Communomics

introduction

The SEZ’s success was replicated and expanded, primarily around eastern coastal areas, south towards Hong Kong and with special attention focussed on conurbations such as Shanghai, the mega-city being allowed to attract foreign inward investment and expertise, for example, by establishing international joint ventures (IJVs). The SEZs were focused almost exclusively on exports which earned foreign currency reserves and effectively financed domestic economic growth and development, a process accelerated by restrictions on capital outflows and a steadily declining yuen over a period of many years. China under Deng was characterised by market liberalization and FDI, concisely paraphrased as ‘one country, two systems’, later to become the philosophy underpinning the Special Administrative Region (SAR) status of Hong Kong and Macao. For the first time in its modern history China had successfully synchronised agricultural and industrial economic reform, although it should be noted that the benefits accrued went largely to eastern-coastal and southern regions at the expense of the west and the vast hinterland between the country’s two longitudinal extremities.

the political economy ‘hall of fame’

 

Adam Smith (1723-90)
As we will demonstrate, while China quite liked the idea of economic reform it was less enamoured by political freedom. Fukuyama was very strong in his contention that the two freedoms must go hand-in-hand which was extremely naïve given the hugely different communist uber-states, the USSR and China (discussed further below). In the paragraphs which follow we will deviate briefly from any semblance of chronological rhythm (to reference Mark Twain’s observation that history doesn’t repeat itself, it rhymes) to understand the contemporary position of China with reference to

 

David Ricardo (1772-1823)
Any book is necessarily selective in the body of knowledge from which it assimilates and articulates its ideas. Outside Fortress Europe and the BiteSized Volumes are no exception to this general observation. The principal concern is to cover a broader range of subject areas than would normally be found in a single textbook or volume, the intention being to provide a cross-functional, multi-disciplinary perspective on the challenges of organizational life and strategy development in a highly competitive and complex global business environment. In a similar vein, all texts must be highly selective in their coverage of any article or book they review. The problem here is

 

Karl Marx (1818-83)
The KMT, under long-time leader and generalissimo Chiang Kai-shek, had already established a retreat in the island of Taiwan (Formosa) ahead of the 1949 fissure, stashing gold, national treasures and foreign currency reserves in anticipation of a temporary period of exile ahead of a triumphant return to the mainland. Two of today’s most powerful trading nations, China (PRC) and Taiwan, the original Republic of China (ROC), were established at the end of the 1945-49 conflict. In all of today’s global institutions and forums, ranging from the UN to the International Olympics Committee, PRC is the ‘legitimate China’ while Taiwan is mostly represented under the name Chinese Taipei.

Vladimir Lenin (1870-1924)
The PRC vigorously maintains its ‘One China Principle’ stance within which it includes Taiwan; as does Taiwan, in its case claiming one Chinese nation (ROC) which includes the PRC or, more realistically in recent years, that it is recognised as an independent sovereign state. Regarding unification of the ‘two Chinas’ on Taiwan’s own terms, The Economist notes (Economist, 2017, October 7th): “That fantasy now exists only among a few diehards. These days governments in Taiwan, including KMT ones, claim to rule only for Taiwan, not for all of China”. Chinese history is fascinating and colourful, and it is extremely tempting to ‘stretch’ a discussion of dynasties, warlords, silk

 

Mao Zedong (1893-1976)
roads, colonisation, opium wars and even dragons into our focus on post-Bretton Woods globalization, just as it would be informative to analyse Chiang Kai-shek’s China’s Destiny alongside Quotations from Chairman Mao Tse-tung (the Little Red Book) for philosophical insights from the two civil war protagonists. But it would be an unnecessary distraction. Closer to our focus, The Long March of the Chinese Communist rebellion, the Great Leap Forward of dismal economic and social reform, the Cultural Revolution, the Gang of Four and the Red Guards had little impact on the pace of post-Bretton Woods globalization

 

John Maynard Keynes (1883-1946)
Interrupted by the Sino-Japanese War and Japan’s occupation of the Chinese mainland and surrounding islands during the Second World War, the Chinese Civil War began in 1927 between the Kuomintang-led (Nationalist) government of the Republic of China (ROC) and the Communist Party of China (CPC) and settled into a protracted clash of fiefdoms led by the KMT’s Chiang Kai-shek and the CPC’s Mao Zedong. As discussed in the introduction to this Chapter, the conclusion to this civil war came in 1949 and laid the foundations for two global economic superpowers, the ROC and PRC, separated by just over a hundred miles of water and.

Milton Friedman (1912-2006)
Although the US had remained ice-cold towards the PRC and its ideology since the civil war had ended, following the latter’s ascendancy to legitimate status as the ‘one China’ in the UN in 1971 relations did begin to thaw. President Richard Nixon saw both opportunity and threat in the vast country and persuaded his National Security Advisor, Henry Kissinger, to his line of thinking. He was also vivid in his rhetoric. 1bn sounds inconsequential, the ‘1’ guiding our misperception of magnitude according to behavioural science. But, as Nixon observed in a hand-written note to make his point (cited in “Chinese Communists … we do not want 800,000,000 living in angry

Ronald Reagan (1911-2004)
isolation”. That looks like a big number and, of course, it is. (China has 1,415,000,000 souls in 2018; or a measly 1.4bn, rounded down). Typical of Nixon, famed for opportunism and grandstanding amongst other political traits, a meeting with the Chairman was arranged by Kissinger in negotiations shrouded in secrecy and subterfuge. When the get-together was subsequently publicised and spun as a great success by both the US and China, the Chinese door was opened to America’s allies, including a hugely symbolic meeting with old-enemy Japan shortly afterwards.More generally, the meeting is widely acknowledged as the first move by China to engage with the West and as such is a significant milestone in the long march of globalization.

Mikhail Gorbachev (1931- )
Although the US had remained ice-cold towards the PRC and its ideology since the civil war had ended, following the latter’s ascendancy to legitimate status as the ‘one China’ in the UN in 1971 relations did begin to thaw. President Richard Nixon saw both opportunity and threat in the vast country and persuaded his National Security Advisor, Henry Kissinger, to his line of thinking. He was also vivid in his rhetoric. 1bn sounds inconsequential, the ‘1’ guiding our misperception of magnitude according to behavioural science. But, as Nixon observed in a hand-written note to make his point (cited in Fenby): “Chinese Communists … we do not want 800,000,000 living in angry

Deng Xiaoping (1904-1997)
isolation”. That looks like a big number and, of course, it is. (China has 1,415,000,000 souls in 2018; or a measly 1.4bn, rounded down). Typical of Nixon, famed for opportunism and grandstanding amongst other political traits, a meeting with the Chairman was arranged by Kissinger in negotiations shrouded in secrecy and subterfuge. When the get-together was subsequently publicised and spun as a great success by both the US and China, the Chinese door was opened to America’s allies, including a hugely symbolic meeting with old-enemy Japan shortly afterwards. More generally,

Xi Jinping (1953- )
Having made this observation, it should be noted that the primary motivation behind Nixon’s visit was to shift the delicate Cold War balance between the USA and the USSR, which at the time resembled a teetering faux-conflict complicated by the Vietnam War. In this it failed, as Fenby notes: “The Sino-US relationship would become enormously important, but the immediate fall-out from the trip was unimpressive, and the real change would have to wait for a decade, under another Chinese leader, who was repairing tractors in Jiangxi when Nixon met Mao”. That amateur mechanic was Deng Xiaoping, the engineer of ‘socialism with Chinese characteristics’ which defines the contemporary era of Chinese engagement with global capitalism.

Thomas Piketty (1971- )
two giant pandas, Ling-Ling and Hsing-Hsing, who subsequently proved to be a major attraction at the National Zoo in Washington D.C. In return, Nixon gave two muskoxen: hairy, horny (in the antler-sense), smelly (during mating) mammals. (China has a long history of Panda Diplomacy, dating back to the Tang Dynasty. In recent years it has developed a business in leasing pandas to zoos worldwide, typically for ten years at around $1m a year with any cubs born reverting to Chinese ownership. Edinburgh Zoo in Scotland currently has two Giant Pandas on a ten-year loan, arranged as part of a £2.6bn UK-China trade deal. The female is called Tian Tian (Sweetie) and the male is Yang Guang (Sunshine). At the time of writing, the pandas remain unproductive on the cub-creation front but are hugely popular amongst families and schoolchildren on social media and at Edinburgh Zoo’s PandaCam, although the SquirrelMonkeyCam is more animated!).

Over many years China has been accused of ‘stealing’ ideas by fair means or foul, an assertion repeatedly featuring in President Trump’s current trade war tweets (also, see the discussion in Chapter Nine of this Volume relating to the transition from GATT to the WTO). But while the focus in recent years has related to technology and intellectual property theft it is important to note that the Communist Party of China has not been shy of ‘borrowing’ ideas from political science and political economy. Deng had been side-lined on numerous occasions under Mao’s chaotic leadership and had witnessed the disastrous consequences of the Great Leap Forward in both the agricultural and industrial sectors. Moreover, he was no doubt very much aware of the impact of Stalin’s purges of the ‘capitalist’ Kulaks and the subsequent failures of various attempts at collectivisation of agriculture in the USSR. Multiple ‘private land-plots’, in contrast, were in large measure the most productive component of Soviet agrarian output and it was this model of agricultural reform that began Deng’s transformative approach to Chinese economics. As Fenby comments:

 


All content © Colin Edward Egan, 2020