(R*) China’s seemingly more efficient response to the pandemic refuels an older debate on the country’s economic success. The figures speak for themselves. According to the World Bank, 800 million people had been lifted out of poverty by 2018, making China the most important contributor to the global decline of poor population from 40 to 10 percent. There is just a small step from here to the glorification of the Chinese political system that some analysts proclaim too easily: the Chinese system is superior to the Western establishment and risks of becoming a model to follow.

The thought process is based on the following “logical” argument. Given that:

A. China is a communist / autocratic country

B. China has seen tremendous economic success

It follows that

C. If economic success is what you are looking for, an autocratic system, such as the Chinese, must be in place.

Obviously, this deductive reasoning is flawed. At the end of the day, there is no evidence to show that had China been a democracy, it would not have enjoyed a similar boom. Let us not forget that the country’s growth originates in the huge amount of capital from the developed world to which it is now eager to teach economic efficiency and democracy. Is the takeaway the fact that these businesses had been drawn to China by its autocratic political regime and had it been a democracy they would have stayed away? Clearly, this is nonsense.

The big capital investments in Russia, Saudi Arabia or China demonstrate the lack of scruples of investors when faced with significant and very lucrative business opportunities, whether in terms of mining or sizeable markets. This is the bottom line, and as I was writing in the How short will the memory of Capital be? post, I seriously doubt that we will witness an economic marginalization of China by the large Western multinationals due to the lack of transparency in dealing with the pandemic. Or, not without generous compensation from the states of origin.

Capital inflows coupled with decades-long currency undervaluation (leading to substantial current account surpluses) have resulted in massive currency reserves which allow now the government to keep bankrupt behemoths afloat, subsidize the dumping price of steel, fund tens of countries of questionable creditworthiness under the One Belt One Road initiative or purchase Western tech companies and the mining resources of developing economies.

A different question should be asked. Is the economy the only criterion to assess the success of an establishment? In other words, do the Chinese really prefer their political system for the sake of economic prosperity? Were they given the option to choose a multiparty democracy, would they say No, preferring instead the one-party system which is increasingly using technological advances to resemble Big Brother? Are they really happy with the Social Credit System which rates them and provides access to some freedoms based on how well they behave? Proper behavior is taken here to mean, among other things, speaking well of the government, not criticizing it on social media, not spreading rumors online or taking part in rallies considered by authorities as illegal.

To assume that such a society may become a model for the developed western societies would be incredibly naïve. No one in Western Europe, let alone in Eastern Europe dreams of a one-party autocratic regime. This does not mean that a different kind of danger does not lurk around: declaring populism dead too early.

Populists are running out of steam as they are associated collectively or separately with high-profile cases of corruption (Israel, Brazil) or poor pandemic management (USA, Brazil, India). But when it comes to institutionalized thievery or healthcare issues, the public attaches no longer a value to the alleged honesty and skills of those making populist promises.

Having said that, we should not believe that the populist wave has passed. Let us not forget that one of its main root causes were economic polarization and the disconnect between the mainstream parties and the ordinary citizen’s economic agenda. As economic divide in the developed countries became more worrying, the main stream political parties had completely other priorities and swept under the rug the blatant inequalities emerging across the society. This encouraged populist parties and leaders who made haste to name the culprits: the aliens and the elites.

The bad news is that these “bullets” will continue to be the purview of populist snipers. After a break courtesy of the pandemic, the waves of migration are likely to resume. The open border policy will continue to be presented as a channel of transmission for future pandemics.

On the other hand, economic statistics show that during the pandemic the gap between the rich and the rest has increased. Temporary economic collapse was used as a purchasing opportunity by those with enough capital at hand. The trend was compounded by the central bank policy of printing money which has inflated financial and real-estate assets owned for the most part by the economic elites. Small- and medium-sized businesses which led to the creation of the middle class have been fighting to survive or have simply gone under.

As long as the mainstream parties fail to take seriously the widening gap in wealth, as well as the fears related to social tensions caused by uncontrolled migration, populist politicians stand a good chance of taking power. The Chinese model, though, has no hope of taking control.

Have a nice weekend!

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