China and Industrial Policy

by on July 17, 2007 at 7:21 am in Economics, History | Permalink

Brad DeLong’s post on China and industrial policy combines a deep knowledge of history, politics and economics.  It’s a superb post, one of Brad’s best ever so do read the whole thing then come back here for some minor quibbles.

Brad goes over the top for Deng Xiaoping ("quite possibly the greatest human hero of the twentieth century.")  Without denying Deng’s importance, I would say that China’s great leap forward came with the death of Mao Zedong.   Once Mao – quite possibly the greatest human killer of the twentieth century – was dead, China could almost not help but improve.

Second, the Chinese people, especially the peasant farmers, deserve a huge amount of credit.  Here’s a couple of paragraphs I wrote recently:

The Great Leap Forward was a great leap backward – agricultural land was less productive in 1978 than it had been in 1949 when the communists took over.  In 1978, however, farmers in the village of Xiaogang held a secret meeting.  The farmers agreed to divide the communal land and assign it to individuals – each farmer had to produce a quota for the government but anything he or she produced in excess of the quota they would keep.  The agreement violated government policy and as a result the farmers also pledged that if any of them were to be jailed the others would raise their children.

The change from collective property rights to something closer to private property rights had an immediate effect, investment, work effort and productivity increased.  “You can’t be lazy when you work for your family and yourself,” said one of the farmers.

Word of the secret agreement leaked out and local bureaucrats cut off Xiaogang from fertilizer, seeds and pesticides.  But amazingly, before Xiaogang could be stopped, farmers in other villages also began to abandon collective property.

Deng and others in the central leadership are to be credited with recognizing a good thing when they saw it but it was the farmers in villages like Xiaogang that began China’s second revolution.

Addendum: For the story of Xiaogang I draw on John McMillan’s very good book, Reinventing the Bazaar.

Christopher July 17, 2007 at 8:50 am

To quibble over the relative greatness of Deng and instead credit the timing (death of Mao) is silly, as the same argument could be made for every great accomplishment of man. Clearly it took the death of Mao to provide the opportunity for someone like Deng to revolutionize China through pragmatic reform, but he still deserves much credit for this. The last centuries are littered with the corpses of government leaders who tried to revolutionize countries through completing destroying old institutions and constructing new (generally weak) institutions in their place. Deng’s post-Mao China is a promising counterpoint to this trend, and toeing the Communist/Market economy line for decades to lift hundreds of millions out of poverty certainly does put him up there as far as individuals go.

Matt July 17, 2007 at 9:12 am

I’d recently read the interesting claim (I can’t recall where so can’t give credit, I’m sorry to say) that what really motivated Deng Xiaoping and his reforms was not that he was _less_ of a Marxist than Mao but rather that he was a _much more orthodox_ Marxist, and came to believe that the idea that communism could be achieved without a period of massive capitalist growth, change, and accumulation (with peasant revolt taking its place) could not, contra Mao, work. In this, of course, he fit with Marx and with early Russian Marxists who actually pushed not for socialism or communism in Russia but for the development of Capitalism as a necessary stage, only to be pushed to the side by Lenin’s heretical “vangard party” idea. The claim went on that this is by far the dominant view among Chinese communist party leaders now as well. I have no idea if it’s true but found it quite interesting. (I think I might have read it in _Dissent_ from an issue or two ago but don’t recall for sure.)

Christopher July 17, 2007 at 9:23 am

Alex,

My point is that you are demeaning the importance of the individual — Deng — because of the great importance of circumstance. If we were to assess the importance of Deng historically, we would be better suited to theorize what the average party leader would do in his position versus what Deng did.

Deng is impressive in the same way that George Washington and Alexander Hamilton are impressive. THe other individuals who would have likely taken their “spot” in history would have lacked their unique skillset which proved unbelievably useful and beneficial — Washington’s ability to be a leader and lay down his power procedurally twice, and ability to stop military coups (taking for granted his decision to not play a part). Hamilton’s opposition to the Jefferson/Madison faction and creation of the economic institutions that would power US growth for the next centuries as well as do more than anything else to tie the fates of the colonies together.

If you want to argue that others of the CCP were capable and prepared to do what Deng did, and he just happened to be at the front of the line, I look forward to hearing your evidence, it would certainly be interesting. Otherwise, if we are to compare Deng to other great men of the 20th century, we should not demean his significance by attributing his accomplishments to fortunate timing. If we were to do so, surely there would be no great man left standing.

ponmel July 17, 2007 at 10:08 am

Chairman Mao-the greatest humanist world ever saw.
Deng-the greatest Killer
Think about Tianamen Squire.

caveat bettor July 17, 2007 at 10:45 am

ponmel, I don’t understand your point about Tiananmen Square. While it clearly demonstrated the Deng government’s fear of freedom, it doesn’t seem to compare with the 38 million deaths under Mao, which R.J. Rummel estimates.

Klug July 17, 2007 at 11:15 am

I spit on them both.

eddie July 17, 2007 at 2:11 pm

If Mao was able to obtain unlimited personal authority over a billion people through his skillful political acumen, building a power structure that was unswervingly loyal to him while routinely purging anyone that might be a threat to his own position, wielding the power of an unquestioned, unrivaled totalitarian dictator all so that he could live the life of a god on earth – then Deng or any other inheritor of that power should have been able to use it to dismantle the machinery of oppression and create a nation of free people.

But he didn’t. Of course not. What absolute dictator ever would?

Deng is only a hero to DeLong because he wasn’t the megalomaniac that Mao was. He didn’t think of himself as a god, and thus didn’t feel like murdering hundreds of millions of his subjects just because it suited his whims. Deng was merely your penny-ante run-of-the-mill absolute dictator; a piker compared to the likes of Mao, Hitler, and Stalin. A very down-to-earth tyrant. An eminently practical despotic thug. The kind who thinks it’s more fun to rule over a country enjoying a growth in prosperity than it is to conquer more land and slaughter more people.

The key point, of course, is that Deng still wanted to rule over the country. Think of Mao and Deng as playing Sid Meier’s Civilization, with two very different playing styles. Deng was playing to get a high score. Mao was just having fun building monuments and killing his own people. But even Deng wouldn’t have had much fun if his people could have voted him out and made him stop playing. Of course, Mao and Deng were playing Civilization for real.

DeLong excuses Deng for holding on to power instead of instituting freedom because, well, those poor benighted Chinese people just weren’t ready for freedom. They were better off under Deng’s wise leadership. If they had been allowed to speak freely, vote for their leaders, set their own prices and wages, own their own property, decide where to live, practice the religions of their choosing, and read whatever books they wanted to… why, they probably would never have had the amazing economic growth we’ve seen to date! Instead of investing in just the right mix of agriculture and industry at just the right time as Deng directed and as DeLong – coincidentally – agrees was optimal, a billion people probably would have burned their crops, smashed their factories, and sold their children to buy opium. It’s just a short hop from there to total anarchy and ruin, like Somalia.

Thank god for Deng, the hero!

DeLong excuses Deng’s iron grip on the hearts, minds, thoughts, actions, jobs, prices, trade, books, travel, birth, death, retirement, schooling, clothing, fashion, entertainment, culture, and worship of a billion people because in his heart of hearts he wants Deng’s job. DeLong complains about being “ruled by these idiots” not because he has any problem with being ruled but because the ones doing it are, in his opinion, idiots. Deng is a hero because he wasn’t an idiot, and if only DeLong could become dictator then he wouldn’t be an idiot either. And if that’s not possible, he’ll at least settle for being ruled by someone who is at least wise enough to listen to his advice.

TGGP July 17, 2007 at 2:54 pm

I guess Washington wasn’t too bad, but if I believed in hell I would be sure Hamilton is burning in it!

ponmel, you are quite possibly the most idiotic commenter that has appeared ’round these parts. Calling Mao the “greatest” anything other than killer is just laughable. And you want to bring up Tianamen Square to make Deng look worse in comparison? Mao killed so many more people he makes Deng’s actions in that incident look angelic.

happyjuggler0, have you read The Ghandi Nobody Knows? I think the British Empire did a pretty good job of running their territories. It was only somewhat recently that India turned away from socialism and really started moving forward.

tc101010 July 17, 2007 at 3:00 pm

You have no idea what you’re talking about. I stop reading your post when you compare Mao and Deng to playing Civilization. How old are you anyway?

Nathan Benedict July 17, 2007 at 3:17 pm

“From a social perspective I’d have to nominate Ghandi, but economically who was better than Deng? Reagan? Thatcher? Milton Friedman? Hayek?”

Norman Borlaug.
Sam Walton, Bill Gates, Malcom McLean and probably a handful of others are probably well above all the people you mention, but still orders of magnitude behind Borlaug.

Christopher July 17, 2007 at 3:51 pm

Eddie,

Could you please come up with a list of political leaders who actually introduced immediate, sweeping revolutionary change that liberalized their state? I don’t mean that as a cutesy statement hinting at the impossibility of such a thing, but I would be interested in your findings.

The “successful” revolutionaries I have seen have set back their country decades, and I would hypothesize that the only cases of successful sweeping, revolutionary political reform were really just formal acknowledgments of economic and social developments that had already occurred.

Anyhow, my point is that China had numerous advantages over countries like the former Soviet Union, but I do think that glasnost and the immediate liberalization of the SU was a much worse policy than the doi moi of Vietnam and the gradualism of China. Furthermore, I think the folly of the SU’s policy reflects a greater weakness in the argument for immediate and sweeping liberalization.

I have no idea whether Deng wanted to empower his Chinese brothers and sisters or whether he wanted to take over the world, but I do know that his balancing of competing interests that a) supported Mao/the communist utopia he represented, b) supported economic growth, c) supported local autonomy led to an improvement in quality of life unmatched anywhere else in the world.

Independent George July 17, 2007 at 5:40 pm

I can actually think of another Chinese leader who might qualify as one of the great heroes of the 20th century: Lee Kuan Yew.

Are his accomplishments any less astonishing than Deng’s? And as far as benevolent despots go, Singapore is far more benevolent – and far less despotic – than China ever was.

eddie July 17, 2007 at 7:32 pm

Christopher: Could you please come up with a list of political leaders who actually introduced immediate, sweeping revolutionary change that liberalized their state?

Egon Krenz did nothing more than allow East Germans to leave the country if they wished. Less than a year later his former subjects were citizens of a free and democratic country.

Nicolae Ceaucescu did his subjects the great service of getting shot. Within three years Romania had multiparty elections, within seven years Ceaucescu’s successor had been peacefully voted out of office, and as early as 2002 Freedom House ranked Romania as “free”.

How many years has gradualism been at work in China? How many more years do you think the Chinese people will have to wait?

I suppose that Germany and Romania fall under your thesis of “formal acknowledgments of economic and social developments that had already occurred”. If so, I can’t really dispute it. Still, I think you give too much deference to the various power-holding factions in China and not enough credence to the simple truth that Deng was a despot and that China was a despotic state under Deng because Deng wanted it that way. Perhaps the autocratic structure Mao had produced was incapable of producing anything other than another autocrat. Perhaps there was no way an actual reformer could have gained power. That doesn’t make Deng a good guy, just one of the many bad guys standing around trying to grab the throne. For all we know, he wasn’t even the least bad of the lot. If Deng is a hero because he instituted more market reforms than Mao did (and killed fewer people), why wouldn’t he also be a villain because he didn’t do as much as Zhao Ziyang would have?

I understand your main argument is that immediate liberalization leads to the crony capitalism of Russia while gradualism leads to prosperity in China. I have a hard time accepting it. If you are being hogtied and beaten, how gradually should your attacker stop beating you and untie you? What’s the ideal rate of cessation of beating and untying of rope to produce the maximal welfare benefit? In the case of Russia, perhaps there’s something other than liberalization that has caused their misery; in the case of China, perhaps there’s something other than control of the people’s lives by the Communist Party that has caused their prosperity. Can crony capitalism be that much worse than crony communism?

eet July 17, 2007 at 8:52 pm

It’s apparent that you only read popular books, but not academic books. Your knowledge is horrible.

Yan Li July 17, 2007 at 10:43 pm

Delong has got one fact wrong:
In the Mao era, China was devastatingly poor, but corruption was not to blame. Corruption was rampant in the pre-Mao era, and has again grown into a serious issue in the post-Mao era. The very low level of corruption during the Mao era was likely due to: 1) ideology; 2) the shortage of rents when the economy was locked in a low-productivity equilibrium; and 3) lack of means to either hide or consume a large sum of money without being detected – the economy was completely closed; and everyone was so poor that any bit of rich would show.

cure July 18, 2007 at 12:03 am

For all of Deng’s economic successes, his role in Tiananmen was outrageous. It wasn’t that we was pressured into action, as far as we know. A number of powerful figures supported the freedoms the students demanded, particularly the aforementioned Zhao Ziyang.

I’m with the commentator who takes Lee Kuan Yew as my despotic, capitalist Asian leader of choice, with Rhee running a close second.

Yan Li July 18, 2007 at 6:27 am

Culturally, the Chinese value stability (order) more than liberty (freedom), which suggests that on the one hand, the government could tolerate or accommodate anything as long as it does not threaten the stability of its regime; on the other, it could act up “irrationally,” “unreasonably,” or “unfairly” toward relatively minor threats of stability. A useful but certainly not politically correct analogy would be to compare the CCO as the first wife of the country, as long as she feels her position is secure, she could tolerate other women in her husband’s life, or even goes out picking a concubine for him. The Chinese system is like a rice-cooker; and much cooking is done quietly inside.

Russ Nelson July 18, 2007 at 8:58 am

eddie, you put too much faith in democracy.

eddie July 18, 2007 at 9:48 am

Russ (Hi, Russ!), certainly democracies can be very illiberal. Considering that Libertopia has yet to be born, we can say that every democracy is illiberal. But surely even replacing iron rule by one (Mao) or a few (the CCP leadership) with iron rule by the majority is progress, no? It sucks to live in the US with its drug laws and tariffs, and it would suck even more to live in Turkey (Freedom House ranking: “Partly Free”), but I’d take them in a heartbeat over China. Wouldn’t you?

Christopher July 18, 2007 at 10:31 am

Eddie, I am afraid your characterization of democracy suffers from selection bias. The examples where democracy has existed for any significant length of time are few, and if you were truly to look at the typical case of ‘rule of the masses’ you would find it to be chaotic, almost wholly illiberal, and prone to a more fierce despotism than common in monarchies or the like.

Obviously (at least in my eyes), democracy (or rather, a republic) is better suited to protect individual rights than an autocracy over a long-period of time. But no, the ‘iron rule of the majority’ is not good. In well-functioning democracies/republics, individual actors retain separate bases of independent power that allows them to limit the will of the masses. The fewer such obstacles to the action of the masses, the more irresponsible and illiberal the democracy. This is a simplification of a vastly complicated issue, but no, replacing the iron rule of one or the few iwth the iron rule of the masses is not necessarily good.

Or put another way, I would rather erode the rule of the few so that they are forced to be more responsive to needs of the many over time rather than replace the rule of the few with the absolute rule of the many. Again, gradualist England vs. revolutionary France.

Sergey Kurdakov July 18, 2007 at 4:56 pm

DeLong makes few important mistakes.

First China in Mao time has developed quite fast

http://www.chinability.com/GDP.htm

second – Deng allowed peasants to own land partly by the fact that they started to seize the land due to overpopulation and low nutrition. Instead of punishing he decided to allow. the next move- to allow free zones were due to experience to buy entire foreign industrial plants just after Mao death. Chinese realized they will go bankrupt if they keep this way. So after land reform to allow someone to invest was a logical step when it is known – there are no alternatives.

so – bad facts – bad conclusions.

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