Village-based Democracy Shows Returns

IN THE fiscal debauchery of a modern Australian election campaign, it can be hard to imagine that democracy causes governments to spend taxpayer money more wisely. But thats because Australians have never known anything else.

In Chinas 800,000 villages, local officials spend 44 per cent of their budgets on themselves, including salaries, administration costs and entertainment, a 2005 World Bank report says. They call it banquet money.

This is partly why Chinas rural infrastructure and services are so poor. Nominal rural incomes are less than one-third of urban incomes and Chinas leaders are finding it hard to create what they call a "New Socialist Countryside".

Thanks to an exhaustive seven-year, 2500-village study by Chinese and American economists, we know these problems would be much worse if not for a little-understood experiment with "grassroots" democracy.

It is often said that Chinas political reforms died on June 4, 1989, in Tiananmen Square. But there was one important seed project that was kept alive by an old communist cadre by the name of Peng Zhen.

Peng, who died 10 years ago aged 95, chaired Chinas parliament, the National Peoples Congress, in the 1980s. In that role, he steered through the legal framework for an experiment in which chosen villages began to directly elect a local management committee to govern alongside the more powerful village Communist Party secretary.

In 1989, in order to marshal political support for the coming Tiananmen Square bloodshed, Deng Xiaoping had to invite many of his old revolutionary comrades back into the fold.

Peng spent his political capital by stubbornly demanding that the village democracy project be kept alive.

He was able to advance village elections at a time when "democracy" had become a counter-revolutionary word.

Elections have now occurred in most Chinese villages. All told, there have been about 5 million village elections since 1987. Rural Chinese are now familiar with the public theatre of election campaigns and they know how to use a ballot box.

In a recent paper titled Village Elections, Public Goods Investments and Pork Barrel Politics, Chinese-style, researchers from the Chinese Academy of Sciences and Stanford University found villages with elected leaders had 15 per cent more public investment projects than those with appointed leaders.

The quantity and value of investment also increased with elected leaders, and fell when villages slipped from having elected to appointed leaders.

"We find strong evidence that in villages that have directly elected leaders, the number of public goods projects and level of investment is higher," the paper says.

The research shows elected leaders have incentives to keep their voters happy. Elected leaders who delivered more projects were significantly more likely to be re-elected.

The village election survey also found a huge rise in public investment coinciding with the rise to power of President Hu Jintao and Premier Wen Jiabao. This new-found interest in the material welfare of the countryside explains why Premier Wen is watching village elections so closely. In private, according to one associate, Wen has even said county-level leaders would be directly elected one day.

To build a New Socialist Countryside, President Hu and Premier Wen need to find a way to make local officials accountable.

Democracy could be the least-worst way to get there.

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