What if the Communist Social Bargain Breaks Down in Laos?

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What if the Communist Social Bargain Breaks Down in Laos?

The economy is stagnant and discontent is on the rise. But don’t bet on a mass uprising against the ruling communist party.

What if the Communist Social Bargain Breaks Down in Laos?
Credit: Depositphotos

Thongloun Sisoulith, the president of Laos and chief of its ruling communist party, must have been taking his COVID-19 tests in Vientiane when protestors descended onto China’s streets to demand the end of “zero-COVID” and the end of one-party rule. On November 30 he arrived in Beijing to meet with Xi Jinping at a moment when the Chinese Communist Party (CCP) was facing an unusual challenge: what to do about the largest wave of discontent since 1989?

Much of the Western media has focused on how the Chinese demonstrators were motivated by a deadly fire in a Xinjiang tower block, from which the government’s “zero-COVID” policies were believed to have prevented residents from fleeing. That was perhaps the catalyst. But the protestors on the university campuses in Beijing and on the streets of Shanghai were also calling for rule of law, free speech, and competitive politics. Those were the same issues that Xi Jinping years ago had expressly forbidden students from discussing. Those are the few ideas and institutions that the CCP hasn’t copied from the West. Zero-COVID may be the touchstone, but it’s clear that many Chinese are not content with the political system. Importantly, the protests also show, despite what some commentators still think, that Chinese society is not culturally predetermined toward accepting autocracy. The desire for liberty is as much a universal sentiment as the desire for a quiet life, the latter being the emotion that the CCP feeds off.

Those same lessons apply equally in communist Laos and Vietnam. And the communist apparatchik sitting in Vientiane will be watching events in China closely. Things, after all, are not going well at home. Laos performed badly during the COVID-19 pandemic; the Nikkei COVID-19 Recovery Index ranked it as the worst performer among more than 120 countries. Its economy grew by just 0.5 percent in 2020.

But 2022 has been the real annus horribilis. Inflation is now up to almost 37 percent, as of October, one of the highest rates in Asia. The price of rice is up 48.1 percent year-on-year. Cooking oil is up 95 percent. The local currency, the kip, was down 68 percent against the U.S. dollar as of October. As a result, the World Bank reckons that around 65 percent of households have cut spending on education and health. A third have cut spending on food. Worse, the government has been perennially at risk of defaulting on its national debt for years, but that looks ever more likely. Public and publicly guaranteed debt now likely stands at more than 100 percent of GDP, although the true figure could be much higher. Debt service obligations will average $1.3 billion per year between 2023 and 2026.

The World Bank reckons the economy will grow by just 2.5 percent this year, down from an earlier projection of 3.8 percent. That compares to a healthy 7.5 percent for Vietnam. What 2023 has in store is unclear. Much depends on whether the government can successfully negotiate its debt obligations; China, the largest bilateral creditor, is wary of letting Laos default. But economic growth next year depends on whether the tourism sector can recover to pre-pandemic levels and if the country’s megaprojects, including railways, bear fruit. Weak growth in China’s economy next year will hamstring Laos’ recovery. It is also dependent on the fortunes of Thailand’s economy.

What are the implications for politics? It’s common to speak of a “social bargain” (some say a “social contract”) as existing in authoritarian states like Laos, Vietnam, and China. It goes something like this: if ordinary people stay out of politics and accept the communist parties’ Leninist monopoly of power, then the communist parties will guarantee that they become markedly richer each year. There’s some truth to this narrative. GDP per capita has risen in Laos from around $172 in 1989 to now more than $2,500.

But economic growth is perceived as the only real form of political legitimacy those communist parties have left. In Laos and Vietnam, nationalism and socialism have ceased to be forms of “moral legitimacy” that the parties can encourage (though things are a little different in China). Lao and Vietnamese communists have attempted to make crackdowns on corruption and organized crime into alternative forms of legitimacy, but it’s unclear whether the majority of ordinary people think this justifies their political monopoly (not least because corruption and organized crime are byproducts of that monopolistic control of politics).

But there are problems with these narratives of economic legitimacy or “social bargains.” They ignore the fact that it was ordinary people, not the communist parties, that drove the market reforms in the 1970s and 1980s. It was the farmers and workers, many in state-owned enterprises, who began illegally trading surplus goods in the 1970s. Unable to prevent this, the communist parties accepted some form of personal trade and ownership. Ordinary people took things further, until the point where they had created something akin to a market system. The communist parties then acquiesced (in 1986 in Vietnam and Laos) with reforms that legalized market practices that were already happening on the ground. Even today, liberalization is still being driven from below, even if the communists maintain the narrative that they were the instigators (and now the only legitimate protectors) of market relations.

But the real problem with the “social bargain” idea is that it’s not really a bargain, let alone a contract. Only one side is compelled to keep to it. If the ruling Lao People’s Revolutionary Party (LPRP) cannot maintain high rates of economic growth, would it throw its hands in the air and admit defeat? Would it voluntarily demolish its own communist apparatus and welcome a multi-party system? Would it permit more protests by disgruntled citizens? And what’s an acceptable rate of economic growth that confers legitimacy? Is that “bargain” being kept if the economy is at least growing, however slowly, or does it have to be in excess of, say, the 6 percent per annum that Laos averaged between 2015 and 2019? What happens if economic growth rates remain at around 2 or 3 percent over the next few years? Even the Panglossian LPRP thinks it will only be 4 percent annually until 2025. Is that good enough? China’s economy, after all, is growing (albeit far more slowly than it was for decades) but are the Chinese demonstrators justified if they say the CCP isn’t keeping its side of the “social contract”?

You cannot be half-communist. It’s either complete control of the political apparatus or nothing. And despite all the noise about economic legitimacy and social bargains, communist parties only really need to be competent at one thing: maintaining their monopoly on power. Recent history suggests that the LPRP is far better at this than its Vietnamese counterpart (although that’s mainly because Vietnam has developed far more than Laos, and so has a larger private sector, a more independent middle-class, and a more rambunctious and outward-looking population).

There have been vast, nationwide protests in Vietnam in recent years, from the Formosa toxic spill demonstrations in 2015 to the June 2018 protests, which saw party buildings attacked. There have even been quasi-pro-democracy movements formed openly, such as Bloc 8406 and the Brotherhood for Democracy. Nothing similar has happened in Laos. The Lao Student Movement for Democracy attempted a march in 1999 but that was crushed within minutes. The exiled anti-communist movement is divided beyond repair. Land-rights campaigners and online commentators regularly call for political reform, but they’re disparate voices and are quickly silenced.

Might that change? During a recent conversation with a friend, an expert on China, I queried what would happen if a mass of Chinese people think that the social bargain has broken down. Greater numbers of people could protest. Workers could stage walkouts or go-slows. Growing numbers of people would try to leave the country, along with their money. Dissent could grow. The private sector might avoid taxation. Maybe junior or provincial party officials turn against the central apparatus. Maybe soldiers and police will go over to the other side.

But history tells us authoritarian systems tend to only buckle because of war or when they lose confidence in their own monopolistic power. That was the lesson the CCP, and most likely the LPRP and Vietnamese Communist Party, learned from watching Mikhail Gorbachev implode the Communist Party of the Soviet Union through political liberalization and a failure to send in the tanks to put down dissent in peripheral areas. One would expect the CCP to crush the current protests in China with alarming brutality. It’s a rather unenforceable “contract” when one side has a monopoly on political power and violence.

Would the LPRP’s position really be at risk if Laos’ economy only grows at 3 percent or 2 percent (or less) over the coming years? Maybe another few months of economic deterioration will bring some Lao onto the streets. But unless the communist party buckles and loses faith in its own monopoly, dissent can be quickly silenced. But that’s an important “unless.” Like the economy, the LPRP is not in rude health. Phankham Viphavanh, the prime minister, is likely to take the blame for the economy. He could be gone by the end of 2023 when he said he should be judged by the party. But who’s to take his place? The LPRP hasn’t been the quickest at promoting technocrats and separating government business from party inspection. The current risers through the party are mostly “princelings” of former leaders.

I argued in this column months ago that while the LPRP maintains a stable political monopoly, politicians actually have very little power to affect change. Thongloun, the previous prime minister, spoke a good game when he was appointed in 2016 but on most fronts (corruption, debt, economic reform) he made very little progress — and Laos regressed on some of these issues. Structurally, Laotian politicians are hamstrung. There are major problems in getting the provinces to listen to ministers in the capital. There’s little accountability for incompetence, while the LPRP has been slow to adopt modern technology or promote technocrats. It still has powerful dynasties as well as factions. The party has too much power over the government apparatus.

This columnist hears from sources that many people in the party and government bureaucracy are (predictably) unhappy with the present situation. So, too, are the masses. The question is, what does the party do? Does it plod along as normal, hoping that its economic fortunes will pick up in a few years (unless that pesky debt strikes) and trusting that its political monopoly can be maintained until then through oppression? Or does it decide on a Xi Jinping-type figure, somebody who reforms the party’s operations and apparatus by centralizing power in a dictatorial fashion? Laos certainly lacks such an authoritative figure, at present. Or does it stumble upon a Mikhail Gorbachev-type leader, one who believes that political and social openness is necessary if the party is to reform?