One of the most surprising and dangerous myths I encounter when meeting participants at our courses in public policy and liberal philosophy is that China is growing and becoming prosperous because it is “communist,” i.e., because (they believe) the state plans and directs economic activity.  This is a tragic farce. What they misunderstand is that since Deng Xiaoping succeeded Mao in 1978, China has been becoming more and more capitalist and it is this transformation that is the primary reason for its growth and poverty reduction.  Before 1978, the push to control, direct, and plan the economy had not succeeded in creating such growth or poverty reduction and in fact had lead to one of the greatest mass starvations in history (Mao’s “Great Leap Forward”).

In their new book How China Became Capitalist, which the Wall Street Journal just reviewed, Ronald Coase and Ning Wang argue that the principles guiding Chinese reform have been “pragmatism, experimentation and the Confucian injunction ‘to seek truth from facts.'”  However, it has been “the gradual withdrawal of government from the economy, rather than the strength or omnipresence of the political leadership . . . explains the success.”

It is true that there is still a huge sector of publicly owned enterprises and extensive interventionism in money, banking, and exchange rates, which is paving the road for some significant troubles ahead. Yet it should be understood that China has been developing despite these, not primarily because of them.

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The opinions expressed in this essay are those of the authors. They do not purport to reflect the opinions or views of CCS.