The Asian Century 4 16 July 2019.

In 1976, Mao Zedong died.  For two years, Hua Guofeng occupied the nominal leadership of China.  Then, in 1978, Deng Xiaoping came to power.  Both men, and many others, recognized that China’s vast potential had remained un-tapped during the long reign of Mao.  The party orthodoxy that peasants formed the backbone of a Communist society in Asia had stifled all economic progress.  Those peasants were themselves trapped in a vast system of collective farms that stifled initiative and productivity.  Marxist and Maoist economic ideas—the only ones taught to China’s educated elite—provided no useful guide to economic reality.[1]  To “save” itself, China would have to change.[2]  For one thing, it would have to become a truly industrial society.

To accomplish this transformation without re-inventing the wheel, China would need foreign advisors who knew how to run an industrial economy.[3]  Initially, these advisors came from the then still-existing Communist bloc.  Soon it became all too apparent that the Communist advisors didn’t have the slightest idea of how to build or manage an industrial economy.   Even before the collapse of the Soviet Union, this reality imposed a frightening and unwelcome change of course.  China would have to turn to the capitalist West.  So it did.

The process began under Hua.  It took the form of a cautious experimentalism.  The Chinese Academy of Social Sciences sounds innocuous enough, or even boring to anyone who has attended a scholarly conference.  However, it provided the home for intense intellectual debates about China’s path forward.  In Sichuan Province, the first experiments with dismantling the collective farms began.  Consideration began of the ideas that would lead to the creation of the “Special Economic Zones.”

The need to save China by changing China had a wide constituency among leaders.  However, it also faced dogged opposition among more traditional Communist Party leaders.  To overcome this opposition, and to sustain and speed-up the pace of change, required a leader of exceptional character.  Deng Xiaoping proved the right man at the right time.  He combined great political skill, a theatrical affability, and ruthless determination.

The speed with which China changed course is fascinating.  So, too, is the enthusiasm in many quarters for both change and contact with Western thought.  Western economists were invited to visit and confer with Chinese leaders.  Chinese scholars, officials, managers and engineers, and—most important—students began to go abroad in growing numbers.  They absorbed and brought back to China the ideas and practices of the West.[4]  China’s history has been one of prolonged periods of hostility to foreign ideas interspersed with briefer periods of openness to foreign ideas.  The spread of Buddhism from India to China, and the curiosity about the West that allowed the Jesuits to operate in China offer earlier examples of this openness.

Now, Xi Jinping seems to be slamming the doors.

[1] See: Venezuela, Cuba, North Korea.  As one fictional character summarized the real Communist achievement: “boiler suits, prison camps, and a damn long march to nowhere.”

[2] This same truth had been recognized by the Japanese more than a century earlier.

[3] Julian Gewirtz, Unlikely Partners: Chinese Reformers, Western Economists, and the Making of Global China (2016).

[4] Inevitably and predictably, many of these ideas and practices had nothing to do with economics.

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The Asian Century 3 15 July 2019.

What do you want, freedom or prosperity?  “It’s an honest question.”[1]  For much of its history, the “West” has been able to achieve an acceptable mix of both.  Other places have not been so lucky.  Some countries climbed into the ranks of the Freedom + Prosperity group by first prioritizing prosperity over freedom.

China’s initial reforms under Deng Xiaoping both encountered obstructive resistance from “conservatives” within the Communist Party and inspired extravagant hopes among educated young people.[2]  Conciliating the conservatives would mean enraging the students; while satisfying the students would enrage the conservatives.  The problem divided even the Communist Party leadership at the center of power.  The party’s General Secretary, Zhao Ziyang, favored a policy of political liberalization.

In Spring 1989, the controversy reached a crisis when massive student demonstrations broke out in Beijing.  Tiananmen Square became the focus of the demonstrations, and of international attention.  Forced to choose, the Party leadership opted for control.  Troops violently cleared the square, and Zhao Ziyang went into house arrest.

As was the case in the European Revolutions of 1848, repression gave way to a new course by enlightened conservatives.  Deng Xiaoping used the crisis—and the fear of a recurrence—to force the conservatives to accept a dramatic acceleration of economic change.[3]  China would exploit its low labor costs and massive population to launch a dramatic acceleration of economic development.  The strategy would be export-based growth through engagement with the world economy.  The benefits of this policy would not be equally shared.  Wealth would flow to the elites and middle classes who supported it.  For the rest of the Chinese there would be low wages and a scanty social safety net.  However, the gamble Deng took reflected a belief that key people would prefer prosperity to freedom if they had to choose.

The effects in the rest of the world have been dramatic as well.  Chinese competition has wreaked havoc with many Western producers and their employees.  And China’s economic success makes it a credible model for people who find the contemporary liberal political and economic arrangements deeply dissatisfying.  Much the same was true in the Thirties, when the Great Depression in the capitalist West made Stalinist Russia look to some observers like a more reasonable alternative.

Despite the bitter divisions that are all too evident in Western democracies, it seems most likely that the countries that will imitates China’s economic and political model will be found in the developing world.  Freedom + Prosperity has become so deeply engrained in the West that incremental reforms are likely to resolve—or diminish to a tolerable level—those divisions.  In other places, where Freedom + Prosperity is new or non-existent, outcomes may differ.

Or perhaps not.  Prediction is a tricky business.  History is more reliable.

[1] https://www.youtube.com/watch?v=vInFuLgwR1U

[2] Of course, many/most young people weren’t very educated.  They did not necessarily share the values of the urban educated elite.  However, urban educated elites are easy to meet and talk to if you are a Western diplomat, journalist, or traveler.  Same thing happened at Tahrir Square.  I haven’t seen much hand-wringing among journalists about how they got it wrong.

[3] Johan Lagerkvist, Tiananmen Redux: The Hard Truth about the Expanded Neoliberal World Order (2017).