Leadership - pragmatism and ideology
Comparing leadership in China and the United States may seem far-fetched. Yet looking at how each has recently handled its economic challenges suggests some ironic insights.
The Chinese announced last weekend (Oct. 20) a plan to restructure their economic system radically. The Central Committee, in a 16,000 word report, decided to transform their economy from a centrally planned system, like that of the Soviet Union, to a more flexible one, similar to Hungary or Yugoslavia. Several years ago they reformed their agriculture by replacing the collectivized communes with family farm units, which have sharply boosted food output and rural incomes.
Central controls, the report says, impede innovation, foster waste, and distort output. The new program would restrict central planning, expand the authority of enterprises over wages, prices, and product, and rely much more on the market and competition to guide production and pricing. A wider spread in wages would be encouraged to reward diligence, productivity, and skill.
The report recognizes that the reform is a sharp break with the past and complex, and it cannot be achieved ''at one stroke.'' Getting rid of consumer subsidies, adjusting prices and wages, and avoiding inflation or undue unemployment will be difficult and will risk serious social dislocation and discontent. Actually, even if pursued vigorously, it will surely take some years.
This is a bold and realistic step. Leaders of the Soviet Union, which also suffers for the same reasons from slow growth, inefficiency, low quality, and lack of innovation in industry and agriculture, have recognized the problems for some years but have done little beyond exhortation and palliatives. Why can China move to reform its economy while the USSR cannot? In both cases, one must assume the bureaucrats and party officials resist changes bound to threaten their positions and perquisites. But in the Soviet Union they have been entrenching themselves at least since Stalin. Twenty years ago, Nikita S. Khrushchev was ousted mainly because these groups resented his unsettling initiatives. In China, however, both the government and party were so disrupted by the Cultural Revolution under Mao Tse-tung that they may not yet be so solidly dug in.
But surely the key factor is the character and leadership of Deng Xiaoping. Despite his age, he has shown the ability to recognize and diagnose China's economic problems, to think freshly and pragmatically about how to cope with them, and to exercise the political skill and patience to build a political base for radical measures. He has that rare combination, essential for major leadership, of both strategic vision and practical action. The Soviet Union has not produced such leaders.
Now turn to the US and its huge budget deficit. Its impact and implications are critical both for the US and the rest of the world. According to impartial estimates, the annual deficit will grow from a bit under $200 billion this year to nearly $300 billion by 1989 even if prosperity continues. By then the interest costs will exceed $200 billion each year. High interest rates will jeopardize US growth and keep the dollar overvalued. That in turn produces enormous trade deficits by penalizing exports and in effect subsidizing imports, thereby damaging and distorting US industry and generating protectionist pressures. Internationally, other economies are starved for capital, interest costs for less developed country debtors are kept at crushing levels, increasing the danger of defaults. And in the wings lurks the danger of a grave economic crisis if confidence in the dollar should decline. Experience has refuted the rosy predictions for a balanced budget by 1984 made by the supply-siders at the start of Ronald Reagan's term.
This urgent problem calls for an ability to understand and assess realistically the consequences of the deficit if not dealt with, and the political courage to propose practical steps to bring it under control. Virtually all experts agree that will require raising taxes. In the past year Mr. Reagan could have put together with Congress a balanced package of spending cuts and increased revenues to cut the deficit, reduce interest rates, and mitigate the other risks involved. That is what a bipartisan group of former Treasury secretaries, businessmen, bankers, and others have been strongly urging in full-page ads.
Yet Mr. Reagan has refused to do so and has blocked initiatives in Congress to that end by rejecting in advance any rise in revenues. He asserts that the deficit will cure itself with prosperity. Maybe this reflects only cynical electoral tactics. But it seems more likely that it is due both to lack of patience and ability to recognize the realities, and to an ideological cast of mind.
The irony is that Communist China has produced a practical leader, guided by analysis and facts, while the US has a President more attuned to ideology than to experience.