The many, many pathways to government opacity and uncertainty

As China gears up for its 18th Party Congress and the trial of Bo Xilai’s wife Gu Kailai on charges of murdering a British business partner, there have been accompanying press stories (even from the Chinese press) about the opaque nature of the Chinese regime. For example, consider this Edward Wong and Jonathan Ansfield New York Times front-pager about the relationship between China’s civilian leadership and the People’s Liberation Army: 

During a holiday banquet for China’s military leadership early this year, a powerful general lashed out in a drunken rage against what he believed was a backhanded move to keep him from being promoted to the military’s top ruling body.

The general, Zhang Qinsheng, vented his fury in front of President Hu Jintao, according to four people with knowledge of the event. At the banquet, he even shoved a commanding general making toasts; Mr. Hu walked out in disgust.

The general’s tirade was one of a series of events this year that have fueled concerns among Communist Party leaders over the level of control they exercise over military officials, who are growing more outspoken and desire greater influence over policy and politics.

With China’s once-a-decade leadership transition only months away, the party is pushing back with a highly visible campaign against disloyalty and corruption, even requiring all officers to report financial assets.

“Party authorities have come to realize that the military is encroaching on political affairs,” said one political scientist with high-level party ties. “Although the party controls the gun, the expression of viewpoints from within the military on political issues has aroused a high level of alarm.” He, like others who agreed to discuss internal party affairs, spoke on the condition of anonymity because of fear of reprisals.

Now if you read the whole article, it’s really not clear at all just how much of a problem this is.  We learn that Hu Jintao’s relationship with the PLA is weak, even though he has engineered promotions of his favored generals (including, apparently, Zhang). We learn Ju’s likely successor Xi Jinping allegedly has better ties to the military, but that Hu might keep control of the Central Military Commission for the next few years anyway. Oddly, we also learn that some PLA hardliners want to see China adopt a more liberal political model — like Singapore. 

In other words, we know a bit more about the machinations than we do in, say, North Korea.  But we don’t know much. 

Western readers are now likely clucking to themselves and thinking, "Man, am I glad that we don’t have to live in a regime with that much political uncertainty and caprice." To those readers: Let’s take a tour of Europe and the United States now, shall we? 

In Europe, there was a long WSJ front-pager about Italian prime minister Mario Monti and his efforts to push back against Angela Merkel’s austerity policies.  The impresssion that was given in the beginning of the article is that Mnti was successful… and then we get to this: 

Mr. Monti didn’t want Rome and Madrid to suffer the stigma of applying formally for aid or signing a list of policy demands written in Brussels, fearing this would undermine his public standing at home, as well that of his ally, Spain’s premier Mariano Rajoy….

The evening before the [June EU Summit meeting], Mr. Monti hatched a plan to hijack the summit. Unless Ms. Merkel accepted his proposal on bond-market intervention by Europe’s bailout fund, Mr. Monti would veto the growth pact — stymieing Ms. Merkel in her parliament.

Italy had previously lobbied for the growth pact, so Mr. Monti’s threatened veto — announced just before Europe’s leaders were due to sit down for dinner — was a bombshell….

Mr. Monti’s blockade lasted until 4 a.m., when leaders finally agreed to a text hashed out by their aides. It promised that Europe’s bailout funds would be used "in a flexible and efficient matter" to stabilize the bond markets of vulnerable euro members.

It didn’t go as far as Mr. Monti had originally wanted: Italy and Spain would still have to apply for any aid and sign a policy memorandum. But by planting the need to stabilize bond markets in the declaration, Italy had convinced Germany to recognize Italian reform efforts and pushed its approach for tackling the crisis into the spotlight.

An ebullient Mr. Monti spoke to reporters, claiming satisfaction for Italy and for Europe. A tired Ms. Merkel slunk off to her hotel.

German media and lawmakers were convinced their chancellor had buckled under Mr. Monti’s pressure, granting Italy and Spain unconditional access to Germany’s treasury. Her protestations later that morning that the fine print preserved the existing procedure for aid went largely unheard.

So did Monti get what he wanted? Beyond political optics, I don’t think so, but the article makes it unclear. Actually, to be fair, the summit declaration itself makes it unclear as well, as the Financial Times’ Peter Spiegel explains: 

Last week’s signal from Spain’s prime minister that he may be prepared to request assistance from the eurozone’s €440bn rescue fund to drive down his country’s borrowing costs has shifted the debate back to where it was more than a month ago: What strings will be attached to such aid?

Eurozone leaders had hoped to put the question to bed during an all-night summit in late June, where Mario Monti, Italy’s prime minister, thought he had won agreement that new aid from the bailout fund to buy a struggling country’s bonds would come with few additional conditions.

Indeed, Herman Van Rompuy, who chaired the summit as president of the European Council, publicly declared there would “not be any more countries” subject to full monitoring if they sought bond-buying assistance from the fund, the European Financial Stability Facility.

The only conditions, Mr Van Rompuy said, would be living up to existing commitments under EU budget rules.

Even before the summit wrapped up, however, that conclusion came into dispute. Indeed, the summit’s final communiqué appears to contradict itself.

At one point, it asserts bond buying programmes would be executed “in a flexible and efficient manner” — code words for light conditions sought by Mr Monti and his Spanish counterpart, Mariano Rajoy. But in another section it says such aid would only be granted under “existing guidelines” — code words for the more onerous conditions that existed before the summit (emphasis added).

So I’m gonna say that the EU is not winning a lot of points in the transparency department right now. 

Well, there’s always the United States, right?  Right? Oh, wait, what’s this New York Times front-pager from Monday saying? 

A rising number of manufacturers are canceling new investments and putting off new hires because they fear paralysis in Washington will force hundreds of billions in tax increases and budget cuts in January, undermining economic growth in the coming months.

Executives at companies making everything from electrical components and power systems to automotive parts say the fiscal stalemate is prompting them to pull back now, rather than wait for a possible resolution to the deadlock on Capitol Hill….

All told, the political gridlock in the United States, along with the continuing debt crisis in Europe, will shave about half a percentage point off growth in the second half of the year, estimates Vincent Reinhart, chief United States economist at Morgan Stanley.

More than 40 percent of companies surveyed by Morgan Stanley in July cited the fiscal cliff as a major reason for their spending restraint, Mr. Reinhart said. He expects that portion to rise when the poll is repeated this month.

“Economists generally overstate the effects of uncertainty on spending, but in this case it does seem to be significant,” he added. “It’s at the macro- and microeconomic levels.”….

In Washington, powerful business lobbies like the National Association of Manufacturers, the Business Roundtable, and more specialized groups like the National Electrical Manufacturers Association have grown more vocal about their frustration with the inaction of Congress, and the possible dangers ahead.

“It’s totally irresponsible and absolutely insane,” said Evan R. Gaddis, the president of the electrical manufacturers’ group. “The two parties are really dug in. Companies see the writing on the wall and business decisions are now being made on this.”

Sure, China is an opaque mess when it comes to governance. Sure, praising China’s governance in an uncritical fashion should trigger critical blowback. Let’s face it, however — 2012 is not a year for democracies to be crowing about how their governing model is more transparent.