Schwarzman Scholars worked together to create an academic journal, reflecting their ability to think critically about the Middle Kingdom and the implications of its rise. These collections of thoughts come together to form "Xinmin Pinglun," our Journal dedicated to the publication of the informative and analytical essays of our scholars. As the application deadline for the class of 2019 is approaching and the arrival of the incoming class is on its way, we are sharing pieces from Ximin Pinglun to give insight into the critical thinking and scholarship taking place at Schwarzman College. Here, Kyle Hutzler, (Class of 2017) shares his thoughts on what a post-modern Chinese state could look like.
The nation-state as the central driver of human affairs is being challenged like never before. Small groups of individuals, whether commandeering airplanes-turned-missiles or a keyboard, have unprecedented power to challenge global security. Multinational corporations, with annual revenues that exceed the gross domestic product of most nations, are ably exploiting the patchwork of global regulation to avoid taxes and bend rule making in their favor. At the same time, supranational organizations are growing more assertive and effective in addressing transnational problems from financial regulation to climate change. Richard Haass and Anne-Marie Slaughter have separately described this phenomenon as an “age of non-polarity” or a “networked century” in which power accrues to the institutions with the strongest ability to build coalitions.
Where those essays focused predominantly on the conduct of foreign policy, this essay focuses more closely on how the same forces transforming international affairs are also changing the state’s domestic role. Moreover, where previous scholarship has focused primarily on the implications for the West, this essay will seek to assess the impact of these new power dynamics on China. China is especially interesting given its emergence, as Financial Times commentator Martin Wolf terms it, as a “premature superpower.” Its sheer scale will accelerate many of the trends affecting nation-states at the same time that it is continuing to develop much of the infrastructure of a modern state.
Defining the state
There is much more to a state than the Weberian understanding of monopolizing the legitimate use of violence and rule making within a territory. That power can neither be measured nor maintained by strength of arms alone: a deeper, reinforcing set of functions underpin a state’s power. Michael Mann, a professor of sociology at UCLA, has written that states possess two types of power: despotic and infrastructural. The former refers to the breadth and depth of the state’s influence; the latter to the effectiveness of the state’s intervention.
A state’s coercive and extractive capacities are the hallmarks of the “pre-modern” state. The first is the monopoly of violence. But coercion is costly and requires an ability to extract resources. The “modern” state as we know it goes on to accomplish four more tasks: an “assimilative capacity” which shapes national identity; a “regulatory capacity” that shapes individual and group behavior in the interest of the state, and ideally, the public interest; a “steering capacity,” or how coherent and effective is the bureaucracy necessary for achieving the aforementioned functions; and, last, a “redistributive capacity,” or how effective the state is in allocating resources between groups, essential to maintaining long-term order and legitimacy.
As nation states enter a “post-modern” age, are these functions increasing or diminishing in importance? Are new capacities necessary for a state to successfully function? This essay assesses the outlook for each capacity, how China is being affected by these changes, and whether new capacities are needed. In this essay, I propose a framework for assessing the evolution of state power. The framework compares the expected change in importance of a given function against a change in the state’s ability to execute that function. For example, it is possible for a function to grow in importance while the state’s ability to actually carry out that function is increasingly challenged by other actors or forces.
Outlook: neutral-challenged. Non-state actors will continue to persist as a major challenge for states. Moreover, the cyber domain’s potential for kinetic attacks will further challenge the state’s monopoly on violence. The possibility of large-scale infrastructural “hijacking” and “ransoms” reverse the notion of disproportionate response: it is difficult for a state to deter individuals with overwhelming force. The potential for cyber warfare will also complicate traditional nation-state interactions, particularly in the absence of behavioral norms. The risk of “false flag” operations will also complicate states’ ability to hold each other accountable.
China continues to invest tremendously in its domestic public security apparatus; at the same time, it has announced far-reaching reforms of its military designed to improve its command-and control. The state’s power is unrivaled internally and is credible, at least for the purposes of self-defense, externally.
Neutral. Today, billions of individual and corporate incomes are successfully evading taxation. There is increasing momentum towards global cooperation to address distortions in international tax law and to promote cooperation. Coupled with increasingly cashless societies, this movement will enhance the state’s extractive capacity because digital money is easier to trace. Alternative currencies, such as Bitcoin, will consequently continue to grow in prominence as they are more likely than China’s renminbi to become a global reserve currency on par with the dollar.
China is still struggling to balance local-central fiscal relations. Beijing has burdened local governments with costly mandates but left them with limited means to raise revenue. The result is an unsustainable dependence on land sales and often ambiguous local financing vehicles. Over the past year, the central government has backed away from attempts to rationalize local finances, opting to bail them out at the expense of an already stressed financial sector.
Challenged. States are experiencing an increase in ethnic diversity at the same time that they are becoming increasingly homogenized by global English, brands, and culture. The United States exemplifies how a diversifying society can become socially polarized, making the consensus-finding role of government increasingly difficult. For many individuals whose lives and work span open borders, the importance of citizenship may be diminished. Successful polities will be those that define themselves in a way unrecognizable from branding; states such as Japan, which have long been averse to immigration, will be challenged as its society adjusts to an increasing dependence upon migrants.
"For many individuals whose lives and work span open borders, the importance of citizenship may be diminished."
The relative homogeneity of China’s population obscures challenges to its assimilative capacity. Income inequality may be the source of significant social cleavage and is a key area of focus for China’s government. At the same time, China’s leadership faces significant challenges in restraining strong nationalist and neo-Maoist currents that may challenge the state’s conduct of foreign policy and continued market- based reforms. In the next ten years, China is likely to face significant challenges on two fronts: continued demands for Hong Kong independence and the upheaval caused by the eventual passing of the Dalai Lama.
President Xi Jinping has responded to these challenges by articulating the idea of a “Chinese dream,” coupled with two “100 year goals” for a prosperous society. In recent months, Xi Jinping has also stated unequivocally that the media’s foremost responsibility is to serve the Communist Party and has inveighed against Western influence in media and education. Nonetheless, China’s growing consumer culture may mean a more global, if not necessarily Western-oriented, Chinese people that will challenge the Party’s self-image.
Challenged. The emergent regulatory challenges to nation-states are well known: from trade and finance to the environment and health, transnational challenges are increasingly addressed within the context of global governance arrangements. Moreover, multinational companies have significant implicit norm-setting power of their own in countries with weaker regulatory capacities.
States will nonetheless have significant opportunities to grow their regulatory capacity. The science of behavioral economics and big data is enhancing governments’ ability to efficiently promote behavioral change and more efficiently target their resources. States will continue to be an enforcer and referee of norms, even if that may increasingly defer to others to realize those norms on its behalf. This may come via crowdsourcing certain functions or use of charter or other arrangements in which state funds are transferred to private or non-profit actors. China has long been a proponent of public-private partnerships, but it is unclear how this preference will evolve with President Xi’s efforts to strengthen the centrality of the Party.
Many futurists envision a world of self-organizing firms that are run via “smart” contracts and self-optimizing software. In such a world, governments could enforce their regulations instantly with what are in effect software updates, ensuring rapid compliance. States’ ability to reach into multiple spheres and phases of individuals’ lives means that they will remain the key gatekeeper of personal identity and, with it, shape trust and creditworthiness. China has announced plans for a far-reaching “social credit system” that would aggregate citizens’ behavior into a score that would affect everything from their ability to get a loan to their subjection to government support or supervision.
In China, anti-corruption has been a major priority since Xi Jinping came to power. These efforts play an important role in ensuring the Party maintains public confidence, but their real purpose is closely linked to concerns over the state’s regulatory capacity. Anti-corruption efforts have been particularly focused on vested interests that oppose the center’s vision and to reinforce local officials’ adherence to the central government. The recently completed Sixth Plenary Session of the 18th Central Committee of the CPC placed great emphasis on stricter party governance. Wu Hui, a professor at the Central Committee Party School, remarked “Party governance has entered a new age – to govern the Party by rigorous rules and regulations.” Less discussed, but no less important, will be for China to find more consistent and transparent means for stakeholders to weigh in on pending regulation.
Internationally, Xi Jinping has called for global governance reform and has affirmed that China “must actively participate in global governance” and will take on more global responsibilities. In his most recent speech on the topic, Xi specifically cited China’s interest in rule-setting for oceans, polar regions, cyberspace, outer space, nuclear security, anti-corruption, and climate change.
Neutral. Nation-states will need to embrace new approaches to managing its bureaucracy and resources. Governance will increasingly target functional as opposed to sovereign borders: where transit agencies have long taken the lead, other government services will likely follow. These cross-regional authorities will have budgets and independence that rival their constituent sovereign entities. The job of head of the New York area’s Metropolitan Transit Authority may become as coveted as that of the governor of Connecticut. China’s steering capacity may be its least developed. A key feature of the Xi Jinping era has been the establishment of small working groups designed to more centrally coordinate policy in a number of critical areas. The establishment of these organizations, however, carries the long-term risk of further distancing policymakers from those charged with implementing them, further weakening the flow of information and command and control.
Important, but with forces challenging and empowering state capacity. Income inequality is a major driver of political instability. Technological change is likely to exacerbate this dynamic: a growing chorus of economists have warned about the potential for artificial intelligence to leave many individuals in developed and developing economies alike unemployed, with potentially explosive societal consequences. This will raise significant challenges as the state thinks about education, retraining, and social security. At the same time, more individuals than ever are benefiting from improvements in the quality of the welfare state. Innovative cash transfer programs in developing countries are empowering the poor with greater autonomy - and at less cost of corruption. In the United States, the expansion of healthcare coverage for millions of previously uninsured Americans was a significant generational accomplishment.
"The science of behavioral economics and big data is enhancing governments' ability to efficiently promote behavior change."
Unfortunately, some of this generosity will not be sustainable. In the developed world, there is a substantial likelihood of pensions-related fiscal crises that will require wrenching reassessment of inter-generational obligations and the state’s role in facilitating them. Rising life expectancy, although exacerbating healthcare costs, may also constitute its own solution in longer working lives. Going forward, post-modern states may shift some of their welfare expenditure to new and more targeted forms of social insurance long advocated by economists, including protection against wage losses caused by economic shocks. In China, inequality is among the world’s most extreme, with the poorest quarter of the country’s population owning just 1% of the country’s wealth. Inequality is further exacerbated by a household registration system that limits access to social services. The government has invested significant sums to strengthen its social safety net, including a push towards universal health coverage that today is broad but not deep. The Thirteenth Five Year Plan has a number of priorities related to the broadening of prosperity, including: reforms to the household registration system, strengthening rural land rights, commitments to poverty alleviation, and strengthening of social insurance and health systems.
New functions for the post-modern state
As the importance of a state’s functions and its capacity to execute them fluctuate, requirements for new functions will also emerge. These functions will reflect states’ more international orientation. They also reflect the terms on which post-modern states will compete with each other for wealth and power. They include:
- "Adaptive capacity" - states, like companies, have no choice but to innovate, specifically with respect to their assimilative and regulatory capacities. Highly adaptive states are those that can facilitate the evolution of their national cultures to respond to new global contexts. States that are unable to guide national cultures away from the traditional suppression of women and other minorities are choosing to cripple themselves. With respect to a state’s regulatory function, states with high adaptive capacity will be those that are able to continue to learn from and incorporate global best practices to fit local circumstances.
- "Human capital capacity" - education is already widely embraced as a basic right, and in many nations, how a country’s schools fare on global rankings is already top of mind. In a world driven by greater trade in services and underpinned by intellectual property, a country’s most potent weapon will be its effectiveness in producing global talent.
- "Attractive capacity" - related to a state’s assimilative capacity, an attractive capacity assesses how successful states are in attracting global flows as a destination or entrepôt. Some aspects of a state’s attractive capacity are naturally endowed - Singapore’s geography grants it a natural edge in trade much in the same way that London’s time zone ensures its continuing relevance to global finance. Yet, there are plenty more opportunities for states to attract talent, capital, goods, and more by fostering a favorable structural and cultural climate.
- "Norm-setting capacity" - certain countries, often by virtue of their markets or the breadth of their external interactions, will have the ability to set global norms and standards. These may range from technological standards to public policy approaches;
- "Global steering capacity" - in short, an ability to produce global leaders, a commitment to policies and behaviors in service of global interests, or provision of global public goods, that endow that nation with the trust and recognition of its peers as an “honest broker.”
Leading the post-modern state
There are four key insights for leaders as post-modern states emerges. First, that all politics is local and global. As polities seek to forge cohesive identities necessary for stable governance, demand for devolution and outright independence will grow more pronounced. Large nations such as the United States will be pushed into even stronger federalist arrangements with their constituent states and, within them, cities too will seek greater autonomy. At the same time, greater supranational governance will shift the world from “national” to “global” standards. Greater localization of power will only succeed if mechanisms exist for stable transfers of resources between polities.
Second, sovereignty will be redefined. Nation states will have less autonomy to define certain policy objectives, but can be expected to maintain considerable discretion with respect to how they achieve and enforce them. Canada’s (domestic) approach to climate change may increasingly be a model for international politics. Under the Paris Agreement, the government has committed to an overall emissions target. At home, it has since set a standard carbon price but is giving discretion to each province to choose between a carbon-tax or cap-and-trade system. Furthermore, each province will keep the funds it raises. Future international agreements will likely follow Canada’s example by even more aggressively creating minimum standards designed to prevent jurisdiction shopping while allowing for autonomy in execution within certain parameters.
Third, the post-modern state will be convener-in-chief. Policy-making will increasingly shift away from legislatures and towards commitments brokered by countries. Consider the example of the Obama administration gathering the largest private sector employers to agree to stop hiring discrimination on the basis of past criminal convictions. This was not simply an artful way to get around a likely impasse in Congress, but a harbinger of the fast-forming coalitions states will form to address key issues. While these agreements do not have the law’s advantage of being punitively enforced, this may be offset by the advantages of voluntary agreements’ speed and precision, focusing on the institutions, states, and cities that matter most. The embrace of prizes by governments to spur innovations are further examples of the state’s convening role.
"A country's most potent weapon will be its effectiveness in producing global talent."
Last, ideology is not dead. The defining contest will not be between those resistant to the post-modern state, but instead a competition between states on two dimensions: big vs. small government and policies geared towards the interest of capital vs. labor. Barring immigration, most rich countries will witness declines in their populations. The United States will be a rare exception as a large, developed nation whose population is expected to continue growing. If it is able to reconcile the interests of capital and labor, the United States can be a model for other nations. No matter how the functions of the state evolve in response to the array of social, technological, institutional, and economic trends to which they are subject, their fundamental responsibility will remain constant: to serve their people. At the same time, a separate question in many developed countries is being asked about people’s faith in government. Whether the temptations of populism are temporary or an enduring consequence of technological and geopolitical disruption remains to be seen.
Kyle Hutzler (Class of 2017) is from the United States of America, and graduated from Yale.