zt Civil Society vs. Political Society: China at a Crossroads

Civil Society vs. Political Society: China at a Crossroads

by

Edward H. Crane

President, Cato Institute

The subject of my talk this morning is civil society vs. political society, which is, I suppose, a bit contentious on the face of it, since China is a society permeated not just with a rich, centuries old culture, but also with politics.

When I was a student at the University of California at Berkeley back in the 1960s, we engaged in often heated debate over ideology. Marxism, fascism, conservatism, neoconservatism, liberalism, libertarianism and more were the ideologies we debated. The overwhelming policy issue of the day was the Vietnam war. Being a libertarian, I found myself in the minority position of supporting laissez-faire capitalism but joining my colleagues on the left in opposing U.S. participation in the war.

I should say that my opposition to U.S. involvement in Vietnam had nothing to do with any support for Ho Chi Minh or his allies, but rather was based on my conviction that the interests of civil society are best served when nations limit their military activities to actions that directly threaten their national security. Vietnam was not such a case and did not merit the expenditure of billions of dollars of American taxpayers' money, much less the loss of nearly 60,000 American lives.

All nations are well served when they respect the territorial integrity of other nations. I've always believed that the best way to ensure peaceful relations among the nations of the world is free trade. That is why my colleagues and I support MFN status for China.

But to get back to the question of ideology, I eventually concluded that my debates back at Berkeley may have focused too much on the trees so that I wasn't seeing the forest. The truth is, that for all the nuanced and sophisticated analysis of ideology, politics boils down to a pretty simple formula. Politics deals with an individual's relationship to the state.

That relationship determines how a society is ordered. Ultimately, there are two fundamental ways to order society: voluntarily, through the private interaction of individuals, associations, religious organizations, businesses and so on -- what we at the Cato Institute term civil society -- or coercively, through state mandates -- what we term political society.

That we require a certain element of political society seems evident enough. We need protection against crime at home and threats from abroad. But what should also be evident is that a free society, if that is indeed what one desires, should have an expansive civil society or voluntary sector. In fact, I would say that it is axiomatic that the primary goal of public policy should be to enhance the ability of individual human beings to control their own lives, develop their own values and goals, and realize their fullest potential in life.

None of which should be interpreted as a call for atomistic individualism. It is absurd to suggest, as both Hegel and Marx did, that individuals, left to their own devices, will choose not to interact with one another cooperatively in social, commercial, and a myriad of other ways. Human interchange and association will be high on virtually everyone's list of values and priorities. The only question is, will that association be coerced or will it be voluntary.

In civil society, as we define it, you make the choices about your life. In political society, someone else makes those choices. Do you choose the career path that you desire, or does someone else assign that career to you? Do you choose the literature you read, or are your choices limited by someone in authority? Do you spend the money you earn or does someone else spend it for you? The opportunities for political society to intervene in our lives are as great as the infinite choices a free individual faces in civil society.

That is why it is encouraging to learn, as Minxin Pei will tell us in the first session this morning, that the growth of voluntary organizations in China over the past several years has been significant, laying the groundwork for the solid growth of true civil society in China. As my colleague Tom Palmer point out, however, it is important that commercial enterprises be viewed a part of the voluntary sector, as part of civil society.

The twentieth century, of course, has been a long and bloody experiment in political society. The great nations of the world have, to one degree or another, all experimented with what the great Nobel laureate economist and social philosopher F.A. Hayek called the "fatal conceit" of believing that one or a few very smart people could order societal affairs in ways that were somehow going to yield results superior to those that would spring from the spontaneous order of a free society -- that is, the order that results from the voluntary interaction of millions of individuals in civil society.

Hayek himself described the enormous economic benefits that resulted from the unplanned, spontaneous order of the marketplace. But his thinking about economics and civil society, while in many ways original, reflected the insights of the great thinkers throughout history who have understood the dangers of giving political power to a few to rule a multitude.

Perhaps none of those thinkers was as great as the Chinese philosopher Lao-tzu, whose writings some twenty-six centuries ago are as fresh as tomorrow and provide a solid intellectual basis for civil society. He wrote in the Tao Te Ching, "Therefore the Master says: I let go of the law, and people become honest. I let go of economics, and people become prosperous. I let go of religion, and people become serene. I let go of all desire for the common good, and the good becomes common as grass."

Lao-tzu was speaking great wisdom. He was talking about the superiority of civil society over political society. Jim Dorn's suggestion yesterday that China follow the path of Market Taoism is a good one. More recently, just two and one-half centuries ago, the first American president, George Washington, expressed similar sentiments when he wrote, "Government is not reason; it is not eloquence. It is force. Like fire, it is a dangerous servant and a fearsome master." Government is not reason or eloquence, it is force. In civil society people interact with one another through reason and persuasion -- eloquence in Washington's words -- whereas in political society force, or coercion, is the basis of action.

And because it is in the nature of man to be free, Lao-tzu described how much better off society is -- not just economically, but spiritually -- when politics plays as small a role as possible in societal affairs.

We know from empirical evidence that civil society is preferable to political society in economics by the many failed experiments in central economic planning in this century and by the many success stories of the free market. From Hong Kong to the United States to Chile and New Zealand, where government restraints on economic activity are removed, the economy and the people prosper. Indeed, in the United States the computer industry is both the least regulated and the most dynamic sector of the economy. The beneficial results of freeing the economy are increasingly evident here in Shanghai, as well.

But it is not just empirical observation that leads us to appreciate the importance of getting politicians and bureaucrats out of economic decision-making. The great economists of the 20th century -- Ludwig von Mises, F.A. Hayek, Milton Friedman, George Stiegler and others -- have shown that the market is not a machine, but more like an organism. It does not have rigid input and output relationships, but instead involves a constant discovery process. What is more, the entrepreneurial spirit that drives an economy is based on knowledge that is not centralized, but widely dispersed. Not only is it widely dispersed, but most of it isn't even articulated. It is tacit, local knowledge that is the essence of any economy. Only freedom can allow that knowledge to be coordinated in a manner that will yield dynamic economic growth. The essence of such a free economy is competition and cooperation. The tremendous complexity of a highly integrated free market economy is the greatest example of human cooperation the world has even known, contrary to what its critics may claim.

To give you just one example of how the marketplace is a discovery process and not something that can be efficiently directed by politicians and bureaucrats, consider the trucking industry in the early 1970s in the United States. It was a heavily regulated, cartelized industry with few companies that served regulated routes at regulated rates. At long last the politicians decided to deregulate the industry on the basis of the obvious fact that more competitors would enter the trucking business and rates would therefore go down.

As it turned out, that is exactly what happened. Rates went down and the economy saved money. But what the politicians and experts did not predict was that by far the greater savings to the economy were to come not from lower rates but rather from the radical downsizing of inventories that the now flexible route and pricing system allowed for -- savings on the order of tens of billions of dollars a year.

Government regulation proscribes certain entrepreneurial activities and thereby short-circuits the discovery process of the free market. The opportunity costs to the world economy, which means the people of the world, imposed by governments from France to China to the United States that continue to follow Hayek's fatal conceit of regulation are in the trillions of dollars every year, year in and year out. Future generations will look back at the 20th century's efforts at political control of the economy and shake their heads in bewilderment.

But civil society is much more than economics. Political society does not just stifle economic growth, it ultimately denies the sense of human fulfillment that can only come from having lived one's life in freedom -- making our own decisions, pursuing our own values, so that in the end our life's achievements -- whether raising a family of many children, inventing a new computer chip, or helping those in need -- are something we can take pride in for having been our achievements, not merely activities others have imposed on us.

Thus, political freedom -- the freedom to make decisions about one's life not just in the economic sphere, but regarding all of life's choices -- is of paramount importance if we are to have true civil society. When the Cato Institute first came to Shanghai in the Fall of 1988, Milton Friedman received an exceptionally warm reception from our Chinese friends who attended that conference. It was at a time of strong political liberalization in China, which I trust will return with even more energy and commitment in the years ahead.

In his great 1962 book Capitalism and Freedom, Milton Friedman wrote about the relationship between economic freedom and political freedom, the two prerequisites for civil society. After discussing the nature of the free market, Friedman writes:

It is this feature of the market that we refer to when we say that the market provides economic freedom. But this characteristic also has implications that go far beyond the narrowly economic. Political freedom means the absence of coercion of a man by his fellow men. The fundamental threat to freedom is power to coerce, be it in the hands of a monarch, a dictator, an oligarchy, or a momentary majority. The preservation of freedom requires the elimination of such concentration of power to the fullest possible extent and the dispersal and distribution of whatever power cannot be eliminated -- a system of checks and balances. By removing the organization of economic activity from the control of political authority, the market eliminates this source of coercive power. It enables economic strength to be a check to political power rather than a reinforcement. (Emphasis added.)

Of course, I believe Milton Friedman was right, that economic liberalization has very positive implications for political liberalization. But we should not forget that throughout the world the political class -- those who believe in and benefit from a strong political society -- while sometimes recognizing the obvious benefits of a free market economy, nevertheless persist in trying to control all other aspects of civil society. They can't seem to learn the wisdom of Lao-tzu, who said, "True mastery can be gained by letting things go their own way. It can't be gained by interfering."

In the United States the Cato Institute spends much of its time and resources fighting those politicians and bureaucrats who are constantly trying to undermine civil society, trying to sever the tendrils of community by replacing private, voluntary initiatives in education, charity, and health care, to name a few, with government-run bureaucratic enterprises. We have a Constitution in the United States that says individual human beings have rights to do those things without interference from government and that, indeed, government itself has no right to interfere, as Lao-tzu would say. Without a constitution and the rule of law, government will continue to sever the tendrils of community. As another great American thinker, Thomas Jefferson said, "The natural progress of things is for government to gain ground and for liberty to yield."

Your struggle in China is in part to create a constitution of liberty. Ours in the United States is to once again enforce the constitution of liberty we created over 200 years ago.

Just last week the Vice President of the United States, Al Gore, who visited here not long ago, was quoted as saying the government should be more "like grandparents in the sense that grandparents perform a nurturing role...." Such a patronizing attitude is an anathema to the American heritage of limited government, of a government with no powers not delegated to it by the people in the first place. The people have a right to live free in civil society. The government's role, at least in the United States, is not to "nurture," but to protect our rights life, liberty, and property and to otherwise leave us alone.

China and the United States have much to learn from each other, and I would never presume to fully understand the nature of your complex and rich culture. But I would suggest you should be concerned about last month's announcement of what Reuters described as "a powerful new ideological watchdog body" called The Central Leading Committee for Construction of Spiritual Civilization for the purpose of reviving "communist doctrines of civic responsibility and self-sacrifice." Such a body poses a real threat to the growing infrastructure of civil society in China today.

Governments of all stripes, left, right and center have through the centuries employed the concept of "self-sacrifice," of subjugating the dignity of the individual to the alleged greater good of society, as a means of enhancing the power of political society over civil society. One of the most articulate critics of that idea was the Russian-born American author Ayn Rand. She wrote of such a system,

[It] is a moral system which holds that man has no right to exist for his own sake, that service to others is the sole justification of his existence, and that self- sacrifice is his highest moral duty, value and virtue. This is the moral base of collectivism, of all dictatorships. In order to seek freedom and capitalism, men need a ... rational code of ethics -- a morality which holds that man is not a sacrificial animal, that he has the right to exist for his own sake, neither sacrificing himself to others, nor others to himself.

The alternative moral code is one that denies that dignity of the individual and says the goals and values of those with the "fatal conceit," those with the power of political society shall determine the destiny of everyone else. But those who advocate such state control over the lives of individual human beings are not just wrong, they are on the wrong side of history. As world trade develops, as the peoples of the globe get to know one another, to appreciate the traditions of other cultures, to form communities through the internet and other means that transcend mere political boundaries, they will develop a growing distrust of and disinterest in the pronouncements of the political class.

Political control of the economy today is not only a bad idea, but increasingly infeasible. Control over how human beings communicate with each other around the globe -- efforts at censorship are increasingly futile. And that is good news.

Those who cling to a past of political society would do well to consider once again the words of Lao-tzu: "When taxes are to high, people go hungry. When the government is too intrusive, people lose their spirit. Act for the people's benefit. Trust them; leave them alone." Perhaps we should call that the wisdom of Market Taoism. Thank you very much.

Civil Society vs. Political Society: China at a Crossroads

by

Edward H. Crane

President, Cato Institute

The subject of my talk this morning is civil society vs. political society, which is, I suppose, a bit contentious on the face of it, since China is a society permeated not just with a rich, centuries old culture, but also with politics.

When I was a student at the University of California at Berkeley back in the 1960s, we engaged in often heated debate over ideology. Marxism, fascism, conservatism, neoconservatism, liberalism, libertarianism and more were the ideologies we debated. The overwhelming policy issue of the day was the Vietnam war. Being a libertarian, I found myself in the minority position of supporting laissez-faire capitalism but joining my colleagues on the left in opposing U.S. participation in the war.

I should say that my opposition to U.S. involvement in Vietnam had nothing to do with any support for Ho Chi Minh or his allies, but rather was based on my conviction that the interests of civil society are best served when nations limit their military activities to actions that directly threaten their national security. Vietnam was not such a case and did not merit the expenditure of billions of dollars of American taxpayers' money, much less the loss of nearly 60,000 American lives.

All nations are well served when they respect the territorial integrity of other nations. I've always believed that the best way to ensure peaceful relations among the nations of the world is free trade. That is why my colleagues and I support MFN status for China.

But to get back to the question of ideology, I eventually concluded that my debates back at Berkeley may have focused too much on the trees so that I wasn't seeing the forest. The truth is, that for all the nuanced and sophisticated analysis of ideology, politics boils down to a pretty simple formula. Politics deals with an individual's relationship to the state.

That relationship determines how a society is ordered. Ultimately, there are two fundamental ways to order society: voluntarily, through the private interaction of individuals, associations, religious organizations, businesses and so on -- what we at the Cato Institute term civil society -- or coercively, through state mandates -- what we term political society.

That we require a certain element of political society seems evident enough. We need protection against crime at home and threats from abroad. But what should also be evident is that a free society, if that is indeed what one desires, should have an expansive civil society or voluntary sector. In fact, I would say that it is axiomatic that the primary goal of public policy should be to enhance the ability of individual human beings to control their own lives, develop their own values and goals, and realize their fullest potential in life.

None of which should be interpreted as a call for atomistic individualism. It is absurd to suggest, as both Hegel and Marx did, that individuals, left to their own devices, will choose not to interact with one another cooperatively in social, commercial, and a myriad of other ways. Human interchange and association will be high on virtually everyone's list of values and priorities. The only question is, will that association be coerced or will it be voluntary.

In civil society, as we define it, you make the choices about your life. In political society, someone else makes those choices. Do you choose the career path that you desire, or does someone else assign that career to you? Do you choose the literature you read, or are your choices limited by someone in authority? Do you spend the money you earn or does someone else spend it for you? The opportunities for political society to intervene in our lives are as great as the infinite choices a free individual faces in civil society.

That is why it is encouraging to learn, as Minxin Pei will tell us in the first session this morning, that the growth of voluntary organizations in China over the past several years has been significant, laying the groundwork for the solid growth of true civil society in China. As my colleague Tom Palmer point out, however, it is important that commercial enterprises be viewed a part of the voluntary sector, as part of civil society.

The twentieth century, of course, has been a long and bloody experiment in political society. The great nations of the world have, to one degree or another, all experimented with what the great Nobel laureate economist and social philosopher F.A. Hayek called the "fatal conceit" of believing that one or a few very smart people could order societal affairs in ways that were somehow going to yield results superior to those that would spring from the spontaneous order of a free society -- that is, the order that results from the voluntary interaction of millions of individuals in civil society.

Hayek himself described the enormous economic benefits that resulted from the unplanned, spontaneous order of the marketplace. But his thinking about economics and civil society, while in many ways original, reflected the insights of the great thinkers throughout history who have understood the dangers of giving political power to a few to rule a multitude.

Perhaps none of those thinkers was as great as the Chinese philosopher Lao-tzu, whose writings some twenty-six centuries ago are as fresh as tomorrow and provide a solid intellectual basis for civil society. He wrote in the Tao Te Ching, "Therefore the Master says: I let go of the law, and people become honest. I let go of economics, and people become prosperous. I let go of religion, and people become serene. I let go of all desire for the common good, and the good becomes common as grass."

Lao-tzu was speaking great wisdom. He was talking about the superiority of civil society over political society. Jim Dorn's suggestion yesterday that China follow the path of Market Taoism is a good one. More recently, just two and one-half centuries ago, the first American president, George Washington, expressed similar sentiments when he wrote, "Government is not reason; it is not eloquence. It is force. Like fire, it is a dangerous servant and a fearsome master." Government is not reason or eloquence, it is force. In civil society people interact with one another through reason and persuasion -- eloquence in Washington's words -- whereas in political society force, or coercion, is the basis of action.

And because it is in the nature of man to be free, Lao-tzu described how much better off society is -- not just economically, but spiritually -- when politics plays as small a role as possible in societal affairs.

We know from empirical evidence that civil society is preferable to political society in economics by the many failed experiments in central economic planning in this century and by the many success stories of the free market. From Hong Kong to the United States to Chile and New Zealand, where government restraints on economic activity are removed, the economy and the people prosper. Indeed, in the United States the computer industry is both the least regulated and the most dynamic sector of the economy. The beneficial results of freeing the economy are increasingly evident here in Shanghai, as well.

But it is not just empirical observation that leads us to appreciate the importance of getting politicians and bureaucrats out of economic decision-making. The great economists of the 20th century -- Ludwig von Mises, F.A. Hayek, Milton Friedman, George Stiegler and others -- have shown that the market is not a machine, but more like an organism. It does not have rigid input and output relationships, but instead involves a constant discovery process. What is more, the entrepreneurial spirit that drives an economy is based on knowledge that is not centralized, but widely dispersed. Not only is it widely dispersed, but most of it isn't even articulated. It is tacit, local knowledge that is the essence of any economy. Only freedom can allow that knowledge to be coordinated in a manner that will yield dynamic economic growth. The essence of such a free economy is competition and cooperation. The tremendous complexity of a highly integrated free market economy is the greatest example of human cooperation the world has even known, contrary to what its critics may claim.

To give you just one example of how the marketplace is a discovery process and not something that can be efficiently directed by politicians and bureaucrats, consider the trucking industry in the early 1970s in the United States. It was a heavily regulated, cartelized industry with few companies that served regulated routes at regulated rates. At long last the politicians decided to deregulate the industry on the basis of the obvious fact that more competitors would enter the trucking business and rates would therefore go down.

As it turned out, that is exactly what happened. Rates went down and the economy saved money. But what the politicians and experts did not predict was that by far the greater savings to the economy were to come not from lower rates but rather from the radical downsizing of inventories that the now flexible route and pricing system allowed for -- savings on the order of tens of billions of dollars a year.

Government regulation proscribes certain entrepreneurial activities and thereby short-circuits the discovery process of the free market. The opportunity costs to the world economy, which means the people of the world, imposed by governments from France to China to the United States that continue to follow Hayek's fatal conceit of regulation are in the trillions of dollars every year, year in and year out. Future generations will look back at the 20th century's efforts at political control of the economy and shake their heads in bewilderment.

But civil society is much more than economics. Political society does not just stifle economic growth, it ultimately denies the sense of human fulfillment that can only come from having lived one's life in freedom -- making our own decisions, pursuing our own values, so that in the end our life's achievements -- whether raising a family of many children, inventing a new computer chip, or helping those in need -- are something we can take pride in for having been our achievements, not merely activities others have imposed on us.

Thus, political freedom -- the freedom to make decisions about one's life not just in the economic sphere, but regarding all of life's choices -- is of paramount importance if we are to have true civil society. When the Cato Institute first came to Shanghai in the Fall of 1988, Milton Friedman received an exceptionally warm reception from our Chinese friends who attended that conference. It was at a time of strong political liberalization in China, which I trust will return with even more energy and commitment in the years ahead.

In his great 1962 book Capitalism and Freedom, Milton Friedman wrote about the relationship between economic freedom and political freedom, the two prerequisites for civil society. After discussing the nature of the free market, Friedman writes:

It is this feature of the market that we refer to when we say that the market provides economic freedom. But this characteristic also has implications that go far beyond the narrowly economic. Political freedom means the absence of coercion of a man by his fellow men. The fundamental threat to freedom is power to coerce, be it in the hands of a monarch, a dictator, an oligarchy, or a momentary majority. The preservation of freedom requires the elimination of such concentration of power to the fullest possible extent and the dispersal and distribution of whatever power cannot be eliminated -- a system of checks and balances. By removing the organization of economic activity from the control of political authority, the market eliminates this source of coercive power. It enables economic strength to be a check to political power rather than a reinforcement. (Emphasis added.)

Of course, I believe Milton Friedman was right, that economic liberalization has very positive implications for political liberalization. But we should not forget that throughout the world the political class -- those who believe in and benefit from a strong political society -- while sometimes recognizing the obvious benefits of a free market economy, nevertheless persist in trying to control all other aspects of civil society. They can't seem to learn the wisdom of Lao-tzu, who said, "True mastery can be gained by letting things go their own way. It can't be gained by interfering."

In the United States the Cato Institute spends much of its time and resources fighting those politicians and bureaucrats who are constantly trying to undermine civil society, trying to sever the tendrils of community by replacing private, voluntary initiatives in education, charity, and health care, to name a few, with government-run bureaucratic enterprises. We have a Constitution in the United States that says individual human beings have rights to do those things without interference from government and that, indeed, government itself has no right to interfere, as Lao-tzu would say. Without a constitution and the rule of law, government will continue to sever the tendrils of community. As another great American thinker, Thomas Jefferson said, "The natural progress of things is for government to gain ground and for liberty to yield."

Your struggle in China is in part to create a constitution of liberty. Ours in the United States is to once again enforce the constitution of liberty we created over 200 years ago.

Just last week the Vice President of the United States, Al Gore, who visited here not long ago, was quoted as saying the government should be more "like grandparents in the sense that grandparents perform a nurturing role...." Such a patronizing attitude is an anathema to the American heritage of limited government, of a government with no powers not delegated to it by the people in the first place. The people have a right to live free in civil society. The government's role, at least in the United States, is not to "nurture," but to protect our rights life, liberty, and property and to otherwise leave us alone.

China and the United States have much to learn from each other, and I would never presume to fully understand the nature of your complex and rich culture. But I would suggest you should be concerned about last month's announcement of what Reuters described as "a powerful new ideological watchdog body" called The Central Leading Committee for Construction of Spiritual Civilization for the purpose of reviving "communist doctrines of civic responsibility and self-sacrifice." Such a body poses a real threat to the growing infrastructure of civil society in China today.

Governments of all stripes, left, right and center have through the centuries employed the concept of "self-sacrifice," of subjugating the dignity of the individual to the alleged greater good of society, as a means of enhancing the power of political society over civil society. One of the most articulate critics of that idea was the Russian-born American author Ayn Rand. She wrote of such a system,

[It] is a moral system which holds that man has no right to exist for his own sake, that service to others is the sole justification of his existence, and that self- sacrifice is his highest moral duty, value and virtue. This is the moral base of collectivism, of all dictatorships. In order to seek freedom and capitalism, men need a ... rational code of ethics -- a morality which holds that man is not a sacrificial animal, that he has the right to exist for his own sake, neither sacrificing himself to others, nor others to himself.

The alternative moral code is one that denies that dignity of the individual and says the goals and values of those with the "fatal conceit," those with the power of political society shall determine the destiny of everyone else. But those who advocate such state control over the lives of individual human beings are not just wrong, they are on the wrong side of history. As world trade develops, as the peoples of the globe get to know one another, to appreciate the traditions of other cultures, to form communities through the internet and other means that transcend mere political boundaries, they will develop a growing distrust of and disinterest in the pronouncements of the political class.

Political control of the economy today is not only a bad idea, but increasingly infeasible. Control over how human beings communicate with each other around the globe -- efforts at censorship are increasingly futile. And that is good news.

Those who cling to a past of political society would do well to consider once again the words of Lao-tzu: "When taxes are to high, people go hungry. When the government is too intrusive, people lose their spirit. Act for the people's benefit. Trust them; leave them alone." Perhaps we should call that the wisdom of Market Taoism. Thank you very much.