China Didn't Copy Capitalism, They Developed Something Else

How China grew faster and longer than any country in human history

“It does not matter if it is a yellow cat or a black cat, as long as it catches mice.” Deng Xiaoping

If you read The Economist you get the sense that China just copied western capitalism. If you read economic history, however, that's not what happened at all.

China developed precisely because they didn't just copy capitalist theories wholesale. After leaping into Soviet communism, they didn't just undertake a 'Great Leap West'. Instead, they studied, they debated, and they applied markets to their own context, within their own strategic goals. They gradually experimented their way forward, one step at a time. And it worked.

As Branko Milanović said, China's economic reforms "set the stage for the fastest and longest growth in world history." Meanwhile most countries that applied shock therapy (essentially copy/paste capitalism) ended up violently shocked to death.

I read Isabella M. Weber's How China Escaped Shock Therapy trying to find out what we could copy from China, but that was the wrong question. China learned from everyone, but they ultimately developed themselves. That's the most vital lesson the developing world must learn.

Deng Xiaoping and Chen Yun, taking walks
Deng Xiaoping and Chen Yun, taking walks, or acid

Copying Kills

By the 1980s, the surviving cadres of the Communist Party of China (CPC) already knew this lesson well. They had copied communism wholesale from the Soviet Union in the 1950s and everyone fucking died. As the economist Xue Muqiao told a World Bank Conference in 1982 (via Weber):

After Mao died, there was broad agreement that China needed economic reform, but this time the CPC really looked before they leapt. They brought back economists from the countryside (where they'd be sent for re-education). These young scholars had both book-learning and lived experience of rural poverty. The CPC sent economists abroad and brought foreign economists in.

At the highest level, the party made a shift from political revolution (which was won) to the economic stage of socialism (people were still broke). Hua Guofeng succeeded Mao and "redefined revolution itself as “liberation of productive forces” and elevated national economic development to the highest priority." Then Deng Xiaoping took over as leader and really made it happen. He exhorted cadres to:

  • “Seek truth from facts” (实事求是) and said
  • “It does not matter if it is a yellow cat or a black cat, as long as it catches mice.”

Deng laid out ambitious, autochthonous goals which were not just "communism broke, capitalism fix it." The opposite really. Deng's vision was that socialism would surpass capitalism by 2050, and he rallied people around that goal.

Deng said "Poverty is not socialism. We must support socialism, but we must move ahead in building a socialism which is truly superior to capitalism." Whereas the western development model is essentially becoming western, this was very different.

Deng also said that markets weren't necessarily capitalist.