My name is Eric Li, and I was born here.

But no, I wasn't born there.

This was where I was born:

Shanghai, at the height of the Cultural Revolution.

My grandmother tells me that she heard

the sound of gunfire along with my first cries.

When I was growing up, I was told a story

that explained all I ever needed to know about humanity.

It went like this.

All human societies develop in linear progression,

beginning with primitive society, then slave society,

feudalism, capitalism, socialism,

and finally, guess where we end up?

Communism!

Sooner or later, all of humanity,

regardless of culture, language, nationality,

will arrive at this final stage

of political and social development.

The entire world's peoples will be unified

in this paradise on Earth

and live happily ever after.

But before we get there, we're engaged

in a struggle between good and evil,

the good of socialism against the evil of capitalism,

and the good shall triumph.

That, of course, was the meta-narrative

distilled from the theories of Karl Marx.

And the Chinese bought it.

We were taught that grand story day in and day out.

It became part of us, and we believed in it.

The story was a bestseller.

About one third of the entire world's population

lived under that meta-narrative.

Then, the world changed overnight.

As for me, disillusioned by the failed religion of my youth,

I went to America and became a Berkeley hippie.

(Laughter)

Now, as I was coming of age, something else happened.

As if one big story wasn't enough,

I was told another one.

This one was just as grand.

It also claims that all human societies

develop in a linear progression towards a singular end.

This one went as follows:

All societies, regardless of culture,

be it Christian, Muslim, Confucian,

must progress from traditional societies

in which groups are the basic units

to modern societies in which atomized individuals

are the sovereign units,

and all these individuals are, by definition, rational,

and they all want one thing:

the vote.

Because they are all rational, once given the vote,

they produce good government

and live happily ever after.

Paradise on Earth, again.

Sooner or later, electoral democracy will be

the only political system for all countries and all peoples,

with a free market to make them all rich.

But before we get there, we're engaged in a struggle

between good and evil.

(Laughter)

The good belongs to those who are democracies

and are charged with a mission of spreading it

around the globe, sometimes by force,

against the evil of those who do not hold elections.

(Video) George H.W. Bush: A new world order ...

(Video) George W. Bush: ... ending tyranny in our world ...

(Video) Barack Obama: ... a single standard for all

who would hold power.

Eric X. Li: Now --

(Laughter) (Applause)

This story also became a bestseller.

According to Freedom House,

the number of democracies went from 45 in 1970

to 115 in 2010.

In the last 20 years, Western elites tirelessly

trotted around the globe selling this prospectus:

Multiple parties fight for political power

and everyone voting on them

is the only path to salvation

to the long-suffering developing world.

Those who buy the prospectus are destined for success.

Those who do not are doomed to fail.

But this time, the Chinese didn't buy it.

Fool me once ...

(Laughter)

The rest is history.

In just 30 years, China went from

one of the poorest agricultural countries in the world

to its second-largest economy.

Six hundred fifty million people

were lifted out of poverty.

Eighty percent of the entire world's poverty alleviation

during that period happened in China.

In other words, all the new and old democracies

put together amounted to a mere fraction

of what a single, one-party state did without voting.

See, I grew up on this stuff: food stamps.

Meat was rationed to a few hundred grams

per person per month at one point.

Needless to say, I ate all my grandmother's portions.

So I asked myself, what's wrong with this picture?

Here I am in my hometown,

my business growing leaps and bounds.

Entrepreneurs are starting companies every day.

Middle class is expanding in speed and scale

unprecedented in human history.

Yet, according to the grand story,

none of this should be happening.

So I went and did the only thing I could. I studied it.

Yes, China is a one-party state

run by the Chinese Communist Party, the Party,

and they don't hold elections.

Three assumptions are made

by the dominant political theories of our time.

Such a system is operationally rigid,

politically closed, and morally illegitimate.

Well, the assumptions are wrong.

The opposites are true.

Adaptability, meritocracy, and legitimacy

are the three defining characteristics

of China's one-party system.

Now, most political scientists will tell us

that a one-party system is inherently incapable

of self-correction.

It won't last long because it cannot adapt.

Now here are the facts.

In 64 years of running the largest country in the world,

the range of the Party's policies has been wider

than any other country in recent memory,

from radical land collectivization to the Great Leap Forward,

then privatization of farmland,

then the Cultural Revolution,

then Deng Xiaoping's market reform,

then successor Jiang Zemin took the giant political step

of opening up Party membership to private businesspeople,

something unimaginable during Mao's rule.

So the Party self-corrects in rather dramatic fashions.

Institutionally, new rules get enacted

to correct previous dysfunctions.

For example, term limits.

Political leaders used to retain their positions for life,

and they used that to accumulate power

and perpetuate their rules.

Mao was the father of modern China,

yet his prolonged rule led to disastrous mistakes.

So the Party instituted term limits

with mandatory retirement age of 68 to 70.

One thing we often hear is,

"Political reforms have lagged far behind economic reforms,"

and "China is in dire need of political reform."

But this claim is a rhetorical trap

hidden behind a political bias.

See, some have decided a priori

what kinds of changes they want to see,

and only such changes can be called political reform.

The truth is, political reforms have never stopped.

Compared with 30 years ago, 20 years, even 10 years ago,

every aspect of Chinese society,

how the country is governed,

from the most local level to the highest center,

are unrecognizable today.

Now such changes are simply not possible

without political reforms of the most fundamental kind.

Now I would venture to suggest the Party

is the world's leading expert in political reform.

The second assumption is that in a one-party state,

power gets concentrated in the hands of the few,

and bad governance and corruption follow.

Indeed, corruption is a big problem,

but let's first look at the larger context.

Now, this may be counterintuitive to you.

The Party happens to be one of the most meritocratic

political institutions in the world today.

China's highest ruling body, the Politburo, has 25 members.

In the most recent one, only five of them

came from a background of privilege, so-called princelings.

The other 20, including the president and the premier,

came from entirely ordinary backgrounds.

In the larger central committee of 300 or more,

the percentage of those who were born

into power and wealth was even smaller.

The vast majority of senior Chinese leaders

worked and competed their way to the top.

Compare that with the ruling elites

in both developed and developing countries,

I think you'll find the Party being near the top

in upward mobility.

The question then is, how could that be possible

in a system run by one party?

Now we come to a powerful political institution,

little-known to Westerners:

the Party's Organization Department.

The department functions like a giant

human resource engine that would be the envy

of even some of the most successful corporations.

It operates a rotating pyramid

made up of three components:

civil service, state-owned enterprises,

and social organizations like a university

or a community program.

They form separate yet integrated career paths

for Chinese officials.

They recruit college grads into entry-level positions

in all three tracks, and they start from the bottom,

called "keyuan" [clerk].

Then they could get promoted

through four increasingly elite ranks:

fuke [deputy section manager], ke [section manager], fuchu [deputy division manager], and chu [division manger].

Now these are not moves from "Karate Kid," okay?

It's serious business.

The range of positions is wide,

from running health care in a village

to foreign investment in a city district

to manager in a company.

Once a year, the department reviews their performance.

They interview their superiors, their peers,

their subordinates. They vet their personal conduct.

They conduct public opinion surveys.

Then they promote the winners.

Throughout their careers, these cadres

can move through and out of all three tracks.

Over time, the good ones move beyond the four base levels

to the fuju [deputy bureau chief] and ju [bureau chief] levels.

There, they enter high officialdom.

By that point, a typical assignment will be

to manage a district with a population in the millions

or a company with hundreds of millions of dollars in revenue.

Just to show you how competitive the system is,

in 2012, there were 900,000 fuke and ke levels,

600,000 fuchu and chu levels,

and only 40,000 fuju and ju levels.

After the ju levels,

the best few move further up several more ranks,

and eventually make it to the Central Committee.

The process takes two to three decades.

Does patronage play a role? Yes, of course.

But merit remains the fundamental driver.

In essence, the Organization Department runs

a modernized version of China's centuries-old

mentoring system.

China's new president, Xi Jinping,

is the son of a former leader, which is very unusual,

first of his kind to make the top job.

Even for him, the career took 30 years.

He started as a village manager,

and by the time he entered the Politburo,

he had managed areas with a total population

of 150 million people

and combined GDPs of 1.5 trillion U.S. dollars.

Now, please don't get me wrong, okay?

This is not a put-down of anyone. It's just a statement of fact.

George W. Bush, remember him?

This is not a put-down.

(Laughter)

Before becoming governor of Texas,

or Barack Obama before running for president,

could not make even a small county manager