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Even China Will Find That Freedom Boosts Growth


Economic Viewpoint

EVEN CHINA WILL FIND THAT FREEDOM BOOSTS GROWTH

Will China extend its autocratic and sometimes repressive ways to Hong Kong after that island is taken over next July, or will the mainland become much more open? The world nervously awaits the outcome. There are reasons for cautious optimism about whether democracy will grow in China during the next decade.

The worldwide trend toward democracy has accelerated during the past few decades and has led some to claim the inevitability of democracy and "the end of history." I do not believe that even in the modern world democracy necessarily comes to countries that become richer. But economic progress--along with rapidly growing international trade and foreign investments, movements of students and workers between nations, and easier access to international communications--has strengthened the pressures on governments across the globe to allow greater political freedom.

OPPORTUNITY. China recognized 20 years ago that competition and private incentives had to be encouraged if its economy was to grow rapidly. Since then, the most populous nation in the world has experienced spectacular development, especially in agriculture and in industries where the private sector became dominant. The average annual growth in per capita income since 1978 has exceeded 8%, among the highest in the world.

Free markets are conducive to democracy partly because a private economy must allow its citizens the freedom to take advantage of the rise and fall of opportunities in different sectors by changing jobs, residences, and the businesses they engage in. After becoming accustomed to these freedoms, they are reluctant to accept severe restrictions on what they can say, read, or watch.

The experiences of many nations during this century suggest that China's economic progress will be a powerful force increasing democracy there. Chile, Korea, and Taiwan, to take three prominent recent examples, all began rapid economic growth under dictatorial regimes that encouraged business and initiative. With little bloodshed, they rather quickly evolved into lively democracies that continue to rely primarily on private organization of economic activity.

Nations that grow rapidly invest extensively in human capital. China has furiously been trying to undo the damage of the Cultural Revolution, which closed many schools and forced students to work in remote rural areas. Since 1980, it has expanded education and training to prepare workers for the demands of a modern economy. But education creates a critical capacity to judge political and social life and makes a person unwilling to accept severe political constraints.

STUDENT PROTESTS. Developing nations must send many students abroad to the U.S., Germany, Japan, and other economic leaders for the advanced education and training the students cannot get at home. This is why China now has more students in the U.S. than democratic India does. After experiencing the political and social freedoms of democracies, foreign students often become discontented with the repression at home.

As a result, many students take jobs in the U.S. or other nations and do not return home; others return home and help oppose authoritarian regimes. For example, the autocratic government of Taiwan recently changed into a democracy partly through the opposition of former students who came back and the protest of students in the U.S. and Europe. Taiwan has had more students abroad than practically any other country.

Technology's march will further erode repression. The growth of international telephoning and fax capabilities, the Internet, satellite dishes, and cellular phones revolutionized worldwide communications. Iranian, Chinese, and other households get CNN and the BBC on hidden satellite dishes, they communicate by fax with relatives and friends anywhere in the world, and they get news and other information over the Net.

This is why it is no longer feasible to do what communist countries succeeded in accomplishing for decades after World War II: make economic progress while being almost completely isolated from the rest of the world. The Soviet Union ended the contest with capitalism when it concluded that further growth was impossible without investments, technology, and communications with the capitalist countries.

Unfortunately, Hong Kong probably will not maintain its extraordinary level of economic, intellectual, and social freedom after becoming part of China. But if I am right and China becomes more democratic, the takeover will not be as devastating as predicted by many.By GARY S. BECKER


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