Review: How China Escaped Shock Therapy by Isabella Weber

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.

Review: Thomas Piketty’s 'Capital in the Twenty First Century' by Stephan Kaufmann

This being a review of a book that is itself a review, I'll keep it short lest it fall prey to the Law of Diminishing Fleas. 

Kaufman's extended essay starts by sketching the context in which Piketty wrote his opus — the wake of the ’08 financial crisis, Occupy Wall Street, and other symptoms arising from several decades of neoliberalism — before presenting a sympathetic summary of Piketty’s argument. That is, the return on capital outstrips the rate of growth, as demonstrated by several centuries of carefully curated tax records (these being too historical for prior economists to have parsed, and too economic for prior historians to have parsed), and so inequality inevitably increases.

Subsequent chapters ask why this book garnered the hype it did (the concept of increasing inequality under capitalism is hardly new), and what we should make of Piketty’s argument. The author examines several critiques of Piketty. The financial interests of many of his critics place them squarely at odds with his prescription (a wealth tax). These libertarian or neoliberal critiques miss their mark: Piketty’s data largely hold up to scrutiny, and his argument is ultimately in defense of capitalism and markets.

Piketty’s warning against inequality can be reduced to a single objection: if the belief in a society that justly rewards performance with legitimate differences in income disappears, then people will start to doubt whether everything is as it should be in capitalism and whether differences between poor and rich are ultimately just. Piketty argues like a crafty technician of power who exhibits concern about the subservience  and motivation of the propertyless masses.

That is, we must tax wealth not because poverty is gruelling and lethal and this wealth can be put to better use, but for the continued stability of capitalism and markets.

Review: Arab Marxism and National Liberation by Mahdi Amel

Mahdi Amel was a philosophy professor at the Lebanese University, who wrote on questions of anti-imperialism and national liberation from a Marxist perspective during the Lebanese Civil War before his assassination in 1987. This collection of essays brings his writing to the Anglosphere for the first time.

The first pair of essays by Amel present his theory of the Colonial Mode of Production. Amel takes an Althusserian/structuralist approach, but hides it up his sleeve, instead buttressing his argument with a close reading of several passages from Marx. In brief, Amel views the Colonial Mode of Production (which is not necessarily shrugged off when countries achieve nominal liberation from their colonizers) as one where capitalism is imposed from without, but not allowed to truly develop due to surplus being captured by the colonizing country, keeping the colonized country producing agricultural cash crops, extracting natural resources, and offering services — all under the supervision of a stunted petty-bourgeoisie (what other anti-colonial Marxists might call the national bourgeoisie).

The strength of this section was its recognition of class struggle as not merely breaking along the lines of worker-versus-capitalist, but also integrating questions of national liberation. He illustrates this multiplicity with the example of the European Algerian neighbourhood of Bab El Oued. This spot had been a popular base of the communist party before the revolution kicked off, when it transformed into “a haven of European racism as well as the home-base and centre of fascist European terror against the revolution.” I also appreciated his development on the dangers of applying “preformed thoughts” rather than conducting an analysis of a given time and place to see if the class relationships of, say, 19th century England, do in fact apply there. Altogether, Amel's close fidelity to Marx and his analysis of the political economy of colonized countries results in a defense against charges of eurocentrism in Marxism.

That said, I had several reservations with his argument. The author uses “Hegelian” as a synonym for simple, static, and overall undialectical; there were also several claims I found to be unfounded and too eager to make their point (e.g., “Only Marxist thought captures the complex nature of the contradiction at the heart of historical reality, because the Marxist contradiction — unlike the Hegelian contradiction — is in its very nature complex.” or “Colonisation is what introduced into our countries the contradiction without which there is no history.” There was, of course, history before colonization.). His structuralist argument falls into many of the same traps of Althusser’s: his structural model is not a philosophy of change but instead makes these structures themselves seem almost eternal; it is a philosophy that dissolves the individual, transforming relationships between individuals into ones between things.

The remaining four chapters included an interesting critique of Edward Said (who he argues insufficiently understood Marx and thus fell into his own form of orientalism), a Marxist assessment of sectarianism (it’s all class struggle; Islam adopts different forms depending on the material conditions of its practitioners, including the bourgeois state), and a study of ideology in national liberation (cultural heritage is always viewed from the present through class ideology, a critique of colonialism as "civilizing"). These essays were an interesting peek into a part of the world I knew very little about. However, most of Amel's answers to these questions were particular to his time and place, making for a challenging read. Broadly, Amel takes a line that does not reject the coupling of Islam with national liberation movements, recognizing that the conflict between religious sects is a (sometimes mystifying) way class struggle manifests, and that this class struggle itself shapes Islam into the various expressions we see today.

The first two chapters are written by the collection’s editors and attempt to contextualize Amel’s writing in the broader tradition of anti-colonial thought and Arabic Marxism in particular. I would have been more satisfied with just a brief biography of Amel, plus a more heavy-handed editorial voice throughout the work. For example, I would have appreciated a preamble for each essay explaining why they were selected, the audience Amel likely had in mind, the political situation at the time of writing, etc. Additional footnotes providing a brief description of some of the political actors or historical events referenced would also have helped me get more out of the text. There was also extensive use of square brackets and excerpting, which made me wonder what was changed or skipped in translation and why. Overall, the presentation seems like a missed opportunity for a collection aiming to popularize Amel’s writing for a Western audience, although the essays themselves provide insight into 20th century West Asian national liberation struggles.

Review: The Poverty of Philosophy by Karl Marx

Marx’s model of political economy is better laid out in Capital and more briefly laid out in Wage Labour and Capital, but it’s fun to see it in draft and wielded like an axe against Proudhon. Even if you are looking for Marxist economics delivered as a killing blow, this book is tough for the uninitiated. Although Marx quotes Proudhon at length, the reader is presumed to be familiar with the overall shape of his argument. I read this work in parallel with Marx's Inferno, and was glad of the extra context Roberts gives regarding Proudhon’s positions (particularly Chapter 5, but also Chapters 2-3).

Perhaps one of the most important take-home messages is that we should uphold correct pro-capitalist economists (in this work, Ricardo and Smith) and not placate incorrect anti-capitalists (like Proudhon) despite the appearance of shared goals. The work is structured in two parts, which correspond somewhat to parts 1-3 and part 4 of Capital. I particularly enjoyed the second section, in which Marx targets Proudhon’s clumsy and idealistic attempt to apply Hegel’s dialectics. The other works by Marx that I’ve read did not discuss dialectics as a tool and it was fun seeing Marx describe historical materialism in these terms. Unlike Capital, this was not a transformative read, but did help me better understand the development of his thought. Marx’s writing in this work is often quite vivid and fun, and I imagine I’ll return to it again when I’m looking for a colourful quote.

Review: An Introduction to the Three Volumes of Karl Marx’s Capital by Michael Heinrich

The reason you would pick up this book is because you have not yet read Marx’s Capital and you would like an introduction. Presumably you hope to read only one such preparatory work before embarking on this journey, and so you are wondering if Heinrich’s offering suits your needs.

Heinrich checks a lot of boxes; at only 240 pages, this book is approachable yet quite comprehensive and precise in its overview of Marx’s three volumes. Despite these qualities, I wouldn’t recommend it as an introductory volume, because I think it fails to adequately present the discourse surrounding Marx’s work. Heinrich’s Introduction pushes the reader along a western chauvinist and nihilistic path that might take more than 240 pages (perhaps as many as 363 pages) to correct.

Heinrich intervenes in both the academic discourse as well as the practical Marxist discourse surrounding interpretations of Capital. However, he rarely names his opponents and even less frequently quotes them at length. Heinrich’s unnamed foes seem to be the weakest representatives of their various tendencies, resulting in strawmanned arguments. Heinrich declares easy defeats, positioning himself as the one true understander of Marx. At the level of academic discourse, the worst of these sins is his comparison of value form theory versus what he calls “substantialism” — always in scare quotes, and not (always?) a term his opponents would use to describe their own interpretation of the labour theory of value. His situation of Capital in practical applications of Marxism is even worse (particularly Chapters 11-12). During the twentieth century, revolutions guided by Marxism produced socialist states across the globe. This wave swept under-developed and colonized nations, not the industrialized nations early Marxists expected to see lead worker's revolutions. Heinrich has a sneering disdain for these efforts:

It is not sufficient for the transition to a communist society to conquer and defend state power during a weak phase of bourgeois rule, like Russia in 1917. Without the corresponding social and economic preconditions, a socialist revolution might be successful as a project to maintain the power of a political party, but not as a project of social emancipation.

Heinrich’s solution is, implicitly, that these workers not attempt to liberate themselves, and instead suffer under colonialism while they wait for the lazy western movements to figure things out first. The futility and illegitimacy of their movements being clear, Heinrich barely engages with Marxist economists and philosophers hailing from the USSR, China or the Global South. To the extent he gives a nod to non-Western interpretations of Marx, he continues his practice of battling unnamed foes, referring to them obliquely as, for example, “worldview Marxists.” To be safe, Heinrich also dismisses dialectics (an important philosophical foundation for Soviet and Eastern socialism) as useless at best and sophistry at worst.

Heinrich’s vision of a post-capitalist society (which he emphasizes is not at all inevitable) is one of full democracy, zero scarcity, and abolition of the value form. But what does the transition to this state look like? Heinrich has no answer.

Heinrich’s dismissal of Marx’s (non-Western) successors is mirrored by the absence of his precursors; Adam Smith, Ricardo, etc, feature little in Heinrich’s overview. As a result, Marx’s brilliant critique (understood properly only by Heinrich, of course) springs from nowhere.

So here we see the seeds of the misconceptions readers introduced to Marxism via Heinrich may be imparted with: a smug sense of western superiority, a depressed sense that nothing can be done to bring about a better world, an elevated sense of Marx’s genius severed from his intellectual context, and a certainty that all other interpretations of Marxism (by critics left unnamed) are patently absurd.

For readers who want less of an introduction and more of an interpretation, Heinrich’s book has some valuable insights. For example, I appreciated his reframing of the debates on the tendency of the rate of profit to fall (TRPF) as questioning if it even matters if it falls. (Heinrich says no, see above regarding the non-inevitability of the fall of capitalism. I agree no, there are many other reasons to end capitalism.) Heinrich also emphasizes that not only workers but capitalists too are subject to domination by capital, a crucial point frequently elided by leftist anti-capitalists. Chapter 8 (“Interest, Credit, and ‘Fictitious Capital’”) and Chapter 10 (“The Fetishism of Social Relations in Bourgeois Society”) were clear treatments of complex subjects.

But for those looking for a preparatory read, where to turn? My experience was Marx’s Inferno by W.C. Roberts, which presents Volume 1 in the fiery discourse of its time, and also emphasizes the impersonal domination of capital (following Heinrich), while refraining from smug strawmanned arguments. However, Roberts’s text is academic, and assumes familiarity with basic Marxist concepts. Perhaps instead start with Wage Labour and Capital, a pamphlet written by Marx with the intent of introducing his work to a popular audience.

Review: Rewriting the Rules of the American Economy by Joseph Stiglitz

This book works as a corrective for people who think that government policy has little impact on wealth equality, but who also care about wealth inequality as morally bad. I'm not sure exactly what audience that is. Some elected democrats, I suppose, and some of their more dedicated but privileged voters. And that is, of course, who this book is addressed to. (Stiglitz wrote this report in 2016, presumably imagining a Clinton administration. In 2024, his discussion of recession recovery, inflation rates, etc, seems already somewhat dated.)

There are many entirely reasonable policies presented here. Capital gains rates should indeed be taxed at a higher rate. Worker bargaining needs to be strengthened. Patent laws are stifling innovation and hurting the general public, who cannot afford life-saving medications, or who have to pay exorbitant costs for it due to laws that block the public sector bargaining for a discount. Addressing these issues would indeed lead to a better economy for the majority of Americans. Though (perhaps because of this work and works like it) there is nothing particularly novel about these recommendations nor the way in which they are advocated.

There is very little role for the State to play in Stiglitz's path forward, other than simply tweaking the rules here or there. I, for example, would argue that if a business is too big to fail, it should be a state owned enterprise, while Stiglitz thinks such banks merely need to have better wills, and maybe be held to a higher level of scrutiny. I also think there should be a public retirement savings plan and many other such public programs, subsidized and well-governed, while Stiglitz believes the main responsibility of a public program is to encourage better market competition and that they should not be subsidized or otherwise given "unfair" advantages.

The analysis is overall flawed for three reasons, one economic, one political, and one philosophical. First, Stiglitz believes that "The American economy is not out of balance because of the natural laws of economics. Today's inequality is not the result of the inevitable evolution of capitalism." This is stated without further justification, as an axiom on which the rest of the book rests. Capitalism necessitates inequality, and sharpens inequality. If everyone has equal wealth and opportunity, there would be no workers for capitalists to hire, or no capitalists for workers to sell their labour to. Because owning capital means you can make money by having money, and without working, inequality naturally rises. Stiglitz takes aim primarily at the financial sector for not doing its job of providing liquidity for investing in production. This is, of course, not the job of the financial sector. The financial sector, like the manufacturing sector and every other private sector, has as its task the goal of accumulating capital. That is what it means to live under capitalism. The finance sector has done a fantastic job of accumulating capital. Stiglitz's proposals, such as implementing a tax on all financial trades, are no more than a game of whack-a-mole of trying to curb the less useful innovations in accumulation of capital.

Second, Stiglitz appears to be uninterested in how policy changes. There is, of course, a hand-waving towards how the government is primarily composed of the wealth, and how the private sector has captured the bodies that regulate them. These issues are to be solved with, for example, easier voter registration and holidays on election days (which are, I agree, policies worth fighting for!). But why would people with political power fight to disprivilege themselves? There is little evidence presented that they would, and Stiglitz seems convinced that simply reasoning with his audience and presenting them a few statistics would be enough for them to willingly sign over a few extra million dollars of their own wealth each year.

Finally, Stiglitz's analysis is ahistorical. In his telling, past efforts were all simply misguided policy decisions. "We now know" that "[supply-side economics] is incorrect and outdated", that "developed economies can rise without lifting all boats," that by "giving into such threats" that businesses would move elsewhere if we did not deregulate we "lost doubly" by hurting the economy and worsening income inequality, and that "the arguments put forward by advocates for capital tax breaks--that they spur investment--is wrong." But these were known before. Each of these policy changes were sharply criticized and opposed at the time. These critics have been proven correct, to little fanfare or reward. But Stiglitz seems uninterested in pursuing why we made these erroneous policy changes. And without asking that question (is it because of who had political power? is it due to fundamental assumptions about economics that must be revised, such as whether capitalism inherently breeds inequality?) how do we know we are not making incorrect policy decisions once more?

Review: How China Escaped The Poverty Trap by Yuen Yuen Ang

This is a well-structured intervention into a body of scholarly output that seems woefully unable to understand China’s economic rise. Yuen Yuen Ang insists on understanding development as an interconnected, co-evolutionary process, in which governance and economic growth are mutually interdependent, against the prevailing schools of “good governance → growth” (how does one develop ‘good’ institutions without resources?), “growth → good governance” (where does the growth come from?) or “history → good governance → growth” (deterministic, fatalistic, sometimes chauvinistic).

In one line, Ang’s argument is: Poor and weak countries can escape the poverty trap by first building markets with weak institutions and, more fundamentally, by crafting environments that facilitate improvisation among the relevant players.

“Weak” institutions are those that correspond to Max Weber’s framework for pre-modern institutions as opposed to legal-rational, professional bureaucracies; that is, those that fuse personal and private interests, are regulated partially rather than impartially, implement policies without coordination, and involve fee extractions as opposed to disinterested oversight. As Ang notes, there is a chauvinism in the way this classification is applied:

We miss the obvious because standard binary labels of “weak/strong” and “good/bad” blinds us to the potential of nonmodern, nonformal, non-rule-of-law, and nondemocratic institutions. Our conventional and strongly rooted bias that the norms of the developed West are universally best leads us to regard any deviation from these norms only as weaknesses. Consequently, institutions in developing societies are routinely identified by what they are not rather than by what they are.

She highlights the ways that “weak” institutions are well-suited to the tasks of initial development, including being able to leverage strong communities ties in order to mobilize resources, move quickly and improvise, and adapt to local conditions and needs. Combating a persistent myth that all that is needed for development to explode is for government to protect private property and otherwise get out of the way (as in England’s 1688 Glorious Revolution), Ang looks at how examples of “weak” institutions supported development in 14th-15th century Europe. I particularly liked her insight into the rationality of prebendalism (widespread throughout Europe at this time): central governments unable to pay or administer salaries to a dispersed bureaucracy instead bestow the right to take portions of the taxes in exchange for collecting the taxes.

In treating development as co-evolutionary, Ang leans on the biological metaphor. In evolution, random variation leads to advantages that are selected for, either leading to survival of the fittest, or divergence into specialization to fill a niche. These themes of variation, selection and niche creation are as crucial for studying economic development, but where the origin of species is determined by unambiguous markers of success (survival and reproduction), in sociological systems, what should be considered “success” is determined via public debate and political decision-making (and, though Ang doesn’t say so, the survival of the State).

Ang’s specific advice for developing countries based on her analysis of China’s remarkable development, is (like me, Ang’s a big fan of numbered lists):

1. Delimit boundaries of experimentation and flexibility. China’s central government developed a system of red policies (clear uncrossable lines enforced consistently by the state), black policies (clear positive instructions from the state that must be fulfilled), and grey policies (deliberately ambiguous guidelines). The “grey” area permitted variation and improvisation, and the central government would then transform successful interventions into “black” universal policies. As Deng Xiaoping says, “Cross the river by feeling for the stones.”
2. Activate incremental changes across connected domains simultaneously. Because all aspects of an economy are interconnected, it is not pragmatic to change only a few policies at once. While China’s reform period is marked by incremental change, incremental does not always mean small, and China’s reforms were often bold and typically multi-pronged. 
3. In the beginning, define success narrowly. At the start of Reform and Opening Up, the central state defined success as economic success. With additional resources at its disposal, additional success metrics have been incorporated, such as environmental policy. (Here, I wish Ang had spent considerably more time, including on interplay between social markers like poverty alleviation or education and economic factors, alas!)
4. Give everyone a personal stake in the development process. Even the on-the-ground representatives of the state, like regulatory officers and school teachers, were given personal incentives in the form of income or professional advancement to work towards the collective goals. (I appreciated Ang’s examination of all levels of the bureaucracy, versus party leaders.)
5. Let some get rich first but pair up the poor and the rich. Coastal regions in China had significant trade advantages, and so developed first. As these regions took off, financed largely by foreign direct investment, domestic investment (both state and private) then shifted to the center of the country.
6. Harness weak institutions to build markets. Like parenting a newborn is different from parenting a teen, developing new markets is different from maintaining existing markets. It is not a matter of developing “good enough” institutions, but of using the institutions you have in the best way possible to achieve development

Ang’s examination is very market focused — even more so than I have laid out here. In her exposition, the goal of development is to have strong markets and institutions that support them. My own value system differs somewhat: the goal is to have a thriving, happy, liberated populace and markets are a tool to enable that. Correspondingly, discussion of the human happiness side of China’s meteoric rise was nearly absent from the narrative, and when it was presented, the negative was emphasized: slums, emptied out villages, etc (to her credit, Ang notes that the same patterns emerged during Europe’s early development) rather than poverty alleviation and a continuation of the rise in life expectancy that started with the 1949 revolution. 

There was very little examination at the philosophical factors that led to China’s uniquely being able to solve the poverty trap. In this way, it was the near opposite of When China Rules The World, which I read earlier this year and which explains China’s rise as a result of its Neo-Confucianism more than any material factors. Ang hits the mark a little better, and I think it is not a coincidence that she emphasizes the interconnectedness of systems, the relationship between economic structure and superstructure, and how one stage of development lays the foundations for the stage of development supersedes it. Or, in other words, her analysis is (unintentionally, I think) dialectical and material, the same philosophical foundations of the Communist Party of China. Ang dismisses — or, to the extent they are discussed, regards as one-sidedly tragic — the policies of the Mao era. I think the relationship between pre-Reform and post-Reform China is more continuous than that presented here, and the impact of policies of that era transmitted well beyond the 1970s.

Ang defends her theses by exploring three cities within China that took different paths to development. She used placeholder names (“Forest Hill”) and I would have preferred she use the real names so that I came away from the book with a firm grasp of a real location rather than a firm grasp of somewhere in The Shire. Ang also compares antebellum United States and Nigeria’s Nollywood as examples of development outside China that fulfilled these steps. Showing two positive controls gives the reader confidence in her thesis. As a scientist, I did note the lack of negative controls that would have lent further support to the parsimoniousness of her recommendations: were there locations that implemented five of her six recommendations but saw only tepid growth?

Though I read it critically, I found this to be informative and thought-provoking. The structure of institutions must match the tasks at hand. This is a lesson worth bearing in mind whether the tasks at hand are those of a small local community organization, a venture capital-backed start-up, or the governing body of the world’s most populous country.