By most accounts, the past few weeks have exposed a drastic maturity gap between the U.S. and Chinese governments. The purported icon of democracy watched its system descend into chaos and petty political gamesmanship, coming within hours of a default that would have sparked global economic disorder.
Publicly, Chinese leaders remained statesmanlike and above the fray, withholding comments on the circus in Washington. At the same time, and unsurprisingly, surrogates in the Chinese news media and commentators in the intelligentsia were less restrained. They gleefully piled on with op-ed articles arguing for “de-Americanizing” the world and rapidly reducing China’s purchase of U.S. Treasuries. It is notable that some of these commentaries only appeared in the English-language press, both within China and globally: They were clearly aimed at a Western audience. So was the showy downgrade of U.S. sovereign debt by China’s Dagong Global Credit Rating Co. — a feature of the last debt-ceiling crisis, too.
The rest of the world got the point. From China, sober voices were calling on America to get its house in order. In the United Statese, politicians were so consumed with self-interest that they appeared willing to risk economic catastrophe. Once again, China’s political system looked a lot stronger and more stable than the U.S.’s.
Yet these are superficial and fleeting contrasts. The two governments share a much more significant problem: how to align their political systems to enable the vital structural economic changes their countries desperately need.
A bargain over the debt ceiling was always likely to be the eventual outcome, despite the 11th-hour scare. But that was never the real issue. The U.S. still faces a structural deficit and a growth problem, which will require significant changes to its economy in order to be resolved.
The showdown in Congress was merely one symptom of a much more complex and intense political debate over the shape of America’s economic future. As it continues to recover from the global economic crisis, the U.S. is confronting several pressing challenges: how to reduce inequality, slow the erosion of the middle class, create 21st-century jobs and sustain competitiveness. Undertaking the appropriate structural reforms will require a rearrangement of political interests, as all such reforms do. Already, structural changes are being contested on ideological grounds. Huge differences exist over whether the state ought to be shepherding reforms in the first place.
China’s schadenfreude over the political dysfunction in the U.S. won’t last long, as the politics of reform are set to command the attention of the Chinese government, too. Officials in Beijing are also in the middle of a heated debate over an ambitious economic reform agenda, elements of which will be unveiled at a major Communist Party meeting in early November.
The question about Chinese reforms isn’t so much “what” as “how” — it’s an execution problem, not a blueprint issue. But execution will require the Chinese leadership to sustain political conditions that allow these reforms to take place with relatively few obstructions. Without a generally unified long- term consensus, it will be quite difficult to repair the ship of state. Economic reforms may end up so riddled with compromises that they please none and disappoint all.