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China’s Transition from Communism to Capitalism
Kevin Lu
Professor Bray
Math 89s: Game Theory and Democracy
22 September 2014
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I: Introduction
China has been a major human civilization since the dawn of mankind. A
land with a vast history and rich culture, China boasts unrivaled contributions to
human advancement that few other societies can match. Expanding across most of
Eastern Asia, China naturally encompasses a large and diverse population,
resulting in an array of different dialects and ethnicities just within a single
nation. Relatively recently, China has gradually shifted its economic structure
from strict Communism to a system resembling that of a more free-market
system. But in order to fully understand the transition, it’s important to have a
little background on China itself.
II: History and Background
China began thousands of years ago as a cradle of civilization in the Yellow
River Valley. The earliest signs of man date back to 10,000 BCE, back when
hunting and gathering were still the primary methods of survival. However, it
wasn’t until approximately 2100 BCE that China’s first dynasty, the Xia Dynasty,
became established. By then, farming was well under way, along with early
technologies such as pottery and bronze smelting. After the fall of the Xia
Dynasty, the Shang Dynasty came into power, and with it came the first written
records of Chinese civilization. The earliest cities also developed during this era,
as surpluses from farming allowed people to focus on specializing in other trades.
Following the Shang Dynasty was a chain of powerful dynasties, which at times
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was interrupted by long periods of fighting amongst smaller warring kingdoms
vying for power over others. With each succession in the chain of dynasties, more
and more advanced technologies and culture developed, while land conquests
pushed the borders further outwards. Several thousand years later, the final
Chinese Dynasty, called the Qing Dynasty, collapsed in 1911 due to internal
stagnant leaders and external intervention from Europe and America (McDowell).
What followed were decades of turmoil and conflict between the two major
powers within China: the Nationalist Party, headed by Sun Yat-sen and later
Chiang Kai-shek, and the Communist Party, most notably led by Mao Zedong.
During World War II, the two parties formed a nominal alliance against the
invading Japanese, but the Nationalist Party received the heaviest casualties from
the war, allowing the Communist Party to force oust the Nationalists and take
control of the nation. Thus begins the era of unopposed Communism in China, one
that has lasted to this day, as China remains the last major stronghold of
Communism in the world (Communist Party).
III: Mao’s Reign
After Mao took power, he began to shape China utilizing a variety of
strategies and methods. One key development that the new People’s Republic of
China implemented was a series of initiatives called Five-year plans, which were
designed to boost China’s industrialization and promote economic and social
growth. Although these plans did help to modernize China, they sometimes only
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saw limited success, and generally came at a high cost (China). One of the costliest
socio-economic campaigns, known as the Great Leap Forward, was intended to turn
China from an agrarian-based society to an industrialized society via agricultural
collectivization. Instead, it triggered a famine that resulted in as many as 45
million deaths. Several years after the expensive catastrophe, Mao launched yet
another socio-political movement known as the Cultural Revolution, this time
focusing on a return to “true Communism” and a purging of any capitalist ideals.
Again, Mao’s movement accomplished nothing more than to cripple China’s
progress both socially and economically, yet the Cultural Revolution continued
until Mao’s death in 1976 (Cultural Revolution).
IV: China’s Economic Transition
Although the man who effectively succeeded Mao never officially held the
highest office, Deng Xiaoping would come to be the de facto paramount leader and
oversee the beginning of China’s transition from Communism to Capitalism.
Starting in 1976 at the death of Mao Zedong, Deng Xiaoping teamed up with Mao’s
designated successor Hua Guofeng to launch the first wave of state-led,
investment driven program focusing on heavy industry in order to jumpstart
China’s economic modernization. However, the program terminated early due to
internal weaknesses and changes in leadership. Nevertheless, Deng bounced back
with a new strategy, which led to the second wave of government reform under
the designs of another high level official Chen Yun. Chen’s strategy directly
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contradicted Hua’s earlier ideas of focusing on heavy industries--Chen preferred
to balance out the economy with more investments into light industries and
agriculture, while at the same time allowing more fiscal autonomy to provincial
governments to decentralize the economy. This new direction resulted in an
increase of consumer goods production rather than capital goods production, as
well as a surge in the agriculture sector. Furthermore, during this time Beijing
began to loosen their restrictions on state-owned enterprises and let them keep
some of their own profits in order to incentivize additional enterprises. All of
these government reforms without a doubt played crucial roles in helping to
initiate China’s transition to capitalism; however, in hindsight, some the biggest
contributors to China’s economic progression can actually be traced to parallel
grassroot movements not instituted by the government (Coase).
During this period of economic transformation, several rising factors
independent of the government paved the way to the China of today. First and
foremost was the privatization of farming, or rather, the re-privatization of
farming. Before Mao had relentlessly collectivized farming, private farming had
existed for thousands of years. And after disasters like the famines of the Great
Leap Forward, there was no more denying that collectivization of farming just
didn’t work. At first Beijing would only allow private farming in specifically
controlled regions, but privatization quickly spread until it was made a national
policy in 1982. Another marginal factor to China’s transformation were township
and village enterprises. These rural industrial operations, which did not benefit
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from the secured channels of raw materials and markets that state enterprises
enjoyed, were unrestricted by the government and quickly found ways around
the regulations that allowed them to outperform their state-run counterparts.
Finally, Special Economic Zones were permitted to be established in tightly
controlled regions. These Zones were designated areas to experiment with market
economies using foreign techniques and strategies. However, they were strictly
confined to avoid potentially undermining socialism, which stunted possible
growth. Each of these individual factors helped China make marginal advances
towards capitalism, and with all of them working together over the course of
several decades, coupled with the Chinese government’s efforts in the state sector,
China has been able to turn its economy around from a broken and debilitated
state in the seventies to a leading worldwide powerhouse in the twenty first
century (Coase).
V: China Today and the Environment
In today’s world, with regards to the environment, modern China is almost
in a Prisoner’s Dilemma with the rest of the world. Currently, with global
warming increasing at an unprecedented rate, many Western countries are
starting to look for alternative solutions to the burning of fossil fuels, especially
renewable resources such as wind and solar energy. On the other hand, China’s
main priority has been to try and catch up with the western countries, which is
why China has been taking industrialization and production to unprecedented
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levels. This has come at a cost, most obviously a cost to the environment, since
China needs energy to power all of this industrialization and burning fossil fuels
is the cheapest way to do so. But because all the resulting pollution is an
externality to China--in other words, a cost that China isn’t responsible for--China
has no incentive to take it into consideration, and so will continue to maintain
high levels of both production and pollution. Take a look at the following graphs:
http://blogs.swa-jkt.com/swa/11246/files/2012/04/China_Economy-vs-Markets1.jpeg
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http://wiki.ubc.ca/images/5/52/Prb0704_2-e.jpg
The top graph displays the growth of China’s GDP over time, while the bottom
graph depicts China’s carbon monoxide emissions over time. It’s not a coincidence
that they share very similar curves, because CO emission is an indicator of output
production, which is apparently directly proportional to Gross Domestic Product.
Furthermore, despite the international pressure to reduce their emissions levels,
China often points to the western industrial era two hundred years prior to use as
an excuse. Perhaps if countries such as America would be willing to cooperate
with China and invest in cleaner energy and make it financially rational, China
could potentially decrease its dependence on fossil fuels; however, until that
happens, it is very unlikely that China would switch to more renewable resources
on their own in the near future.
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Summary:
China is home to a people and a culture with a long and rich history.
However, over the past 150 years, China has struggled with weak leaders and
foreign competition. After World War II, the Communist Party defeated the
Nationalist Party to take full control of mainland China, with Mao Zedong at the
helm. Mao’s policies get China on the path to modernization, but they often come
at high costs to the people of China. After Mao comes Deng Xiaoping, who becomes
the main leader that guides China from debilitated nation to economic
powerhouse. Today, China is at an impassé with the rest of the world regarding
pollution in the environment. Unless other nations can incentivize a way for China
to switch to cleaner energy sources, China will continue to produce and pollute in
order to catch up with other developed nations.
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<http://www.cato.org/policy-report/januaryfebruary-2013/how-china-be
came-capitalist>.
"The Communist Party of China." An Illustrated History of the Communist Party of
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<http://www.china.org.cn/english/features/45981.htm>.
"Cultural Revolution." History. A&E Television Networks, LLC, 1 Jan. 2014. Web. 1
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