Xi’s Ideological Conflict

Feb 9, 2023

Xi Jinping threw down the ideological gauntlet in a major speech on February 7 to senior Party leaders. The essence of his remarks focused on the ideological underpinnings of modernization. The extraordinary success of modernization with Chinese characteristics, he stressed, debunks “the myth that modernization means Westernization.”

Modernization is a slippery concept.  In its most basic sense, it refers to a progressive transformation of a traditional rural nation into more of an advanced urban-based society drawing on breakthrough technologies and innovations. Well-known political scientists, especially Samuel Huntington and Seymour Lipset, framed modernization as a political theory, linking economic development to democracy.  While there has been some criticism of spurious causality in this thesis, Xi Jinping has now raised a more fundamental point, arguing for a socialist strain of modernization.

While there may well be a socialist solution to modernization, it is far from clear that China is on the path that Xi celebrates.  Unsurprisingly, his argument is couched in terms of the elliptical trappings of Xi Jinping Thought — personified by a Chinese system that “not only creates higher efficiency than capitalism” but also draws on the “two establishes” (Xi as the core leader of the CPC and as the author of its new ideology) to find a perfect balance between efficiency, social equity, and, of course, national security.   While much of this follows from Xi’s work report to the 20th Party Congress last October — especially the dual emphasis on security and common prosperity — it misses one critical point: productivity.

Can modernization occur without sustainable productivity enhancement? Surely, there are early-stage productivity dividends that any developing nation enjoys from shifting resources from low-productivity rural, agricultural activities, to higher productivity urban, industrial activities.  China, hardly an exception to this transitional productivity surge, may have well benefited more than most by its unusually rapid surge in urbanization and industrialization from 1980 to 2010.

Since then, however, Chinese productivity growth has been stymied. I stressed this point recently for Foreign Affairs, noting that China’s total factor productivity has declined by an average of 0.6% per year between 2011 and 2019 as the impetus to Chinese economic growth shifted away from a dynamic private sector back to more ossified, low-productivity state-owned enterprises. Moreover, I argued, prospective trends in Chinese productivity are likely to be adversely impacted by regulatory pressures bearing down on Internet platform companies as well as by US-led sanctions on advanced semiconductors that could adversely impact China’s key potential drivers of indigenous innovation, artificial intelligence and quantum computing. At a minimum, these stiff headwinds to Chinese productivity growth are problematic for the progressive transformation of modernization.

I was particularly struck by Xi’s stress on the comparative benefits of China’s approach to modernization relative to that of the West. While this week’s speech doesn’t single out the United States by name, there can be little doubt of Xi’s focus.  This has the ideological conflict of Cold War 2.0 written all over it — strikingly reminiscent of Nikita Khrushchev’s famous threat to America during Cold War 1.0, ”We will bury you.”  Without productivity enhancement, Xi Jinping may be a bit premature in picking up the shovel.

You can follow me on Twitter @SRoach_econ

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