How China Became Capitalist

Abstract

How China Became Capitalist Ronald Coase and Ning Wang Palgrave Macmillan, 2013China's transition from Maoism to "capitalism with Chinese characteristics" is not only one of the principal facts about the global economy today, but is also a subject of great complexity and ambiguity. What is one to make of a society in which Adam Smith is revered while Marxism is still universally taught in the schools? In How China Became Capitalist, Ronald Coase, a Nobel Prize winner in economics, and Ning Wang, an assistant professor at the School of Politics and Global Studies at Arizona State University, have joined in writing an extended essay on the history and economics of China since the Communists completed their victory over Chiang Kai-shek in 1949. It is clear from the book's title that they believe China has "become capitalist," but it is apparent that there is much that is muddled about the transformation. There are many contradictory elements that go together to cook up a social and economic stew that is likely to bubble vigorously for quite a while before it develops any culinary coherence.The subject is of such importance that there is compelling reason for serious minds to read this book attentively. It is full of information new to any reader who isn't a China specialist. At the same time, it is for several reasons hard to recommend it to the general reader. It isn't difficult reading or full of technical information, but neither is it particularly engaging, as one might require of a "good read." Even though the chapter titles suggest a chronological account, there is throughout the book a rather jumbled mixture of time elements, with much rehashing, as though the chapters were done as separate essays independently needing to cover and recover the same ground. The result is not an ordered chronology. We are reminded of Eric Hoffer's observation that many books' content could just as well be stated in a single article, attaining greater concision and clarity. More substantively, a telling criticism is that there is much that Coase and Wang don't explain or even inquire into, leaving many unanswered questions. We will have more to say about that later.Through most of the country's history before the Communist take-over in 1949, "the family had been the basic social unit and organizational form in rural China." Mao changed things radically into the commune system, where "all assets were taken away from households and managed as collective goods." Coase and Wang write of this as "an extreme form of socialist agricultural management where farming was organized by production teams..., with households treated as employees." It will surprise many readers that Mao had an "instinctive hostility toward centralization." There was "no private property or free market," but also "much less central planning than the name socialism might suggest." Although we are told that China received a fair amount of equipment from the Soviet bloc during the first Five Year Plan, the authors don't explain how it happened that Communist China eventually built up "an impressive nationwide industrial base" during Mao's tenure. We know that the Great Leap Forward in the late 1950s was an attempt at that, with its command that millions of people try making steel in backyard furnaces, but we also know that that was a disastrous failure. Perhaps a reason industrialization went forward lay in Mao's "bias against consumer goods." On another point, the authors tell us that since there was no market creating a price system, prices were set by "a powerful computing machine" that was intended to "calculate prices scientifically," using input-output data. Even though Coase is a prominent economist and may be presumed to know much more than this book tells us, the discussion isn't broadened to inform readers about Wassily Leontief and how his input-output theory became the basis for the Soviet Union's socialist planning. That would have allowed readers to understand China's experience in a broader, less provincial, context. …