China and the pursuit of happiness
Under Mao Zedong China had a communist system so rigid it made the Soviet Union seem positively capitalist by comparison. Since then, the Chinese government allowed farmers to control their own plots of land, allowed private rural enterprises, then welcomed $100s of billions in private foreign investment, then allowed private urban entrepreneurs, then privatized urban dwellings, then privatized many state-owned enterprises, and then set up two stock markets. That’s a lot of capitalism. Yet it’s also true that the Chinese state still dominates many parts of the economy, owns all the land, and has lots of controls that make it far less market-oriented than a place like Hong Kong.
Let’s suppose neoliberalism works. What should have happened as a result of all those Chinese reforms. Here are three choices:
1. China stays as poor (in relative terms) as in 1976. Comparable to central Africa, or Bangladesh.
2. China grows rapidly, but even in 2010 remains much poorer than Mexico.
3. China grows at explosive rates, and became a fully-developed country by 2010.
Which would be the outcome that would vindicate neoliberalism? And which would refute it? I could imagine reasonable people saying #2 would vindicate the neoliberal reforms. That’s what I’d say, and that’s what happened. I could imagine someone hostile to capitalism insisting that only #3 would count as success. But I must admit that until I read this book review from John Gray, I could never have imagined someone arguing that only outcome #1 would vindicate neoliberalism. At least that’s what I think he is saying. See what you think:
Disdainful or ignorant of the past, Ridley is uninterested in the forces that shape events. He writes hundreds of pages about the wealth-increasing virtues of free markets, but allots post-Mao China only a few lines. This brevity is symptomatic, as China falsifies Ridley’s central thesis; the largest burst of continuous economic growth in history has occurred without the benefit of free markets. Wealth has been created as never before, not as a result of evolutionary change, but as a product of revolution and dictatorship.
Am I misreading Gray, or is he actually saying that all that growth that followed Mao’s death is evidence that market reforms don’t work? If I met him I’d love to ask him what sort of outcome for China would count as success for their neoliberal reforms. I’ve noticed that when people have a strong aversion to a particular ideology, the answer is often a null set. Is it just me, or do you guys think that if China was still as poor as sub-Saharan Africa, Gray would be using that fact as evidence neoliberal reforms don’t work?
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