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.