Kot napovedujem v sosednji kolumni, je kitajski industrijski vzpon dokaj podoben ameriškemu iz 19. stoletja glede ključnih karakteristik, to je korupciji kot gonilu razvoja. Zato oznaka  “The Gilded Age” – Pozlačena doba. Yuen Yuen Ang (iz John Hopkins University) je v dveh izjemno dobrih knjigah (The China Gilded Age in How China Escaped the Poverty Trap) pokazala, da je prav korupcija (v sicer avtoritarnem sistemu) pospešila razvoj v Kitajski (podobno kot podeljeni monopoli v ZDA v 19. stoletju ali tehnološki monopoli v 21. stoletju). Kitajska se je lotila preganjanja korupcije šele v zadnjem desetletju, ko je že dosegla visoko raven razvitosti. Podobno kot ZDA v začetku 20. stoletja z protimonopolno zakonodajo.

Spodaj je nekaj odlomkov iz primerjalne analize Angove glede ameriške in kitajske pozlačene dobe industrializacije. Angova dokazuje, da glede rivalstva med ZDA in Kitajsko ne gre za “spopad civilizacij”, pač pa za neverjetno podobnost razvoja v njuni zgodnji fazi industrializacije. Kot pravi Angova:

ko odstranimo datume in imena v ameriški zgodovini 19. stoletja, so vzporednice med tem obdobjem in Kitajsko po letu 1978 osupljive. 

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Contrary to popular cultural tropes, America and China today are not caught in the “clash of civilizations.” Rather, as I earlier underscored in Foreign Affairs in July 2021, we’re witnessing a curious form of great power competition: the clash of two Gilded Ages. Both the U.S. and China confront sharp inequality, corruption or capture of state power by economic elites, and persistent financial risks to common people who have no way to indemnify themselves. Both are struggling to reconcile the tensions between capitalism and their respective political systems, albeit with greater intensity in China’s nominally communist system. Both U.S. President Biden and Chinese President Xi have staked their legacy on ending the excesses of capitalism, except under different banners. Whereas Biden pledges to “build back better,” Xi dubs his campaign “common prosperity.”

To say that the U.S. and China are similar, however, does not mean that they are identical. America is a democracy with constitutional protections of individual freedoms, whereas China is a top-down political system ruled by one party. Thus, the two countries are pursuing progressive reforms very differently. At the turn of the 20^th century, when America was an emerging industrial power, its society fought graft and inequality through political activism, civil service reforms, new regulations and by voting corrupt politicians out of office. Today, facing a deindustrialized economy and outdated infrastructure, Biden’s agenda is focused on passing legislation on large public investment and raising taxes on corporations. Xi, on the other hand, is trying to stamp out capitalist excesses through commands and campaigns to punish graft, eliminate poverty and rein in the “chaotic expansion of capital.” Like Biden, Xi aspires for fairer development — but with the CCP firmly in control.

The narratives we choose shape the realities we experience. The “clash of civilizations” implies that the U.S. and China are culturally — or worse, racially — destined to fight each other, and everyone else must choose one side. If you buy this narrative, a new Cold War can be the only outcome. By contrast, the “clash of two Gilded Ages” reminds us that the U.S. and China are rivals who share similar woes at home. Their competition should not be over who trips and outruns the other, but rather who fixes their own problems first. Competition can be a force for self-renewal instead of mutual destruction.

America’s Gilded Age

For a personification of the American Gilded Age, there is no better candidate than Mr. Leland Stanford, the railroad robber baron who would eventually endow the university that bears his name. Stanford entered into business serendipitously. After his Wisconsin law firm burned down in a fire, he moved to California and co-founded one of the largest railroad companies in the U.S., the Central Pacific Railroad. Connecting the east and west coasts of the United States by a transcontinental railroad was a revolutionary business that, along with his directorships of Wells Fargo Bank and the Pacific Mutual Life Insurance Company of California, eventually made Stanford one of the richest men of his time.

Constructing railroads was both expensive and risky. Thus, government support was indispensable. In 1861, just months after he founded the Central Pacific, Stanford was elected governor of California. Upon taking office, he badgered the state legislature into investing millions in public funds into railroad construction. Offering bribes and shares of the Central Pacific in bulging suitcases, Stanford’s associates convinced politicians to pass laws that would maximize their company’s profit while transferring the risk of failure to taxpayers. This culminated in the 1862 Railroad Act that granted railroad companies their wish list. To cut costs, Central Pacific imported “coolies” from China, contract laborers who worked for dirt-cheap wages and had no rights. When these workers waged a strike demanding a raise and safer conditions, management starved them into submission.

Many Americans assume that capitalism and democracy are natural, happy companions. American leaders see themselves as champions of both free markets and political liberty. Yet as Brands reminds us, capitalism and democracy have always coexisted in tension in the United States:

Democracy depends on equality, capitalism on inequality. Citizens in a democracy come to the public square with one vote each; participants in a capitalist economy arrive at the marketplace with unequal talents and resources and leave the marketplace with unequal rewards.

Moreover, capitalism cannot operate without inequality, Brands adds. It is the promise of unequal rewards that drives individuals to invest their smarts and efforts into producing results; the more inequality, the stronger the drive. Collectively, this fosters innovation and national competitiveness.

Yet this same drive can also lead to greed and corruption. Rising to the top doesn’t necessarily require better products and services; instead, favorable laws, government handouts, tax breaks and regulatory exemptions can do just as well. The theme behind the stories of the Gilded Age is the triumph of capitalism over democracy. Capitalists were able to buy government. Sometimes, the capitalists were the government. Laden with political advantages, they exploited labor, monopolized markets and took excessive risks. Over the course of the 19^th century, America suffered not one — but five — financial panics, all linked to speculative investment, overvalued stocks and reckless debt.

Eventually, the simmering troubles of the Gilded Age could no longer be ignored. Discontented groups from various parts of society, some radical and some moderate, launched social movements across the country. The emerging working class waged strikes demanding labor rights, which were violently suppressed by their capitalist employers. To improve governance, middle-class progressives, on the other hand, pushed for civil service professionalization, anti-monopoly regulations, health and safety regulations, restrictions on corporate contributions to political campaigns, tax reforms and more. Muckraking journalists and transparency initiatives exposed corruption. This set of wide-ranging economic and political reforms came to be known as the Progressive Era, which lasted roughly from the 1890s to the 1920s.

Progressives, wrote Brands, were “the democratic skeptics of capitalism.” On the one hand, capitalism raised standards of living for millions of Americans and turned America into the most attractive emerging economy for European investors at the time (the 19^th century equivalent of contemporary China). On the other hand, the unchecked forces of capitalism threatened to splinter society and destabilize the economy. It became time for democracy to reassert its authority. “The captains of industry who have driven the railway systems across this content, who have built up our commerce, who have developed our manufactures, have on the whole done great good to our people,” said President Theodore Roosevelt, who launched a new age of progressive reforms. But, he continued, “Great corporations exist only because they are created and safeguarded by our institutions; and it is therefore our right and our duty to see that they work in harmony with these institutions.”

More than a century later and across the Pacific, the leader of another capitalist juggernaut would utter similar words — this time, under the rule of a Communist Party.  

China’s Gilded Age

If Stanford’s dominance in politics and business captures the American Gilded Age, then his equivalent in China would be a duo who represent the asymmetrical marriage of power and money.

Bo Xilai is a modern-day princeling — his father, Bo Yibo, was one of the pioneers of the CCP, rehabilitated by Deng after Mao died to steer China’s market opening as vice premier. While other senior party apparatchiks were colorless and recited speeches in monotone, Bo Xilai stood out for his good looks, charm and flamboyance. The BBC described him as “the nearest thing China has to a Western-style politician.” From 2007, Bo was the provincial party secretary of Chongqing, a Southwestern backwater. There, he rolled out a populist agenda with great fanfare, deploying welfare benefits for the poor, state investment, Maoist songs and crackdowns on crime. At the height of his popularity, Bo was a contender for the top post in the CCP. But after a shocking turn of events in 2012, Bo was ousted for corruption and sent to prison. Xi came to power amid Bo’s scandal.

Public trials of Bo’s corruption revealed the supporting role of his capitalist henchman, Xu Ming. For years, Xu financed the lavish lifestyles of Bo’s family and, in return, received lucrative government contracts and generous loans from state banks. At its peak, the business activities of his conglomerate spanned construction, sports, finance, and real estate. In 2005, Forbes named Xu the eighth richest person in China, with an estimated net worth of more than $1 billion. When Bo fell from power, Xu was arrested with him and died mysteriously in prison shortly before his release.

The great mystery of China’s rise isn’t simply a question of how China became rich. Rather, it is a more vexing question of how China became rich despite rampant corruption, as evident from numerous scandals like Bo’s and Xu’s. If we believe the conventional wisdom that corruption impedes growth and that Western economies like the U.S. prospered by first eradicating corruption and establishing good, accountable institutions, then China appears to be “a gigantic outlier.”

According to renowned economists Daron Acemoglu and Jim Robinson, authors of “Why Nations Fail,” American capitalism flourished because European migrants brought “inclusive” and “non-extractive” institutions from Europe to North American soil. “It should therefore be no surprise,” they concluded, “that it was U.S. society, not Mexico or Peru, that produced Thomas Edison,” because “economic institutions that encouraged private property, uphold contracts [and] create a level playing field” fostered innovation and growth. 

But a recap of the history of America’s Gilded Age reveals a very different reality. Sure, a small section of society — elite white men — enjoyed secure property rights, while Native Americans, slaves in the South, indentured laborers from China, migrants and women were excluded. Even among the privileged, it was no “level playing field.” Robber barons like Stanford publicly championed free-market principles while privately benefiting from state-supplied privileges and protection. And yet, American capitalism boomed for reasons similar to China’s: a particular type of corruption came to dominate the economy. I call it access money, the purchase of privileges by capitalists from those in power. This transactional form of corruption must be distinguished from extractive corruption such as embezzlement, extortion and petty bribery. The latter existed during the early stages of capitalism in both America and China, but they were steadily brought under control through administrative reforms and increased state capacity. Access money, on the other hand, exploded.

Access money functioned like the steroids of capitalism. It didn’t just spur any growth, but specifically risky and imbalanced growth. In China, politicians were handsomely rewarded for serving capitalist interests. Together, they built, borrowed and invested more, all of which contributed to GDP. But in a feverish race for growth, politicians borrowed and built regardless of sustainability and, in the process, accumulated massive debts and a litany of white elephant projects.

Real estate was the hot spot of Chinese corruption. In exchange for kickbacks, local governments helped real estate developers drive away farmers and convert rural land into pricey urban properties. Flushed with easy credit and pre-payments from homebuyers, profit-hungry developers built more projects before completing existing ones. During the go-go days, Evergrande extended its business into selling wealth management products, which it is now unable to repay.

Xi inherited a Gilded Age from his predecessors. While China is no longer impoverished as a whole, it suffers the ailments of a richer, crony capitalist economy. In thick party speak, the CCP’s historic resolution in 2021 acknowledged: although market liberalization has made “historic strides in raising the living standards of its people from bare subsistence to moderate prosperity … China faces no small number of long unresolved, deep-seated problems as well as newly emerging problems.” In particular, Xi believes it is time to rein in the “chaotic expansion” of private, free markets. “Capital is a critical component of the socialist market economy,” he pronounced in a speech in April 2022. But today, the CCP must “regulate and guide the healthy development of capital” because this concerns “the quality of development and common prosperity as well as national security and social stability.”

If the American Progressives at the turn of the 20^th century were democratic skeptics of capitalism, then Xi is an authoritarian skeptic of capitalism. He sees his historic mission as summoning China out of the Gilded Age and into a Red Progressive Era, using the tools of Leninism: commands and campaigns. For him, the end goal is not only to correct social inequality, but also to preserve the CCP’s grip on power, even as China becomes more affluent and globalized. Upon taking office in 2012, Xi has in effect launched a platform of Red Progressivism, even though he did not call it that. This began with his anti-corruption drive, the largest in the party’s history, and his poverty eradication campaign. In 2021, baffled observers thought the CCP’s crackdown on big private companies and rich celebrities came out of nowhere; in fact, it was a logical extension of Xi’s Red Progressivism.  

Future historians should mark this peculiar moment in history: it is the first time a communist party has tried to order away the problems of capitalism after encouraging it to thrive. When the CCP’s regulatory storm in 2021 alarmed investors and wiped out billions in share value, Xi learned about the limits of commands. In a speech later that year, he told an audience of Chinese bureaucrats: “On fixing poverty, we have plenty of experience. But on managing capitalism, we still have much to learn.”

Vir: Yuen Yuen Ang, Noema