The Economic Miracle of Capitalism in China
China went from being an authoritarian, communist, and poor country to an authoritarian, capitalist nation with the greatest wealth in the world
Spanish – China is one of the most elusive mysteries for political theorists. Its regime went from being one of the most communist ones in the history of humanity to turning towards a capitalist economy, preserving the ideological principles of communism. The most surprising thing is that those who decided to turn China into a capitalist economy are avowed members of the Communist Party, Mao’s collaborators for decades.
Yes, a whole sea of ambiguities and ideological inconsistencies. A “great traitor,” Mao’s followers, said of Deng Xiaoping, a 1.52-meter tall man who opposed China’s entire communist establishment after Mao’s death in 1976 to push for a radical change in communist policies and transform China into the superpower it is today.
Mao Zedong seized power in China after overthrowing the Kuomintang and forcing them to take refuge in what we now know as Taiwan. The communist leader took control of the mainland in 1949 and announced the People’s Republic of China on 1st October of that year. In the first decade, Mao carried out a program of land distribution and industrialization with the help of the Soviet Union. In those early years, police stole land and imprisoned those who were considered “capitalists.”
Over the years, socialist policies expanded until the time came to implement the “Great Leap Forward,” a campaign of economic and social measures to achieve the long-awaited communism, which was launched in 1958, to transform China’s agrarian economy into an industrialized one. Something very similar to what Stalin did decades ago in Russia with slight modifications. Mao was stubborn and arrogant to imagine that Soviet recipes would produce positive results in China.
One of Mao’s main ideas was to create communes as “self-sufficient” economic units (Hugo Chavez often had this dream for Venezuela as well). The communist leader thought that through the collectivization of the economy and mass labor, Chinese steel production would surpass that of the European powers.
In 1958, the first commune was established in the province of Henan. It was the official start of the Great Leap Forward (the most prominent political and economic mistake in China’s history). Then the model was extended to the rest of the country, in most cases through violence. More than twenty thousand communes were created the first year with the idea of industrializing China.
This imposition of labor for an exclusive area (steel) led to the neglect of China’s rural countryside, thus losing large portions of land and crops, which soon led to an unprecedented famine. It is estimated that during only three years, that is, from 1958 to 1961, approximately forty million Chinese residents died from starvation and diseases associated with malnutrition. Historians of the time say that people crowded around the state granaries looking for food, but Mao never issued instructions to open them, as he had committed to pay the Soviet Union with these food supplies.
The Communist Party never accepted that there was a shortage of food, a generalized famine, or that people were dying. In fact, Mao blamed the peasants for hiding the food to boycott him.
After this tragedy, the Communist Party introduced the “Cultural Revolution” to recover the popularity they lost thanks to the Great Leap Forward that led to a genocide that could wipe out the population of an entire country like Venezuela or Peru. This revolution, also known as the “Great Proletarian Cultural Revolution,” began in 1966 and lasted for ten years until Mao’s death. It was nothing more than the radicalization of the ideological establishment of communism through an aggressive cult around Mao’s personality, and the authorization of local groups and others related to the revolution to “get rid” of those who opposed the fundamental principles of the party.
This led to a purge of high-ranking officials, the so-called “reformists.” These included Deng and Liu, whom the Maoists considered to be “right-wing and counter-revolutionaries,” as well as people deemed to be subversive, who were subjected to imprisonment, torture, confiscation of property, forced labor, and, in many cases, execution.
Later, Mao died, and China’s economy had still not taken off. The loyalties within the Communist Party started shifting. Although Mao would have chosen Hua Guoteng as his successor, eventually, Deng Xiaoping seized power from the shadows with the support of a broad party base. The “gang of four,” consisting of Jian Qing (Mao’s widow), Zhang Chunqiao, Yao Wenyuan, and Wang Hongwen, the key people responsible for the implementation of the Cultural Revolution, were arrested and expelled from the party for the crimes perpetrated, and the influence of Mao’s chosen representatives began to disappear.
During the early 1980s, Deng took over negotiations with British Prime Minister Margaret Thatcher to agree to return Hong Kong to Chinese rule. This, coupled with economic growth, made the country popular. With a clear path and almost unanimous support in the Communist Party, Xiaoping was in charge of implementing all the changes that years later would turn China into a superpower.
The first step was dissolving the communes, allowing entrepreneurs and private companies to enter the economic arena. Further, China once again accepted foreign investment. This so-called first phase, which occurred in the early years after Mao’s death when a conservative communist core was still in power, brought about the first changes, although at first, they did not influence the economy as drastically. The people of China had spent decades mired under a communist system that destroyed educational foundations. During Mao’s time, the information was considered subversive, implied a political risk, so the knowledge was defeated. During this time, China moved away from the West, world trade, and culture at large. Therefore, innovation was not so simple. There was no in-depth knowledge about administration, accounting processes, technology, diversification, production chains, or other necessities; the only economic force that began to snowball was that of the countryside because, despite certain restrictions on paper, the government did not encourage its officials to apply the law strictly.
By 1982, private agriculture was formalized and the measure was extended to the entire country after being applied in only some regions for a few months. Subsequently, private businesses began to emerge more firmly in the cities, where improvisation, success, and error found their own stability. The state monopoly in various areas of the economy quickly began to be dismantled, and there was exponential growth that the state had not foreseen. When the economy was freed of controls, initiatives that the government had never planned arose, and capitalism began to expand in China.
The liberation of the economy while maintaining the repressive communist qualities transformed China into an authoritarian capitalist state. Wealth was glorified again in official discourse, and over time, the economy began to grow in the various regions of the country.
Already in the 1990s, regional competition became a major driver of the national economy. With so many players and so much supply and demand, China quickly became an economic power with the highest average growth in the world. In 1992, the country implemented price reforms, thereby opening the way for the end of price control; protectionist measures and regulations were also removed, although certain public monopolies were maintained, such as banking and oil. In 1994 the tax reform was implemented, and an aggressive process of privatization of state enterprises began. Thus, in the last 40 years, China has recorded an annual growth rate of 9.6%, lifting more than 700 million of its citizens out of poverty.
In 2014, China became the nation with the highest GDP adjusted for purchasing power parity in the world, and it also became the largest exporter and importer of goods and the first industrial power.
However, it is interesting to note that despite the country’s significant economic progress, the People’s Republic of China ranked 86th in the latest measure of the Human Development Index published in September 2018. It ranks well below first world countries, and quite far from Hong Kong, China’s special administrative region that is in seventh place on this index. We can interpret this in many ways, starting with the fact that despite promoting measures of capitalist economies, the Communist Party continues to behave in an authoritarian way in China, applying various types of restrictions on its population and restricting the freedoms of its citizens.
Today, China continues to be ruled by a single party after 70 years. The Communist Party has managed to stand by the same autocratic measures of the previous century, but with an economic system completely different from that designed by Mao. Today the capitalist principles implemented by Xiaoping, who died in Beijing at the age of 92 on 19th February 1997, reign supreme. However, the police state designed by Mao persists. Thus, China went from being an authoritarian, communist and poor country to an authoritarian, capitalist nation with the greatest wealth in the world.