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Emancipation
“Reform and opening” started from the top with the seminal leadership transition from Mao to Deng. Deng Xiaoping heralded China’s boom in late 1978 when he called for experiments with “economic democracy” and “emancipation” from orthodox ideas. But the boom was not simply a top-down, state-orchestrated phenomenon. In fact, the biggest contribution of the state, especially in the first phase of growth, was to get out of the way. Farmers were liberated from collectives, sparking a wildfire of capitalism in the countryside. Urban markets and industry were freed to “grow out of the plan,” making profits on surplus production and creating powerful incentives for rapid growth. |
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Beijing Back Then Was Like PyongyangPeriod: Emancipation (1978-84)
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Click to expand This is not like 1979, and frankly Peking back then was like Pyongyang. I’m serious. If you were in Beijing back then, it didn’t go beyond where the second ring road is right now, for one, and nobody would talk to you because it was politically unacceptable to talk to foreigners. Well, it just wasn’t polite to talk to foreigners. So, it was very much like Pyongyang. It just came out of the ten years of the Cultural Revolution and they were nowhere. The country was bankrupt. There’s a great story in a book by a famous general about when Deng Xiaoping went to the UN in 1974 to address the UN and it was the first time anybody senior like that had ever gone out of the country. So, they had to pay for the trip and everybody ran around Beijing to the banks to try and find hard currency. They found $38,000. So, when I say that China was bankrupt in 1978-9, it was bankrupt. If you look at all the statistics books and so on, they go back to then and they don’t go before. There was nothing before that. So, they’ve come a long, long way and that’s because they’ve stepped back. Now, this place varies between grabbing things too tightly and letting things go too loosely. Now, the 1980s was clearly a time when they stepped back and a lot of things that were very interesting happened. The second thing that made this happen was a version of the first thing. That was, when the AFC happened, there was a policy adopted of zhuada fangxiao, “grab the big ones and let the others go.” So, for those provinces that had entrepreneurial capabilities like Jiansgu, Zhejiang, Guangdong, all of those SOEs at the provincial level or below were all spun off into private hands. We can argue about whether they’re really privatized or not, but at least they’re operated by private guys. Those are the big, big chunk of the guys that export to a lot of multinationals. Again, the state backed off and let the people do what they knew how to do. So, to me, the two biggest things around here that happened is that the state backed off. Now we’re seeing the state come back on again, so it’s not clear to me what the next few years are going to be like.
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