The Making of China’s Economic Reforms. Interview with Isabella Weber
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Do you think that China’s long history and consolidated culture played a role in the successful phase of economic reform? Would you argue, as some seem to suggest, that Confucianism played a role?
Isabella Weber: I think that the economic reform practices that emerged through the interaction of experimentation at the margins and empirical investigation in parts relied on reviving pre-revolutionary practices and in this regard traditional conceptions and governance institutions have been important. I show this in detail in my book as regards practices of price regulation. As regards the broader debate over the revival of Confucianism in China, it is important to ask why such a debate is happening now. And I think that there are deep reasons for this to happen, in the sense that the more than 200 years of almost exclusive Western economic, political and cultural dominance that followed the industrial revolution are coming to a close, and we see the signs of that in many spheres. In China this has created a new self-confidence that China is not anymore the colonized, or backward subordinate. This poses the question of what China is, where it comes from and how to make sense of China in relation to the West. I think this is the broad historical moment from which discussions about the role of Confucianism stems. These discussions are used in political ways often taking the form of propaganda, but there is also a genuine intellectual interest among scholars in trying to make sense of China’s Confucian heritage. Quite a different question is whether it is possible to understand China’s historical path, let’s say in the 20th century, as a result of its Confucian tradition. There is a lot of debate around this question, but I personally like to think that it would surely be absurd not to recognise the millennia of Chinese tradition of statecraft, bureaucracy, philosophy, even mathematics, encyclopaedic works and so on, while it would be equally misguided to see the 20th century just as a reaction to that tradition.
Can you give us an example of the process of mediation between Western economic ideas and Chinese socialism? How was the idea of a possible mediation between socialism and a gradual opening of markets achieved? How was this translated into actual policies?
Isabella Weber: I think there are two different questions here. The first one is about how Western economics becomes relevant to China in the late 70s and how it was integrated into the reform discourse. In the context of Socialist China, why bother with capitalist, bourgeoise economics? In this context the idea of making up lessons from capitalist development is decisive. This originates from an orthodox Marxist notion of economic development in terms of stages. If China has jumped the stage of capitalist development by moving from a feudal society dominated by foreign imperial powers to socialism, this means that China can learn from capitalist management techniques in order to make up lessons and move forward in history. This notion of making up lessons is very problematic in many ways, but it definitely was an important discursive element in the late 1970s and early 1980s. As a result of that, China really started to explore all sorts of foreign economic doctrines, from Milton Freedman to Western Marxists.
The second question is about the different ways in which Western economics has been used within China. There was a group of scholars who were inspired by the eastern European émigrés mentioned earlier who were invited to China by the World Bank. Those who in China were strongly influenced by this kind of economics were driven by a pursuit of a market economy as target model. So they posed questions such as: how can we establish equilibrium prices so that, to put it in simple terms, once we get equilibrium prices right we can let the market do its job? This was a very uncritical, in a certain sense naïve, embrace of Western neoclassical economics. On the other hand the economists who sought to contribute to economic reform by helping to design, surveying and interpreting experiments were also extremely interested in all sorts of Western economics and social science research techniques. But they saw this more as a tool to understand concrete problems and solve concrete challenges within reforms, rather than as a paradigm that would provide a theoretically derived target model. These two groups of economists were engaged in a fierce debate in the 1980s not over whether or not but over how to reform China’s economy. The first group proposed a package reform that would have had important similarities with shock therapy. The second group strongly opposed such a reform in one go arguing that this was a dangerous move that would have undermined the success of reform itself. While this is a story of the 1980s, I think that it is still relevant today. When it is argued that China’s reforms are unfinished, this suggests that they are unfinished in relation to some target model, typically defined based on Western capitalism as the idealtype. By contrast, if reform is thought of as a dynamic, open and continuous process, we can understand that, while it is not without direction, it can never be finished. For example, with questions like the financial sector reform, I would say that this confrontation is still going on, and similarly for the question of state-owned enterprise reform, where you have the question of whether you should model a state-owned enterprise such as to function as if it was a capitalist private stock market listed company, or whether a new type of enterprise should be created that does take some elements from a private capitalist, stock-market listed multinational company, but nevertheless evolves in an experimentalist way towards a new type of institution.
Would you say that the mediation between a neoliberal agenda and Chinese socialism has turned out to be a success story? How and why?
Isabella Weber: As I already hinted at in my previous answer, the struggle over neoliberal reforms is not over. An important aspect of the trade war is to force China to open sectors of its economy that have so far been shielded from foreign access. The ongoing dispute around the question of whether China is a market economy or not based on the arguably neoliberal standards of the WTO and EU also shows that China’s economic governance has clearly not been fully neoliberalised. As such China presents a challenge to the prevailing neoliberal system of global governance. Yet, whether China presents a socialist alternative is an altogether different question. It strikes me that even though the term socialism is experiencing a revival of some sort there is little consensus what socialism means in the 21st century and I am afraid that China’s present system does not fill that gap.
At the same time, there is little doubt that China has been successful in creating a set of institutions different from the Washington Consensus that have proven superior in delivering economic growth. In this regard the comparison with Russia is striking. Russia implemented the neoliberal policy prescription of shock therapy. According to the Piketty database, in 2015 the bottom 99% of Russians had a lower per adult income in real USD terms than in 1990. In comparison, the per adult income of the 99% had increased more than fourfold in China in the same period. As I argue in my chapter of the SAGE Handbook of Neoliberalims (2018), China has thoroughly embraced market competition with all the social problems that this brings including very high levels of inequality, but has escaped shock therapy as the purist form of neoliberalisation. This escape from shock therapy was critical for the unprecedented levels of growth we have observed over the last decades.