The Fat Years is a fascinating dystopian novel that captures the dilemmas of Chinese politics. The exciting plot, the intellectual content, and the realistic characters make the novel a must-read for anyone interested in international relations.
The insightful author of the book, the Shanghai-born Chan Koonchung, grew up in Hong Kong and Taiwan. He now lives in mainland China, trying to learn about the culture and politics as much as his outsider identity allows. Chan uses the mouth of the character He Dongsheng, “a Communist party official who is an insomniac and drives around Beijing in the wee hours of the night,” to outline a detailed plan of how China ascended to the position of the leading hegemonic power in 2013. (America and the West fester in debt and decline during a second global economic meltdown.)
I will attempt to summarize the plan in the following paragraphs and I hope to incite a discussion of the economic accuracy of this plan.
- The Chinese government is authoritarian.
- During the 2nd economic meltdown, people lose confidence in the dollar and sets off a wave of selling; (2009)
- America enters stagflation and its stock market plunges; (2009)
- Like most parts of the world, China is affected by America’s downturn: exports=0, unemployment soars, GDP growth becomes negative; (2009)
- China still holds a lot of dollars and suffers from the dollar’s rapidly declining value.
- Chinese people become extremely worried and start hoarding commodities. (2010 Jan.)
Stage 1: The state will not initiate any command for police or army forces to restore “social order” anywhere in China, except for Xinjiang and Tibet.
He Dongsheng’s Explanation: We will wait to see how long the people can endure anarchy.
Result: Some start to steal, rob, and burn stores. Most people, worried of their safety, beg for the state to restore order (“give themselves up to the Leviathan.”).
a) The state “strikes hard” (yanda) against crimes across the nation and sentences quick executions to convicts of most serious crimes.
He Dongsheng’s Explanation: In 1817, the Lord of Liverpool and his government suspended Habeas Corpus by rushing the Gagging Acts through Parliament. These measures banned meetings of over fifty people and instructed magistrates to arrest everyone suspected of spreading seditious libel. The economy started to flourish the next year. Similarly the Chinese government needs to exercise its force to “tame” its people and improve the economy.
b) 25% of everyone’s personal domestic bank account money will be converted to vouchers. 1/3 of the vouchers must be spent in the next 90 days, 2/3 of the vouchers must be spent in the next 6 months. The vouchers lose their value after expiration dates.
He Dongsheng’s explanation: the lack of domestic demand is mostly caused by Chinese people’s over-saving. During severe economic times, the wealth tend to save up. During times of emergency, the government can increase consumption through direct orders.
This plan is practical because it is easy to execute, given that all banks are routed to computers, and that it will only affect people with relatively more property (because they have bank accounts). Lastly, it does not require any government stimulus or Keynesian employment plan to increase consumption as well as GDP by at least 5 percentiles.
c) Supply must increase along with increased demand. The Chinese government will loosen restrictions on services and manufacture industries (except the ones dominated by state-owned enterprises or related to national security), encourage financial credits, and improve the accessibility to private funds. We will encourage entrepreneurship.
Result: Everyone will become businessmen. Enterprises flourish, urban unemployment plunges, and people earn higher income. New products and new services emerge in 1-2 months. China will successfully transition from an investment and export-based economy to a domestic demand-led economy.
d) Allow farmers to own rights to their own farm land. (In reality, the state has the final say to all property rights)
He Dongsheng’s explanation: to placate the farmers and prevent them from revolting.
e) “Strike-hard” campaign aimed at economic and corruption-related crimes.
He Dongsheng’s explanation: The government previously scared off the hooligans, gangs, and human traffickers. Now the government must use the justice system to defeat the opportunists during this period of transition.
f) Price controls.
He Dongsheng’s explanation: the supply of goods and services will often experience short periods of shortage even without opportunists who mess with the market. People’s expectations of these shortages will create irregular inflation cycles. Without price control, these cycles might develop into hyperinflation and undermine the entire economic reform. (He Dongsheng cited a historical exemplar: Franklin D. Roosevelt initiated price controls during World War II and saved America from the Great Depression.)
With capable technocrats, statisticians experienced in price control, the economic information previously unavailable during the years of China’s planned economy (real-time updating of prices online), and strict forbiddance against opportunistic hoarding, China realizes a new form of “commandist economy” and gains dominance amidst many crises.
The following stages involve more international politics. The government, under He Dongsheng’s master plan, will expand China’s geopolitical influence, such as establishing strong ties with Islamic countries as well as Japan. I will summarize those strategies in my next blog post.