China’s Yuan Dynasty collapsed in 1368, of course, following a century of Mongolian conquest. But the Yuan, China’s currency, is tottering in the stock market. The Chinese Communist Party, which rules the world’s most populous nation without rival, may be lucky that its stock market is comparatively small. China’s overall economy is at least as big as America’s now. Before the ongoing crash, the combined value of China’s biggest stock markets was $10 trillion, while America’s is around $27 trillion. Despite being relatively contained, China’s markets have been growing at an absurd pace in an orgy of irrational exuberance, and are now cratering to rival 1929. The markets have dived over 30% in a few weeks, so far claiming an estimated $3.35 trillion, and we don’t know where it will bottom out.

The immediate pain will be felt near the top of the economic ladder. The farmers, laborers and venders who make up the broad base of China’s economy have virtually nothing invested in the stock market. As the crisis deepens, the damage will trickle down, and China could experience symptoms such as a housing crunch that could crush the already poor. But in the near-term, an avalanche is barreling toward China’s narrow slice of middle and upper class. China has a burgeoning bourgeoisie increasingly invested in the stock market. Among them are people who, insanely, were given loans to buy stocks. It is these nouveau riche that the Communist government most needs to spend money, and not ask too many questions.

Much as China was able in the 14th Century to absorb foreign invaders into their culture, the Communist Party survived a near-death experience at the 1989 Tiananmen Square demonstrations by absorbing a restless generation into an implicit promise of constant economic growth in exchange for political apathy. Back in February, as China’s growth slowed, The Diplomat warned,

“Many Westerners forget that the massive protests that rocked Beijing and other Chinese cities in 1989 coincided with the biggest economic crisis of the post-Mao era, with annual inflation of 30 percent leading to panic buying throughout the country.

“Since 1990, China has been governed by a social contract in which the material lives of ordinary citizens improve dramatically while the Party keeps a monopoly on political power. Rising wages and standards of living helped ensure political stability. Historically most revolutions, including the recent upheavals in the Middle East, only reached critical mass when a majority of a country’s people lost hope in the economic capabilities of the governing political structure.”

The question that will soon face China is: As trillions in wealth are wiped out, is the post-Tiananmen political arrangement also being wiped out? In the calculus of growth-for-stability, when growth is replaced by crash, what replaces stability?

The pendulum of American politics swings most drastically when the economy stalls. The Great Depression enabled FDR’s historic presidency and the Great Recession boosted Obama’s electoral chances in 2008, and in 2012, as voters still blamed the economy on Bush. It has also led to polarization, as Republicans have taken over more local and state level positions. While the resulting gridlock may deepen frustration, it also creates a paradoxical stability. What happens in a one-party state, when the economy crashes, and there’s no other party to run to?

The Communist Party is already reacting with what, from the outside, looks a lot like full-blown panic. China’s response has been to cajole banks into agreeing to buying falling stocks, threatening shareholders not to sell, printing money, and now, it is beginning to close down exchanges. None of this will change the fact of an epic bubble burst, brought on by failure of confidence that is rotting China’s stock market. It calls to mind the legend of King Canute, who stood at the edge of the sea and commanded the tide not to rise on his land.

The biggest problem China may face is allowing free markets, but then bullying investors as it attempts to assert control over market forces. It makes the Communist Party look like a matador trying to control the direction of a charging bull. If China can’t figure out how to contain this financial rout, or at least undergird the fundamentals of its economy to mitigate the pain, the economic devastation could be historic for modern China, and could eventually be felt across the globe. But we could also see a revolt of the nouveau riche and the people of the People’s Republic slouching toward Tiananmen Square.

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