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Unlikely Partners: Chinese Reformers, Western Economists, and the Making of Global China
With Deng Xiaoping’s blessing, Mao’s successors scoured the globe for fresh ideas to launch domestic prosperity and global economic power. Yet China’s government did not publicize its engagement with Western-style innovations, claiming instead that economic reinvention was the Party’s achievement alone. Julian Gewirtz sets forth the truer story.
412 pages, Kindle Edition
Published January 2, 2017
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570 people want to read
About the author
Julian Gewirtz
5 books15 followersJulian Gewirtz is an American diplomat, historian, and poet currently serving as Deputy Coordinator for Global China Affairs at the U.S. Department of State in the Biden administration. He was previously Director for China at the White House National Security Council (NSC).
Gerwirtz attended Hopkins School in New Haven, Connecticut, and later earned a PhD in modern Chinese history from Oxford University as a Rhodes Scholar in 2018 and a BA from Harvard College in 2013.
Prior to joining the NSC, Gewirtz was a Senior Fellow for China Studies at the Council on Foreign Relations. He was a Wilson China Fellow at the Woodrow Wilson International Center in 2020.
Gerwirtz attended Hopkins School in New Haven, Connecticut, and later earned a PhD in modern Chinese history from Oxford University as a Rhodes Scholar in 2018 and a BA from Harvard College in 2013.
Prior to joining the NSC, Gewirtz was a Senior Fellow for China Studies at the Council on Foreign Relations. He was a Wilson China Fellow at the Woodrow Wilson International Center in 2020.
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Displaying 1 - 12 of 12 reviews
October 31, 2020
Unlikely Partners is a history of the relationship between elements of the leadership of the Chinese government and an array of foreign economists on the Chinese economic reforms of the late 1970s and 1980s. This reform stemmed from Deng Xiaoping's endorsement of learning from foreign experts - not just in science and technology, but in moving away from the deprivation and poverty left after the command economy and the turmoil of the Cultural Revolution. Premier Zhao Ziyang, who enjoyed Deng's support, was more involved in the process of reform.
This led to communications with many foreign economists - this included specialists on the Eastern Bloc and command economies like the Hungarian János Kornai, and the Polish Włodzimierz Brus -- American Keynesians like James Tobin, and even monetarists like Milton Friedman.
This is not to say that this was a matter of passive acceptance - these ideas were often challenged by the conservatives and the old guard of the party, such as the Chairman of the Central Advisory Commission, Chen Yun, who saw them as a betrayal of socialism. This was not a straightforward process of deciding to modernize and openly copy policy - it was a process of intense debate and political maneuvering between elites. It was a process of reform, but a reform where Deng and future "core leaders" wished to retain power and intervene where they saw the need.
Zhao Ziyang himself was sidelined - he called for treating the protestors of Tiananmen with mercy and sympathy. The rest of the party would move on without him - but on the other hand, the policies developed under his aegis would continue for the following decades. This result is the "socialist market" economy, with the dramatic results of reform but with the CCP still occupying the commanding heights. That said, the system of elite consensus does not appear to be in place anymore - the core leadership has concentrated even further in the hands of one individual, Xi Jinping, and that does not appear likely to change any time soon.
This led to communications with many foreign economists - this included specialists on the Eastern Bloc and command economies like the Hungarian János Kornai, and the Polish Włodzimierz Brus -- American Keynesians like James Tobin, and even monetarists like Milton Friedman.
This is not to say that this was a matter of passive acceptance - these ideas were often challenged by the conservatives and the old guard of the party, such as the Chairman of the Central Advisory Commission, Chen Yun, who saw them as a betrayal of socialism. This was not a straightforward process of deciding to modernize and openly copy policy - it was a process of intense debate and political maneuvering between elites. It was a process of reform, but a reform where Deng and future "core leaders" wished to retain power and intervene where they saw the need.
Zhao Ziyang himself was sidelined - he called for treating the protestors of Tiananmen with mercy and sympathy. The rest of the party would move on without him - but on the other hand, the policies developed under his aegis would continue for the following decades. This result is the "socialist market" economy, with the dramatic results of reform but with the CCP still occupying the commanding heights. That said, the system of elite consensus does not appear to be in place anymore - the core leadership has concentrated even further in the hands of one individual, Xi Jinping, and that does not appear likely to change any time soon.
June 1, 2023
Unlikely Partners: Chinese Reformers, Western Economists, and the Making of Global China, Julian Gewirtz, 2017, 389 pages, Library-of-Congress HC 427.92 .G478 2017 Memorial Library, ISBN 9780674971134
Chinese leaders' and economists' 1978-1993 efforts to adopt policies that would improve China's economy. Focuses on meetings, not so much on results.
1644-1911 Qing Dynasty. p. 5.
1839 First Opium War began a "century of humiliation." p. 5.
1919 Moscow founded the Communist International; sent emissaries to China. p. 6.
1921 Chinese Communist Party founded. p. 6.
1949 People's Republic of China (PRC) founded. p. 2.
1949-1976 Tens of thousands of "rightist" intellectuals and officialswere put to death. p. 4.
1966-1976 Cultural Revolution. Thinkers were a threat, needed to be reeducated. p. 3.
1976 Mao died, age 82. China was poor and isolated. pp. 1-2, 15.
1978 China's GDP per person was $US 175. p. 2.
Deng Xiaoping aimed to make China modern, wealthy, and powerful. p. 2.
1993 Chinese constitution. p. 4.
2017 China is now the world's largest economy by purchasing power parity. p. 1.
2025 China's GDP is expected to surpass that of the United States. p. 1.
Chinese leaders' and economists' 1978-1993 efforts to adopt policies that would improve China's economy. Focuses on meetings, not so much on results.
1644-1911 Qing Dynasty. p. 5.
1839 First Opium War began a "century of humiliation." p. 5.
1919 Moscow founded the Communist International; sent emissaries to China. p. 6.
1921 Chinese Communist Party founded. p. 6.
1949 People's Republic of China (PRC) founded. p. 2.
1949-1976 Tens of thousands of "rightist" intellectuals and officialswere put to death. p. 4.
1966-1976 Cultural Revolution. Thinkers were a threat, needed to be reeducated. p. 3.
1976 Mao died, age 82. China was poor and isolated. pp. 1-2, 15.
1978 China's GDP per person was $US 175. p. 2.
Deng Xiaoping aimed to make China modern, wealthy, and powerful. p. 2.
1993 Chinese constitution. p. 4.
2017 China is now the world's largest economy by purchasing power parity. p. 1.
2025 China's GDP is expected to surpass that of the United States. p. 1.
July 12, 2019
A few minutes ago, I finished Julian Gewirtz's "Unlikely Partners: Chinese Reformers, Western Economists, and the Making of Global China"
China is an astonishing country that has defied many economists’ guideline on how a progressive economy works. Just a few years after rendering China incapable of development, Milton Friedman would throw out the challenge, "The economist who is able to provide an analysis of China’s economic development and reform is qualified for a Nobel prize."
With the Chinese propagandist machinery intent on keeping out the great influences that has made it a truly super economy, the book laid bare the twists and turns that made China a global economy it is today.
The book spans the period between the time of Mao Zedong's death in 1976 to the mid-90s, and the many partners who helped it achieve its astronomical growth.
From the period of Mao's death, his eventual successor Deng Xioping made it clear that his lifelong ambition was to turn China from a pauper nation to a nation of prosperity. With many of his colleagues still intent on following Mao's fully Marxist system - a system that birthed initiatives like the Great Leap Forward (where an estimated 40 million people died in just three years) and the Cultural Revolution (where 3 million Chinese died) - Deng decided that he would seek out ideas from anyone and anywhere if these would help fulfil his ambitions.
Deng would use terms like “crossing the river by feeling for the stones...” and “seeking truth from facts” to declare a momentous break with the inefficient traditional socialist economy and his intention to find a form of socialism that did not “boil down to shared poverty".
Deng and his protégé Zhao Zedong would send delegations upon delegations to visit both capitalist (US, UK, Japan, Germany, Brazil, etc.) and socialist countries (Hungary, Romania, etc). For example, in 1978 twenty-one delegations with participants at the vice premier or vice chairman level traveled to fifty-one countries. Deng and Zhao gave them only one assignment - learn what works and bring it to China for development. One of the most remarkable moments in the book for me was when Deng, leader of about a billion people at the time, met with the World Bank in 1980 and uttered the words, "We are very poor. We are very poor. We have lost touch with the world. We need the World Bank to catch up."
And help the World Bank did. During the period of 1981-1989, the World Bank approved sixty-nine projects totaling over US$7.25 billion, and provided over US$3 billion in loans. During this period, the World Bank became China’s largest single source of foreign capital, and China became the Bank’s largest borrower. Efforts by the World Bank would eventually help in the facilitation of the popular Bashan Conference, a framework still in use by the Chinese top officials.
(As an aside, when someone like John Williamson and his ilk portray the World Bank and IMF as a bastion of neoliberalism with damaging results, China provides a counter to how these institutions' recommendations can be both flexible and context-specific.)
Asides the World Bank, organizations like the Ford Foundation, in particular, would be instrumental in providing millions of dollars to fund expert exchanges and academic study.
Upon opening up of the economy to capitalistic tendencies in 1978, experts from other countries would notice a total lack in depth in intellectual exchanges with Chinese economists and intellectuals, however it was crystal clear that these people wanted to learn. In the years to come, Chinese economists would be revered economic experts in their own right, to the extent that Justin Yifu Lin would become the first non-Western World Bank chief economist (2008 to 2012).
The Premier Zhao Zedong, the force behind China's economic blueprint would eventually be placed under house arrest till his death and his achievements purged from public records because he was seen to be sympathetic towards political reforms as well as his involvement in events leading to the bloodbath known as Tiananmen Square. A reminder that even though China would extricate itself from Marxism and Socialism and officially call its system "Socialist Market System", it was not ready to let go of its political system at the time or in the future.
With Zhao gone in 1989 and conservatives at the helm of affairs, the Chinese economy would record its lowest growth since opening-up at 3.4% in 1990. Thankfully, Deng was able to hold his ground and accelerate the promotion of another pro-market reformer, Zhu Rongji, to coordinate the economy and among his other achievements, a growth of 13.4% in 1993.
It's truly remarkable. From a country where 9 out of 10 people were in extreme poverty in 1976 to one where a lot of its citizens have experienced a 50-fold increase in their standard of living, China continues to astound. As at last count, 850 million have been lifted out of poverty since 1978. It's a miracle. It's unprecedented in human history. 40 years of economic miracle have created a greater increase in human well-being for more individuals than occurred in the previous 4000+ years of China's history.
And it's because China sought out the best ideas and partnership even if from unlikely quarters, and adapted them to its local economy.
At a point, Deng declared bluntly to anti-market conservatives, “Whoever is against reform must leave office...”, because according to him, "It doesn’t matter whether a cat is black or white, so long as it catches the mouse.”
#BookReview #UnlikelyPartners
China is an astonishing country that has defied many economists’ guideline on how a progressive economy works. Just a few years after rendering China incapable of development, Milton Friedman would throw out the challenge, "The economist who is able to provide an analysis of China’s economic development and reform is qualified for a Nobel prize."
With the Chinese propagandist machinery intent on keeping out the great influences that has made it a truly super economy, the book laid bare the twists and turns that made China a global economy it is today.
The book spans the period between the time of Mao Zedong's death in 1976 to the mid-90s, and the many partners who helped it achieve its astronomical growth.
From the period of Mao's death, his eventual successor Deng Xioping made it clear that his lifelong ambition was to turn China from a pauper nation to a nation of prosperity. With many of his colleagues still intent on following Mao's fully Marxist system - a system that birthed initiatives like the Great Leap Forward (where an estimated 40 million people died in just three years) and the Cultural Revolution (where 3 million Chinese died) - Deng decided that he would seek out ideas from anyone and anywhere if these would help fulfil his ambitions.
Deng would use terms like “crossing the river by feeling for the stones...” and “seeking truth from facts” to declare a momentous break with the inefficient traditional socialist economy and his intention to find a form of socialism that did not “boil down to shared poverty".
Deng and his protégé Zhao Zedong would send delegations upon delegations to visit both capitalist (US, UK, Japan, Germany, Brazil, etc.) and socialist countries (Hungary, Romania, etc). For example, in 1978 twenty-one delegations with participants at the vice premier or vice chairman level traveled to fifty-one countries. Deng and Zhao gave them only one assignment - learn what works and bring it to China for development. One of the most remarkable moments in the book for me was when Deng, leader of about a billion people at the time, met with the World Bank in 1980 and uttered the words, "We are very poor. We are very poor. We have lost touch with the world. We need the World Bank to catch up."
And help the World Bank did. During the period of 1981-1989, the World Bank approved sixty-nine projects totaling over US$7.25 billion, and provided over US$3 billion in loans. During this period, the World Bank became China’s largest single source of foreign capital, and China became the Bank’s largest borrower. Efforts by the World Bank would eventually help in the facilitation of the popular Bashan Conference, a framework still in use by the Chinese top officials.
(As an aside, when someone like John Williamson and his ilk portray the World Bank and IMF as a bastion of neoliberalism with damaging results, China provides a counter to how these institutions' recommendations can be both flexible and context-specific.)
Asides the World Bank, organizations like the Ford Foundation, in particular, would be instrumental in providing millions of dollars to fund expert exchanges and academic study.
Upon opening up of the economy to capitalistic tendencies in 1978, experts from other countries would notice a total lack in depth in intellectual exchanges with Chinese economists and intellectuals, however it was crystal clear that these people wanted to learn. In the years to come, Chinese economists would be revered economic experts in their own right, to the extent that Justin Yifu Lin would become the first non-Western World Bank chief economist (2008 to 2012).
The Premier Zhao Zedong, the force behind China's economic blueprint would eventually be placed under house arrest till his death and his achievements purged from public records because he was seen to be sympathetic towards political reforms as well as his involvement in events leading to the bloodbath known as Tiananmen Square. A reminder that even though China would extricate itself from Marxism and Socialism and officially call its system "Socialist Market System", it was not ready to let go of its political system at the time or in the future.
With Zhao gone in 1989 and conservatives at the helm of affairs, the Chinese economy would record its lowest growth since opening-up at 3.4% in 1990. Thankfully, Deng was able to hold his ground and accelerate the promotion of another pro-market reformer, Zhu Rongji, to coordinate the economy and among his other achievements, a growth of 13.4% in 1993.
It's truly remarkable. From a country where 9 out of 10 people were in extreme poverty in 1976 to one where a lot of its citizens have experienced a 50-fold increase in their standard of living, China continues to astound. As at last count, 850 million have been lifted out of poverty since 1978. It's a miracle. It's unprecedented in human history. 40 years of economic miracle have created a greater increase in human well-being for more individuals than occurred in the previous 4000+ years of China's history.
And it's because China sought out the best ideas and partnership even if from unlikely quarters, and adapted them to its local economy.
At a point, Deng declared bluntly to anti-market conservatives, “Whoever is against reform must leave office...”, because according to him, "It doesn’t matter whether a cat is black or white, so long as it catches the mouse.”
#BookReview #UnlikelyPartners
March 23, 2017
Julian Gewirtz has written a history of how economic reform in China, after its initiation by Deng Xiaoping and others in 1978 up until 1993. It is a thoughtful, well researched, and interesting work, although also a bit of a slog to read.
The reform of the Chinese economy since 1978 is arguably one of the most consequential (and generally positive) developments of the entire 20th century. When one encounters statistics about the sharp fall in the numbers of people facing abject poverty in the world, it is Chinese economic reform that has helped to bring about this massive rise in world living standards. Reality is always complicated, of course,but it is difficult to understate the importance of the Chinese reforms.
The magnitude of the reforms seem more striking if one considers the starting point for change. China at the time of Mao's death in 1976 was a poor country that had suffered through nearly 30 years of disastrous Communist party rule that emphasized ideological purity of the standard of living of the Chinese people. The government that changed after Mao's death was the same one that brought about the Great Leap Forward, a massive famine that killed millions, and near civil war during the Cultural Revolution. How does one bring about such a major set of changes in a country of a billion people that had little experience with positive economic reform at all?
To the immediate Communist past can be added the longer term colonialist past. In the 19th and 20th centuries, Chinese was subjected to a broad range of indignities due to colonial pressures from the European powers, Russia, and Japan. This longer history poses real problems for a government seeking to modernize in a post-colonial world. Does one adopt the ways of the West? Does one attempt to go it alone and give autarchy a try? How does one reconcile the demands of modernization with those of natural culture and values?
In this context, China's achievements are nothing short of striking. It is important to ask how such changes came about. How did reformers go about their work? This is where Gewirtz's book fits in. There is a tremendous temptation to think that when some new leader announces a broad program of change, then the implementation of that change can be taken as a given. One can even see this in American politics on occasion. The problem is that inertia is very powerful and most announced plans for big changes do not come to much of a fruition. Talk is cheap while consequential action is very costly. Nine times out of ten I will bet on inertia over bold plans.
Gewirtz focuses on the interactions between Chinese and Western economists as key activities in enabling change. The Chinese had to learn about modern markets and market economics if they were to have any hope of successfully reforming their economy. There was more going on in these interactions that the swapping of papers, models, equations, and jokes by economists - however interesting that no doubt was. This is also a story about bringing people with the requisite economic knowledge and administrative/political skills to positions of power from which changes could be made. The story also involves changing the "rules of the game" in terms of norms, values, official statements, government bodies, and regulations so that the success of change will not depend on one or a few individuals and that decisions once made will be implemented. Reform needed to become taken for granted by policy makers.
Change on a large scales also involves hard politics. New policies create winners and losers. The losers will fight to avoid loss. Add to this the fact that the Communist world went into a crisis at the end of the 1980s and it does not take much to see how Chinese politics became a popular blood sport - especially with the suppression of the democracy movement by Deng at Tiananmen Square in 1989. Gewirtz traces the evolution of economic reform by looking at relations among Chinese and western economists during this choppy period until arrangements stabilized in the early 1990s. After that, the rest was history. Gewirtz tries hard to balance his focus with the broader context of geopolitics and economics at the time and generally succeeds.
This book reads like a well written doctoral project, which I suspect it was. The story is told in detail. Gewirtz draws on lots of sources and documents them thoroughly. He is able to make use of a variety of official and unofficial reports and this helps him to elucidate the roles of all the major individuals involved in the story, including some, like Zhao Ziyang, who were purged after the Tiananmen Square crackdown after 1989.
It is easy to discuss grand changes after the fact as if they were meant to occur and the result of a great leader. In reality, however, no major changes were necessary and needed to occur. A deep dive into the change process is valuable to reinforce that implementation is a "team sport" and crucial to the success of big ventures whether public or private.
The reform of the Chinese economy since 1978 is arguably one of the most consequential (and generally positive) developments of the entire 20th century. When one encounters statistics about the sharp fall in the numbers of people facing abject poverty in the world, it is Chinese economic reform that has helped to bring about this massive rise in world living standards. Reality is always complicated, of course,but it is difficult to understate the importance of the Chinese reforms.
The magnitude of the reforms seem more striking if one considers the starting point for change. China at the time of Mao's death in 1976 was a poor country that had suffered through nearly 30 years of disastrous Communist party rule that emphasized ideological purity of the standard of living of the Chinese people. The government that changed after Mao's death was the same one that brought about the Great Leap Forward, a massive famine that killed millions, and near civil war during the Cultural Revolution. How does one bring about such a major set of changes in a country of a billion people that had little experience with positive economic reform at all?
To the immediate Communist past can be added the longer term colonialist past. In the 19th and 20th centuries, Chinese was subjected to a broad range of indignities due to colonial pressures from the European powers, Russia, and Japan. This longer history poses real problems for a government seeking to modernize in a post-colonial world. Does one adopt the ways of the West? Does one attempt to go it alone and give autarchy a try? How does one reconcile the demands of modernization with those of natural culture and values?
In this context, China's achievements are nothing short of striking. It is important to ask how such changes came about. How did reformers go about their work? This is where Gewirtz's book fits in. There is a tremendous temptation to think that when some new leader announces a broad program of change, then the implementation of that change can be taken as a given. One can even see this in American politics on occasion. The problem is that inertia is very powerful and most announced plans for big changes do not come to much of a fruition. Talk is cheap while consequential action is very costly. Nine times out of ten I will bet on inertia over bold plans.
Gewirtz focuses on the interactions between Chinese and Western economists as key activities in enabling change. The Chinese had to learn about modern markets and market economics if they were to have any hope of successfully reforming their economy. There was more going on in these interactions that the swapping of papers, models, equations, and jokes by economists - however interesting that no doubt was. This is also a story about bringing people with the requisite economic knowledge and administrative/political skills to positions of power from which changes could be made. The story also involves changing the "rules of the game" in terms of norms, values, official statements, government bodies, and regulations so that the success of change will not depend on one or a few individuals and that decisions once made will be implemented. Reform needed to become taken for granted by policy makers.
Change on a large scales also involves hard politics. New policies create winners and losers. The losers will fight to avoid loss. Add to this the fact that the Communist world went into a crisis at the end of the 1980s and it does not take much to see how Chinese politics became a popular blood sport - especially with the suppression of the democracy movement by Deng at Tiananmen Square in 1989. Gewirtz traces the evolution of economic reform by looking at relations among Chinese and western economists during this choppy period until arrangements stabilized in the early 1990s. After that, the rest was history. Gewirtz tries hard to balance his focus with the broader context of geopolitics and economics at the time and generally succeeds.
This book reads like a well written doctoral project, which I suspect it was. The story is told in detail. Gewirtz draws on lots of sources and documents them thoroughly. He is able to make use of a variety of official and unofficial reports and this helps him to elucidate the roles of all the major individuals involved in the story, including some, like Zhao Ziyang, who were purged after the Tiananmen Square crackdown after 1989.
It is easy to discuss grand changes after the fact as if they were meant to occur and the result of a great leader. In reality, however, no major changes were necessary and needed to occur. A deep dive into the change process is valuable to reinforce that implementation is a "team sport" and crucial to the success of big ventures whether public or private.
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May 20, 2021Julian Gewirtz has written a fascinating account of China's "reform and opening" phase, beginning from the death of Mao Zedong in 1976 to the enshrinement of China's "socialist market economy" in its constitution in 1993. His particular emphasis in this book is on the contribution to China's economic reforms of experts and ideas from around the globe, describing how these foreign influences aided China in charting the path that it did throughout the 1980s.
As such, the book portrays the dynamics between three main groups: Chinese reformers, who advocated for market reforms to augment the socialist planned economy, Chinese conservatives, who wished to preserve the primacy of the plan over the market, and foreign economists, who provided the ideas and techniques that the reformers seized upon to make the changes that they eventually did. An overarching theme is that the reform process was never smooth and inevitable, even after Deng Xiaoping rose to paramount leadership in December 1978. The 1980s were riddled with debates and political contestation as reformers and conservatives attempted to make their case.
Foremost among the reform camp was Zhao Ziyang, who served as premier of the People's Republic of China (PRC) from 1980-1987, then general secretary of the Chinese Communist Party from 1987-1989. In August 1978, Zhao accompanied then-premier Hua Guofeng on a trip to Yugoslavia and Romania, in a search for new ideas to boost China's economic growth. Hua took interest in "Yugoslav enterprise management, which stressed self-management and enterprise autonomy", and instructed Zhao to implement reforms of this nature in Sichuan province, where he was then party secretary (p.40). Zhao's success in Sichuan prompted Deng Xiaoping to elevate him to premier in 1980.
Foremost among the conservatives in the book was Chen Yun, a party elder who held a key role in economic management during the Mao era. Chen was "a consistent advocate of incorporating market mechanisms into the socialist planned economy", yet he maintained that planning should remain as "fundamental and predominant" with markets a "supplementary and secondary" addition (p.46). He was widely regarded as the second most powerful person in China during the 1980s and early 1990s.
In addition to numerous forays abroad, including the aforementioned trip to Yugoslavia and Romania, Chinese reformers invited a wide array of prominent foreign economists to China to teach Chinese economists the ideas and techniques that they had long avoided for fear of being branded a "rightist" or "bourgeois liberal" during the Mao era (p.21).
One of these was Czechoslovak economist Ota Šik, a reformer who was vice premier and economics minister during the 1968 Prague Spring, a period of political and economic liberalisation that was quickly crushed when the Soviets sent half a million Warsaw Pact troops to occupy the country. Šik was a fierce critic of "the directive system of planning" in command economies, which he saw as "inefficient and irrational", concluding that "it is therefore essential for a real market to function as a continual criterion and corrector" of the inefficiencies and errors of planning.
Šik's ideas for reform earned him an invitation to Beijing in March 1981. In a series of lectures, he contended that "to automatically equate the market with capitalist relations is an error", an ideological defence that would emerge as vital for reformers throughout the 1980s. Furthermore, he advocated price reform as "the primary step of reform of the economic system". He believed that "the goal of price reform is a complete transition to free-market prices", but as an intermediate step, to have a "transitional two-track price system in which the state continued to set a guidance price but allowed enterprises freedom to sell goods within limits of the state-set price".
Šik's ideas on price "resonated strongly with China's situation", seeing as "prices had been essentially frozen for over a decade [by 1980] ... [hence] incentives and information were profoundly distorted" (pp.89-93). Price decontrols would emerge as an important element of the reform process, such that "by 1999, 95 percent of retail commodities and approximately 85 percent of both agricultural commodities and producer goods would be sold at market prices" (pp.249-250).
Another Eastern Bloc contributor was Włodzimierz Brus, an advocate of market reforms in Poland before moving to Oxford's Wolfson College in 1968 amid a rising tide of antisemitism in Polish politics. Visiting China in December 1979/January 1980, Brus made the case for another major current in Chinese reformist thought: enterprise reform. He began his lectures by distinguishing three levels of the economy: "macroeconomic decision-making, enterprise decision-making, and individual and household decision-making". He then presented four models of the socialist economy: ""war communism, in which all three levels were centralized; the "centralized model", in which household decision-making was decontrolled; the "planned economic model with market mechanisms", in which enterprises were also decontrolled; and "market socialism", in which all three tiers of making were decontrolled".
Brus argued strongly for the third model: the "planned economic model with market mechanisms", stressing that China's enterprises needed "greater autonomy, with latitude to be more responsive to market dynamics" (pp.65-68). This establishment of a goal model, a system to aspire to, was significant because, contrary to what may be assumed, China's reformers had hitherto had no end-goal in mind. As Zhao Ziyang wrote in his memoirs, "My earliest understanding of how to proceed with reform was shallow and vague ... I did not have any preconceived model or a systematic idea in mind" (p.42). Brus helped provide that systematic idea, especially with regard to enterprise autonomy.
The sheer extent to which Chinese reformers were receptive to alien economic ideas was revealed when Beijing sent an invitation to Milton Friedman, the firebrand advocate of free-market ideology, who visited in the autumn of 1980. Friedman himself deemed the invitation "a phenomenon that I find almost literally incredible", though was sought after by China's younger reformers for his alleged expertise in fighting inflation, at a time when its spectre was looming over China's changing economy (p.84). The visit, perhaps inevitably, was "met with exasperation on both sides" (p.87), with intense ideological confrontation between Friedman and the Chinese economists. Yet despite this, Milton Friedman was invited to China yet again in September 1988, when price decontrols had ignited the scourge of inflation, which was now soaring. In addition to his usual evangelising, he suggested that inflation might be tackled by pursuing a contractionary monetary policy (pp.210,211).
In 1985, this attitude of openness and cooperation culminated in what was perhaps the most extraordinary and significant gathering of all; a conference of prominent Chinese and foreign economists on a river cruise aboard the SS Bashan. First to speak was James Tobin, an American Nobel laureate in economics who was sought after for his neo-Keynesian focus on government intervention. He presented ways in which balance and stability in the economy could be preserved using techniques of "macroeconomic management", which could supplant direct administrative control to an extent. He described how a developed central bank could enable China to conduct monetary policy, and demonstrated how an expansionary policy could trigger a "multiplier effect", as well as how a contractionary policy could tame inflation (p.144,145) (The idea of the "multiplier" eventually influenced the approach of vice premier Zhu Rongji in tackling problems of widespread debt in the economy in late 1991 (pp.242,243)). Incidentally, one of the participants in the conference was Zhou Xiaochuan, who would go on to serve as governor of the People's Bank of China - the central bank - from 2002 to 2018.
Also speaking in the conference was Hungarian economist János Kornai, who drew from Hungary's experience to argue that China's target model should be one of "market coordination with macroeconomic control": enterprises should be rewarded or penalised depending on their "price responsiveness", and be given hard budget constraints such that they could not continue to rely on paternalism from the state (p.148).
The import of ideas from Tobin and Kornai directly influenced the work report of the CCP's Thirteenth Party Congress in November 1987, where Zhao asserted that "we must gradually shrink the scope of compulsory plans and gradually transform to a management system of primarily indirect management", defining the new system to be one where "the state manages the market, and the market guides the enterprises" (p.191).
This is only a brief snapshot of the exchange of ideas that Gewirtz describes in this book. As his narrative shows, the import of foreign economic ideas has been hugely influential in guiding China's reform and opening in the 1980s and 1990s. Why is it, then, that this story has long been under-appreciated?
In his conclusion, Gewirtz provides two reasons, one from the Chinese side and one from the Western side. For its part, the Chinese Communist Party strives to portray the ideological and economic developments of the past few decades as entirely home-made, "grown out of the soil of China", in the words of foreign minister Wang Yi (p.273). This is fuelled by the CCP's avowed role as a guardian of the Chinese people against the efforts and ideas of "hostile foreign powers", a nationalist idea that has functioned as the CCP's primary claim to legitimacy since the Tiananmen Square massacre of 1989 (according to historian John Garver, read "China's Quest"). Therefore, "in the face of this patriotic narrative it could be seen as a slight to shine a light on the role of foreign ideas and individuals" (p.273).
This patriotic narrative of history finds a parallel in the story of Zhao Ziyang. Throughout the 1980s, he was one of the most important and instrumental reformers in the People's Republic of China, yet his role in most accounts of China's modern history is minimal at best, if not completely omitted. As Gewirtz explains, this is far from incidental given Ziyang's purge from the party after the Tiananmen Square massacre, where he was seen as supportive of the student demonstrators. By the time he passed away in 2005, he had spent around 15 years under house arrest.
As to why these stories are seldom mentioned in the West, one reason "may be that they call into question the received assumptions about how Western countries influence the developing world - and, indeed, how economic development occurs. Instead of an inevitable teleology toward Western-defined "development", these stories show the negotiated acceptance of market ideas and global norms - by Chinese leaders, on Chinese terms." (p.274). The Western narrative of superiority toward the developing world - in economic as well as other fields (e.g. human rights) - has long influenced its interactions with it. This finds expression in the "Washington Consensus" policy recommendations that organisations such as the IMF provide to debtor countries, which often do more harm than good (read Ha-Joon Chang's "Bad Samaritans"). It also finds expression in phenomena such as former US president Donald Trump's trade war against China, allegedly for pursuing "unfair" trade practices (despite the US' own long history of protectionism and industrial policy, read my article "Kicking Away the Chinese Ladder", https://uclpimedia.com/online/kicking...). China's case shows that the developing world can deal with the West on equal terms, and not simply as a subservient junior partner.
Overall, Unlikely Partners is an engaging read, and the lessons are important, shining light on how China and the West alike should view their history. As Gewirtz concludes, "the spirit of cooperation and partnership is a part of China's shared history with the rest of the world, certainly on matters like the development of its economic system but also on challenges on many other fronts, and we should hope that our experts and leaders take up the challenges with that spirit in mind" (p.276).
As such, the book portrays the dynamics between three main groups: Chinese reformers, who advocated for market reforms to augment the socialist planned economy, Chinese conservatives, who wished to preserve the primacy of the plan over the market, and foreign economists, who provided the ideas and techniques that the reformers seized upon to make the changes that they eventually did. An overarching theme is that the reform process was never smooth and inevitable, even after Deng Xiaoping rose to paramount leadership in December 1978. The 1980s were riddled with debates and political contestation as reformers and conservatives attempted to make their case.
Foremost among the reform camp was Zhao Ziyang, who served as premier of the People's Republic of China (PRC) from 1980-1987, then general secretary of the Chinese Communist Party from 1987-1989. In August 1978, Zhao accompanied then-premier Hua Guofeng on a trip to Yugoslavia and Romania, in a search for new ideas to boost China's economic growth. Hua took interest in "Yugoslav enterprise management, which stressed self-management and enterprise autonomy", and instructed Zhao to implement reforms of this nature in Sichuan province, where he was then party secretary (p.40). Zhao's success in Sichuan prompted Deng Xiaoping to elevate him to premier in 1980.
Foremost among the conservatives in the book was Chen Yun, a party elder who held a key role in economic management during the Mao era. Chen was "a consistent advocate of incorporating market mechanisms into the socialist planned economy", yet he maintained that planning should remain as "fundamental and predominant" with markets a "supplementary and secondary" addition (p.46). He was widely regarded as the second most powerful person in China during the 1980s and early 1990s.
In addition to numerous forays abroad, including the aforementioned trip to Yugoslavia and Romania, Chinese reformers invited a wide array of prominent foreign economists to China to teach Chinese economists the ideas and techniques that they had long avoided for fear of being branded a "rightist" or "bourgeois liberal" during the Mao era (p.21).
One of these was Czechoslovak economist Ota Šik, a reformer who was vice premier and economics minister during the 1968 Prague Spring, a period of political and economic liberalisation that was quickly crushed when the Soviets sent half a million Warsaw Pact troops to occupy the country. Šik was a fierce critic of "the directive system of planning" in command economies, which he saw as "inefficient and irrational", concluding that "it is therefore essential for a real market to function as a continual criterion and corrector" of the inefficiencies and errors of planning.
Šik's ideas for reform earned him an invitation to Beijing in March 1981. In a series of lectures, he contended that "to automatically equate the market with capitalist relations is an error", an ideological defence that would emerge as vital for reformers throughout the 1980s. Furthermore, he advocated price reform as "the primary step of reform of the economic system". He believed that "the goal of price reform is a complete transition to free-market prices", but as an intermediate step, to have a "transitional two-track price system in which the state continued to set a guidance price but allowed enterprises freedom to sell goods within limits of the state-set price".
Šik's ideas on price "resonated strongly with China's situation", seeing as "prices had been essentially frozen for over a decade [by 1980] ... [hence] incentives and information were profoundly distorted" (pp.89-93). Price decontrols would emerge as an important element of the reform process, such that "by 1999, 95 percent of retail commodities and approximately 85 percent of both agricultural commodities and producer goods would be sold at market prices" (pp.249-250).
Another Eastern Bloc contributor was Włodzimierz Brus, an advocate of market reforms in Poland before moving to Oxford's Wolfson College in 1968 amid a rising tide of antisemitism in Polish politics. Visiting China in December 1979/January 1980, Brus made the case for another major current in Chinese reformist thought: enterprise reform. He began his lectures by distinguishing three levels of the economy: "macroeconomic decision-making, enterprise decision-making, and individual and household decision-making". He then presented four models of the socialist economy: ""war communism, in which all three levels were centralized; the "centralized model", in which household decision-making was decontrolled; the "planned economic model with market mechanisms", in which enterprises were also decontrolled; and "market socialism", in which all three tiers of making were decontrolled".
Brus argued strongly for the third model: the "planned economic model with market mechanisms", stressing that China's enterprises needed "greater autonomy, with latitude to be more responsive to market dynamics" (pp.65-68). This establishment of a goal model, a system to aspire to, was significant because, contrary to what may be assumed, China's reformers had hitherto had no end-goal in mind. As Zhao Ziyang wrote in his memoirs, "My earliest understanding of how to proceed with reform was shallow and vague ... I did not have any preconceived model or a systematic idea in mind" (p.42). Brus helped provide that systematic idea, especially with regard to enterprise autonomy.
The sheer extent to which Chinese reformers were receptive to alien economic ideas was revealed when Beijing sent an invitation to Milton Friedman, the firebrand advocate of free-market ideology, who visited in the autumn of 1980. Friedman himself deemed the invitation "a phenomenon that I find almost literally incredible", though was sought after by China's younger reformers for his alleged expertise in fighting inflation, at a time when its spectre was looming over China's changing economy (p.84). The visit, perhaps inevitably, was "met with exasperation on both sides" (p.87), with intense ideological confrontation between Friedman and the Chinese economists. Yet despite this, Milton Friedman was invited to China yet again in September 1988, when price decontrols had ignited the scourge of inflation, which was now soaring. In addition to his usual evangelising, he suggested that inflation might be tackled by pursuing a contractionary monetary policy (pp.210,211).
In 1985, this attitude of openness and cooperation culminated in what was perhaps the most extraordinary and significant gathering of all; a conference of prominent Chinese and foreign economists on a river cruise aboard the SS Bashan. First to speak was James Tobin, an American Nobel laureate in economics who was sought after for his neo-Keynesian focus on government intervention. He presented ways in which balance and stability in the economy could be preserved using techniques of "macroeconomic management", which could supplant direct administrative control to an extent. He described how a developed central bank could enable China to conduct monetary policy, and demonstrated how an expansionary policy could trigger a "multiplier effect", as well as how a contractionary policy could tame inflation (p.144,145) (The idea of the "multiplier" eventually influenced the approach of vice premier Zhu Rongji in tackling problems of widespread debt in the economy in late 1991 (pp.242,243)). Incidentally, one of the participants in the conference was Zhou Xiaochuan, who would go on to serve as governor of the People's Bank of China - the central bank - from 2002 to 2018.
Also speaking in the conference was Hungarian economist János Kornai, who drew from Hungary's experience to argue that China's target model should be one of "market coordination with macroeconomic control": enterprises should be rewarded or penalised depending on their "price responsiveness", and be given hard budget constraints such that they could not continue to rely on paternalism from the state (p.148).
The import of ideas from Tobin and Kornai directly influenced the work report of the CCP's Thirteenth Party Congress in November 1987, where Zhao asserted that "we must gradually shrink the scope of compulsory plans and gradually transform to a management system of primarily indirect management", defining the new system to be one where "the state manages the market, and the market guides the enterprises" (p.191).
This is only a brief snapshot of the exchange of ideas that Gewirtz describes in this book. As his narrative shows, the import of foreign economic ideas has been hugely influential in guiding China's reform and opening in the 1980s and 1990s. Why is it, then, that this story has long been under-appreciated?
In his conclusion, Gewirtz provides two reasons, one from the Chinese side and one from the Western side. For its part, the Chinese Communist Party strives to portray the ideological and economic developments of the past few decades as entirely home-made, "grown out of the soil of China", in the words of foreign minister Wang Yi (p.273). This is fuelled by the CCP's avowed role as a guardian of the Chinese people against the efforts and ideas of "hostile foreign powers", a nationalist idea that has functioned as the CCP's primary claim to legitimacy since the Tiananmen Square massacre of 1989 (according to historian John Garver, read "China's Quest"). Therefore, "in the face of this patriotic narrative it could be seen as a slight to shine a light on the role of foreign ideas and individuals" (p.273).
This patriotic narrative of history finds a parallel in the story of Zhao Ziyang. Throughout the 1980s, he was one of the most important and instrumental reformers in the People's Republic of China, yet his role in most accounts of China's modern history is minimal at best, if not completely omitted. As Gewirtz explains, this is far from incidental given Ziyang's purge from the party after the Tiananmen Square massacre, where he was seen as supportive of the student demonstrators. By the time he passed away in 2005, he had spent around 15 years under house arrest.
As to why these stories are seldom mentioned in the West, one reason "may be that they call into question the received assumptions about how Western countries influence the developing world - and, indeed, how economic development occurs. Instead of an inevitable teleology toward Western-defined "development", these stories show the negotiated acceptance of market ideas and global norms - by Chinese leaders, on Chinese terms." (p.274). The Western narrative of superiority toward the developing world - in economic as well as other fields (e.g. human rights) - has long influenced its interactions with it. This finds expression in the "Washington Consensus" policy recommendations that organisations such as the IMF provide to debtor countries, which often do more harm than good (read Ha-Joon Chang's "Bad Samaritans"). It also finds expression in phenomena such as former US president Donald Trump's trade war against China, allegedly for pursuing "unfair" trade practices (despite the US' own long history of protectionism and industrial policy, read my article "Kicking Away the Chinese Ladder", https://uclpimedia.com/online/kicking...). China's case shows that the developing world can deal with the West on equal terms, and not simply as a subservient junior partner.
Overall, Unlikely Partners is an engaging read, and the lessons are important, shining light on how China and the West alike should view their history. As Gewirtz concludes, "the spirit of cooperation and partnership is a part of China's shared history with the rest of the world, certainly on matters like the development of its economic system but also on challenges on many other fronts, and we should hope that our experts and leaders take up the challenges with that spirit in mind" (p.276).
Want to read
November 30, 2016This entire review has been hidden because of spoilers.
November 1, 2018
In 1976, the ideologue of ideologues, Mao Zedong died. He left in his wake 8 years of economic growth from 1949-1957, followed by 20 years of economic disaster, social upheaval and economic chaos. Mao's Peoples' Republic of China saw little lead for intellectual expertise in any pursuit. Mao's Utopianism saw China as one continuous mass movement of revolutionary fervor. His eventual replacement was Deng Xiaoping, who initiated China's "Second Revolution." In the opposite of Mao's China, Deng's China would try to put people's livelihood above their revolutionary fervor. While Mao's China stood up to foreign powers, Deng's got rich.
Yet, at the cusp of this second revolution, there was very little in the way of autochthonous theory on how to get rich and how to go from economic backwater. Deng extolled his followers to listen to foreigners and find the best ideas to bring to China and implement them with Chinese characteristics.
Gewirtz documents that story. Against the backdrop of Chinese reformers trying to out maneuver Conservatives and remake the economy, we meet a line of foreign economists who want to help China change and reform. These reformers meet with everyone from European socialists looking to improve the socialist model to Milton Friedman (spoiler alert: Milton Friedman is an a--hole).
As economic and political changes comes to a head in the days of Tiananmen, many of the initial reformers and most of their foreign exposure were quietly airbrushed out of the official history.
Now, China embarks on its "Third Revolution" and it's important to know how it stood up and how it got rich. Gewirtz elucidates that story. With a historians knack for storytelling and an analysts ability to boil complex economic theory to a manageable level, this book is a quick and sometimes fun read into that important stage of Chinese history.
Yet, at the cusp of this second revolution, there was very little in the way of autochthonous theory on how to get rich and how to go from economic backwater. Deng extolled his followers to listen to foreigners and find the best ideas to bring to China and implement them with Chinese characteristics.
Gewirtz documents that story. Against the backdrop of Chinese reformers trying to out maneuver Conservatives and remake the economy, we meet a line of foreign economists who want to help China change and reform. These reformers meet with everyone from European socialists looking to improve the socialist model to Milton Friedman (spoiler alert: Milton Friedman is an a--hole).
As economic and political changes comes to a head in the days of Tiananmen, many of the initial reformers and most of their foreign exposure were quietly airbrushed out of the official history.
Now, China embarks on its "Third Revolution" and it's important to know how it stood up and how it got rich. Gewirtz elucidates that story. With a historians knack for storytelling and an analysts ability to boil complex economic theory to a manageable level, this book is a quick and sometimes fun read into that important stage of Chinese history.
August 20, 2024
The focus of this book is very interesting to me. As we know, China is a one-party rule nation, and everything is under one leadership, but this book gives me one interesting insight: this one-party rule party also has contradictions, especially about the future of China. There are many ideas about how to rule this country, and all these ideas fight each other to show the world that one of their ideas suits much with reality. This fight especially began after the death of Mao Zedong and his policy disaster. It leaves politicians in China with a memory of disasters in their country and a plan to avoid them happening again. This is a good book, and everyone must read it.
December 29, 2019
Best book read so far! And first review on goodreads due to genuine fond of this book.
To read this book well, one might require se basic knowledge of the Chinese political figures in current history. Otherwise those names can be confusing. But Julian had made so much investigation to write this book in order to represent the true story in history. There is no picking sides as one usually expects in such books. Julian just documented an objective series of events happened in history and its impact with his ultimate professionalism.
To read this book well, one might require se basic knowledge of the Chinese political figures in current history. Otherwise those names can be confusing. But Julian had made so much investigation to write this book in order to represent the true story in history. There is no picking sides as one usually expects in such books. Julian just documented an objective series of events happened in history and its impact with his ultimate professionalism.
April 23, 2022
In Unlikely Partners, Gewirtz takes the Chinese phrase "cross the river by feeling the stones" and uses it as a leitmotif throughout. In so doing, he re-contextualizes the phrase (which I associated with wading across a river) by linking it with the 1985 Bashan Conference, which took place on a boat on the Yangtze River.
In all, the book gives a good rundown of the economic debates in the 1980s, giving proper attention to Chen Yun, as well as pointing to multiple Western (both Eastern European and American) economists who provided insights to Chinese policy-makers vis reform and opening. The book strikes a careful balance of giving a thumbnail sketch of those economists' views without letting the scope and pace of the book get out of control - after all, one could just read Kornai, Brus, et al. My personal view, I would have appreciated a layer deeper on the economics - i.e., linking the debates more directly to material economic conditions in China then (and perhaps today).
The conclusion takes this historical episode to argue that the Chinese openness to and ability to incorporate external views in the spirit of partnership are signs of strength and confidence. It's interesting, in part given the political climate and trajectory in both countries, and because it reads as addressed to a Chinese audience more than a Western one (or at least mournful of how the Chinese political environment has become so closed and nationalistic).
In all, the book gives a good rundown of the economic debates in the 1980s, giving proper attention to Chen Yun, as well as pointing to multiple Western (both Eastern European and American) economists who provided insights to Chinese policy-makers vis reform and opening. The book strikes a careful balance of giving a thumbnail sketch of those economists' views without letting the scope and pace of the book get out of control - after all, one could just read Kornai, Brus, et al. My personal view, I would have appreciated a layer deeper on the economics - i.e., linking the debates more directly to material economic conditions in China then (and perhaps today).
The conclusion takes this historical episode to argue that the Chinese openness to and ability to incorporate external views in the spirit of partnership are signs of strength and confidence. It's interesting, in part given the political climate and trajectory in both countries, and because it reads as addressed to a Chinese audience more than a Western one (or at least mournful of how the Chinese political environment has become so closed and nationalistic).
March 28, 2022
The book shows the author’s diligent efforts put in researching the documentation and in linking the dots of international exchanges. Unfortunately the book has only provided a descriptive narrative of the history and does not really go into interpretation of what the economic policies mean for China.
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