Transcription
Um, so today I want to begin with a hypothesis. Um, it's a long hypothesis. Are you ready? So the hypothesis goes as follows: Reform is in global demand. So the 21st century will be defined by competition of reform, and those who succeed in reform will be the winners. Those who fail will be the losers. And China's party-state stands the best chance of winning in this reform race. Therefore, the 21st century will be a Chinese century.
Good afternoon, uh, ladies and gentlemen. I'm Tim Huxley. I'm the uh, executive director of the Asia office of the International Institute for Strategic Studies Asia here in Singapore. I'm uh, very pleased to welcome you to this latest, and I'm very pleased, delighted uh, this afternoon to welcome Mr. Eric Lee. Uh, Mr. Lee is a Chinese venture capitalist. He's managing director of Changi Capital, based in Shanghai. Eric Lee is well known internationally as a thought-provoking, sometimes provocative speaker, particularly on the theme of his country's development, politics, and international relations. And he's spoken at other uh, major events before on that theme. Today, he's going to talk about China's political system and its evolution. Given China's economic and demographic weight and potential, this is a crucially important topic, not just for China and its people, but also for the rest of Asia and indeed the world. Eric, we look forward to hearing you speak. Following your, your presentation, uh, you've kindly agreed to respond to some questions and enter into a discussion with our audience here in the Straits Room. The floor is now yours.
Thank you very much. Uh, thank you, Tim. Uh, thank you all for coming. It's good to be in Singapore. Um, now, last night I was worried about this talk, so I worked all night and I did my PPT and I sent it to Clara, and she replied that at IISS, we don't do PPTs. So I said, "What? You don't do PPTs?" Giving a talk without a PPT is like driving without the GPS. So I'm completely lost today. Just to prove it to you, I have it. Um, in any case, um, I will try my best, um, without my GPS.
Um, today, uh, the title of my talk is "The Party and the Age of Reform." Uh, "party." Of course, there's only one party in the world, and I'm not referring to PAP. I'm referring to CCP, the Chinese Communist Party. Um, so I'm only a part-time political science student. And political science, of course, is a soft science. It's not a hard science like physics or chemistry. It's a soft science. And soft science means that the use of scientific methods to study soft matters: sociology, politics, what have you. So the scientific method, of course, is you begin an inquiry with a hypothesis, and a hypothesis, and you test it in the laboratory, and, and you could prove it, and it becomes a theory. And of course, once it becomes a theory, many people come and develop new hypotheses, and they overturn that theory, uh, as these new hypotheses uh, get proven. Uh, so that's the scientific method. There's no truth, only hypotheses and theories, and, and, and theories overturned.
Um, so today I want to begin with a hypothesis. Um, it's a long hypothesis. Are you ready? So the hypothesis goes as follows: Reform is in global demand. So the 21st century will be defined by competition of reform, and those who succeed in reform will be the winners. Those who fail will be the losers. And China's party-state stands the best chance of winning in this reform race. Therefore, the 21st century will be a Chinese century. That's the hypothesis. Yeah.
So if you read the newspapers, turn on TV, or travel around the world, you will notice that almost the entire world, every country, developed countries, developing countries, are swept by what I call a crisis of governance everywhere. If you go to developed countries, go to America, right? There's a healthcare crisis that demands healthcare reform. There's an immigration crisis that demands immigration reform. Financial crisis. The list goes on. You go to Europe, of course, the welfare state in trouble. Needs reform. Immigration, big problems. Fiscal policies, they're, they're not in congruence with the, the, the unified currency. Needs reforms badly. Japan, three arrows, two arrows out, one arrow lost in the process, needs reform. And the developing world, of course, including China, uh, crisis of governance. Everything needs to be reformed. Singapore also, um, I sense every time I come to Singapore, it's a beautiful place, but I sense discontent in Singaporean society. Needs reforms. Um, yet, what we notice is reform is failing everywhere, almost everywhere. In America, of course, healthcare. You know, I, I remember when I first went to America as a foreign student at UC Berkeley, this was in the late 1980s. Um, everybody saying that America was having a healthcare crisis. The richest country in the world in history, um, had 15, 20% of its population living without healthcare insurance coverage. And today, 20-some years later, still 15, 20-some percent of the richest country in the world, people living without healthcare insurance. Needed reforms for 20 years. And of course, Obamacare, the famous Obamacare, instituted uh, medical reform, and, and the website doesn't work, that collapsed. Immigration reform, of course, in the US also run aground. Um, in Europe, we see that as well. In developing countries. So why is reform failing everywhere?
Um, so today I want to organize my talk by referring to five political scientists. Four of them are our contemporaries, and one ancient. And these four contemporaries have all focused their recent studies, recent meaning in recent decades, on reform and are relevant to reform. Uh, the four, the first three I want to first talk about. One is Samuel Huntington. Second is Mensor Olson. And third, Francis Fukuyama. Samuel Huntington, of course, we all know his most famous work, uh, "The Clash of Civilizations." Uh, but his most theoretical work, I think, on on politics is, uh, a book called, uh, a book called "Political Order in Changing Societies." And Samuel Huntington invented a term called "political decay." He coined that term. Uh, second political scientist is, uh, Mensor Olson, who also coined the term called "distributive coalitions." So I want to talk about these two first.
So Samuel Huntington, he studied newly independent states, post-World War II. That was his main focus for, for, for several decades. Um, and he said that political, he, he invented the term "political decay." He says political decay happens when political institutions in a state or in a country are failing to adapt to internal and external changes. So your environment is experiencing qualitative changes, both internal and externally, but your political system, your political institutions cannot make relevant changes, adapt to those new environments, and in that circumstance, political decay happens. Ossification of the system. Um, and he also says that institutional stability or institutional success could also lead to political decay. So you, when you have a political institution or system that's very successful for a long time, then it becomes very difficult to change, becomes ossified, and then your environment changes, you cannot change with it, and political decay happens. Right?
So Mensor Olson, his seminal work called "The Rise and Decline of Nations," he studied democracies, democratic political institutions, and he invented a term called "distributive coalitions." And what that is, is he said in, in democracies, you have interest groups in societies. They form different interest groups, and those interest groups, of course, are politically active. And as they continuously accumulate power, they become distributive coalitions. And distributive coalitions are political groups that are powerful enough to seek grants, number one, and number two, they're powerful enough to capture political institutions and make them work for the interests of their own groups at the expense of the collective good. And when that happens, the system decays and gets worse day by day. And what Manser Olson said was very pessimistic. He said, "There's no solution to it. There's no way out. The democracy cannot fix that problem once it gets into distributive coalitions capturing political, the political institutions. There's no way out. There are only two ways to break out of this deadlock: One is a revolution. Second is external shock, like a war." Short of these two, uh, ways, you cannot break out of it. Mensor Olson, very important, uh, uh, very important scholar.
So third, Francis Fukuyama, um, whom I'll focus on a little longer. He is, of course, was known for a long time at a very young age, he published this seminal work, most famous work at the time, called "End of History and the Last Man," uh, at the end of the Cold War, and was, um, uh, known to many as, uh, the godfather of the neoconservative political movement in America, which led ultimately to the Iraq War and what have you. So, um, Frank Fukuyama, of course, his thoughts have evolved over the years, and recently, in the last two years, he published two big volumes of his lifelong study, each this thick. Uh, the first volume called "The Origins of Political Order." It's a history of political systems from the, from, from monkeys to the French Revolution. And the second volume called "Political Order and Political Decay," which summarized the development of political systems from the French Revolution to the present day. So he combined the two concepts: one is Samuel Huntington, who was his teacher, actually, at Harvard, "political decay," and the concept of "distributive coalitions." And he says that political decay can happen in any political system, authoritarian, democratic, etc. And, and then he says that modern governance has three ingredients for success. You need three things to make modern governance succeed. The first is strong government. The second is rule of law, and third is democratic accountability. Okay.
So, of course, it came as a surprise for those who follow Fukuyama, because, uh, u, uh, at the end of the Cold War, everybody thought that the, the state, the role of the state was weakening. We're in a globalization world where the role of the state is weakening, and it's a good thing. Um, and everybody is, the markets are getting unified, political systems are becoming more alike. Um, but Fukuyama, after his initial, um, um, engagement with that kind of thinking, had taken a different path. His, his book "State Building" was the first one of its kind in that period and said that the, without a state, without a competent, effective state, everything else is useless. Um, and of course, this was before the Iraq War, before all these other, uh, uh, uh, catastrophes where people are going to institute political systems without an effective state, and everything collapses. Um, so, but in this, uh, latest volume, he went into much, a lot more details and, and talking about these three ingredients. And, and then he said that in contemporary America, he said America is having, experiencing political decay. And one of the reasons America is experiencing political decay is in today's America, you have strong rule of law, strong democracy, and weak government. So you have the three elements, you have two, two, two elements that are overwhelming the most important one, the first one, which is strong government, as government is very weak. So he said that, and he also, um, and that's the, that's driving political decay in America. So we'll talk a little bit more about that.
But then he divided, you know, for, ever since I think for decades, people were dividing political systems and political institutions into a dichotomy of democratic and authoritarian, which is a valid classification. But, but Fukuyama classified them into two kinds of political systems. One, he says, for any system to work, you've got to have a degree of accountability, right? So he says there are two kinds of accountabilities: upward accountability or downward accountability. Upward accountability means people who are in government are accountable to their bosses, and their bosses accountable to their bosses, all the way to the top, uh, which is closer to what how China is run, or how Apple Computer is run, or any private enterprise is run, on upward accountability. Downward accountability is basically electoral democracy, like in America. People are, the politicians accountable to the electorate, and if, if they're not happy with them, they can vote them out and put in new people. Okay.
So he says that each system has its pros and cons. Each system has its inherent advantages and inherent disadvantages. In the upward accountability system, the advantages are: one, you have execution ability. You can execute. You can make design initiatives and make it happen. And two is you have political autonomy. Uh, political autonomy, meaning you have political organization that's above the boss, is above everyone. So he's not held captive by groups in society. So he could do what he wants. So that's political autonomy. The inherent risks in that system, of course, is one is information problem. So the boss doesn't know what's going on. He gets fed bad data. He makes bad decisions. Second is what he called the bad emperor problem. So the boss goes bad, then of course everything goes bad. Right?
Now, in the downward accountability system, the, the inherent advantage is you have an automatic response mechanism. So every four years, or five years, or two years, you have an election, and people say that guy's no good, you're out. Automatic response. But the inherent risk and inherent disadvantage is what Manser Olson talks about: distributive, the formation of distributive coalitions, where interest groups in societies capture the political systems. Okay. And hold it captive at the expense of the collective good. So nothing good ever gets done. He calls it "vetocracy." Rub by veto. Democracy, vetocracy. Rub by veto. Rule by veto means that when you want to do something, a reform, you want to make a change, every subgroup has the power, enough power to veto you. So in the Chinese, there's an old saying called "and they can't make anything happen, but they can stop just about everything." One, every single one subgroup, every single distributive coalition could stop everything. Um, so vetocracy. Civil society leads excessive civil society leads leads to vetocracy.
The third one. Come on. Third one. What Singapore is most proud of? Yes. Rule of law. Say what? Rule of law. Now it's bad. Rule of law in America. Of course, he's studying the American case. Rule of law in America has become what he called "judicialization of governance" and "legalized corruption." Right? Judicialization of governance means that rule of law demands that everything, everything political to be done by law, by legislation. Of course, you know, you want to do anything by law, you have to legislate, right? So, so I want to build a public bathroom or a road, public bathroom. You've got to legislate. You go to the legislature. You have the plan. People debate. Of course, nobody wants the bathroom. Finally, you eventually, you, you can't get there, but eventually, for, when you're lucky, you get a bathroom bill passed. Everybody signs it. And it's the ultimate compromise. The bathroom, finally, after two years of debate, we're not going to build this public bathroom. And it's in the legislature. It's likely to be a very complicated piece of legislation specifying the size, where it is, and the budget, so on so forth. Of course, then you go build the public bathroom. And of course, when you start building something, you find problems. You have to move it this way by a meter, and the window here doesn't quite work. You've got to move the window there. Well, you're breaking the law. You're, you're over budget. You're breaking the law. There are people who are against the bathroom to begin with. So what do they do? They sue you. They sue you. And, and I'm working on a book, and I went to interview, um, Jerry Brown, the governor of California, for my book. And, and Jerry Brown is a very, um, special politician in America. He, he was both the youngest, one of the youngest and oldest governor of California because he was governor of California in his 30s, 30, 40 years ago, and now in his 70s, he came back to be the oldest governor of California. And California, of course, is the biggest state in America, 18% of GDP, I think, the eighth or ninth largest economy in the world, like some country. And, and Jerry Brown is very interesting because also his father was governor of California in the 60s, two terms, both of them. So between father and son, in the last 50 years, they ran in California for 24 years. Okay. So, I went to Jerry Brown. I said, you know, what's happening with your high-speed rail project? Um, you know, he had a plan to link San Francisco and, and Los Angeles. So, an eight-hour drive. He wants to make it an hour-and-a-half train ride. Made a lot of sense, but, you know, it hasn't been happening. A lot of problems. So, he said, "Well, it's not my high-speed rail project. This was my dad's project. He said in the 60s, my dad wanted to build high-speed rail for California, and we actually passed an authorization bill to build high-speed rail, but of course got bogged down. Interest groups didn't like it." And ever since, and then when I became governor for the first time in my 30s, I tried to do it, couldn't do it. Ever since then, every governor of California, Republican or Democratic, except for Ronald Reagan, everyone tried to build high-speed rail. And now I'm in my 70s, my second time as governor, my second term. And guess what? I've got 200 lawsuits on high-speed rail, tied up in court. 200 lawsuits. Um, so judicialization of governance, right?
The fourth one. Take a guess. That's the ultimate liberty, freedom. I've got liberty. Liberty leads to privilege. According to this is Fukuyama. Yeah. He says there's only a thin line between liberty and privilege. And privilege, meaning, so, so the example I like to use is, of course, freedom of speech, for instance, is liberty. But there's a thin line between that liberty and privilege. So, for instance, in America, it's legal for you to give money to politicians and help them get elected. Legal to for you to give money to support policies and buy TV commercials, say this is good and that is bad, right? And, and after Nixon, there was a lot of corruption. After Nixon, they made a law and said there's a ceiling, you can't exceed the ceiling when you do that. And of course, the Supreme Court said that's not constitutional. They removed it. Why? Of course, the Supreme Court is right. It's in contradiction to the freedom of speech. Of course, they're right. If I earn my money legitimately, it's my money. Why can I not be allowed to spend it how I see fit? To express my views, to support this guy, to be senator, to support that policy. Why not? It's an infringement on my liberty. It's true. So, if you want to protect that liberty, you have to say it's not constitutional. You are free to spend your money however you see fit to support politicians and policies, or oppose politicians or policies. So, of course, the end result is those who have more money have more say. It becomes a privilege. And these, all these things now are enemies of reform in America. So, so the premise of Fukuyama is America badly needs reforms, and reforms are not happening because excessive democracy, excessive transparency, civil society gone bad. Rule of law became judicialization of governance and legalized corruption, and liberty becomes privilege. Um, he actually used the term "Ancien Régime" to describe America's political system today. Ancien Régime, of course, is the system under Louis XVI before the French Revolution. Um, and of course, he also said there's no way out, like Vancer, you cannot get out of this particular gridlock short of revolution or external shock.
So, now this is a landscape of recent political thoughts about political reform and what's happening in the developed world and developing countries. So, so I want to come back and, and touch on China a little bit. Uh, first, I think I'm using the word "reform" as a neutral word, which simply means making qualitative changes to one's political institution in order to adapt to changing environments. Okay, neutral term. There could be bad reform. You could make qualitative changes that they don't work out and make you worse off. It's also possible. Uh, I'm also using the term "political reform" as a neutral term. Uh, many people say that some, some people have predefined political reform. But I'm just saying political reform is essentially making qualitative, doing surgeries to your political institution to making changes in order for it to adapt. But it could, it could be a failure, right?
So, so in China, of course, uh, in the last 65 years, it's been run by one party, CCP. And it turns out that I want to suggest that the CCP is the most powerful reform organization in modern history. Again, using the word reform as a neutral term. It turns out that if you look back in history, in the last 65 years since they've been running the country, China, among all major powers in the world, even smaller countries, the breadth of political changes that have taken place under the leadership of one party have been wider and more intense than than just about any other country you could think of. Right? From 1949, the, the, the radical land collectivization to Great Leap Forward, which was a disaster, bad reform, to quasi-privatization of farmland in the early 60s, and then of course, the catastrophic Cultural Revolution, and then of course, Deng Xiaoping's market reform, all the way to today. So, so huge changes. So they've been able, under one political institution, institution, and the same political institution, they've been able to engineer and implement enormous reforms. And that's a fact. Some were bad reforms, some were good reforms, but the fact is they've been able to engineer reforms. Okay.
Um, so the, the fourth, uh, political scientist I wanted to bring to your attention is Professor Wang Shaoguang at the Chinese University of Hong Kong. Uh, he is someone that who's been, he's a Yale, uh, PhD in political science, very senior guy. And he, before even before Fukuyama, he'd been talking about state building, state competency. He, he studied states around the country, around the world, and especially. And he said, you know, the state's capacity to execute changes is the most critical element of its success or failure. And, and recently he published this book called "The, uh, uh, Chinese Decision-Making." Okay. I don't know if it's been translated into English yet. But he used a case study of China's health insurance reform. And we talked about America's health insurance problem. And he said that actually, it's true. When you think back in the middle of the 2000s, 2002, 2003, 2004, 2005, every political analyst was writing in the papers, in their reports, and China is in big trouble. The Chinese system is going to collapse because it's going through a crisis, a healthcare crisis that's really going to get people on the street and overthrow the government. You know, at that time, in 2006, only 20% of the Chinese population had health coverage. 20%. Okay. So in 2009, there was a crisis. In 2009, the party CCP issued a health reform plan. And today, 2015, six years later, essentially there's universal coverage in China, 99.7%. Now, granted, the lower-level people are pretty basic stuff. There's no Cadillac plan here, but essentially they did go from in six years from 20% coverage to near 100% health insurance coverage. The basic stuff, pretty basic, but, uh, huge change, huge change, six years, right? 1.3 billion people.
Um, and I want to, so I characterize Chinese government governance into three characteristics. What I call: one, meritocratic governance; second, experimental governance; and third, responsive governance. And this is upward accountability. Governance of upward accountability. Meritocratic governance is that I think that the Chinese, the party CCP, over the last 50, 30, 50 years have developed a very sophisticated system which they, I think they inherited from thousands of years of dynastic history, the mandarin system, where people from the grassroots get recruited into the party, and they move up over 20, 30, 40-year period, and they rotate through different sectors of society. And by the time the crème de la crème gets to the top, they have run countries. Uh, of course, there are some bad apples. Uh, but by and large, the capable ones make it to the top.
Second is experimental governance, which is unique to China. Um, yeah, I, for my book, I've been studying, uh, the, the, you know, civil, a lot of agent problems. Okay. So, so they essentially, what they do is they have a nationwide problem. So how do you solve it? They get different jurisdictions, counties, cities, provinces to try all sorts of different policies, and then they watch. And those who are showing some signs of success, they send everybody to go study, and then they come back and try it again. And then when they have a real success case, they say, nationwide implementation. Okay. Which is very much like Silicon Valley, actually. You keep the cost of failure very low because you, these experimentations are in small places. In Silicon Valley, you have a lot of startups, and they fail, but the costs are low. But once you have a winner, you push it. But that's unique to the Chinese system. You can only do that in a centralized, one-party system. You, you can't do it in America. If something is working in Boston, Obama can't call California and say, "You try it too." Doesn't work. And once you're trying, of course, the next election, the party gets thrown out, and a new party can't, can't sustain it. So experimental governance.
Third is responsive governance. Responsive governance is, I think they've developed a very sophisticated system of collecting feedback from the population. You, I, uh, I'm familiar with a polling company, the largest polling company in China, private polling company like Gallup. Their biggest, uh, client is the government. Not just the central government, but provincial government, local government, neighborhood committees, district committees. They run public polling. Are you happy with garbage collection? Are you happy with this? Are you unhappy with that? And they don't, it's a black box. There's no transparency. They don't declare the results, but they know. And, and the officials, when they get evaluated for promotion, that's a part of the criteria.
Um, so let me talk about the current reforms that are happening in China. I think they're very significant. Um, there are a lot of, the Third Plenum two years ago announced a great big economic reform agenda, but I want to focus on political reform. Um, and political reform. There are three aspects of the recent current political reform beginning at the Third Plenum a year and a half ago. One is a rearrangement of the relationship between central and local and provincial governments. Um, the, um, I, I think the Third Plenum launched the most significant restructuring of that relationship, and it's a historic balancing act. In, in ancient Chinese dynasties, when that relationship was intact, was in balance, it worked. When it's out of balance, the dynasty falls, right? So in, in China, they went through three phases: centralization, devolution, and recentralization. It's very complicated. I don't want to get into too much detail, but essentially they've done major surgery to the relationship between central government and local government by centralizing a lot of power. They, it's the first time in history they now have a national budget.
Second is discipline and the law. So anti-corruption. The anti-corruption campaign they've, is the most intense anti-corruption campaign in history. And they've engineered a big redistribution of power within the legal system. The, the party central disciplinary inspection commission used to be within each level's party committee. Okay. So, so let's say you're the, you're the, uh, city party secretary. You have a party committee. You run the committee. I'm the disciplinary inspection chief. So I actually work for you. I'm a part of, member of that committee. So you're responsible for my promotion. So there's no way I could check you. I mean, I could check the guys below, but I cannot check the boss. You know, when Bo Xilai was arrested for corruption in the, in Chongqing, at the Chongqing party committee, the, the disciplinary commission chief was not even a member of the Central Committee. And Bo Xilai was the member of the Politburo, three levels above him. Not possible for him to check them. So now, and this system has been around for like 70 years, since 1927, they borrowed from the Soviet Union, the Soviet party. Now, at the Third Plenum and the Fourth Plenum, they extracted the entire disciplinary inspection commission system out of that system, and now they all report all the way up to the Central Disciplinary Commission. So, so if you're your party boss at a city, your disciplinary commission chief is on your committee, yet he reports for, for who to investigate his promotion, or he's accountable to the next layer up disciplinary commission officer, not to the party secretary at that locality. Okay. Huge redistribution of political power.
Third is the relationship between party and state. Um, you know, at the founding of the People's Republic in 1949, they borrowed from the Soviet Union what's called the "three carriages model." Three carriages are the Supreme Soviet, which corresponds to China's National People's Congress; the Soviet Party Central Committee, which corresponds to the CCP Central Committee; and the Ministerial Conference, which is China's State Council. Okay. So the three carriages, in, in theory, run parallel. But of course, behind the scenes, the party runs everything, right? But it caused a lot of conflicts. You know, many people blame it, blame the Cultural Revolution on on the confusion of power and power struggle within these carriages. Um, so this has been around for 65 years. At the Third Plenum, they changed it. I think they made qualitative changes. Now the party is stepping forward as the leadership, play to play a trans, at to the front and center of Chinese governance. So they established new institutions. Uh, one is, of course, the National Security Committee Commission, and it's directly under the party Politburo, run by Xi Jinping. And that's in charge of both internal and external security. So the Foreign Ministry, theoretically, is under that. Defense, theoretically, under that. The police, theoretically, under that. Used to be all under the State Council. Okay. Major redistribution of power. They established a Central Reform Commission, run by the Politburo, run by Xi Jinping himself. Uh, basically controls now the economic portfolio. Um, so major re-engineering of political institutions.
Um, so I think I'm going to end it here. I'm running out of time.
Well, thank you very much, Eric. Um, you, you've, um, you've given a really excellent, uh, address. Um, you've, you've outlined some important theories of political reform. Um, and in the course of doing that, um, you, you highlighted particularly some, some weaknesses of, uh, of the US political system and, um, some challenges, uh, to, to, to reforms in the US. And then in the last part, you focused particularly on, on China's strength in terms of the party's ability to carry through political reform. Uh, personally, I found your analysis, uh, gripping. You've provided a lot of, uh, food, food for thought, and I think there, there are going to be many in our audience who are going to want to, uh, engage with you directly on some of the points you, you made. Um, so we'll move now into a, into a discussion and question and answer session. You're welcome to sit down if you'd, if you'd like to. Um, and, uh, the, the floor is open for, for questions. If you'd like to ask a question, just raise your arm and the microphone will, will come to you. When you have the microphone, please say who you are and what your affiliation is, and please keep your question for Eric Lee. Uh, gentleman in the front.
Hello. Uh, my name is Bill Fu, and I'm from, uh, Uni-Gestion, which is an investment management firm. Uh, Mr. My question to you is, can you give us a view about, say, the next three years? What will be the development or the end result of some of those, uh, reforms? You know, particularly, there's been a lot of cases about corruption and, you know, of the people being apprehended. Because I think, uh, one of the challenges that, in my view, is that reforms are also, so, you know, may be much more effective, especially the way you pay people. You know, you pay state-owned enterprise presidents, if you don't pay them market rates, and, you know, their companies are listed on the New York Stock Exchange, can be quite an issue. So, may I have your view, please?
Thank you.
Thank you. Uh, good question. Um, I think in the next few years, uh, the results of these reforms are several. One, of course, I think there will be a major dampening of the degree of corruption. Uh, corruption has been endemic, um, and the current anti-corruption campaign, if these institutional rules could follow, like what I'm talking about, um, I think will, you will never be able to eradicate, eradicate corruption, but it would meaningfully reduce the level of corruption for some time. It will always come back, um, but, but I think that would be one of the major results of the current political reform. Second is urbanization. Um, urbanization being one of China's, I think, top economic priorities for China in the next decade. And urbanization requires this kind of, the next wave of urbanization, basically making new cities, requires centralized political authority because you have to centralize national resources for healthcare, for, for education, for newly urbanized people. And, and the current centralization of economic policy and resources, I think will, what will, will contribute to, to, to the pushing through of the urbanization initiative.
Hi, my name is Eko, and I'm from the political science department of NUS. Um, my question is, um, there, you talk, um, from what I understand, Fukuyama not only, uh, talks about the shortcomings of democracy. He also, he believes in democracy in absolute terms. He sees it as not as a means to an end, but as an end itself. So my question is, in build of this, uh, of democracy in China, I mean, like, just because, you know, not having democracy avoids, I mean, kind of helps the country to avoid some shortcomings, doesn't mean that the government is going to be stronger in, uh, uh, in these aspects? So, uh, my question is, in view of this, uh, of democracy, and the call for democracy, I mean, right now, among these people. So, how do you think that will impact the Chinese government, uh, in terms of reform? And, yeah, I just want to know your personal view. Thank you.
Yeah. Um, I, I do think that, well, Fukuyama has a lot of analyses about the, the advantages and disadvantages about political systems. But of course, behind it all, um, many people do believe democracy is an end in itself, um, not a means to an end. Um, and I think this is not my view. I think democracy is a political system. Um, it's not an end in itself. It's a means to other ends. Um, but if you take democracy as an end in itself, then of course, it's a religion. You can't argue against that. It doesn't mean you, you, so, so if, if the result is civil war, then of course, you still want democracy. It doesn't matter. Democracy is the ultimate good. It's, it's, it's basically faith. And, and that's not how, that's not sort of this discussion. I mean, our, our discussion, we're not making a normative discussion. We're making a positive discussion, which is analyzing the advantages and disadvantages of different political systems. Um, there are calls for democracy, and there are calls for political Islam around the world, and all these calls view politics, a particular political system as an end in itself. ISIS is not, ISIS, uh, sees political Islam as an end in itself, and that's a political system. So it's a religion. You can't argue against that. Um, and same as those who, some who call democracy, view democracy as an end in itself. Uh, but some don't. Some who call democracy think it's the best. It's a good system for under the circumstances. But some, some do view it as an end in itself.
Thank you very much. Deon Schwartz, Fox Group, Singapore. And I definitely need to think about a lot of topics, what also Mr. mentioned. But one problem or one topic I have is actually China's way of success. So if you look, and I was living there for three years, the people are very hungry. The, the party steers in a way that more and more people participate on the success. And that this leads also to an, from my point of view, not happiness, but to a, um, to a society what is okay with the government. But what I saw in Singapore after 10 years coming back is that although Singapore was a country like this, it was a very strict government, also from Lee Kuan Yew and then later on from Mr. Goh Chok Tong. And today you see that the government is not that strong anymore because people are asking for different things. The wealth is already there. They are quite happy. They are okay with their lifestyle. And we had that war also with Europe 10 years ago. Germany was the same. So, the question what I have is, how can the Chinese government make a step, not for the next 10 years, but after more and more people are so pleased with their lifestyle that they actually are looking for more freedom to talk? And you see that with the younger population in China as well, that they use more freedom to talk, that they would like to get, that they look for, for, for the in the United States where they have more democracy and where they ask for participation on the rules. So how can the Chinese government make this in the future? Thank you very much.
Very, very good question. I'll need two hours to answer that one.
But let me touch on it briefly. Okay. I think there are two misconceptions that I want to address through, through the question. One is the misconception about the idea that somehow people get wealthier, middle class, and, and they begin to demand political rights. I think that's a uniquely European experience. And here's why. That's why I never use the word "middle class" to describe China. Middle class essentially means the bourgeoisie. And the bourgeoisie experience is uniquely European because the bourgeoisie had deep religious and political roots before they got money. So it, of course, came from the Protestant Reformation. We talked for a long, long, long time. But the bourgeoisie class, the middle class in the West, in Europe, they had political aspirations before industrialization, before economic development that gave them the actual ability to demand political rights. So, so it's the reverse. And, and the idea that other, in other cultures, that without those religious roots, when people start buying refrigerators and cars, they're going to want to vote. I think it's a misconception. Uh, it's, it's, it's a misassumption. Of course, they're going to want to participate. They're going to want their issues addressed, but that's fundamentally different. I mean, is, let's say you own a house, you want to protect your property, and they have these interests that need to be taken care of. But it's fundamentally different from the abstract principle of political rights. So, so, so you, you need to, China will need to build institutions and build systems to respond to that change. So that's again, political reform. Can they respond to new demands and new interests that come, that come about when the middle-income group gets bigger and bigger? If they cannot, they will lose power. If they can, they can sustain power.
Um, second is about freedom. So, um, um, Isaiah Berlin, the political scientist, uh, who wrote one of his most seminal, uh, uh, piece called "Two Concepts of Liberty." So there are two kinds of freedom. One is positive freedom, the other is negative freedom. Negative freedom means freedom from. So I can do anything I want in my private life, and the government can't come in and say you can't do this. So I can marry whomever I want. I can go work wherever I want in my own home. I can be naked all day long. Whatever. But that's called negative freedom. Positive freedom means the freedom to act, to make some change in society, to, to go to the public square and make a speech, to organize a political party. That's positive freedom. Okay. And there are two fundamental different kinds of freedom. So I would argue actually in China today, the degree of negative freedom is extraordinarily high. It is high compared to both, it in its own history in hundreds of years, the degree of negative freedom is the highest. In compared with itself, and horizontally against other countries, the degree of negative freedom is very, very high. The degree of positive freedom is much lower. You cannot publish, you cannot go to the public square and say certain things, you cannot organize. But, so, so I would think that that, that's a, that, that's the difference that we should be aware of when we project China's future. And third, of course, is no political system could survive forever. Eventually, the point about Singapore, and I don't know enough about Singapore to comment on it meaningfully, but about China, you know, my own projection is the current political system is young and robust enough to be able to reform itself and respond to those changing environments, internally or externally, for some time to come. And sometime meaning probably a few decades, at least through the middle of this century. Uh, I'm not projecting further than that.
Thank you very much, Mr. Lee. Uh, my name is During Chong. I'm from International Enterprise Singapore, which is a government agency that promotes trade and supports companies when they invest abroad. Um, I've been very impressed by the reforms that China has has gone through under Mr. Xi Jinping, and it looks very, very promising. Uh, but I have a question. While China does not have the disadvantage of a country like America of excessive democracy and so on, it does have some other disadvantages. And to me, the biggest challenge for Mr. Xi now is probably the vested interests within the CCP. And these are very, very powerful vested interests. We have two ex-presidents somewhere there. Um, and as they go on with the anti-corruption drive and other reforms, he's bound to come to a point whereby he hurts the interests of these vested interest groups. How is he able to overcome this and continue with some of these necessary reforms? That's my question. Yeah, thank you.
Um, so I, I believe the phenomena you described does exist. Uh, there are also interest groups. Uh, but they are not distributive coalitions in, in Manser Olson's definition. So it's, it's interesting that, you know, I was reading, uh, a few years ago, a friend of mine, Ming Pei, uh, at the Carnegie, was a China, one of the leading China scholars in the West, and he was writing a few years ago and said, he said, "Chinese political system is going to go through political decay." He also used the same concept, political decay, meaning ossification. Ossification. He says, "In China, there are now powerful interest groups that are now being formed and have been formed. They're going to block any reform. You, you can't." And he made a list of them: a telecom interest group, the certain SOEs, blah, blah, blah. He made a long list of them, okay? That was three, four years ago. And I look at the list now. Two-thirds of them are in jail. So they could make the change. So, so these interest groups are not nearly as strong as the ones in other countries. Um, railway ministry, very, very powerful guy, tens of hundreds of billions of dollars to build high-speed rail. Overnight, you're gone. You're in jail. So they can't break it. So, so not yet. The system is not ossified. Um, eventually it will. But not in the foreseeable future.
From Maple Tree, just got a question follow on from the question.
So is fixing people a way to make sure that reforms will happen? Because a lot of people have been locked up or arrested, executed, whatever. So is it a necessity to fix people to ensure the reforms will happen?
Well, it's certainly one way. You know, I don't, I mean, I don't want to mix any corruption with reform. I mean, any corruption is any corruption. But I think incidentally, a lot of the corruption has to do with the formation of interest groups, and those interest groups want to capture the political system, just like any other interest group in any other political system.
Um, and of course, you know, China doesn't have the problem of, I mean, I think, I think at the present time, China has one advantage. It doesn't have this thing called legalized corruption. You know, in many countries, when, you know, it's very interesting. You look at Transparency International, right? They rank, they have this thing called the Corruption Perception Index. They rank these countries, and China is sort of middle, a little upper middle. And the US is usually ranked pretty high, meaning it's very clean. And it's how the perception of whether the country is clean governance, clean or corrupt. But when you look at American public opinion surveys for the last few decades, you'll find every year consistently, two-thirds of Americans think elections are for sale, and they think lobbyists control the country. They essentially perceive America's political system is highly corrupt. Yet, why is it viewed as so clean in the index? Because they're legal. So as long as these things are legal, it's not considered, it's not defined as corruption. Uh, but in China, they don't have that issue. I mean, in China, they have other problems, you know, but they don't have the legalized corruption problem. So you can crack down. You can crack down when you decide to. Of course, you, you, if you decide not to crack down, I mean, corruption is a major threat to the regime, I think.
We have time for one more question, and then unfortunately, we need to bring the session to a close. So at the front here.
Hi, my name is Aaron Wong from KPMG. I'm qualified as a lawyer and I have worked for a family office based in Hong Kong and traveled extensively to China as the PA to a tycoon. So I observe an interesting phenomenon with China. They have gone through various cyclical phenomenons with different dynasties and political leaders trying to stem their mark of legacy on different administrations. So we've seen it in the likes of the Cultural Revolution where people have jailed and come up to be the leaders of the next generation. So how long do you see this political cleanup happening, and do you see this being consistent with successive generations? Now, you have got to crack down on corruption. Um, and I'm not sure what kind of trade-off goes between previous leaders to say we're removing the people that you have entrusted in positions of power. And now, how long do you see this going on, and do you see them making a comeback? You said people are jailed, and we've seen things happen in the Cultural Revolution, and that's been reversed.
Um, I think I'd be careful with that assessment. I think when they first began the anti-corruption campaign, there were many who said that this could be a tool of political power struggle. Um, but I think now, very few are saying that. And now most analysts will say that this is a widespread institutional initiative against corruption. It's similar to what America went through at the beginning of the last century, when the US, after the Gilded Age, you know, was a highly corrupt society, highly corrupt politics, went through successive presidents and crackdowns on corruption in big ways, politically and legislatively. Um, so I think China is going through that process. It's not a political, well, every politician uses every tool to fight against their political enemies, okay? That is a given. Okay. But, but, you know, aside from that, given that the current anti-corruption campaign, I think goes way, way beyond political power struggle.
Eric, thank you very much. Thank you for the answer to that question and the...