese, most of whom were rural peasants. There was sufficient food to prevent mass starvation, if at the same time Mao had not chosen to use grain to repay Soviet loans, and CCP members in those years generally ate quite well. Probably a couple million of the dead were murdered by CCP village leaders and others for attempting to get food for their families or themselves. Frank Dikotter documents those years in Mao’s Great Famine, a chilling account from county level records and personal stories.

People in cities did not die at a fearsome rate. They were needed in factory and office jobs.

The Cultural Revolution was an extraordinarily confused time. Hundreds of thousands of teachers and officials were killed, and tens of thousands persecuted shamed or tortured.  Hard to see that any group benefitted, even senior cadres. When Mao died, schools were reopened, certainly a peasant benefit. One could say that Mao’s death was a great benefit to peasants and all of Chinese.

The “household responsibility system” that came into place after 1978 that reversed the prior thirty years of policy was in fact a true benefit to the population. It was not a CCP innovation. This movement was begun by a group of farmers in Anhui who pledged to assist one another’s families if their proposal to farm their own land, instead of what was demanded by the Party leader, resulted in their death or imprisonment. That and the “township-village enterprises” that began at the same time were the real beginning of benefits to the Chinese people – begun at the potential threat from CCP.

The protests in spring of 1989 were not so much about democracy, but age old complaints – corruption and prices. Freedoms of speech and the press were added to the list of student complaints.  CCP response to student concerns about moral freedom is well documented in The Gate of Heavenly Peace, the 1995 film about the murder of hundreds of Chinese on the night of June 3, 1989. The tanks and soldiers came on orders from Deng Xiaoping. Leaders like Zhao Ziyang who wanted to appease the students were shunted aside, permanently.  Part II of The Gate of Heavenly Peace documents the events on the night of June 3. Shortly after, at a meeting of senior government and military officials, Deng proposed a moment of silence in honor of the martyrs. The revolution was sanctified by the blood of martyrs … that of soldiers who died that same night.

CCP cannot claim to be a peasant movement when it has killed so many peasants. CCP cannot claim to be working in  the interests of the workers when it has killed so many workers. Preservation of its own power is the only truth. That would hold true for every dynasty and every occupier over two thousand years.

In the last ten years, one can see the Xi anti-corruption campaign as a ruling house-peasant alignment, insofar as the rulers are attempting to assuage the belief of majority of Chinese that the system is fundamentally corrupt. No CCP officials close to Xi have been caught in the net.

The near term future for CCP and China requires substantial new spending on care for the people. Over the years Xi has made a number of announcements about improvements in rural health care and education and income equality. Results are not matched by the rhetoric. In the next few years, Xi will have to spend substantial funds on improving education and health care and stabilizing pensions, all of which have been ignored in favor of building things. See below.

Literati-peasants … I mean, citizens

The Chinese economic miracle for millions is no illusion. It is the greatest achievement against destitution in history. There remain 600 or 800 million Chinese who are demonstrably in poverty, with little hope of decent health care or schools or prospects. The most obvious evidence of the Chinese apartheid model, Qin says, is the hukou, which still constrains rural Chinese from access to urban education, health care, housing, and social services. The hukou is a place registration system, which still attaches Chinese to their place of birth (technically, that of their mother). Benefits are available based partly on one’s location at birth.

The hukou remains a substantial barrier between middle class Chinese (who may have an urban hukou) and anyone with a peasant (that is the term) hukou. As in America, middle class parents don’t want their kid going to school with poor kids.

What is difficult for CCP is the huge middle class that did not exist prior to about 2002. Many of the Chinese in that group are CCP members. But they want middle class lives and middle class securities and at least some elements of moral freedom – to be able to think for themselves and speak and write as they wish. This is the major feature of the occupation now – the restriction on moral freedom. Of developed countries, only in China is it still required to “think correctly” or be required to go through “thought reform.”

Rule of men, control of information, arbitrary disappearances and punishments, threats against family members and occasional maiming and killing of protesters has always worked wonderfully to keep the population in check. The people comport themselves as necessary to get along, but provide little intellectual or moral support to government. Politically, this has been the China lesson to the world. The Party-state occupation leads, the people follow.

Some Results

When dynasties changed, the officialdom did not change – think of scholar officials as the “deep state.” When the Mongols conquered the Song, they preserved the Chinese imperial governance system. The Ming kept the traditional elite governance system in place when they conquered the Mongols. When the Qing defeated the Ming, they preserved the Chinese imperial governance system. The literati, scholar-officials, imperial degree holders maintained.

Keeping the scholar-officials in place was always a wise choice, partly because rebellious farmers or expansionist tribes were not skilled at running a large country. The literati were subject to examination continually throughout their careers, even after passing imperial examinations. Chang describes the life of the scholars who had become officials as an “examination life.”

Thus the schools and the whole examination system aimed at forcing the gentry and those who were striving to become gentry into an “examination life” and channeling their thoughts into the lines of official ideology which emphasized the principles of loyalty and service. The indoctrinated gentry were then to inculcate these principles upon the masses. The goal was a peaceful world satisfied with the Manchu rule and the existing social structure.

Chang Chung-li (Zhang Zhongli). The Chinese Gentry – Studies on Their Role in
Nineteenth-Century Chinese Society. University of Washington Press, 1955, p 202. Available at  https://archive.org/details/chinesegentrystu0000chan/page/n9/mode/2up

Notably, this examination life did little to prepare officials for public management, although it created a tight ideology of loyalty to the emperor and the system throughout officialdom. No dynastic change could do without it. The 80% of the population that were peasants were usually unaffected, unless drafted into fighting for one side or another.

There were peasant rebellions in which the leader became emperor, or at least a sort of king over some territory, for a while. But most rebellions were crushed ruthlessly, even if it took a decade or more to do so. Dissidents had nowhere to go in the huge and isolated Chinese state. And while the state usually had little relation with individuals, it could find and punish individuals and their families ruthlessly if it wished.

The imperial government provided almost no social services for the vast majority of Chinese, and enforcement of laws or regulations was always subject to Legalist context, if not to imperial and local privilege. Law might be applied as Fairbank says, with a good deal of exactitude, but it was never constrained by a rule of law, a chance by a defendant  to make a defense, or habeas corpus. A person could be detained indefinitely and was presumed guilty.

There was no other source of power to constrain the state – no Church or powerful merchant groups or other neighbor states. Officials were exempted from taxation and from prosecution for most crimes. Local officials had to cooperate with local lineages or clans and merchant groups to collect taxes, and were thus isolated from contact with the populace. At the same time, local gods, local practices were left undisturbed, as long as tax revenue and corvee labor could be obtained. Officials did not remain in one location for a long period of time in any case – the same three to five year period as is done now.  And officials now return to school with some frequency for training before a new job or a promotion. There is serious concern about qualifications for office.

Victor Shih lends some support to this contention (though Shih is – pointedly – writing about the current dynasty).

Given sufficient time horizon, the autocrat has strong incentive to pay off local defenders of the regime, as well as incentive to promote development through awarding growth and supporting education. In sharp contrast to democracies, however, autocracies have little incentive to transfer money to areas with higher shares of the elderly, since they do not vote and their contribution to long-term growth is discounted. 

Victor Shih, Luke Qi Zhang, and Mingxing Liu. When the Autocrat Gives: Determinants of Fiscal Transfers in China. Working Paper, 2010. Available at https://scholar.google.com/citations?view_op=view_citation&hl=en&user=7HLuG6EAAAAJ&citation_for_view=7HLuG6EAAAAJ:ufrVoPGSRksC

Light central taxation – in the old days

Central government revenues were based on taxation of privately owned land. In the Qing, in 1753, land taxes accounted for 73.5 per cent of central revenues. Salt taxes accounted for 11.9 per cent, taxes on trade, 7.3% and 7.3% other (BMR, p 64).

Tax collection in China was always a difficult proposition. Tax protests, with violence, were common. Subterfuge in ascribing ownership, once a single land tax was implemented, was common, and since successful examination takers were exempt from taxes, this was a lucrative business for officials at the same time as it impoverished the central government.  One can see the failure, time and again, to successfully implement a land tax collection system is symptomatic of an occupation strategy – insufficient revenues meant requirements for local financing of nearly all infrastructure, at the same time as it increased the wealth of officials and left most Chinese at the mercy of a landlord who claimed benefits from land worked by others. It was feudal.

Central government expenditures in the Qing were about 50% to military and 17% to officials and bureaucrats. Infrastructure such as river transport maintenance or social services were about 10%.

From the Tang dynasty, a single property tax was the principle tax that farmers faced. There is no property tax in China now. In 2006 I did predict a property tax was coming, and there have been announcements of the beginnings of an attempt at a trial of maybe implementing an annual property tax, but so far, there is still none. Perhaps it will come with the general fiscal restructuring that I expect will happen in the next five years. But far too many officials own properties they could not afford on their salaries, so some means will need to be found to untie ownership to the property tax payee.

The major tax that people pay and don’t see is the VAT, 13% and more on luxury consumer goods and cars. The VAT is built into prices, so no one sees how much of their expenses are taxes. The VAT charge does not show up in customer receipts from stores.

Income taxes are deducted from salary when paid to the individual. The income tax is zero below a monthly salary of 3,000 yuan. That amount would now be a low starting factory wage. From about 2006, farmer income is exempt from the income tax, which leads some people with a peasant hukou to remain with that status rather than obtain an urban – citizen – hukou.

Stein Ringen argues that regardless of what one sees as taxes paid into the government, the Chinese system now remains highly extractive,  paying extraordinary benefits to the ruling class with minimal returns to the general populace. Formal taxation may be about 30% of GDP, but there is an additional 30% or so that is in the form of labor market repression, financial repression, land extractions, and similar policies. Opposition to the system is brutally put down, whether by formal means in the courts (where conviction rates approximate 99%) or informally, by hired thugs who beat up and occasionally murder protesters and free thinkers. The Great Famine and the Cultural Revolution are only the two best known of the wars conducted against the people. The Chinese people understand this current regime as continuation of the dynastic model. The arbitrariness of security crackdowns is a positive benefit to self-control and self-censorship. If people occasionally need a reminder, then the 1989 Tian’anmen massacres, mass arrests of women protesting harassment in 2016, the use of forced indoctrination camps for Uighurs in Xinjiang in 2018, and other daily examples are usually sufficient. The purpose of reform and opening up in the late 1970s was first and foremost to restore some fiscal integrity to a bankrupt government, rather than to provide better living for the population.  Ringen describes the Chinese political, security, and economic system as a “controlocracy” – a dictatorship perfected. There is no civil society from which either new ideas or opposition can spring up. People respond to oppression in many ways – by courage, by ingenuity, by helping and protecting each other, by opposing and protecting, by organizing, by subverting, by pretending, by surviving (…) as well as by acquiescence and obedience, by collaborating in oppression, by opportunism and cowardice. Ringen is reporting on the same relations between occupier and occupied that has been the case for most of the last two thousand years.

The Chinese Dream as promoted by Xi Jinping is a dream of state dominance in which the individual’s interests are aligned with those of the state. It is not a dream of individual achievement. I see the Chinese Dream as continued CCP “occupation.” CCP members are about 6.5% of the total population. Members with academic degrees are now more than 50% of the total membership and a much greater proportion of younger members.

Stein Ringen.The Perfect Dictatorship. Available at http://www.international.ucla.edu/media/podcasts/03.09.17-Stein-Ringen-tj-0cw.mp3

Merics. Who is the CCP? March 16, 2021. Available at https://merics.org/en/short-analysis/who-ccp-chinas-communist-party-infographics

In 2023, China is still unable to implement a stable land tax system – too many local official oxen would be seriously gored and far too many officials own property that would be impossible to purchase on a government salary. Remember that Google and the New York Times remain blocked in China for their 2015 stories on the wealth of the Xi Jinping and Hu Jintao families.

… heavier local taxation

There were no centrally imposed local taxes other than the land tax. But rebellions were usually about excess taxation, and that was always a local problem. The imposed taxes were “off the books” but necessary for local officials to do their jobs.

Jonathan Spence on the Ming and Qing officialdom –

it was still possible in a few years of officeholding to make enough money from salary, perquisites, special fees, and perhaps outright graft to repay all the costs one had incurred in obtaining the position, and retain a hefty surplus to invest in more land and in educating one’s own children ….

Jonathan Spence. The Search for Modern China.  W. W. Norton, 1991.

Chang Chung-li estimates non-official income extracted from locals in the Qing at nineteen times the official income. This would be bribes, local imposed taxes, imposed fees, taxes collected for the central government but never sent, and business income for officials.

Chang Chung-li (Zhang Zhongli). The Chinese Gentry – Studies on Their Role in
Nineteenth-Century Chinese Society. University of Washington Press, 1955, p 202. Available at  https://archive.org/details/chinesegentrystu0000chan/page/n9/mode/2up

Jared Rubin and Debin Ma. The Paradox of Power: Understanding Fiscal Capacity in Imperial China and Absolutist Regimes. Working Papers 17-02, Chapman University, Economic Science Institute, 2017. Available at https://ideas.repec.org/p/chu/wpaper/17-02.html

The exception that proves the rule – results of a lesser occupation

The Song dynasty is known for its openness, innovation and progress. We ask why China seemed to stop innovating at the end of the Song. There can be many reasons, but there is no reason to think that Chinese people suddenly lost the knack. (I briefly discuss the Song more in What Survived Gone with the Wind?)

We can see that a fearful and predatory ruling elite – Yuan, Ming, or Qing – saw no advantage to any disruptive change, or any change at all. The occupation took on a more insistent tone. Yuan and Qing were foreigners, and necessarily lived apart even as they used the literati for management of daily affairs. The Ming were scared of bandits from the borders and pirates from Japan and saw withdrawal into austerity as their best preservation move.

Becoming a merchant could offer great monetary rewards, but carried its own risks in dealing with officialdom. The non-literati elite – wealthy merchants, for example – were always at  risk of expropriation, in one way or another.

The perfect dictatorship that resulted from Confucian orthodoxy, ancestor veneration, control of literacy, local control with always available threats to individual and family and distant borders provided policies that rewarded obedience and compliance, and punished contrariness or defiance. Rather than “the squeaky wheel gets the grease” it was – and is – “the nail that sticks up gets hammered down.”

This cultural occupation for the benefit of the elite virtually eliminated innovation for a thousand years. Many economic historians see China at the end of the Song as perched on the edge of an industrial revolution. There was experimentation, and exchange of information, and confidence about the future. We can’t know what might have resulted from a 13^th century industrial revolution. But for that elite hammer figuratively pounding that commoner nail from about 1250, maybe we could have had a 13^th century industrial revolution. The Song showed Chinese what could happen when the occupation was lessened. The economy exploded. But the occupation returned when the Southern Song was defeated by the Mongols.

Why could the Song innovations not be extended? The Song was under attack from northern tribes for decades. In 1127, they moved the capital from Kaifeng to Hangzhou, establishing the Southern Song dynasty. Even that fell to the Mongols in 1279.

The Mongol dynasty – named Yuan – only lasted for about a hundred years before being defeated by the emergent Ming.

One might make the analogy of reform and opening circa 1978 to the Song innovations. When given a chance, Chinese are excellent makers, traders, and innovators. All they needed was for the occupation to lessen its grip. The economic explosion after 1978 was simply getting the government out of the way.

The modern economic argument about occupation

The raison d’etre for CCP is to achieve the communist state, like the traditional myth of da yitong in which all are at peace, no one is hungry or sick, and people take care of one another. It is heaven on earth. The first objective for CCP is economic development. That is written into the CCP constitution –

In leading the cause of socialism, the Communist Party of China must persist in taking economic development as the central task, making all other work subordinate to and serve this central task.

Constitution Of The Communist Party Of China. The Communist Party Of China. English Edition Of Qiushi Journal, 4:4, November 20, 2012. Available at http://www.xinhuanet.com/english/download/Constitution_of_the_Communist_Party_of_China.pdf Note: site is blocked in the US as of December, 2022.

Everyone in CCP – and seemingly everyone on the street – knows that development is the priority. By about 2020, that goal of a “moderately prosperous society” has been achieved for a substantial part of the Chinese population. For citizens in the eastern cities – Shanghai, Hangzhou, Guangzhou, Beijing, Tianjin, Dalian – the question is “Now what?” What is the next goal? World domination seems a bit heady. But it is a real question – do we get freedom next?

For much of its history, rulers were able to ignore the mass of Chinese people by taxing them little and offering them little. The economic development model used since 1978 did not alter that formula very much.

The model is a standard one in economic development field, and similar to that used by the US in its early days – develop industry and develop exports using finance and policies to do so. It recognizes that a country with excess labor could move some of that labor into more productive work without burdening food production or prices. For China before 1978, most production was consumed. There was little trade and little industrialization. With some investment directed in proper ways, there could be production beyond what was necessary for survival. This was industrialization. This is basically a W.W. Rostow stages of growth model with a bit of Harrod Domar – industrialization needs investment, and investment comes from savings. These ideas are not disputed.

When a country has excess labor – and China in the 1980s had plenty – it is a no-brainer to move that farmer from the field into a factory where he performs menial tasks but is instantly more productive than he was yesterday on the farm, and GDP explodes. Policies to make this model work in China required keeping interest rates very low, much below the rate of growth in the economy, so borrowers could borrow cheaply to invest in factories and roads and ports and airports. Concomitantly, interest rates paid to savers had to be kept even lower.

You should understand that artificially low rates on savings are another tax on savers, as is the hukou. The hukou prevents farmers from “moving to opportunity” except to work in factories or do construction as temporary workers. Their families may not accompany them, so they are stuck with rural education and health care.

This model worked to develop China for about thirty years. By about 2008 or so, China had sufficient infrastructure to become a world leader in exports and fuel a burgeoning middle class. As the investment-driven model was pushed and pushed, China began running out of projects with a positive rate of return, wages and food prices began to rise and those with vested interests in the model (manufacturers, real estate developers, banks, investment firms, local governments) lobbied hard to maintain the system as it has been. More and more supply-side stimulus was the only solution CCP could conjure for further development.

But in 2023 the low-wage, supply side investment push model (low wages, low interest rates, lots of concrete and little social spending) has outlived its ability to generate GDP. Using more investment to keep GDP growth up has become like pushing on a string. It is necessary to shift to a more consumption driven, social welfare model. That will be difficult.

how to understand savings and investment

A momentary visit with development economics, starting with a definition of GDP, the total amount of stuff produced in a locale each year –

Y = C + I + G + NX

This is a standard definition of GDP where Y = annual GDP, C = consumption in the economy, I = investment, G = government spending, and NX = net exports.

In China, we generally don’t bother with writing the G, since most investment has  been done by the state or its SOE and government social spending is quite low. For the last forty years, both I and NX have been unusually high. Investment has hovered around 40 to 50% of GDP, a rate seen elsewhere only for a few years when Japan was booming. China has become the factory to the world, and its net exports are also a very large share of GDP.

Now the equation above is an accounting identity, not a formula. It is not required that if I goes up, then something else must go down to keep a constant Y. But we can see that if I is 40% of the economy and NX is 20% of the economy then C can only be 40%. That C is all the buying and selling among Chinese in China. It is food and clothing and cars and education and entertainment. It is also the lowest share of total GDP of any developed country. The consumption share in the US is about 68%. In most other countries it is about 60%.

What does this mean in our model? We also say that savings – in banks and other intermediaries – equals investment. This makes sense – funds for investment must come from someone’s savings. In China interest rates are artificially kept low to benefit borrowers; savers are automatically disfavored. Wages are held low to keep export profits high and the excess labor pool allowed that to happen until recently. The hukou restricts worker longevity in one place and that helps keep manufacturing wages low. Wages and interest rates held low means that household income in China is the lowest share of GDP anywhere in the developed world. One should not be fooled by the those who suggest Chinese households save at very high levels. Chinese save at about the same rate as do other Asians.  A lot of those savings are not coming from Chinese households but from Chinese businesses in the form of profits and government in the form of taxes. Michael Pettis has been making this argument for at least twelve years. (two sample pieces –The Four Stages of Chinese Growth and How Much Investment is Optimal?) As GDP goes up, but household income does not keep pace, then consumption, which is a share of household income, must fall as a per cent of GDP.

This isn’t really economics, but arithmetic. You can think of the model as government taking money from households in the form of taxes and interest payments not made to savers, and giving the money to SOE and exporters and real estate developers in the form of lowered interest rates and huge overbuilt infrastructure projects. When you can borrow at 3% and the economy is growing at 8%, there just isn’t much risk in borrowing as much as you can. Years ago in the boom times, I heard a common business phrase in China – “the more risk, the more profit.” What serious business person thinks that way? But if you are assured of your position in the occupying regime, of course that makes sense.

And to the extent households do save, they do so to counter the lack of government funding for good health care, education for kids, trustworthy pensions, and senior care.

The occupation has kept household income share of GDP extremely low, the lowest in the world, so SOE could build infrastructure and factories could export at low prices.

This is the old model that won’t work anymore. There are essentially no more productive infrastructure investments to make, and there cannot be more growth in exports. We’ve not heard much recently about debt problems, other than those in real estate, but debt is still hanging over all the economy – notably now from local governments having to bail out local real estate companies and provide public services when a principal revenue source – selling land to real estate companies – has fallen dramatically. Since the population is now falling, particularly the working age population, there are fewer Chinese to buy new apartments to live in. The aging population and demographic bust mean that the government must spend much more on transfer payments. The government continues to try supply side stimulus (build stuff, lower interest rates, lower bank reserve requirements, subsidize small businesses) but these policies have run out of steam. What is needed is demand side stimulus (give households money via better health insurance coverage, better schools, better pensions for farmers, higher interest rates on savings, safer investments).

But demand side policies are what an occupation does not want to think about. It  would be taking money from Us (the state, SOE, exporters and real estate developers) and giving it to Them (ordinary Chinese households). It must perforce come, but it is anathema.

A sidebar – one can think of the Belt and Road Initiative as a way to keep export  levels high and provide jobs for Chinese making steel at home and building things in Africa and the rest of Asia. Aside from the geopolitical value of the OBOR, the projects were a way to delay the adjustments needed in the internal Chinese economy.

As another sidebar, the images of crazy rich Chinese spending spending spending are not illusory. Some people are making out like … well, Mancur Olson might say, bandits. Not all crazy rich Chinese are CCP members, but there is significant overlap. There are about 100,000,000 CCP members; with family, that might account for about 250,000,000 people. There are still about 1,000,000,000 people not buying frantically, and 600,000,000 or 800,000,000 of them still quite poor.

The new development model will need to be more concerned with the Chinese who are not crazy rich, or even a little disoriented rich. The occupation force has done quite nicely, thank you, over the past forty years. Many millions of Chinese are now part of that middle class occupying class. They have bought into the system. The benefits of being in the system can be substantial – decent salary, good health care now for all the family, good schools for kids, very good pension at retirement, living in a nice apartment in a neighborhood that is clean and well maintained. Sometimes we can characterize this idea as “socialism for the rich, capitalism for the poor.” There are social benefits – schools, tax laws, opportunities, health care, insurance, salaries, forgiveness of debts – that are available to the upper classes, but not the lower. Around 2007, a new tax law removed the burden of income taxes for farmers and for anyone making less  than 3000 yuan per month. That is a useful demand side benefit. Getting rid of the hukou would help, or at least permitting migrants to get health care and schooling where they are living and working, rather than only back in their home province.

Everywhere in the world, at all times, development and growth and political power derive from “the consent of the governed”  or it does not last. It may take generations for change to occur, but too much inequality, or too much oppression, or a gross sense of lack of fairness, always end the existing ruling system.

In the Chinese case, the literati and cultural Confucian expectations have always drawn a rebellious leader back to the authoritarian occupation model. Now, the huge CCP middle class, clearly heavily vested in the status quo, finds a way to remember the pledge.

The CCP pledge and all that implies has kept middle class cadres sufficiently loyal. The pledge is taken seriously –  Chapter 1, Article 6 of the CCP Constitution – A probationary Party member must take an oath of admission before the Party flag. The oath reads: It is my will to join the Communist Party of China, uphold the Party’s program, observe the provisions of the Party Constitution, fulfill the obligations of a Party member, carry out the Party’s decisions, strictly observe Party discipline, protect Party secrets, be loyal to the Party, work hard, fight for communism for the rest of my life, always be prepared to sacrifice my all for the Party and the people, and never betray the Party.

Not so many members turn their back on their pledge.

Colonizers want trade – occupiers want stability

There remains one additional argument for the concept of Chinese as an occupied people, and that is the stagnation of China post-Song dynasty. There were periods of strong economic growth and creativity in China, in the Tang, Northern Song, and Qing. Arts flourished at times in the Qing and before. Inventions were not lacking. Many observers – Mark Elvin, for one – have wondered whether flourishing in the southern Song might have led to a sustained period of economic development, the first industrial revolution, but for … and the but for is the unanswered question. The easy answer is that the Yuan dynasty, the Mongol foreign dynasty, disrupted the conditions for growth. That does not make sense for a colonizer.

Colonizers are willing to see the colony grow and prosper – the more growth, the more extraction. But part of the tacit agreement, part of the stationary bandit terms, is that growth must be limited to growth that the emperor can control and does not violate an interpretation of Confucian principles. For a resident bandit seeking colonization or annexation, more growth is good. More foreign trade would be a good thing and invention would be a good thing. These might be discouraged if they gave too much advantage to commoners with respect to the gentry or threatened ancient class relations. The occupation might be threatened. That is in fact one of the arguments for Ming closing off of trade – too many merchants with too much money.

Control meant that government would always retain a superior position in key industries and institutions. Historically, that included salt and iron, tea and silk.

China had problems with coastal pirates since before the Han. Chinese military fleets were unable to control the coastline, with thousands of inlets and small islands and rough waters that were known only to locals. There was substantial international trade in export of porcelain, tea and silks, but instead of increasing protections for trade, the general response from the Song dynasty on was to restrict or eliminate trade and turn inward. This may have been because the empire was more concerned with barbarian uprisings on the western and northern borders; but in any case trade that would benefit many merchants and Chinese families was scrapped. At three different times in the Qing the entire population within 50 li of the south coast (roughly two miles at the time) was forced to relocate inland. This was to eliminate piracy and sanctuary for Ming loyalists seeking to overthrow the Qing. This was a great hardship for local people all along the coast. To me, that is not the action of a colonizer, which would work hard to exploit more resources and might possibly work to protect the local population. It is the work of an occupier, unconcerned about the well-being of the locals.

Angus Deaton argues that the prohibition on trade starting about 1430 arose from fear in the imperial capital that merchants were getting too rich from trade, with corresponding power. That was considered a threat to the power of some bureaucrats in the Ming, which began a four hundred year-long isolation through the Qing (with some letups in prohibitions from time to time). Deaton’s point is that the Empire was unwilling or unable to recognize gains from trade; or as noted by the Qianlong Emperor  in 1793 “… we have no need of your manufactures.” Well, yes. Qianlong had no need. The imperial eunuchs had no need. One could say that China saw nothing outside its national boundaries that rivalled what the Chinese state had achieved on its own. One could also say that the imperial court and the attendant literati saw no need to take care of the vast majority of the population.

Innovation always needs government, and needs it in two ways – to get out of the way, on one hand, and be supportive on the other. Song dynasty inventions were largely of a type for which the government had a purpose, or for which scale was important in making them useful – gunpowder, steel, paper money and ship building. In the Ming and Qing, government was mostly not supportive and sometimes actively opposed to private invention. In the early 19^th century, when England and then Europe began its own industrial revolution, the early inventions like the steam pump, looms and spinning jennies were inventions in which the government had little interest. At the same time, the government permitted the “marketplace of ideas” (or Joel Mokyr’s Republic of Letters) to flourish. Dissemination of information was not hampered. Commercialization was not limited.

The opposite was the case in China. No “marketplace of ideas” could develop when the conditions were otherwise ripe. No “republic of letters” could develop when the best and the brightest were committed to a lifetime of study and memorization of 200,000-plus characters in the classics and commentaries and imperial edicts. By the time foreigners entered China, in the late Ming, they could observe the withering away of curiosity and creativity that had taken the Song close to self-sustaining economic growth based in creative destruction and innovation. The stationary bandit-occupant had no interest in innovation that might disrupt the balance by letting too many commoners into the role of gentry – too much money or influence.

Today, the state monopolies include transportation, tobacco, chemicals, steel production, railroads, power generation and power grid, oil production and distribution, finance and telecommunications. CCP will say that there are many private companies in this mix, but private is clearly defined differently than we would in the west. In prior dynasties, growth that required too much change, or coordination across class boundaries, or even provincial boundaries, was suspect. Today, growth is encouraged with a watchful CCP eye. In 2023, despite Xi’s pronouncements to the contrary, the trend is to combine state-owned businesses to make them fewer and even larger.

More on occupation now – moral freedom

An occupying force lives in fear of rebellion. Chinese dynasties have always been afraid of local rebellions, with good reason.

When rebellions happen now, for whatever reason – theft of land from farmers, a corrupt local official, environmental problems – information must be kept under strict control. Some news to the public may get out; but all sources of information must be monitored “for the public’s own good.” We think of June 4^th as protests and killings at Tian’anmen, but there were large protests in cities all over China at the time. That sort of common action, even if not coordinated, must not be allowed. It is a threat to harmony – more importantly, it is a threat to CCP occupation. See Human Rights Watch, the Council on Foreign Relations, the Brookings Institute, Voice of America.

Western web sites are devoted to stories of detentions, disappearances, and imprisonments for disruption of harmony – which is anything that questions the role of CCP in occupation. Just as a reminder – “You Might Disappear at Any Time”. These are usually people who have broken no law, according to the Chinese constitution. They have broken the rules of CCP – to question the moral authority of CCP.  There is no church, no union, no community organization, no journalist to appeal to for help. Lawyers who do take cases – and there are a surprising number who still do this, out of a sense of justice – are subject to the same threats and jail. Torture, threats to self and family work wonders to tamp down dissent. Remember that the law works for CCP.

CCP exercises its fears as only a technologically advanced government can. It is the panopticon state. Every movement of every individual can be tracked, every phone call or text monitored. Police can be thuggish; the chengguan, city management officials, can beat or kill farmers trying to sell from carts on the street or beat up farmers looking to get paid for their construction work. Citizens can disappear for days, weeks or months or years without any contact with the outside world. If arrested, the conviction rate in court is about 99%. Jail sentences are handed down for minor offenses. Now with social media and social credit scores, an individual can be cut off from using the train or airplanes or going into stores.

From Chinareflections.com in 2018 – Winnie-the-Pooh is now censored in China, and a Shanghai artist who put an altered Xi picture on t-shirts, suitcases, and coke cans was arrested, facing five years in prison.

Source:  https://www.koreaherald.com/view.php?ud=20130613000972

This sort of behavior by government is not colonization, not annexation, not full incorporation of wayward citizens into the society. It is occupation.

Occupation now is much more about thought control than economic control.

The question for 2023 is whether China can continue to rise under the stiffening occupational burden coming from Zhongnanhai.

Xi announced in 2012 that CCP must lead in every aspect of society – education, manufacturing, services, arts. And as in prior dynasties, the arts and media must serve CCP.

Yuen Yuen Ang has written an excellent analysis of Xi’s motivations now in The Robber Barons of Beijing in Foreign Affairs. Xi has worked hard to control corruption in CCP, but corruption as access money – gifts for favors or favorable rulings – has exploded since about 2000 and Xi cannot control it. The  reason for that is the economy now has so many more points at which access can be useful – land leases, construction contracts, advising on investments. As is said – without guanxi, nothing is possible; with guanxi, everything is possible.

Good relationships are the way business has always been done. Rule of law can be a burden in getting things done. It can diminish the usefulness of bribery or good relationships. But China does not have rule of law. Who you know is still critical to success.  It has been that way for more than two thousand years.

CCP is anxious to encourage invention and investment in the economy. The government sponsors small business incubators and investment in new technologies and has several lucrative programs to attract Chinese scientists back from overseas to set up labs and do research in China. And, of course, we have the potential stimulus to the economy that comes from theft of intellectual property.

The fundamental problem for inventors and tinkerers and investors remains the specter of the “anaconda in the chandelier.”  We look at the wanton destruction of Falun Gong, real estate companies, tutoring companies, tech companies in the last three years. Anyone with an idea is going to ask themselves, at what point will the anaconda come for me? This is hardly different from the specter of government or merchant association intervention hundreds of years ago in the Ming or Qing. No one ever knows when a red line has been crossed that will trigger being “asked out for tea.”  All too often, when one questions the reason for being summoned to tea by the police  – “what did I do?” the answer comes,  “You know what you did.” Vague accusations and vague interpretations of law are mother’s milk to an occupying elite.

Ang writes that Xi has chosen just the wrong medicine to fix current problems. He could have promoted rule of law, but that would hamstring CCP generally. He could have focused more on demand side stimulus to the economy, rather than continue the supply side stimulus that has been the model for forty years. He could focus intently on education improvement, access to education, health care improvement, health insurance, clearing of environmental problems in land and water, and pension security improvement. Pointedly, not. Xi’s purity campaigns have done nothing to lower inequality. His path is the path of an occupying emperor – command and control. Chinese citizens barely exist in the current model; the oligarchs of CCP are those whom Xi wishes to placate.

Occupation according to law

Don Clarke did an analysis of law in China in Is China a Dual State? The concept of a dual state is that a dual state is one in which two parallel orders co-exist: the Normative State and the Prerogative State. The former is the realm of law; the latter, the realm of arbitrariness. Legal order and lawlessness co-exist. Thus, it might be better to think of the normative state as the realm of rule by law, whereas the prerogative state is the realm of rule by arbitrary decree.

Clarke says China under CCP is not a dual state as usually defined. What he means is that there are no directly political courts to seize control from government courts in cases deemed sensitive. On the contrary –

Dissenters and opponents of the Party cannot take legal norms and institutions seriously as swords or shields. Denying opponents the legal counsel of their choice and preventing them from calling desired witnesses, the state seems uninterested in maintaining even a façade of fairness in its legal institutions.

Indeed, the Chinese government seems to have anticipated these criteria and publicly announced its non-conformity: In February of 2011, responding to a foreign journalist’s question about which specific law journalists were being accused of violating, Ministry of Foreign Affairs spokesperson Jiang Yu said, “Don’t use the law as a shield. The real problem is that there are people who want to see the world in chaos, and they want to make trouble in China. For people with these kinds of motives, I think no law can protect them.”

In other words, the law will not protect someone “making trouble in China.”

Most cases in China get resolved “according to law” is the term used in China. Clarke asks How, then, do we explain what appears to be law-following behavior by agents of the state without resorting to a dual-state theory?

The political sphere is a vacuum as far as law is concerned. Of course it contains a certain element of factual order and predictability, but only insofar as there is a certain regularity and predictability in the behavior of officials. There is, however, no legal regulation of the official bodies. This predictability can look like the protection of legal rights, but in fact need be nothing more than what Tom Ginsburg has labeled the “actuarial” protection of rights: it may be statistically likely that in any given situation, state agents will act in a lawlike way, but it would be a mistake to confuse this statistical probability with a legal motivation.

We know that in 2019 the Central Committee issued a Regulation on the Communist Party of China’s Political-Legal Work that has wide implications for all law in China, including all government use of law. As with all other endeavors under Xi, the Party will lead everything. This is nothing less than putting all law, all security under the supervision of the occupying forces of CCP. We know the courts are not independent of CCP – their leadership is CCP, not the government. Prosecutors are not independent either. Ling Li has an analysis suggesting that for the first time, I think, CCP declares the absolute leadership of the Party over the work of all zhengfa institutions, including courts and procuratorates. The assertiveness of this declaration indicates a complete and unambivalent severance from the judicial independence framework.

I think it is easy to explain the treatment of people deemed “troublesome” as having been noticed by the occupation forces. When a CCP official wishes to take notice of a case, all that is needed is a phone call or a dinner to set the political wheel in motion. Matters not if the case is low level commercial or civil in subject matter. If it is of interest to CCP, it is political and subject to “occupational hazard.” More than anywhere else, the personal is political.

We see that Xi has chosen to take down the real estate industry, which in its entirety accounts for about 25% to 30% of GDP. He has chosen to take down high tech information companies like Alibaba, ByteDance, and Tencent. He has chosen to take down the after-school tutoring industry, which employed hundreds of thousands of Chinese. These industries will not disappear, but they have become substantially riskier for investors and potential employees. The crackdown on foreign businesses – particularly American – has led many companies to leave China or plan for investments elsewhere. Government salvation for big real estate companies in the form of money to pay off bonded debt will put foreign investors low on the payback chart. Foxconn makes about 75% of all the iPhones sold. They have told their suppliers to prepare to sell to Foxconn somewhere outside of China, perhaps Vietnam.

China is a big country and despite what we sometimes think, Xi is not government by himself.  But it feels as if the current dynasty has one of those emperors who has gone off the rails, signaling the end of the dynasty. Perhaps not in the next year, or five, or ten, but without substantial restructuring to a more evenly balanced economy the rebellions will appear, social media controls or not, and police thugs or not. What is missing now – and has always been missing, but now more salient – is moral freedom.

De Tocqueville on China

Alexis De Tocqueville said that Chinese have “tranquility without happiness, industry without progress, stability without strength, and material order without public morality. With them society always gets along fairly well, never very well.”

Democracy in America, Volumes One and Two by Alexis de Tocqueville, trans. Henry Reeve, The Pennsylvania State University, Electronic Classics Series, Jim Manis, Faculty Editor,  2002, p 109. Available at https://www.academia.edu/4780188/Democracy_in_America_By_Alexis_de_Tocqueville_A_Penn_State_Electronic_Classics_Series_Publication

De Tocqueville is describing moral freedom and its lack. This is what libertarians and radical Republicans talk about – the loss of moral compass that comes with loss of personal responsibility for success or failure, progress or not, well-being.

De Tocqueville goes on to say that such a society is one in which the desire for official office, for government employment, is the highest desire.  

There is no need for me to say that this universal and uncontrolled desire for official appointments is a great social evil, that it undermines every citizen’s sense of independence and spreads a venal and servile temper throughout the nation… (Democracy in America, page 707).

Absolutely prescient. In the Ming, in the Qing, and in CCP, the greatest ambition of the best and the brightest is for government service. Central government now takes fewer than 1% of applicants each year. The exam to enter national service is a major late fall event.

But I think that administrative centralisation only serves to enervate the peoples that submit to it, because it constantly tends to diminish their civic spirit.   (Democracy in America page 754)

The love of public tranquility becomes at such times an indiscriminating passion, and the members of the community are apt to conceive a most inordinate devotion to order.  (Democracy in America, page 754)

Describing the literati in China …

Suppose a nation stands apart from the rest of mankind: independently of certain general wants inherent in the human race, it will also have wants and interests peculiar to itself: certain opinions of censure or approbation forthwith arise in the community, which are peculiar to itself, and which are styled honor by the members of that community. Now suppose that in this same nation a caste arises, which, in its turn, stands apart from all the other classes, and contracts certain peculiar wants, which give rise in their turn to special opinions. The honor of this caste, composed of a medley of the peculiar notions of the nation, and the still more peculiar notions of the caste, will be as remote as it is possible to conceive from the simple and general opinions of men. (Democracy in America, page 700)

… and CCP now.

I don’t mean that all CCP is disconnected from the wishes of most Chinese. Far from it. I do mean that authoritarian occupier regimes inevitably make a sufficient number of major mistakes to cause rebellion. Of course democracies make mistakes. But they have an ability to self-correct. Francis Fukuyama reminds us that the critical problem for dynasties is the “bad emperor” problem. Its quite a reversal from 2012, when people thought Xi Jinping was a good reformer, but he is looking more and more like one of those bad emperors that signal end of a dynasty. Plenty of bad problems not of his doing, but also far too many own goals. Remember Mencius Wan Zhang I.5 (5A.5) – “Heaven sees according as my people see; Heaven hears according as my people hear.”‘  Sometimes it takes a decade or two, but heaven does finally see and hear and then the bright-eyed, bushy-tailed tianzi, the son of heaven, is no more and tianxia, all under heaven, actually belongs to somebody else. Tianchao, the celestial empire, is no more.

Bao Tong was policy advisor to Zhao Ziyang, CCP General Secretary who was forced to resign in May, 1989, for his wish to discuss with the student leaders at Tian’anmen. The resignations and the attack on the students were both ordered by Deng Xiaoping. Both Zhao and Bao spent the rest of their lives under house arrest.

Bao continued to write and speak out to people in the west.

From a CNN interview of Bao Tong with Rebecca Mackinnon in 1999 on CCP leadership –

“We must correct all of Deng Xiaoping‘s mistakes. This is the only way to truly uphold Deng Xiaoping’s vision. This is what it truly means to carry on Deng Xiaoping’s work. Only when they acknowledge his mistakes and correct his mistakes can they stand taller than Deng Xiaoping. Otherwise they have no right to call themselves Deng Xiaoping’s successors. They can only call themselves the successors of Deng Xiaoping’s mistakes.”

On Zhao Ziyang – [his] life formed part of a heroic and mighty task, that of pioneering the protection of human rights and democracy for the Chinese people … To mourn Zhao is to defend human rights. To mourn Zhao is to pursue democracy and the rule of law.

https://web.archive.org/web/20060523032924/http://www.asiaamerica.org/Backup/ChinaInFocus.html

On trust, referring to the 2008 milk scandal that killed babies and sickened thousands and was hushed up in favor of the 2008 Olympics – The tainted milk scandal shows us that the more dark secrets are exposed, the better. You can’t cure the disease, or save the Chinese people, until you get to the root of the problem…. If the Chinese government tries to play down this incident, there will be no social stability in China, let alone harmony … It will mean that this government has lost the most basic level of trust.

https://www.rfa.org/english/news/china/milk-09232008075809.html?searchterm=None

Zhao and Bao were considered to have made “mistakes.” Their mistakes were to potentially compromise CCP invincibility in favor of the Chinese people.

In a 1990 Foreign Affairs article Lucian Pye called China a civilization pretending to be a nation-state (“Erratic State, Frustrated Society.” Foreign Affairs. 69(4), 1990, pp 56-74). He meant that China operates with a particular view of its own cultural supremacy resulting from its historical continuity and cultural unity over time. China doesn’t act as a balancer in international relations; its rulers tell its businesses what to do in foreign lands, and the businesses obey out of loyalty to the civilization. CCP monitors Chinese when outside China and threatens them if they say something perceived as disloyal. Its foreign relations are conducted mostly ruler to ruler, rather than through multitudes of agencies and businesses. The government is regarded as the guardian of the people with natural authority over their daily life.

Moral freedom

As de Tocqueville describes Chinese in the passages above, these are not descriptions of a people that senses itself free. This is a culture in which the individual is always socially connected and socially embedded, leading to a sense of satisfaction and contentment, but without the sense of individual strength, individual achievement, individual confidence that comes from the sense of self-mastery, or, better, mastery of the external world.  The person is always dependent on others for well-being, whether government or clan or lineage group or village.

We note that the ages of great growth in China, the ages of invention and innovation, were those of “plural China,” when centralizing tendencies were loosened, when greater freedoms were offered in exchange for service in imperial armies or more taxes.

This is the real problem Xi Jinping now brings to China – that fear has again become a central feature to be parsed alongside investment risks. Chinese people won’t change, but their reasoned evaluation of risks will. So, too, for foreign investors.

The desire for more centralization, more paternalistic behavior, need not be a conscious one on the part of either ruler or populace. It is a result of cultural beliefs – Confucianism, taken to a political next step; of lineage or clan society; of population density; of banding together against the barbarians; of local control only supervised at the margin by the central. We have noted that the central government actually provided little. But the image of a powerful leader, a benevolent father-figure, is seen everywhere – in volunteering in crisis; in the desire, even approval, for power to be exercised; in the acceptance of absolute inequality; and per Ci Jewei, acceptance of agency through identification rather than agency through freedom (See the chapter The Civilization State and Freedom).

Now, the great innovation of the last twenty years can only come from a people who feel sufficiently free to take risks without excessive fear of expropriation or arbitrary arrest. And the great question of the moment, of the age, is whether CCP can continue to permit that sense of freedom, involving, as it must, pushing the boundaries of current permissiveness. As we see in 2023, the answer seems to be no. The police, the People’s Armed Police, the hated Chengguan, the local prosecutor’s office Jian cha yuan 检察院 , and for CCP members, the local discipline inspection bureau Jiwei work hard to ensure people’s thinking correctly.

The propaganda bureau xuanchuan 宣传 has promotion of thinking correctly as it primary task. The Ministry of Industry and Information Technology and its 50 cent army and internet censorship and the various state information offices also work hard to control thought. As I have been told by the research director at one of the leading CCP Party schools, the source of all morality is the leader himself. To oppose the leader, to think differently, is then a form of immorality. It is Mao Zedong Thought and Xi Jinping Thought that have been enshrined in both the CCP Constitution and the Chinese Constitution.

I’m verging on a bit of a Marxian analysis – the state as an instrument of repression wielded by the ruling class. Patricia Thornton explains in Disciplining the State: Virtue, Violence, and State-making in Modern China –

Yet state-making is, in China as elsewhere, a profoundly normative and normalizing process, seeking not only to impose a particular moral order within which the state can claim primacy, but also to make the presence of the state at the center of that totalizing vision appear both natural and necessary. These activities rely on … the ability of a regime to construct itself as an autonomous moral agent simultaneously separate from and embedded within an imagined political community.

Any alternative moral voice is destroyed or carefully monitored. CCP now appoints bishops of the Catholic church in China, a policy to which the Vatican – inexplicably – agreed. Even the Shaolin Buddhist monks have signaled their allegiance in an unprecedented move to raise the Chinese flag on their grounds. One of the reasons to destroy independence in Hong Kong and Taiwan and Tibet and Xinjiang is they represent alternative Chinese moral voices. One might say, there is no god but CCP, and Xi is its prophet.

Occupation then and now

Many China observers have wondered, as has Orville Schell, how the fumbling, ideological China of 1975 could become something entirely more open, more modern, more commercial in a period of 10 or 20 years.  How could a society transform itself?

I think the answer bespeaks the occupation argument. The Chinese people were desperately hungry for a return to family values and respect for their property rights. They have always been willing to work very hard as long as their family and clan could benefit. These are traditional conservative or Protestant values, if you will. When the occupational forces lessened their grip, just a little, a tsunami of energy poured into the gap. From the beginning in 1978, when farmers could decide what to grow on their own land, sell to whomever they wanted, and keep the profits, grain production increased by one-third in six years (Barry Naughton, The Chinese Economy, MIT Press, 2018,  p 89).

Chinese people retained a fear of government crime and punishment over the centuries. When they could safely take advantage of a crack in government regulation, they did as Sunzi advised. In other words, the society did not need to change. The ruler needed to change, as it did in the Song, and the Qing, two other times of surprising progress in development. The saying in China is guo jin min tui  “the state advances, the private (sector) retreats.”  While there is something of a tautology to this saying, it describes the oscillation between strict control and lesser control that characterizes the dynastic cycle and the periods of substantial growth in the Tang, Song, and later Qing dynasties. We saw a mini-cycle again in the first thirty years of CCP control with extreme control of the economic and the intellectual marketplaces, then substantial loosening for about thirty years, and now reaffirmation of state control.

The American counterpart might be to think of the black population in the south, pre- and post-Civil War.  Leadership changed; de jure law changed; white rule, plantation rule, translated to de facto government rule, not so much. I don’t want to make too much of this analogy. But for me, it helps understand power relations in China. An occupying force seizes every opportunity to project and use power, to keep the threat of death and destruction always in mind, while leaders remain aloof from the commoners and commoners never have certainty about rules and regulations.  I think that describes China over the centuries. Elvin on the practices of what one can see as an occupation –

There can be no doubt that from time to time the officials and their underlings, in a time-honoured Chinese phrase, “hunted and fished” the people, including merchants who had no official protectors (Elvin, Patterns of the Chinese Past,  page 289).

We know about crushing of dissent in China – anything that resists or opposes CCP.  But within the occupying force, there is room for heated discussion and consideration of alternative ideas. The Counsellor’s Office was set up at the high level of CCP to get views from non-party members.

The office chief Wang Zhongwei stressed that the counsellors can speak their mind freely when they discuss policies…. “[Free discussion] has never been an issue,” said Wang. “Before the detailed implementation rules for tax reduction were announced, our opinions were different from those of the Ministry of Finance and we have had very heated debates. These discussions were allowed.”

Zhuang Pinghui.  The Counsellor’s Office -Top Beijing think tank reveals the secrets of the Chinese Communist Party’s policymaking. South China Morning Post (online) October 28, 2019. Available at https://www.scmp.com/print/news/china/politics/article/3035238/behind-scenes-beijings-policy-powerhouse

Midlevel Party members can receive some benefits – certainly the assured job with a decent salary, pension and health benefits and health care are big factors. Above a certain level – upper mid-levels and higher – CCP members have special treatment, even as they live among the people. They eat special food, grown in government farmland and away from dangers of pesticides and heavy metals.  They have special treatment at hospitals, see the best doctors on short notice, and of course, their kid (still only one) gets special allocation and special treatment in school. Within some bounds, they – and perhaps their family – are free from prosecution for crimes, although that is now subject to change. But the law still is not independent of the state, but a tool of government.  Judges report to CCP, not to an independent arm of government. The law serves the purposes of the state, not the quest for justice. High leaders continue to vote with their feet, moving kids or entire families to the west, perhaps not to return. Money follows. Notably, the government has clamped down harder on the money outflow since the stock market collapse in 2015.  There are still surreptitious ways around that. Families are generally still permitted to leave China – and kids to go to school outside – although recently problems have developed for Chinese government officials with foreign spouses. No more promotions.

In 2017 I had an excellent lunch with a senior party member and a friend of his. The friend was very wealthy and owned several businesses in China. His wife and two sons were in the US and had been for more than ten years. The sons were now high school and college age. They were going to school in the US, were reluctant to go back to China even for spring festival. Their father apologized to me for the poor Chinese language skills of his sons, but what could he do?

A good friend of mine with a senior position in Hangzhou city government was to meet me for dinner. The restaurant I had chosen was a very popular local place, adjacent to the famous Longjing National Tea Museum and in the heart of the famous and expensive Longjing tea farming land. Longjing green tea is known as the tea of emperors. This same friend had taken me to the tea museum many years before. There could not be any reason to miss this location.  My friend was late for our dinner, even after calling me twice for more details on the location. He had never been to the restaurant adjacent to the museum. Did not know the place. He had lived in Hangzhou all his life. He did not eat there. Even when dining out, he ate other food in other venues.

In Tianjin, we were given a gift of a bag of special rice, grown only for provincial vice-governor level and higher. To tell the truth, I did not notice any difference in the taste. But everyone felt assured of the quality.

As to threats and punishments for wrongdoers, or those simply accused of being wrongdoers –

For both rewards and punishments, it can be useful to think of relationships akin to those in an American high school. Two people can pledge to be best friends forever, and truly mean it.  And two people can despise each other with a passion, and get others to agree with them to act on their emotions.

The difference is that the cases in China are about real people being put in jail for years without evidence but at the suggestion of someone higher up in CCP who  wants revenge for some act of years ago.

It is important to remember one of the ten commandments offered by László Ladány in the final edition of his China News Analysis in 1982 that summed up an approach to the study of politics in the People’s Republic of China – Remember that no one living in a free society ever has a full understanding of life in a regimented society.

Laszlo Ladany, China News Analysis, cited in Geremie Barme, Watching China Watching. China Heritage. The Wairarapa Academy for New Sinology. Available at https://chinaheritage.net/journal/the-china-expert-and-the-ten-commandments/

A colleague of mine was called in to talk with the jian cha yuan the prosecutor’s office in the investigation of another colleague. She was asked questions for about an hour, the interrogator was making notes, and at the end of the questioning my friend was asked to read and sign the statement based on the answers she gave.  There were many differences, some writing the very opposite of what she had said, all by way of supporting a charge against my colleague. My friend is honest, and refused to sign the statement as presented. But one can imagine many others, with a veiled in-person threat from the jian cha yuan, signing anything just to get out of the building. The colleague under arrest spent 7-1/2 years in jail on completely false charges. He had been reported by an old political rival early in the anti-corruption campaign. That vengeance seemed to be the reason for the arrest. The local jian cha yuan wanted to look good for having put someone in jail. The conviction rate in Chinese courts is about 99%.

I am aware of three instances in which a university person was arrested and charged with a crime. By my accounts, one of which I am personally aware, the accused did nothing to warrant arrest. A fourth person, a judge, told me she feels guilty at having to put people in jail without evidence but on the direction of some higher-up in CCP. All these are violation of moral freedom – the right to think and speak as one wishes.

How can it be that members of the Politburo, living in Beijing, breathe the same air as the rest of the population, air that is dangerous to inhale? The answer is, they don’t breathe the same air. Air filters and purifiers are everywhere they go. One is reminded of Mel Brooks in the History of the World – “Its good to be the king.” Or the literati or the governing elite.

CCP has always been the vanguard. It makes no bones about it. All policy, all law, all art and journalism is directed not at improvements for the Chinese people but at preservation of CCP.  At the 19^th Party Congress CCP vowed to lead everything. Xinhua reported in 2017 that “Party, government, military, civilian, and academic, east, west, south, north, and center, the party leads everything.”

At the 20^th Party congress, the language was  built in to the CCP Constitution –

Leadership of the Communist Party of China is the most essential attribute of socialism with Chinese characteristics, and the greatest strength of this system. The Party is the highest force for political leadership. It exercises overall leadership over all areas of endeavor in every part of the country.

North, south, east and west.

As a good occupier seeking benefits to itself, CCP under Xi has removed some of the thin red lines separating party and government.  Some of the changes are shown below –

Source: The Party Leads on Everything. Mercator Institute for China Studies, September 24, 2019. Available at  https://merics.org/en/report/party-leads-everything

For me, there are two defining moments for occupation under Xi. One is the litany of Xi Jinping crackdowns on business and openness. The second is the despicable treatment of apartment buyers whose lives are in limbo as they have paid in full for apartments they may never occupy.

Now we see the direct results. The energy of the Chinese economy is gone. The goodwill of the world, including that of many people in the US, is gone. Foreign investors will still come as long as they can benefit from the authoritarian regime Authoritarian leaders everywhere in the world will still benefit from Belt and Road projects, but the “soft power” image on which CCP worked so hard is in tatters.

The Xi crackdowns remind me of nothing so much as the Ming crackdown on the energetic and remarkable growth and innovation that began in the Tang and Song dynasties and continued through most of the Yuan. The Song dynamism that some economic historians see as a first industrial revolution was stamped out. It was excess taxation, fear of foreigners and fear of commerce as an alternative voice to the ruler that destroyed national progress. From Ming dynasty – science and technology citing Joseph Needham in Science and Civilisation in China -Volume 4, Physics and Physical Technology Part-2 – Mechanical Engineering –

When the Ming founder Hongwu came upon the mechanical devices housed in the Yuan dynasty’s palace at Khanbaliq – such as fountains with balls dancing on their jets, self-operating tiger automata, dragon-headed devices that spouted mists of perfume, and mechanical clocks in the tradition of Yi Xing (683–727) and Su Song (1020–1101) – he associated all of them with the decadence of Mongol rule and had them destroyed.

https://www.scmp.com/economy/china-economy/article/3204688/chinas-wary-private-sector-takes-wait-and-see-attitude-after-beijing-pledges-unwavering-support?utm_source=Twitter&utm_medium=share_widget&utm_campaign=3204688

The after-school tutoring services, a critical component of middle class Chineshttp://www.scribd.com/doc/302492321/Science-and-Civilisation-in-China-Volume-4-Physics-and-Physical-Technology-Part-2-Mechanical-Engineering-1965e aspirations, were wiped out. Big tech companies like Alibaba and Meituan were targeted in anti-trust investigations and basically curtailed. Property developers, who did need reigning in, were hobbled to the point of bankruptcy and their foreign investment potential destroyed. Private sector financing difficulties continue, to the benefit of SOE. Party cells are now a requirement for all businesses of any size, including foreign businesses. Foreign businesses are now targeted even more than they were before for any violations of regulations. Now millions of new college graduates have little or no prospects of finding the kind of work they and their families expected. We see emerging fear of foreigners and fear of commerce now. The occupation has entered, as we say, “interesting times.”

You know about the problems in the real estate industry. Overbuilding and overmarketing are not unknown in the US. But law and regulations and mortgage banking discretion do not permit buyers to take out mortgages in full for apartments that are shells, perhaps even unstarted. There would seem to be some moral hazard in permitting that – developers would just take the money and … well, maybe not run … but have little concern for finishing the project for which they took the money, while they use the money from buyers and their bank to bid on other vacant land offered by the local government, or maybe finish the project promised for delivery two or three years ago. It is a Ponzi scheme. It is not legal, even in China, but it is the practice.

Now homebuyers who are on the hook for hundreds of thousands of dollars in mortgage payments have no place to turn. The local governments are only interested in tamping down protest. Courts are not a viable solution. Buyers have joined forces to threaten to stop payments on mortgages, hoping that action against their banks will encourage  government to find some solution. But in the grossly intertangled web of relationships among government, banks, contractors and real estate developers, home buyers and their mortgage problems have little sway. Governments to date – early 2023 – are only seeking to threaten home buyers who protest and demand action and bail out some developers, more for their debts than to finish projects started years ago. Economists refer to Chinese government actions as supply side benefits – assist the forces of capital and ignore demand side benefits, like helping home buyers directly with mortgage payments or funding project completions directly. Even at that, thousands of home buyers will have double-spent on rent or another mortgage for two or three years or more while those old bugaboos of Marxism – the owners of capital and their lackeys in government – sort out a response minimal enough to forestall rebellion.

In the Hu Jintao era the heavy hand of occupation lifted a bit, and Chinese experienced a little more openness. It is true that corruption was also running rampant. Xi’s portfolio was to save CCP, not improve the lives of Chinese people. Xi seems to have saved CCP, at cost to the Chinese people.

The CCP constitution says that CCP must take economic development as its primary task. But that primary task is always in support of dynastic survival. The economy – and the people – can go pound sand for a while, while Xi sorts out internal CCP problems like excessive influence of big tech and big real estate and big education.

In the end, the dynastic cycle was characterized by oscillation of openness and closedness. China developed well when open; less so when closed. That oscillation also served to sap ambition. There is no point to invention when people are worried about expropriation or prohibition or survival. What limited innovation after the Song is working to constrain growth now.

As you also know, demographics resulting from four decades of the one-child policy are now moving strongly against China. By the government own calculations, total population will fall by about 50% by 2100. Right now, the working population is falling by five million or more each year. Mr. Xi can’t do much about that. When couples see prospects as too expensive or too dim or too uncertain, they won’t risk bringing children into that world.

The apartment fiasco is a clear sign to many Chinese that the government does not care about them, and will not keep whatever it promises about assistance for new parents. Hard to be optimistic when you feel under someone’s thumb. Remember the 1960s ZPG (zero population growth) movement? China is on it, big time. Now China will teach the world in the next few decades what that means for GDP growth.

In early 2023 Liu Jianchao, head of the International Liaison Department of the Chinese Communist Party (ILD), had an essay in the ILD publication “Contemporary World 当代世界” titled “Strive to write a new chapter in the party’s external work in the new era and on the new journey.”  The ILD is one of the CCP organizations for reaching out to foreign governments and foreign people. An excerpt from his essay – Tell the story of the Communist Party of China deeply and thoroughly. We should continuously enhance our ability and level of telling the story of China and the CPC to the outside world, fully demonstrate the most ambitious and unique theoretical and practical innovation in human history that China is undergoing, and lead the international community, especially political party figures and think tank scholars, to deeply understand the theoretical and practical logic behind the “China Miracle”.

Precisely what I have tried to do.