62 A Venture Capitalist writes from Shanghai

Posted on February 17, 2012 by

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Eric X. LI, a Shanghai venture capitalist, has written an edifying op-ed in the New York Times[1] of 16 February 2012, with the eloquent title: Why China’s Political Model Is Superior.

Here his main points: “In Athens, ever-increasing popular participation in politics led to rule by demagogy. And in today’s America, money is now the great enabler of demagogy. As the Nobel-winning economist A. Michael Spence has put it: America has gone from “one propertied man, one vote; to one man, one vote; to one person, one vote; trending to one dollar, one vote.” By any measure, the United States is a constitutional republic in name only.”

He continues: “The West’s current competition with China is therefore not a face-off between democracy and authoritarianism, but rather the clash of two fundamentally different political outlooks. The modern West sees democracy and human rights as the pinnacle of human development. It is a belief premised on an absolute faith. China is on a different path. Its leaders are prepared to allow greater popular participation in political decisions if and when it is conducive to economic development and favorable to the country’s national interests.”

He concludes: “The fundamental difference between Washington’s view and Beijing’s is whether political rights are considered God-given and therefore absolute or whether they should be seen as privileges to be negotiated based on the needs and conditions of the nation (my emphasis). The West seems incapable of becoming less democratic even when its survival may depend on such a shift. In this sense, America today is similar to the old Soviet Union, which also viewed its political system as the ultimate end.”

I find this exposé fascinating. If “human rights” are conditional on good behavior, or dependent on the “needs and conditions of the nation”, then they are the reflection of the “good-will” of the contry’s political leadership, not entitlements of the people. Such rights are thus discretionary. Political authority is not expression of the “will of the people”, but belongs to an unfettered sovereign, whose legitimacy the author does not justify – hence he probably sees it inherent and tautological (“the Party id always right”), or immanent.

Note that this formulation goes beyond the Confucian view of the authority having (a rescindable) “Heaven’s Mandate”: He who governs by means of his virtue is, to use an analogy, like the pole-star: it remains in its place while all the lesser stars do homage to it.” (Lunyu 2.1). We have an infiltration of Western ideology: the undisputed and undisputable dictatorship of the Party[2].

I’d hold a different – more analytical view, which does not start from “transcendent” rights, but from observation of fundamental social phenomena.

Life being what it is, it is based on “trial and error” in generating creative progress. It stands to reason that the more diversity there is, the better we stand a chance to find wheat amidst chaff.

Democracy, with its strong reliance on freedom, is very good at generating “diversity”[3]. I know no better way of exploring possible pathways to the future than our relentless and unfettered curiosity, emulation, and imagination. Problems arise when we need to sort out among the many choices our creativity has thrown up. Three people who rank three choices differently – and democratic choice fails[4]. Democracy has great difficulties achieving workable consensus. It easily degenerates in demagogy – consensus obtained by “group think”, rather than deliberation. Value systems we share may help shrink the spectrum of choice . When economic interests face each other, finding the “common good” becomes difficult.

An authoritarian regime is just the opposite: it is deficient in creativity because it suppresses or discourages freedom but, once a choice is made, it is superior in execution (if it can keep corruption under control) – whether the “poeple” are happy with the result is cura posterior.

The shibboleth, and the essential superiority of democracy, lies in its ability to stop error cold – through bankruptcy. Bankruptcy is an automatic circuit-breaker that eliminates “bad choices” before big mistakes are made. Elections are not meant to select the way ahead, but are a referendum on the “political bankruptcy” of the party in power.

An autocratic regime has no such automatic economic and political “circuit-breakers”: only discretional decisions – hence a wrong choice is more difficult to revise. Both the Soviet leadership and the CPC belatedly and ruefully had to admit to major errors of their leaders[5], and advocate “reality checks” – without indicating clear criteria for such checks, as one would have in bankruptcy.

The strength of democracy is not only its undisputed ability to generate choices, but also its ability to liquidate errors. As long as these two pillars stand, we are better off in a democratic system. Everyone admired Mussolini and Hitler – as long as they built highways and lowered unemployment. But then they took the turn toward military conquest. We all know the end of the story.


[2]           Much of “modern non Western though has been infected with Western concepts and categories. See: Ian BURTUMA – Avishai MARGALIT (2004): Occidentalism. The West in the eyes of its enemies. Penguin Press, London.

[3]           See: James SUROWIECKI (2004): Wisdom of crowds. Why the many are smarted than the few. Little Brown, New York.

[4]           In social choice theory Arrow’s impossibility theorem, the General Possibility Theorem, or Arrow’s paradox, states that, when voters have three or more distinct alternatives (options), no voting system can convert the ranked preferences of individuals into a community-wide (complete and transitive) ranking while also meeting a specific set of criteria. See: http://en.wikipedia.org/wiki/Arrow’s_impossibility_theorem

[5]           “Second, the socialist system is a completely new social system in the history of mankind and its development has to undergo a long historical process from inexperience to experience, from imperfect to perfect, from immature to mature. It is hard to completely avoid mistakes, twists and reverses during this process. We can try to arrive at a correct understanding by following the patter, “practice, knowledge, and then back to practice, knowledge,” constantly summing up our experiences and moving step by step from the realm of necessity to the realm of freedom.” See: http://www.politicalaffairs.net/deng-xiaoping-theory-and-the-historical-destiny-of-socialism/