China’s adoption of market economics
To many outside China, the country’s impressive economic growth over the past three decades is the natural result of a decision to abandon Communism and adopt free-market economics.
But that decision was never made, and to this day China’s increasingly capitalist leaders speak reverentially about Marxist-Leninist Mao Zedong thought and refer to their system as “socialism (with Chinese characteristics)”.
One of the most transformative global developments of recent decades is still not fully acknowledged by those who made it happen. The future of that experiment remains a topic of debate at the highest levels of China’s authoritarian political structure.
“The ambivalence of the leadership has led to a messy stir-fry of Leninism and a market economy,” says Leslie Young, professor of economics at Cheung Kong Graduate School of Business in Beijing. “Allowing the ruling hierarchy to make money while maintaining nostalgia for Marxism has resulted in the party never fully legitimising the assets they control as private property.”
It all began in 1978 when the old Communist guerrilla Deng Xiaoping solidified his grip on the party and launched a modernisation programme following the death of Mao and the end of the disastrous cultural revolution.
In explaining his adoption of what were effectively capitalist ideas, Deng is said to have told comrades: “It doesn’t matter whether the cat is black or white, as long as it catches rats.”
But right up to his death in 1997 he faced staunch opposition from conservative hardliners in the party and neither he nor his successors ever stopped describing the system as “socialist”.
The first steps in what became known as “reform and opening” were taken in the countryside, where tens of millions had died in the great leap forward of the late 1950s as Mao collectivised the land and forced peasant farmers to produce steel.
Beginning in the late 1970s, the party broke up the communes and allowed households to farm their own plots of land. Peasant farmers and state factories were allowed to sell anything they produced beyond state quotas – and private businesses began to flourish.
This continued throughout the 1980s, but it was in the wake of the 1989 massacre of protesters in Beijing’s Tiananmen Square and the demise of the Soviet Union that the isolated and uncertain Chinese leadership launched privatisation and price reforms, adopting market economics in practice, if not name.
The sudden inclusion of one-fifth of humanity into the global labour market and the willingness of those new workers to toil for a pittance has been one of the most fundamental shifts in the world economy. Particularly in high-cost developed economies, observers described a giant sucking sound as manufacturing jobs went to China.
On the other hand, the cost to western consumers of everything from televisions to T-shirts plummeted as China became the workshop of the world.
As China produced more and more of the world’s goods it developed a seemingly insatiable appetite for raw materials. By the mid-1990s it became a net importer of oil and other industrial commodities, driving the commodity super-cycle of the past decade.
But the trend towards an open market economy and integration into the global system has not been entirely smooth. Most economists believe China’s export-oriented, investment-intensive growth model is running out of steam and that the country stands at a crossroads.
Famed Chinese economist and free market advocate Wu Jinglian has said China must either launch bold new reforms to introduce a truly market-based economy, or possibly slip instead into a sordid form of crony capitalism.
In today’s China, it seems the cat is neither black nor white but a dirty shade of grey.
Jamil Anderlini