As free market democracies flail, find China

By Ian Bremmer

USA Today

Twenty months of economic and political turmoil have American voters ready to reject Washington and anyone connected with it.

And we have company: British voters couldn’t wait to sweep Gordon Brown from 10 Downing Street. A recent poll in “Le Parisien” found that nearly 60 percent of respondents expressed “no confidence” in French President Nikolas Sarkozy. A poll in the magazine “Stern” gave German Chancellor Angela Merkel 32 percent support, and just 17 percent said the government could solve Germany’s problems. Watch news reports from Greece, and you won’t need the volume on to know what citizens think of their leaders.

Nor is this simply a “Western” trend.

Thousands of protesters in Thailand occupied entire neighborhoods of Bangkok for weeks to demand early elections.

Crowds dispersed only after conflicts with soldiers killed more than 40 people. Japanese Prime Minister Yukio Hatoyama’s poll numbers make Gordon Brown look like Nelson Mandela.

What do all these countries have in common? They’re free-market democracies in various stages of economic trouble.

Where do we go to find a popular government? How about China? Three decades of double-digit economic growth can buy a government plenty of popular goodwill. There are tens of thousands of protests in China each year, but very few of those target the Chinese Communist Party directly.

Many of them appeal to the party for help with local problems. It’s impossible to know how China’s government would poll with its people. The country remains a police state, and foreign pollsters aren’t exactly welcome.

But China is not North Korea or Cuba. Journalists and foreigners can interact with ordinary Chinese and exchange views with them both publicly and privately. The accumulated anecdotal evidence suggests that China’s entrance onto the international political and economic stage serves as a point of great pride, and that many citizens credit their government with wise leadership.

The bigger worry is that China’s solid rebound from the global market meltdown is attracting admirers (and imitators) from across the developing world. China’s state-driven form of capitalism has become a threat to the future of free markets.

China’s leaders have created that model to ensure that markets don’t threaten their political power. They use state-owned oil companies to lock up the long-term energy supplies. They use other state-owned and privately owned but politically loyal companies to dominate other industries. They pay for all this with help from a pair of sovereign wealth funds created from the extra cash China earns from exports to America, Europe and Japan.

This trend threatens free markets for several reasons.

First, China has welcomed foreign investment for years to gain exposure to the technological, management and marketing expertise in Western and Japanese companies. As Chinese companies find their footing, their government has less need of foreign help and an interest in promoting Chinese firms at the expense of outsiders.

Second, multinational companies now must compete throughout the developing world with powerful stateowned Chinese companies.

Third, China continues to build commercial relations with international outlaws such as Iran, Sudan and Burma, making it all but impossible to impose tough sanctions.

Finally, developing countries see anxiety in America, upheaval in Europe, paralysis in Japan, and growth and stability in China. Which is the more attractive model? Many free-market democracies are preoccupied with yesterday’s accidents and today’s repairs. Too few have their eyes on trouble in the road ahead.

Ian Bremmer is president of Eurasia Group and author of “The End of the Free Market: Who Wins the War Between States and Corporations?”