Socialism with Chinese characteristics for the young person

Several years ago, Chinese state’s People’s Publishing House introduced  English translation of excerpts from Xi Jinping’s speeches and, in a few cases, from his writings under the title of “Anecdotes and sayings of Xi Jinping”. The original was published in Chinese in 2017. The link to the book is available here. I could not find it on Amazon though. I am unsure if it is available in the United States. I recently bought a paper-copy in Belgrade and read it in Serbian translation made from the English translation. Thus one has to take into account that the text has gone through a number of language metamorphoses.

            Some may compare the book of Xi’s “anecdotes and sayings” to the famous Little Red Book. There are similarities in the sense that both publications aim to promote the way of thinking of the leaders, and that Xi has recently began to enjoy somewhat of a cult of personality reminiscent of the one that enveloped Mao from the Cultural Revolution to his death. There are also differences. The Little Red Book was a collection of relatively short excerpts from Mao’s writings. The current Xi’s volume is a selection of longer (on average page-long) pieces from Xi’s speeches, each followed by a more detailed interpretation written by the editors of Renmin Ribao (People’s Daily). Since Xi’s “anecdotes” draw very heavily on Chinese history and since the level of historical detail to which Xi refers is unlikely to be known to most non-Chinese readers (and I would guess to many Chinese too), interpretations are absolutely indispensable. I wish they were  clearer and less repetitive of Xi’s own sayings.

There is another important difference between Mao’s and Xi’s books. Mao belonged to the generation of leaders like Lenin, Stalin and Churchill who were writing their own texts (and, in Mao’s case, poems as well). So we could be sure that whatever was published was indeed written by these old-fashioned leaders. Leaders nowadays rely on ghost-writers. This is especially the case when we deal with speeches that provide most of the text in this book. We cannot be sure if this is something that Xi has really said, or that his speechwriters have written and he just approved. This is not a small issue. Why? Because the book is replete with examples from the Chinese history and literature, Marxist literature, and finally world literature and history. Xi is, by his own admission or claim, a voracious reader, and has been so since a very young age (“What do I do with my leisure time? Of course, most of my time is spent working. The only hobby that I have retained [from my youth] is reading; it has become my way of life. It strengthens my spirits, gives me inspiration, reinforces my morality.”). But did anyone who was climbing the steps of power in China (or elsewhere) really have enough time to absorb all these different schools of thought? We do not know. But the reader may wonder.

The book is composed of two parts. The first is directed at the Chinese reader, discusses Chinese (but also to a certain extent global) themes, and uses mostly the examples, projected as metaphors, from the millennial Chinese history, the cases of extraordinary individuals from the Maoist times, and even some from the contemporary period of construction of “socialism with Chinese characteristics.”  The second (much less interesting) part is a compilation of various speeches given by Xi at the occasions of international meetings (conversations with Obama figure there two times, but there is no Putin). The second part is supposed to showcase Chinese benevolent interaction with the rest of the world, but its programmatic character makes it much less interesting. The only exception to this is where Xi discusses soccer of which he is genuinely fond, and where his opinions are interesting.

The undisputable emphasis in the “Chinese” part of the book is on the matters of governance. By giving numerous examples from Chinese history of rulers and their aides who cared about people’s welfare, lived modestly (“One should be the first when taking care of state affairs, the last when taking care of personal affairs”), strove to improve themselves morally and educationally, Xi proposes a theory of governance that is based on virtue of rulers and results achieved, not procedure. While Western theories emphasize the procedural aspect (how is one selected to be the ruler, is it by a well-established democratic process or not), Xi’s concern is with the results. The tacit premise is not to discuss how one is selected to rule—and this applies not only to top positions, but to all positions from the lowest county level to the head of CPC—but how successful they are in fulfilling their functions.  The success is defined in terms of improvement in the well-being and happiness of people whom they govern.

The good rule itself, as in a story from ancient China told by Xi, need not be structurally the same. Three different rulers, Xi writes, imposed the just rule by different mechanisms: one by his attention to detail and by controlling all government expenses item by item; another by his good nature; and the third by severe punishments. Corruption was eradicated under each of the three rulers but for a different reason: under the first, people could not cheat; under the second, they felt ashamed to cheat; under the third, they were punished if they cheated.  Xi who told that story in 2004 does not reveal which of the three ways he prefers.

In all cases of a good rule, there is the emphasis on individual characteristics of rulers. As editors mention, if many virtuous and conscientious rulers and government officials existed in the feudal China, would not the more ideologically-conscious and people-oriented Communists be even more likely to care about their co-citizens? What is required, they write, is “morality inside and virtue outside”; what is sought is the rule of virtue, and by virtue.  

But how to bring about such rule? Obviously, by having moral rulers. Hence--the reader begins to realize--Xi’s ideological campaign: if Confucian-cum-Communist  ideology is disregarded and everything is simply esteemed in terms of money and economic success, there cannot be a moral and virtuous rule. To quote Confucius, as the editors do, “if one allows oneself to follow profit in one’s behavior, there will be many with cause for complain.” There could be a fair procedural selection of rulers, say, by election, but not necessarily a virtuous rule. The latter can be assured only through education of rulers.

The key question, unanswered in the book, then becomes: is it possible to achieve an educational and moral “rejuvenation” under the current “normal” conditions of capitalism where money-making is held by the majority of the population to be the highest objective revealing also one’s individual worth? Can the examples brought up from the revolutionary era, from Yen’an forum, early Mao etc. be relevant for a new generation raised in the world of relentless commercialization? One is allowed to doubt. This does not make the ideological campaign conducted by Xi (including probably through this book) less relevant—it makes it rather more so. Yet the likelihood of success of that campaign is not very high. Xi is fighting against the spirit of the times, and while his struggle may be driven by a genuine desire to create a morally superior China, the odds of succeeding in this endeavor are, I am afraid, not particularly high.   

But, perhaps, Xi could answer with the story, told by Mao in 1942, of the crazy old man who tries to move two mountains. In Mao’s version the two mountains were feudalism and colonialism. They were removed. In Xi’s version, they could be greed and indifference.  

 

Interpreting or misinterpreting China’s success

         I recently read a review of China’s long-term economic progress by two well-known scholars of Chinese economy: Loren Brandt and Thomas Rawski. I have read and cited both. Just to give some examples: I liked very much a paper on inequality in the Chinese countryside in the 1930s co-authored by Brandt; or Rawski’s work on growth (and, secondarily, on inequality) in pre-war China. As these examples show, my interest in both authors was, not surprisingly, more on what they wrote on inequality in China, not on the issues of growth and long-term development. The latter however is the topic they address in this paper (which is also a chapter in the recently published Cambridge Economic History of China vol. 2).

I thus read their new piece with great interest. Alas, I was disappointed.  I will criticize the paper in two respects: first, the implicit, or at times quite explicit, narrative regarding China’s development from the end of the 19^th century to today, and second, internal contradictions among the arguments made in the paper.

Brandt and Rawski (B-R) narrative can be summarized as follows. The late Qing and early Republican China, while backward in many respects, have shown the signs of remarkable ability to quicky adopt western production and financial techniques. Coercive and discriminatory rules imposed by Western powers, Russia and Japan were in reality helpful for the Chinese development. (It is unlikely that China could have experienced this early development burst without Western semi-colonialism.) The Nanjing KMT government adopted much more pro-state policies (compared to the late Qing), although this was short-lived because of the war and internal conflict. The Maoist government when it came to power in 1949 continued KMT’s line of state-led development and made it more planified (even if it never approaching the Soviet extent of planning). Because such policies  blunted the incentives, they created a huge gap between the potential and actual  output. The gap was “mopped up” during Deng’s pro-market episode.  The recent approach by Xi Jinping is a reversal aiming to give greater role to the state (“an inward-looking Soviet-style plan”), accompanied by a “retreat from…global cooperation.” It is very unlikely that China will be able to make technological leaps that the Party and the government promise and have made the cornerstone of their policies.

I believe that this, hopefully fair, review of the B-R argument highlights several important points on which the authors insist. First, the quasi-colonial relations were good for China’s development (“privileges won through foreign military pressure encouraged domestic economic growth”, p. 787).  Second, there was a continuum between KMT’s and Maoist policies. Third, China’s spectacular post-1978 growth is to be explained simply as a “rebound”, the clever use of the already existing capacities and capabilities.

Let me focus on these points. The principal argument for the first is the existence of economically dynamic parts, or rather cities, in the coastal region of China. B-R mention for example that Shanghai was a sleepy country seat  and that its the growth rate in the Republican period was comparable to the  growth rates of Japan, India and the USSR.  Such examples of individual successes in a country as enormous as China (500 million people in the 1930s) are a form of cherry-picking, if they are used to claim something more than that there were a few poles of growth. One could almost at will find cities or areas that have prospered in any country in the world while that country as a whole had stagnated or even went backward. Maddison’s data on China show its GDP per capita to have increased from $985 in 1913 to $1,003 in 1938 (all in international dollars), which gives an average annual growth rate of hardly above zero. Thus, Chinese growth in the pre-war period merely kept up with the increase of population (which was about 0.6% per year). This is hardly extraordinary.

As the quote below from a survey of villages undertaken by the China Cotton Mill Owners’ Association for the purpose of estimating the demand for textiles in the 1930s shows:

[we] found disastrous conditions: women in Szechuan were not wearing skirts because the rural devastation had left farmers without the means to purchase cloth, and in many households family members shared one item of clothing (Shiroyama 2008, 127; quoted from Milanovic, Capitalism, Alone, p.80)

China, for most of its inhabitants was a land of almost unimaginable poverty and backwardness. A few entrepots’ bright lights here and there made little  difference to the country as a whole. This holds even more if we believe that the lack of domestic agency (that is, the quasi colonial relationship) is a negative thing per se.

The continuation of policies between KMT and Mao’s government has been noted by many authors. It is not a new point. But in B-R it plays a paradoxical role. They aim to situate the post-1978  Chinese advances not on the basis created by Mao’s policies but very implausibly, given the short duration of the KMT government, on pre-revolutionary developments. The authors’ narrative becomes inconsistent: on the one hand, a number of glaring inefficiencies of socialist planning are rightly cited, but then the Dengist success is explained by the claim that it simply exploited the existing gap between the potential and realized output created during the Mao era. But if Mao’s era created the possibility to have a much higher output, it must have done something right. Since the  authors cannot bring themselves to mention anything positive to have happened during Mao’s period we are left in a quandary as to how a thoroughly  inefficient system such as Mao’s could have created the basis for Dengist revival.

B-R come to this impossible position because they tend to see the Dengist revival not so much on its own terms, to have been the greatest long-term expansion in economic history, but to treat it as, almost mechanically, filling up the gap between the possible and the actual. Thus the narrative undervalues the importance of Dengist reforms (which are not discussed in any detail), dismisses explicitly Maoist period (while indirectly acknowledging its importance), and all but explains China’s 1980-2008 successes by the Nanjing government policies.

The authors here face a real problem: in order to dismiss Deng, they need to claim that the potential for growth already existed under Mao; but they cannot credit Mao for that potential because they criticize all of his policies. Thus, somehow, that potential has to be shown to have originated in a government that lasted less than ten years, never controlled the entire territory of China, and operated in an entirely different intellectual and global environment more than half-a-century before Deng.

My last point already hints at one internal contradictions in the paper. They are many. The authors document low productivity growth of state-owned enterprises (SOEs) by, among other things, pointing to their low profitability. But they do not seem to notice that SOEs low profitability may be due to extra-economic tasks that these enterprises are supposed to fulfill, as well as to higher effective taxation. Moreover, in order to explain the Belt and Road initiative they have to acknowledge large profits of SOEs; so suddenly we read that the share of SOE profits in GDP has risen. But if SOEs profits are increasing faster than the total value added, this is hard to reconcile with the earlier statement that low profitability of SOEs is due to their inefficiency.

B-R write with a Thatcherite glee about the industrial restructuring that took place n the 1990s (urban reforms). The employees of SOEs are “culled” (p. 809), the reforms “decanted” tens of millions of workers “into the grip of market discipline” (p. 825) at the time when companies were “bulging with surplus employees” (p 827). The dogma  of efficiency which comes on the heels of privatization is so extravagant that, reading this in 2022, when in many countries the gains from privatization of the existing companies have been found to be minimal (if any), the text seems slightly embarrassing and anachronic. The authors probably would not imagine using this cheerleading language if they were to describe Thatcher’s or Reagan’s policies. But this kind of language, and more importantly, the cheerful interpretation of driving out in the street thousands of middle-aged workers, seems to be de rigueur when writing of former socialist economies and China.  Its costs are never mentioned.

After celebrating unemployment and “sharpness of incentives” that it brings, the authors strangely blame CPC for high inequality that “resembles” the late Qing era (p. 824). Leaving aside that their quote of 15% of total income received by the top 1 percent is highly contested (because it is based of imputing SOE profits to individuals with the highest private capital incomes—a most dubious assumption), a 15% share is still much lower than the 24% share of the top 1 percent in 1880s obtained from a study of incomes of Chinese gentry.  

But even if (1) the 15% share were somehow right (the just released 2018 nation-wide household income survey gives the share of the top 1 percent to be 7%), and (2) even if the 15% share “resembled” the 24% share, the entire tenor of the article celebrates inequality as a force that, when unleashed, explains Chinese growth—so what is then suddenly wrong with inequality? There again we encounter an internal contradiction: the current CPC is criticized for not being more market- and incentive-friendly (in contrast to Jiang Zemin’s policy of “three represents”), and is then, in a strange reversal, also criticized for allowing inequality to be too high. So, is Xi Jinping in favor of too little or too much inequality?

Now, one can reconcile the two (which B-R never attempt). Perhaps that the government hogged all income and everybody on the top is corrupt. But this line of argument has to be defended. As Yang, Novokmet and  I show here, the elite at the top of China’s income pyramid has markedly shifted toward private sector entrepreneurs and large capitalists. While people linked with the private sector accounted for ¼ of those in the top 5% in 1988, their share exceeded ½ in 2013 (see Figure 3 in our article and the discussion around it). This is in contradiction with the possible claim that inequality is due to the state and party functionaries alone being inordinately rich. On the contrary, it is the private sector that is the richissime. Moreover, that line of argument cannot at all explain the anti-corruption campaign that was directed against people whose state and party connection enabled them to amass money. So, if B-R celebrate greater market incentives and inequality throughout their article, and people on the top in China are rich private-sector entrepreneurs, why is CPC’s insufficient market-orientation taken to task for allowing high inequality?

In conclusion, it is deeply dispiriting that such a unidimensional view of Chinese long-run growth which fails to deal with very important questions of (just to name a few) emergence of TVEs, de facto privatization of land, its later commercialization, the dilemmas of the Big Bang vs gradual reform (on which scores of papers and books have been written; see e.g. Weber,  Gewirtz;  Ang; all of them reviewed on my website or Substack), and adopts a simplistic, and at times even dogmatic, narrative may be read as a valid summary of one hundred years of China’s development. This is especially important because China’s experience is influencing other countries and a unidimensional Washington-consensus interpretation favored here is likely, if accepted, to have harmful  consequences for global development.

 

 

 

PS. Even the choice of some references by Brandt and Rawski is rather unusual. For the share of the state sector in value added, B-R cite the journalistic article “The State Never Retreats” published in Gavekal Dragonomics rather than the most detailed study of the state sector importance done by the World Bank’s Shunlin Zhang  in 2019 (and which, on the contrary,  shows a steady decline in the state-sector share in value added and employment). The finding of lower growth of total factor productivity among state firms is seriously challenged (see Hsieh and Song, “Grasp the large, let go of the small’, Brookings papers on economic activity, 2019) but this is never mentioned.

PS1. Lin Chun’s Revolution and counterrevolution in China (my review here) represents a perfect antidote to the interpretation presented by Brandt and Rawski. I would suggest to read the two texts one after another.