Tuesday, May 14, 2019

China’s Latest Crackdown Target Is On Hayekian Economists

By Matthew Campbell and Peter Martin

Around 10 a.m. one day last summer, a low-ranking government official visited the offices of China’s most prominent free-market think tank to lodge a complaint. The scholars of the Unirule Institute of Economics were being too loud for the neighbors, the official said, and should consider finding an alternative place of business.

It was an odd allegation to make against a group whose idea of a wild night out might include a vigorous discussion of Hayek’s minor works, but no one at Unirule was surprised. For months, the organization had been harassed at its converted western Beijing apartment by a rotating cast of angry visitors: a landlord claiming it was violating the terms of its lease, tax collectors demanding to inspect financial records, bureaucrats citing violations of unspecified municipal regulations.

Unirule’s executive director, an amiable 64-year-old economist named Sheng Hong, had given his staff a set of instructions for such visits. They were to be polite, provide any requested files, and promise to address any genuine problems. His colleague Jiang Hao followed the script with the official, telling her the think tank would duly apologize to anyone who’d been disturbed and would be quieter in the future. His promises seemed to be successful, and the visitor departed.

Jiang was at his desk that afternoon when Unirule’s landlord arrived, accompanied by a property manager and a team of construction workers carrying power tools, a welding torch, and a reinforced metal door. Security doors aren’t uncommon in Chinese residential buildings, and at first Jiang wasn’t particularly alarmed. Then something astonishing happened: The workers began welding the door across the entrance to Unirule’s office, sealing Jiang and several colleagues inside. He protested and took photos, but the workers refused to stop. Not knowing what else to do, Jiang called the police. Soon, officers arrived and persuaded the building caretaker to let the Unirule staffers out. When they returned the next day to collect their belongings, the metal door was secured in place again. A few days after that, two security cameras were set up outside.

Unirule is the brainchild of Mao Yushi, a respected 90-year-old economist who was among the first scholars to spread free-market ideas such as deregulation and privatization within China. Until recently, the think tank was one of the country’s more influential nongovernmental organizations, benefiting from the relative liberty granted to economics since the rule of Deng Xiaoping, who once declared that he didn’t care “if the cat is black or white, so long as it catches mice.” So long as they stayed mostly clear of politics, scholars were free to discuss Western thinkers and how their ideas applied to China. The result was a vibrant intellectual community that interacted with government decision-makers, providing data-driven reality checks for officials with little experience outside the Communist Party.

That space has shrunk drastically under President Xi Jinping, who has forcefully reasserted the party’s power and the state’s economic role, and has attacked the civil society that emerged under his predecessors. A crackdown on dissent that began shortly after he took office in 2012 has seen Unirule, which has a small but consequential following among entrepreneurs and academics, hounded almost into oblivion. Its Chinese website and social media accounts have been shut down, its events broken up, and some of its staff barred from traveling abroad.

As China navigates the challenges of a slowing economy and a bruising trade war with the U.S., some foreign observers have become alarmed. “Economic decision-making has become incredibly personalized under Xi. An economist who raises questions may be seen as raising questions with Xi personally,” says Julian Gewirtz, a researcher at Harvard and the author of Unlikely Partners: Chinese Reformers, Western Economists, and the Making of Global China. He calls the resulting chill “a profound source of risk for China’s future.”

Unirule found another office after its sudden eviction, and so far it has survived, if just barely, thanks to its prominence abroad and the prestige of Mao, who retains quiet admirers in China’s establishment. But the think tank’s experience demonstrates just how little scope for independent inquiry remains, even on critically important economic issues such as fiscal policy and the sustainability of the country’s vast archipelago of state-owned enterprises. In Xi’s China, it turns out, practicing the wrong kind of macroeconomics can be a thought crime.

China in the 1980s was a place of intellectual ferment, with previously banned ideas being widely discussed—at first gingerly, as citizens who came of age during the Cultural Revolution tested their new boundaries, then with increasing openness. At a time when Ronald Reagan and Margaret Thatcher were transforming the economies of the U.S. and U.K., these ideas included the theories of thinkers from the Chicago School, who argued that free markets are invariably better at creating wealth than governments.

Such views sometimes gained a remarkable degree of official sanction in China. The government invited archlibertarian Milton Friedman to Beijing in 1980 to get his advice on how to curb inflation resulting from the relaxation of state price controls, for example. (Admittedly, his opinion wasn’t well-received.) Over the next several years, China also began allowing more academics to study abroad. They got direct experience of Western prosperity, and many returned with opinions on how to replicate it.

Mao Yushi was among the fascinated. Born in Nanjing and sent as a young man for “labor reform” in rural Shandong, he spent most of his career as an engineer for the state railways, driving trains and working on engine designs in a Beijing office. As the country opened up, he began reading widely in economics and attending lectures by the foreign academics who were visiting more and more frequently. He was struck by the ideas of Friedman and others of the Chicago School. Their theories might have translated in China into reducing the state’s role in setting prices and allocating investment, or into moving faster to chip away at state monopolies in industries such as telecommunications and airlines—emulating the free-market-oriented policy overhauls under way in the West.

Read the rest here.

(ht Marginal Revolution)

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