Explaining China’s massive economic growth and transformation over the past four decades is probably at the top of the list of things a China expert is supposed to be able to do. But without a thorough grounding in a particular discipline such as economics, history or political science, how do we approach these large questions with important normative implications for future action?
In the process of studying an area as an outsider, it is all too easy to focus on the differences, the apparent uniqueness of the “other.” It is common to hear that China is fundamentally different from “the West,” so different rules must be assumed to apply. So when asking questions, such as “what was the cause of China’s rapid growth in wealth over the past four decades?” it is tempting to look for answers in something apparently unique to China’s experience.
Another possibility is that studying China reveals the validity of more general principles. In this sense, it lends cultural credibility to ostensibly universal ideas. This has been the experience of many liberal thinkers; both in China and abroad. Not only do they claim that a liberal program would be best for China’s future, they also hold that the basic principles have been formulated by great thinkers of Chinese civilization, and that far from there being some unique “China Model” that explains her recent growth, it mainly came about as a result of increased space for individual freedom in society. The most important ideas of liberalism for this story is the respect for private property rights, and the superiority of markets over central planning for allocating scarce resources and harnessing specialised knowledge in society.
Are most students of China familiar with this line of reasoning? I don’t know, so here is a brief overview based on the work of a few notable writers.
CHINA’S GROWTH - “a product of human action but not human design”
When people think about China, images of a strong central government probably come to mind. Faced with statements by media outlets and the World Bank, such as “Since China began to open up and reform its economy in 1978, GDP growth has averaged almost 10 percent a year, and more than 850 million people have been lifted out of poverty” it is understandable, even imperative, that China experts try to understand how this came about - and maybe of more importance politically, who is responsible. A common answer is that it is the state, or the Chinese Communist Party, which, through wise industrial policy and poverty alleviation programs, is responsible for what is, we must all agree, some of the best news in history. This gives us a clear agent of change on which to focus. Even the phrasing “lifted out of poverty” implies a separation between those in poverty and those doing the lifting. Since it is an observable fact that this growth in wealth happened under the rule of the CCP, who were not too modest to take credit for the developments, it is to be expected that one might focus on the particularities of the so-called “China Model” as the causal factors in bringing about rapid economic growth - a strong central government, wise industrial policy and dominating state-owned enterprises. But what if this were not the case?
In How China Became Capitalist economists Ning Wang and Ronald Coase argue that China’s rapid economic growth came about largely as a result of “marginal revolutions” at the periphery of the state-run economy. Rather than being the result of targeted central government policy, the successes of private farming and commercial activity were attributable to local grassroots initiatives first springing up in areas where the state-economy was weak. These activities were first allowed with several restrictions in 1979 (some profits were permitted, but employers could only hire up to seven employees) and weren’t equally recognized alongside the state-economy until 1992. The government was able to incorporate these unexpected developments due to a pragmatic shift in ideas. As Deng Xiaoping said: “Planning and market forces are both means of controlling economic activity. The essence of socialism is liberation and development of the productive forces, elimination of exploitation and polarization, and the ultimate achievement of prosperity for all.” This slight shift gave private individuals enough space to take their fate into their own hands. Wang and Coase write:
“Still rallied under the ideological banner of socialism, they [the CCP] tried out different ways of achieving its practical ends. However, by the end of the twentieth century, instead of celebrating itself as a “great, modern, socialist power” resting on public ownership and state planning, as intended in the 1978 communique, China found itself with a vibrant economy awash with private entrepreneurship and market forces. This is the most unexpected aspect of the Chinese economic transformation. China became capitalist while it was trying to modernize socialism. The story of China is the quintessence of what Adam Ferguson called the “products of human action but not human design”. A Chinese proverb puts it more poetically: “flowers planted on purpose do not blossom; the willows no one cared for have grown into big trees offering ample shade.”
According to this understanding of China’s development, the defining features of the China Model were more of a hindrance than an aid to economic growth; it’s a question of discerning “despite of” from “because of.” As the state was forced to pull back from central planning, ordinary people laid millions of localised plans. In this view, rather than say 850 million Chinese were “lifted out of poverty,” it would be more accurate to say they “raised themselves” out of poverty - by their proverbial bootstraps, if you will.
LIBERALISM - with Chinese Characteristics?
There are many advocates of this view in China, but insofar as the tendency towards individual liberty is considered a Western idea, they find themselves facing an uphill battle. The pride of Chinese civilization (and the ideological legacy of socialism) has apparently made it necessary to rebrand many ideas - hence China’s particular form of capitalism with a large degree of state intervention is called “Socialism with Chinese Characteristics.” The apparent ease at which many people accept institutions or ideas based on the degree to which they are perceived to be “native” suggests that formulating new arguments for good ideas is needed.
One person attempting to do this is the economist and author, Zhang Weiying 张维迎. In his book Ideas for China’s Future, he speaks to a Chinese audience using examples and references from Chinese history and culture to argue for the desirability of liberal ideas - most importantly, the need for a free market of ideas:
“In its own history, the Chinese were most innovative in the Spring and Autumn period and Song dynasty. These two time periods were the most free periods in China’s history. The first emperor of Qin’s Burn Books and Bury Scholars Campaign, the emperor Wu of Han’s policy of dismissing other schools of thought besides Confucianism, and the Qing dynasty’s literary inquisition are all examples of interventions into and violation of the market of ideas, and are related to the long term stagnation of Chinese society.”
Zhang relates debates on the difference between legislative law and natural law to the Chinese concepts of wangfa 王法 and tianli 天理, arguing that Confucian “ritual law” embodies the spirit of natural law. In addition, he advocates a shift to a “rights-based” rather than a utilitarian system of ethics. Quoting Daoists and Confucians, he also claims that several Chinese thinkers have previously arrived at similar conclusions regarding the functions of a market economy as the classical liberal guru, Nobel laureate Friedrich Hayek:
“In Hayek’s view, the market is fundamentally a cognitive system; a process of producing and transmitting information. Through prices and entrepreneurship, the market transmits dispersed knowledge to many separate decision makers. They can thereby coordinate their actions and achieve an efficient allocation of scarce resources that have alternative uses, all without being aware of each other’s priorities or having an overall plan for the economy as a whole. The claim that a market system is more efficient than centralised planning is based on a universal claim about the limits of human cognition. Setting aside the question of people’s natural degree of concern for self-interest or altruism, humanity’s ignorance is sufficient in explaining the inevitable failure of central planning. In modern times, this has been expressed most famously by an Austrian economist, but similar insights were reached more than 2000 years ago in China as well.”
For instance, Laozi 老子 may be considered the world’s first laissez-faire theorist. He argued that government, with its "laws and regulations more numerous than the hairs of an ox," was a vicious oppressor of the individual, and "more to be feared than fierce tigers." Discerning what modern political economists would call the systemic effects of government intervention, Laozi came to the conclusion that "The more artificial taboos and restrictions there are in the world, the more the people are impoverished — The more that laws and regulations are given prominence, the more thieves and robbers there will be." And in another passage "Therefore, the Sage says: I take no action yet the people transform themselves, I favour quiescence and the people right themselves, I take no action and the people enrich themselves—" For Laozi “inaction” - wuwei无为 - was the ultimate ideal of governance.
Another star of the Chinese cannon who apparently appreciated the mechanisms of private enterprise was the Han Dynasty Grand Historian, Sima Qian 司马迁. Through his observations and historical work, he saw that specialization and the division of labour in the market produced goods and services in an orderly fashion:
“Each man has only to be left to utilize his own abilities and exert his strength to obtain what he wishes - When each person works away at his own occupation and delights in his own business, then like water flowing downward, goods will naturally flow ceaselessly day and night without being summoned, and the people will produce commodities without having been asked.”
Today, the idea of a spontaneous, mutually beneficent order emerging from individuals engaging in trade based on their own perceived self-interest is more commonly associated with Hayek’s “spontaneous order” and Adam Smith’s “invisible hand” of the market, not with Sima Qian. And the prescription of limited government is likewise associated with the intellectual tradition of the West, not of China.
This is of course not sufficient evidence in itself that these ideas have a distinctly Chinese origin or that they are necessarily “good” ideas, but hopefully it can help to weaken the cognitive link many people have, equating “liberal” with “Western.” In the end, it all comes down to what one means by these terms, so an accurate understanding of specific ideas and the cultural context in which they are discussed is even more important for those of us who are expected to comment on developments in non-Western countries.
DIVERSE SOURCES FOR UNIVERSAL IDEAS – Wuwei or the highway
So far, there has been no reference to particular types of political systems, only a focus on the inherent dangers of government planning, regardless of whether it’s a democracy, monarchy or one-party dictatorship. Surely there are people in China who want some form of democratic political system, and that might well be the best option, but one cannot claim that electoral democracy was the cause of the positive changes in China over the past 40 years. What one can argue, however, is that the “liberal” part of liberal democracy, that is to say, the freedom of individuals from arbitrary government intervention, was crucial. What is more, one can make a case that there is precedent for liberal policies in important parts of Chinese history. The liberal prescription of limited government will in this view not necessarily make China more similar to the West but will rather allow more freedom for that which is uniquely Chinese to manifest itself through the innumerable actions and plans of individual Chinese people. As Wang and Coase write: “The Chinese market economy will continue to develop with its own characteristics, integrating its rich traditions and the diversity of the modern world. After all, capitalism is not an end state, but an open-ended evolutionary process of collective learning and self-transformation.”
Terms like capitalism and liberalism come with a lot of baggage, and what associations one has to them is often determined by a particular ideological viewpoint. Regardless of where you stand, I would like to invite you to pay attention to thinkers, such as Zhang Weiying and Ronald Coase, who suggest alternative ways of interpreting China’s growth and argue for the universality of some version of Adam Smith’s “obvious and simple system of natural liberty,” without viewing this as China necessarily becoming “more like the West.” Is it not intriguing for the common philosophical heritage of humanity that we can find parallels in Laozi? Who knows, maybe future historians will reference the Chinese system of wuwei to describe a classical liberal world order.
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Magnus Bjerke is a Master student at the Department of Culture Studies and Oriental Languages, University of Oslo.
Ronald Coase and Ning Wang, How China Became Capitalist, (Palgrave Macmillan, 2012), 116.
Ronald Coase and Ning Wang, How China Became Capitalist, (Palgrave Macmillan, 2012), 154.
Zhang Weiying, Ideas for China’s Future, (Palgrave Macmillan, 2020), 4768. Kindle.
Zhang Weiying, Ideas for China’s Future, (Palgrave Macmillan, 2020), 1961, 4366. Kindle.
Zhang Weiying, Ideas for China’s Future, (Palgrave Macmillan, 2020), 2560. Kindle.
Murray N. Rothbard, Austrian Perspective on the History of Economic Thought, Vol 1, (Edward Elgar Publishing, 1995), 685. Kindle.
Murray N. Rothbard, Austrian Perspective on the History of Economic Thought, Vol 1, (Edward Elgar Publishing, 1995), 755. Kindle.
Ronald Coase and Ning Wang, How China Became Capitalist, (Palgrave Macmillan, 2012), 202.