Two cheers for Jiang Zemin's three represents

Yasheng Huang, Associate Professor, Harvard Business School, Project Syndicate

Mockery of retiring Chinese President Jiang Zemin's theory of the "Three Represents" is rife. Pundits scorn the theory, which says that the Communist party should not only represent workers and peasants but also society's "advanced productive forces, culture and interests," and they deem it wholly inadequate to China's mounting problems of inequality, corruption, and lack of democracy.

These critics are right to point out the theory's shortcomings, and the nauseating way that "Jiang Zemin thought" is promulgated does remind us of Mao's Cultural Revolution. But they miss the point that the "Three Represents" marks a leap forward over the ideology it seeks to replace -- the dictatorship of the proletariat.

Under today's arrangements, China faces a choice between the "Dictatorship of the Proletariat" or the "Three Represents." Which to choose seems very clear to me.

The big contribution of the "Three Represents" is that, for the first time, a ruling communist party gives up -- of its own volition -- the idea of class warfare. The gist of the Three Represents is not that the ruling party should protect the interests of capitalists at the expense of others, but that capitalists should not be automatically excluded from China's political process.

Of course, the status of capitalists will improve once the "Three Represents" is implemented. But those who argue that this will be achieved at the expense of China's working class need a reality check.

Today, private firms employ more of China's working class than state-owned enterprises (SOEs). With a fraction of the resources of the SOEs, private firms employ much of the proletariat, produce goods demanded by proletarian consumers, and, because of their superior performance, safeguard the interests of proletarian savers by actually paying back their bank loans.

Why most pundits miss the fact that workers are protesting, not in the liberal provinces of Zhejiang and Guangdong, but in the socialist bastions of the northeast, is a mystery.

Workers don't protest against menial jobs in capitalistic Wenzhou but against no jobs in socialist Shenyang. The government cannot pay unemployed workers their pensions because socialism has bankrupted its finance. Indeed, in contrast, in many Chinese regions, the tax contribution of a single private firm can exceed the combined tax revenue from all SOEs.

Moreover, describing Chinese private entrepreneurs as a "plutocracy" is grotesque. The term plutocracy is commonly applied to Russia's oligarchs, who grew rich through political connections, corruption and shady business deals. Of course, some private entrepreneurs in China grew rich that way. Most, however, run mom-and-pop businesses in fiercely competitive sectors. They became rich by working hard and because of their innovation and efficiency.

Some of China's biggest private entrepreneurs come from extremely humble backgrounds. Many hail from China's impoverished interior and rural areas. China's biggest private firm, the Hope Group, is located in Sichuan and started in the animal feed business. Why such origins? In the 1980s and 1990s, the central government curtailed private sector activity in urban centers so as to minimize competition with SOEs. The countryside was left with more freedom because the central government never thought that entrepreneurs there could succeed.

Those who think that entrepreneurs got rich because of their political connections commit a classic analytical error: They reason backward on the basis of outcomes rather than the processes that produced those outcomes. They fail to realize that cozy relations are often the result of, not the cause of, business success. Those who succeed command respect and leverage with the government because of their business acumen and the fact that they beat their competitors. Only a few entrepreneurs "make it." Many, as everywhere else in the world, fail on the way.

Detractors of the "Three Represents" also have their ideas about democracy backward. They think that the dictatorship of the proletariat means that the communist party represents the interests of the working class. But the dictatorship of the proletariat was as much a straightjacket on workers as on everybody else.

Only a vibrant private propertied class can one day bring democracy to China. A market economy based on private property rights is an economic democracy, and it is only a matter of time before political democracy follows. This optimism is not based on the belief that capitalists favor democracy.

Instead, it is based on the idea that democracy comes from forcing the state to share power with those it cannot directly control. Capitalists control wealth and wealth creation. Sooner or later capitalists will demand returns on their tax contributions in the form of greater accountability of government policies and practices.

There is another virtue associated with a political change engineered by propertied members of society -- a stable, gradual and peaceful transition. In the 20th century, countries like Korea, Taiwan and Chile made the transition to democracy peacefully and successfully. All had a vibrant private sector and a prosperous market economy. In contrast, countries with a large and bankrupt state sector incurred tumultuous, incomplete and often violent lurches toward democracy. Rumania's current nightmare would be of unimaginable scale if repeated in China.

The "Three Represents" may offend the sense and sensibility of some. But it's a trivial price to pay in order to make China's future more secure and peaceful for millions of Chinese.

The writer's forthcoming book is Selling China: Foreign direct investment during reform era.