Russia and China in economic crisis 0

 From an article in The American Prospect:

Despite valiant efforts to assure their people that nothing is wrong, the autocrats cannot cover their economic holes. In Venezuela, Hugo Chavez, after first mocking the financial crisis as a danger to the West, now admits, "The fall in oil prices due to the current global financial crisis may have a negative influence on the economy of Venezuela." In Russia, where the stock market has fallen by some 70 percent since last spring and the ruble has weathered fierce attacks, Vladimir Putin recently declared he would launch new tax cuts because of the steep drop in Russia’s economy. As Stephen Sestanovich of the Council on Foreign Relations notes, "Russia is confronting virtually all the negatives at once – sharply declining export earnings from energy and metals, overleveraged corporate balance sheets and a chorus of bailout appeals, a credit crunch and banking failures, a bursting real-estate bubble." While unemployment, poverty, and unrest indicate cracks in the system of autocracy, there are signs that a nascent movement toward liberal democracy could take its place. Indeed, increasing numbers of Chinese are challenging the government, and in December, 303 Chinese intellectuals signed and published a daring manifesto called Charter 08, which demands an end to one-party rule. Charter 08 is only one sign that the autocracies are feeling the pressure. In Venezuela, Chavez’s allies lost ground to opposition parties in recent regional elections. In Russia, a worried President Dmitri Medvedev recently instructed police to stamp out social unrest caused by the downturn. In December, the police arrested some 100 people at a protest in the poor eastern city of Vladivostok; at roughly the same time, 1,000 people attended a protest in Moscow against the government. Even in the Persian Gulf and Central Asian states, normally some of the quietest parts of the world, the crisis has had political consequences. Kazakh activists have started holding rallies against the government, previously a rare occurrence in the country. Iran, too, faces instability. Inflation in the Islamic Republic is now running near 30 percent, and a powerful cleric mused publicly that the crisis could do "big damage." The autocrats clearly are worried. In addition to cracking down on the Charter 08 signers and other activists, Beijing recently announced a stimulus package worth $586 billion. In Gansu, local officials actually met with the protest leaders and vowed to invest some $3 billion in the area. The autocracies have money to burn. China has stockpiled nearly $2 trillion but is eating it up fast. Russia is spending nearly $10 billion a week defending the ruble, to little avail, as the value of the currency keeps plummeting. Though they can plow money into their economies, the autocratic leaders cannot make Western consumers shop or guzzle gas and so are powerless to control their major economic engines. And if regimes like Chavez’s try to get their economies under control by cutting government spending, they risk undermining their own power, which was bolstered by government social-welfare programs that often targeted the middle classes whose support they now need. Unlike 20th-century autocrats, such as Fidel Castro, who led their countries in wars of independence, most of today’s leaders came up through the political system and have no revolutionary bona fides to play. The modern authoritarian governments long ago abandoned real ideology. (Chavez is an exception: He has tried to fashion a modern statist ideology he calls the "Bolivarian Revolution.") China remains a nominally communist country…

In order to improve their standing on the world stage, today’s autocrats at least try to create the facade of democracy. Their people know about democratic movements in other countries, can access free media, and are not easily subdued. Because the authoritarian governments have created some semblance of a legal system, workers have begun to think they have rights. Compared to the 1980s, when word of demonstrations in China was passed from person to person, today middle-class demonstrators organize by text message, and news of protests quickly appears on Chinese blogs. Chinese and foreign reporters can also follow protests, making it harder for the security forces to get away with a real crackdown.

Neither the short term nor the long term looks good for Moscow, Beijing, and the other autocrats. In the near future, their economies will slow down severely and, in the case of Russia, likely fall into a serious recession. In China, many analysts believe unemployment will rise to its highest level in a decade. Growth is likely to dip below 8 percent, the magic number needed to keep creating enough jobs for all the people entering the work force in China.

Millions of Chinese migrant workers who can no longer find factory jobs will return to the interior of the country. Back in rural areas, anger is already rising. These unemployed workers, who have seen the wealth of urban elites in cities like Shanghai, could begin organizing larger demonstrations, smashing up local Communist Party offices and even attacking local officials. Middle-class protests are likely to rise as well – over issues of government competence like safety, land prices, and land evictions. Since the urbanites have media connections, they are able to get their stories onto Chinese blogs and news sites. Recently, parents of Chinese children who were made ill or died from tainted milk gathered together to push the government for better health care, refusing the regime’s attempts to essentially buy them off. (The government recently sentenced two people to death for playing a key role in the tainted-milk scandal.)

Thus far, the autocracies have kept groups of people with grievances against the government from forming united fronts. Moscow has achieved this through the skillful use of nationalism, which drives a wedge between liberal Russians and ethnic minorities with grievances against the government. Beijing has used a combination of crackdowns and payoffs to top demonstrators to keep labor protests separate from one another, preventing them from developing a common theme or common leaders.

Divide and conquer, though, won’t work forever. In China, rural and urban protests might soon begin to link up – through activist networks, religious groups, or blogs – and form a national protest. Charter 08 and a nationwide taxi-driver strike, both organized on the Internet, are a first hint of this nationwide movement.

The Great Depression fed dangerous new autocratic ideologies like fascism and communism; a second Great Depression could destroy them. While the economic crisis will cause untold human suffering in these and other countries, it is quite possible that, on the other side of it, we will see the end of that distinctive phenomenon of the late 1990s and early 21st century: the growth autocracy… 

Except perhaps in the US, where it is only just beginning?

Posted under Commentary by Jillian Becker on Wednesday, March 25, 2009

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