This ended up being perhaps my favourite book of the year. Weber’s argument is clearly organized and based on extensive interviews with dozens of key figures involved in China’s 1970s-1980s reform period. I’ll summarize briefly some of the key conclusions I drew from her research and presentation:
(1) China’s reform should be thought of as indigenous, not “westernization.” In charting a path forward, the CPC and their advisors looked to ancient philosophy and liberation era (1930s-1940s) policy, and rejected the “Washington Consensus” that ended up wreaking havoc on Eastern Europe in the 1990s.
(2) The question was never whether or not to reform, but how to reform. There were clear failures of the existing system to address the new stage of development China had entered. Furthermore, the modern industrial system had become increasingly high tech, and China needed to catch up and keep up with this rapidly changing system.
(3) The two approaches to reform can be grouped into idealist “package reform” and pragmatist “experimental gradualism.” The package reform position, which aligned with the Washington Consensus, was idealist because it formulated an ideal market state, and believed that implementing the required infrastructure would be sufficient to achieve it, all in one step (“shock therapy”). The pragmatist approach, on the other hand, adapted to changing conditions, recognizing the interconnectedness of the economy, and made use of the dual-track price system to raise production in key areas without increasing prices. These two modes of thought (idealist package reformers versus experimental gradualists) had echoes in ancient Chinese debates.
(4) When trying to understand the impacts of price control liberalization, it is important to study not only Socialist Bloc countries; liberal capitalist democracies also resorted to price controls in times of war, and provide valuable case studies for understanding typical economic patterns. For example, post WW2, the USA followed rapid price liberalization and experienced high inflation and unemployment. In contrast, the UK followed slow, incremental reform, and avoided these catastrophes. These same results followed, respectively, in the wake of Eastern Europe’s rapid price liberalization and China’s slow price liberalization.
(5) The CPC’s success in economic reform stems from their careful study of economic policy from multiple schools of thought, as well as interviews with bureaucrats from nations that also conducted economics reforms in the late 20th century (Eastern Europe and Latin America). Surprisingly, economists and those with actual hands-on experience diverged wildly. Economists promoted policies more aligned with the Washington Consensus while those in charge of implementing these policies were far more critical of their successfulness. CPC policy was informed by their analysis of neoliberal, Keynesian, and Marxist economic thought and economic tools.
(6) Despite price liberalization and increased reliance on market forces, the CPC retained control over large parts of the economy. Unlike the CPSU, the CPC did not relinquish political control over banks, allowing them to direct capital flows via market means. State owned enterprises continued to play a large role in the economy. New growth, particularly in non-essentials and consumer products, was privately owned while crucial but slower growing heavy industry and energy sectors remained under state control.
(7) Economic reforms were rolled out gradually, responding to economic conditions and popular sentiment — more poetically summarized as “crossing the river by touching the stones.” The CPC advanced reforms only when they felt they were on solid, stable footing. At times, they rolled back reforms in response to public outcry or rapid inflation.
Economies are complex and dynamic: it can take a long time to change course, yet on the other hand, rapid change can lead to collapse and crisis in just a matter of months. China’s reforms should be considered a remarkable success regardless of one’s preference for free markets or absence thereof. The CPC achieved its goal of economic development without the devastation that swept across other former planned economies. I wished Weber had spent a little more time analyzing measures related to quality of life; economic development is not the whole picture of economic success, and all industrialized countries went through significant poverty and deprivation during their industrialization. Still, quality of life in China seems relatively high, and continues to improve. The world holds its breath to see how China will tackle future reforms: will it liberalize further, or return to more socialized ownership of the means of production? My hope (and hunch…) is for the latter, but regardless of the path they choose, I feel confident it will be charted via thorough study, careful analysis of changing conditions, and long-term thinking.
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