It’s hardly news that 2011 has witnessed a severe deterioration of relations between the Vatican and China. Nor is it any secret what’s at stake for Rome: the Catholic Church’s freedom in China from state control. Benedict XVI can no more accept that the lay bureaucrats (some of whom aren’t even Christian) who run the state’s Chinese Patriotic Catholic Association should decide who will be China’s Catholic bishops, any more than Pope Clement VII could acknowledge Henry VIII’s absurd claim to be Supreme Head of the Church of England in 1534.

There is, however, a broader backdrop against which this struggle is being played out. Much of it proceeds from internal contradictions unleashed by China’s embrace of capitalism.

Whether or not we believe the growth figures published by China’s government, there’s no question that millions of Chinese have escaped poverty since Deng Xiaoping began liberalizing China’s economy in the late-1970s. This has not, however, been without its complications.

It’s abundantly clear, for instance, that China’s economy is hardly the capitalism envisaged by Adam Smith. Instead, it’s a crony-capitalist arrangement. One symptom of this is the extensive corruption prevailing throughout Chinese society.

In 2010, Transparency International ranked China as 78th out of 179 countries on its Corruption Perceptions Index. That made China only slightly less-corrupt than Russia! Moreover, as Yashen Huang illustrates in Capitalism with Chinese Characteristics (2008), apparatchiks from China’s Communist party, government, and military exercise far-reaching control over thousands of the businesses powering China’s development in the special economic zones. That’s a recipe for a growing culture of accelerating bribes, nepotism, and fraud.

Wiser heads in China, however, know crony capitalism isn’t infinitely sustainable. In the long-term, China needs the rule of law and a stable system of property rights — all of which implies limiting the capacity of those with political power to act arbitrarily.

But while rule of law and property rights are essential for sustainable economic growth, they are not enough. Equally important is a generally accepted moral culture that most people have internalized and generally follow.

Here, however, Beijing is in a quandary. Thanks to decades of often-brutal upheaval (not to mention the nihilistic destruction unleashed by Mao’s Cultural Revolution), the Confucianism which provided the moral glue that held Chinese society together for centuries has been decimated. Nor does anyone believe in the Communist party’s Marxist-Maoist alternative. It simply functions to legitimize existing power-arrangements.

This brings us squarely to the issue of religion. Even someone as militantly anti-Catholic as Voltaire acknowledged Christianity’s civilizing effects upon those whom he dismissed as the great-unwashed.

And religion is plainly on the rise in China. Five years ago, the English language version of the Communist Party’s newspaper, China Daily, reported on the results of studies done by Shanghai University professors which indicated that millions of Chinese — especially the young and particularly in the special economic zones — were becoming Christian.

This shouldn’t be too surprising. It is materialism that leads to atheism, not the growth of wealth per se. Economic liberty requires and encourages people to think and choose freely. But such thoughts can’t be quarantined to commercial considerations. With increasing wealth, many Chinese now have the time and resources to explore life’s more important questions. Many have found answers in Christianity.

Such developments, according to some Chinese officials, aren’t necessarily a bad thing. Back in 2006, the then-head of China’s religious affairs ministry, Ye Xiaowen, begrudgingly acknowledged the various Christian churches’ contributions to helping Chinese society cope with the effects of increasing wealth.

Beijing’s predicament, however, is that the same Christianity which provides people with a moral compass in rapidly changing societies also insists the state is not God and may not exercise religious authority over the Church. This position is especially pronounced in Catholicism. It receives doctrinal and canonical affirmation in Catholicism’s insistence upon the need for all Catholic bishops to be in full communion with St. Peter’s successors as Bishop of Rome. Among other things, this means Rome’s approval must be granted before ordination as a Catholic bishop is considered licit.

China’s government thus faces a paradox. Some of China’s corruption problems might well be alleviated by the growth of Catholicism’s moral influence within its borders. As a faith, Catholicism articulates a moral teaching that is (even according to many of its critics) remarkably consistent and absolutely prohibits intentional choices to murder, steal, or lie. The Church also remains the world’s strongest promoter of natural law moral reasoning — something that, by definition, isn’t premised on explicitly Christian claims.

That same Catholic Church, however, cannot and will not bend the knee to contemporary China’s Caesars, be it on questions of doctrine or bishop appointments. 

From this standpoint, Beijing’s quarrel with Rome is a proxy for many of China’s dilemmas. Today, the regime’s raison d’être is essentially one of a monopoly of power for its own sake: the same domination that contributes to the corruption that handicaps China economically, but which also rules out allowing significant freedom to those very organizations that might help address such problems.

The way out, of course, is for China’s rulers to accept freedom’s indivisible character. Once you concede religious or economic liberty, it’s hard to quarantine its effects. Acknowledging this, however, would require China’s Communist Party to self-terminate its grip on political power. Regrettably, as history illustrates, Communists never do that — or at least not until it’s truly inevitable.