Gansu is one of interior China's most forlorn provinces, one that has gone largely unnoticed by the outside world. When I worked in rural Gansu two years ago, I met few people who had ever left their hometown. In one tiny village, ethnic minority Muslims were eking out a living as farmers in the dusty, arid climate and sleeping in simple stone huts that looked like they'd been built centuries earlier. Most villagers had never met a foreigner before.
Then last fall, Gansu suddenly hit the news. Some 2,000 people rioted in one district, torching cars, smashing up the local Communist Party offices, and attacking policemen with iron rods, chains, and axes in protest of a local government decision that might have forced some of them to resettle.
Gansu isn't the only Chinese province that has erupted in social unrest lately. Taxi drivers have gone on strike in several Chinese cities, people who lost money in illegal fundraising have protested in Beijing, and demonstrators have gathered across the country to demand unpaid back wages. Protest has even spread to the Pearl River Delta, the manufacturing center that abuts Hong Kong, traditionally one of the most prosperous parts of the country. In some years, the Delta's factories have produced 5 percent of all manufactured goods made in the world. But orders for the Delta's products have dried up, and angry factory workers, many owed back pay, have taken to looting warehouses. As these protests turn violent, they could provoke a violent response; Chinese factory owners are increasingly hiring thugs to hit back at demonstrators.
The protests hint at something even bigger than China: The economic downturn has created a profound threat to the autocratic regimes of the world, from China and Russia to Venezuela and the Persian Gulf states. Already, the Russian police have been placed on alert to crack down on demonstrators. Several of Russia's prominent human-rights activists have been killed in recent weeks. Protests, once rare, have spread from eastern Russia to the heart of the Kremlin itself.
Modern autocracies are very different from those of the past. Rather than ruling by strict ideology, ruthless internal police, and tight control of information, authoritarian regimes like Beijing and Moscow have remained in power primarily by making an implicit bargain with their most critical middle-class citizens -- you might not have freedom, but you will have money. As long as the broad middle class, which is where the most dangerous dissent would take hold, is gaining ground economically, the regime is safe.
So while in the West, leaders worry that the global economy faces a second Great Depression, such an economic crisis poses a major threat to some of the world's most resilient autocracies. A strong economy was their only backstop. Now, starved of the growth that keeps them in power and unable to repress their people as old-fashioned dictators did, these autocracies may have nothing left to fall back on.
Over the past decade, authoritarian capitalist countries built impressive economic resumés. China has grown by over 10 percent in most years, and some of its biggest cities, like Shanghai, now boast per-capita incomes of more than $7,000 per year, the same level as a middle-income nation. Russia, all but bankrupt in the late 1990s, has delivered strong enough growth that it now boasts the third-largest capital reserves in the world and has built its gas companies into such powerhouses that they now dominate the markets of Europe. The authoritarian capitalists proved so successful, in fact, that some in the West began wondering whether their model of development had surpassed liberal democratic capitalism. Israeli political theorist Azar Gat argued in Foreign Affairs last year that the most significant challenge to liberal democracy today "emanates from the rise of non-democratic great powers: the West's old Cold War rivals China and Russia, now operating under authoritarian capitalist, rather than communist, regimes."
Constant growth kept the populations quiet. In Russia, Vladimir Putin promised to save the country from the ruin of the 1990s, a time when Russians enjoyed a more open society but incomes and wages fell sharply. True democracy, he implicitly suggested, might result in disorder in such a large and unwieldy nation. And in return for higher growth rates and greater disposable income, Russians allowed Putin to slowly strangle their freedoms. "Putin does provide stability of sorts, which the middle classes cherish," says Dmitri Trenin of the Carnegie Endowment's Moscow Center. "Even those [Russians] who oppose authoritarianism in principle fear that the likely alternatives are worse -- outright chaos, populist nationalism, much harsher authoritarianism than Putin's."
In China, the regime made a similar bargain, if not with the masses, at least with its urban middle classes. The regime's investment and largesse was slanted toward the big cities. As Deng Xiaoping vowed when he opened China's economy, "Some will get rich first" -- and those nouveau riche would appreciate who paid for their cars, homes, and glittery new mobile phones. In recent years, according to China expert Jonathan Unger, the government has made a deliberate policy of favoring this population.
In a poll by the Pew Research Center, over 80 percent of Chinese said they were satisfied with conditions in their country, among the highest of responses in the world. Even after two terms in office, Vladimir Putin enjoyed popularity ratings that would be the envy of any Western leader. When I traveled across urban, eastern China two years ago asking young Chinese their view of the government, I found what seemed like a striking amount of political inertia among young elites. "We don't have any control over these things," one middle-class young woman told me in Shanghai, before asking if I'd seen the latest episodes of The Wire on DVD.
The true test of any government, though, comes not in good times but in bad. The autocracies are particularly poorly prepared for a global economic crisis because they have weak domestic consumer markets and rely upon exports to survive. Powerful authoritarian regimes like Russia and the Persian Gulf states are dependent on exports of petroleum or one sole commodity. In Venezuela, energy accounts for some 95 percent of all export revenue. In Iran, it provides some 80 percent of revenues. But the price of oil has dropped by more than half in the past six months. And China, which depends largely on exporting manufactured goods to wealthy nations, will also suffer from the financial crisis as consumer spending drops in the U.S., Europe, and Japan. Exports constitute nearly 35 percent of China's gross domestic product -- far too high a figure to be considered a balanced economy. (U.S. exports account for about 10 percent of GDP most years.)
Despite valiant efforts to assure their people that nothing is wrong, the autocrats cannot cover their economic holes. In Venezuela, Hugo Chavez, after first mocking the financial crisis as a danger to the West, now admits, "The fall in oil prices due to the current global financial crisis may have a negative influence on the economy of Venezuela." In Russia, where the stock market has fallen by some 70 percent since last spring and the ruble has weathered fierce attacks, Vladimir Putin recently declared he would launch new tax cuts because of the steep drop in Russia's economy. As Stephen Sestanovich of the Council on Foreign Relations notes, "Russia is confronting virtually all the negatives at once -- sharply declining export earnings from energy and metals, overleveraged corporate balance sheets and a chorus of bailout appeals, a credit crunch and banking failures, a bursting real-estate bubble." While unemployment, poverty, and unrest indicate cracks in the system of autocracy, there are signs that a nascent movement toward liberal democracy could take its place. Indeed, increasing numbers of Chinese are challenging the government, and in December, 303 Chinese intellectuals signed and published a daring manifesto called Charter 08, which demands an end to one-party rule. Charter 08 is only one sign that the autocracies are feeling the pressure. In Venezuela, Chavez's allies lost ground to opposition parties in recent regional elections. In Russia, a worried President Dmitri Medvedev recently instructed police to stamp out social unrest caused by the downturn. In December, the police arrested some 100 people at a protest in the poor eastern city of Vladivostok; at roughly the same time, 1,000 people attended a protest in Moscow against the government. Even in the Persian Gulf and Central Asian states, normally some of the quietest parts of the world, the crisis has had political consequences. Kazakh activists have started holding rallies against the government, previously a rare occurrence in the country. Iran, too, faces instability. Inflation in the Islamic Republic is now running near 30 percent, and a powerful cleric mused publicly that the crisis could do "big damage." The autocrats clearly are worried. In addition to cracking down on the Charter 08 signers and other activists, Beijing recently announced a stimulus package worth $586 billion. In Gansu, local officials actually met with the protest leaders and vowed to invest some $3 billion in the area. The autocracies have money to burn. China has stockpiled nearly $2 trillion but is eating it up fast. Russia is spending nearly $10 billion a week defending the ruble, to little avail, as the value of the currency keeps plummeting. Though they can plow money into their economies, the autocratic leaders cannot make Western consumers shop or guzzle gas and so are powerless to control their major economic engines. And if regimes like Chavez's try to get their economies under control by cutting government spending, they risk undermining their own power, which was bolstered by government social-welfare programs that often targeted the middle classes whose support they now need. Unlike 20th-century autocrats, such as Fidel Castro, who led their countries in wars of independence, most of today's leaders came up through the political system and have no revolutionary bona fides to play. The modern authoritarian governments long ago abandoned real ideology. (Chavez is an exception: He has tried to fashion a modern statist ideology he calls the "Bolivarian Revolution.") China remains a nominally communist country, but if Karl Marx were to visit today, he would be horrified. With policies that favor the urban elite and virtually no social welfare programs left, this "communist" nation has become one of the most unequal societies in Asia. Lacking any ideology other than sour nationalism, the new autocrats cannot rally their population in down times by appealing to their political idealism, as they did in the 1950s and early 1960s, when ideology kept the government in control during massive famines. And while these nations have sophisticated security apparatuses, their leaders have allowed enough freedom for the economy to grow -- which means it's too late to brainwash their citizens or to create a personality cult like Kim Jong-Il's in North Korea. Despite Putin's crackdown on the Russian press, liberal-opposition media outlets are still in business, and average Russians can access most Internet sites.
In order to improve their standing on the world stage, today's autocrats at least try to create the facade of democracy. Their people know about democratic movements in other countries, can access free media, and are not easily subdued. Because the authoritarian governments have created some semblance of a legal system, workers have begun to think they have rights. Compared to the 1980s, when word of demonstrations in China was passed from person to person, today middle-class demonstrators organize by text message, and news of protests quickly appears on Chinese blogs. Chinese and foreign reporters can also follow protests, making it harder for the security forces to get away with a real crackdown.
Neither the short term nor the long term looks good for Moscow, Beijing, and the other autocrats. In the near future, their economies will slow down severely and, in the case of Russia, likely fall into a serious recession. In China, many analysts believe unemployment will rise to its highest level in a decade. Growth is likely to dip below 8 percent, the magic number needed to keep creating enough jobs for all the people entering the work force in China.
Millions of Chinese migrant workers who can no longer find factory jobs will return to the interior of the country. Back in rural areas, anger is already rising. These unemployed workers, who have seen the wealth of urban elites in cities like Shanghai, could begin organizing larger demonstrations, smashing up local Communist Party offices and even attacking local officials. Middle-class protests are likely to rise as well -- over issues of government competence like safety, land prices, and land evictions. Since the urbanites have media connections, they are able to get their stories onto Chinese blogs and news sites. Recently, parents of Chinese children who were made ill or died from tainted milk gathered together to push the government for better health care, refusing the regime's attempts to essentially buy them off. (The government recently sentenced two people to death for playing a key role in the tainted-milk scandal.)
Thus far, the autocracies have kept groups of people with grievances against the government from forming united fronts. Moscow has achieved this through the skillful use of nationalism, which drives a wedge between liberal Russians and ethnic minorities with grievances against the government. Beijing has used a combination of crackdowns and payoffs to top demonstrators to keep labor protests separate from one another, preventing them from developing a common theme or common leaders.
Divide and conquer, though, won't work forever. In China, rural and urban protests might soon begin to link up -- through activist networks, religious groups, or blogs -- and form a national protest. Charter 08 and a nationwide taxi-driver strike, both organized on the Internet, are a first hint of this nationwide movement.
The Great Depression fed dangerous new autocratic ideologies like fascism and communism; a second Great Depression could destroy them. While the economic crisis will cause untold human suffering in these and other countries, it is quite possible that, on the other side of it, we will see the end of that distinctive phenomenon of the late 1990s and early 21st century: the growth autocracy. And that, at least, would bring some light to a financial dark age.
