How China Escaped Shock Therapy 

A better title：How China Escaped Our Trap

Before he died, the farmer asked his son: "Pigs complain about poor feed, cows complain about heavy work, and chickens complain about dirty nests. What should I do?" The son said, "Feed good feed, do some light work, and clean up the chicken nest." The Lord shook his head and said, "Don't do anything. Give them votes. Let them choose you or your wife to take care of them. Let them think that this family is theirs."

Deng Xiaoping is one of the most misrepresented political figure in the 20th century. He is often held up as this Capitalist Champion by the West that saw the bright light of capitalism One of the misrepresented quote by Deng was "Let some people get rich first", as evidence for his acceptance for capitalism. HOWEVER the second part of this quote is deliberately left out, which he says "Let some get rich first, SO they can help other parts of the country to get rich, and achieve COMMON PROSPERITY" Western media loves to bash Xi Jinping for him "slipping back to Mao" when in fact he's actually is continuing Deng's reforms. The West loves to put different generations of Chinese leader against each other. When in reality, each successive generation of leadership is simply continuing the incremental reforms that had been happening for decades. Without Mao's industrialization, Deng won't have any foundation to build on, without Deng's commercialization and opening up of the Chinese economy, then Xi won't have any foundation for his reforms either.

why would one need 'shock therapy' if one is not sick or insane? it seems that we in the west are the ones in need of serious therapy in these crazy times...

I’m Chinese. I know China is heading to the right direction because its rapidly growing economy and the ever fierce criticism from the West.

The Chinese leadership **NAILED** it perfectly. They drew lessons from Japan, under US occupation and forced to accept the Plaza Accord, and lessons from Southeast Asia financial meltdown due to currency attacks from the West, and South America's middle-income trap... Beijing utilized its centralized power and engineered their development on solid footings, solving one obstacle at a time. The western democracies are no match. They must smear Beijing to maintain the western political status quo. But smearing Beijing only works for limited time on the western population. It has no effect to the Chinese because they already see their government's success first-hand. How time has changed - back in the cold war, the socialist nations kept control with lies, and fast forward to today, the West has to lie to keep control on their own people. LoL talking about reversal of roles.

2100 years ago, 81 BC to be exact, a big debate about economic development model happened in imperial court in China. The debate was about whether the economy should be more market-driven mainly by private businesses, which was the model before Emperor Wu, or more state guided/controlled which was during Emperor Wu's reign as he consolidated power and resources to fight Huns. The debate was recorded and compiled into a book, "Discourses on Salt and Iron".Many people, especially westerners, had misconception about the development of economic theories in China historically. In fact, 2500 years ago, the ruling elites already deployed sort of financial/economic warfare to gain advantage against its rivalries, such as Qi.

In the west the governments make plan for next quarter of a year, in China the government makes plan for the next quarter of a century.

Let me contribute some thoughts to you, I grow up in the rich part of China at the time that China was still quite poor more than 40 years ago. 1, Chinese are good at small businesses Long before the communist exists. So market is not alien to us at all. The planned economy was mainly to solve the shortage of essential goods such as food and electricity and steel etc. It’s really very efficient for these things, but it didn’t work for the huge variety of daily goods or services. 2, although China was very poor at that time, but actually it was not that poor as you thought in USD. For example my family build the first 2 storey house in year 1984, at the cost of only 2000 RMB, which is only 1000USD in official exchange rate or even only 200 USD in black market rate. A 2 storey house’s real value doesn’t get reflected at it’s dollar price. We do suffer the shortage of variety of goods but not the basic ones. This is why reform and open up policy was really essential at that time. We need to bring in the supply of varieties to populate our shops and stores. 3, the Chinese TOP Politicians doesn’t trust the western world. They are very polite and humble to welcome the western investment so they didn’t express their deep beliefs that the western world always have a very bad intention behind their beautiful words. This deep belief got strengthened through the 1989.64 incident. Chinese leaders know exactly what they want from the west and what west what from them. Embrace the capitalist but keep the door secure for the politics was the basic rule. But the difference between today and that time is the common people’s thinking. Today everyone knows the west doesn’t want a better China in their heart no matter how beautiful they talks, but at that time really a lot of Chinese believed the western way was the right way. That’s why today you still can found so many migrated Chinese in the western world still insist their belief and acted very strongly against their Mother country. Because if the mainland Chinese lives a better life than them, it will means their mental world of faith and worship collapse. So they have to hope China get worse and collapse everyday to prove they are right.

*The China Model is unique to China. At the macro level, it cannot be copied. At the micro level however, there are lessons to be learnt such as methods of alleviating poverty, city planning and infrastructure development. There is absolutely nothing to be feared about China exporting its model. The arrogance of the Western doctrine is that everything is possible under the democratic model. The stark truth is that practical realities invariably stifle progress.*

In order to understand China, the only major ancient civilization survived, you have to study the history of China. The history of political system in China is a history of evolution of meritocracy, which is continously adapted and improved to govern a country as large and a population as diversified as China.

In China, government think about people's lives. They think about long term strategies. Of course there is corruption and injustice like rest of world, but its not as corrupted as rest .

Dr. Weber's opening line is so self-evident: "There is not one single blueprint for development that we can spread throughout the world, and this would solve the problem of development" but are in total opposition to what the West keeps shoving onto poor countries. Significantly, China's position has echoed her words: Study what we've done if you want, but you've got to develop your own model in line with your own history and state of development. That's far more open-minded than the "open" West.

To understand China's economic reform in the '80s, one must thoroughly study the policies implemented by Deng Xiaoping. When Deng came back into power and was assigned as the person in charge of the reform, he immediately pushed ahead with education reform and regroup the scientific community (which suffered a huge setback during the cultural revolution). Higher education levels then became the backbone of China and its ensuing economic reform. This smart move also showed everyone that he is not in to challenge the authority of the Communist Party. Mo unified China except for Taiwan (admittingly made some mistakes along the way). Deng quietly elevated China from one of the poorest countries in the world to a middle-income country. Xi is loved by the Chinese people, despite constant smearing by the western MSM, and is leading us to a path of reawakening. We are fortunate to have these great leaders.

That is the best understanding of the process of Chinese transformation in her economic model. The granuality of the planning and care for details are important reasons that China succedded. For example, in agricultural reform in 1980s, China rejected the US proposals to privatise land ownership in a big bang and chose only to liberate the distribution of earnings. This grandual approch proved to be very successful and avoided troubles in privatisation of land in the long run . Even now China still chooses making careful planing to suit the situations at local level rather than adopes some theory that applied to all over the country .

The Liberal system was relevant when resources were plentiful and margins were high. Unleash that onto a world with depleting resources and you realise that wastage and sub-optimum results are no longer tolerable.

Surely ALL economic development requires a strong state to facilitate? It seems a peculiar Anglo-Saxon more of thinking to benefit from the structure a strong state provides only to turn around and denigrate the state. Also, yes, the vital importance of understanding geographic variation! What an idiot Friedman must have looked to the Chinese policy-makers, who were concerned with their people's welfare and not just the academic exercise being contemplated by an overconfident and under-informed outsider.

WHEN YOU INVEST, YOU'RE BUYING A DAY YOU DON'T HAVE TO WORK..

When the Western countries are crictizing you, you know you must be onto something good

I think there are two deep core reasons making sure that China can escape the shock therapy: Chinese culture and the ability of progressively self-reform. As a Chinese, I know our culture emphasize cautiousness, we want to do things step by step after think twice. For self-reform, it is a real reason a system can exist. Soviet union losts it, then collapses.

Just yesterday I searched for the podcast of this book. I was so excited to see it just now!

I am still remembered during the asian financial crisis in late 1990s how Western economists were boasting on about the inherent supremacy and strength of the Westerna and US financial management and accountability. This was before the GFCs in 2008 and Euro debt crisis in 2012. Asian tigers (i.e. South Korea, Indonesia, Thailand, Malaysia) were bascially eviscerated by these same financial geniuses that advocated shock therapy for Russia.

How about quoting some Chinese economists than largely failed Western big name economists that have failed the Russian people as well as leading to M shaped societies in Western spheres. Reviewing China’s economic reforms of the last 40 + years and record shattering poverty alleviation, I’d say a few Nobel economics prizes are in order or the Nobel prize is a shame.

Really interesting stuff, lots of good details about China's economy that I hadn't heard of anywhere else. Thanks for posting, I'll keep her book on my watchlist!

I feel it will do well for the populace to realise how much Chinese cheaper goods contribute to their well being and how much the buying of their debt by China and thereby giving free goods to the US for paper money. If there is no China, the rest of the world's big economies will have to provide free goods for paper and they will get tired soon.

Wow I love Isabela Weber’s analysis. So factual, so clear and eloquent, now I actually feel like I understand this topic. Definitely going to read her book!!

In short, it's "中国特色社会主义".

This is a really good analysis overall. As a Chinese, I don't think most people in the West appreciate the enormous transformations that China had undergone in the last 4 decades. And while China is now (largely) a market economy not too different from the rest of the world, there remains an enormous sense of hope, mission, and destiny among ordinary Chinese people that is really lacking in the West. Development, prosperity, national rejuvenation, and socialism--they aren't just slogans, but genuine beliefs and hopes of the Chinese people. We have Deng to thank for that.

If 1980 was the starting point where we cannot forget how poor China was, then I guess we cannot forget what brought China to that level of poverty in the first place, to name a few：the opium war, invasions and colonialism.

ah finally a non-biased discussion on china. This is so rare these days....

Deng Xiaoping was the greatest mind of the 20th century, what he did for China was an absolute miracle.

One of the best concise and fair presentation on China's economic reform I've ever listened to. The speaker did a great job! It's interesting how she said Zhao Ziyang (@13:50), who was in charge of China's economic reform, and the subtitle writes Xiaoping.

The answer is very simple: trust themselves instead of the Americans.

I much appreciate the high caliber of this presentation, demonstrating a very level of understanding about China. Congratulations to the speaker. You have added a lot to the discourse on the subject. I will seek out more of your presentations.

Basically, its all thx to all the prediction of how china's economy gonna fail. With all those warnings, they could prevent any domino effect. Thx. Gordon chang. Even tho people like you become a joke in china, you helped alot with your dooms day prediction (even tho its inaccurate) in avoiding pitfalls when china was moving forward.

Shock Therapy sound like western medicine one pill for patient who has the same symptoms.

Great summary and story telling of the China miracle.

what you said is exactly the reform experience in China from1980s-1990s .

USA is here to have a good time!! China was here for a long time and is looking forward for a much longer time.

40 years ago, when most of China was dirt poor, China was largely ignored and we overseas Chinese were given pariah treatment in western nations. However, in the last ten years, something has gone terribly wrong. China is developing so fast, so advanced, her people are so prosperous; wtf!!! So every week, there will be talks, discussions and endless videos on China. Suddenly the whole world is talking abt China, looking at China while some are making up lies & false stories and slandering China and her excellent leadership. I know, it's because it's unacceptable for any of us Chinese to be (more) successful but that's how it is now. Stop your hateful rhetoric against Communism - the reality is, Communism is superior system to your so-called democracy. If you understand meritocracy, you will understand China's system of governance. There is no room for mediocre standards and raving mad, jealous idiots.

The reason that China didn't choose "Shock Therapy" was mainly because of our culture. Chinese people don't believe that there is such a "shortcut" for national governance. Speaking to "National governance" We have our own philosophy, we have our own culture, we have our own experience which was accumulated during our 4000-5000 years history. We don't need to seek therapy from outside.

Thanks for this highly informative presentation!

China was affected by the shock therapy greatly. In this thread, many people praised how smart or intelligent Deng was, yet he also made grave mistakes in the economic reform in 80's. Luckily, Chinese were wise that we only administered half dose of shock therapy onto our system, and were constantly adjusting the practice along the way. The whole 64 event in 1989 was people's protest to the outcome of the shock therapy: the price reform was failed and caused huge inflation.

Mao:" We cannot be the tail of people, We must read the trend and plan to satisfy the need of people even before they asked." This feature still remains in CPC. Many western critics of CPC policy as against people's will in some part, but many measures it takes are trend they read and preparing for that trend ahead of asking.

I can't really take mainstream economists seriously :) :) . Study of ecomics is mostly a joke. Most of their models have nothing to do with how the real world actually works

其实不同国家、文化是有传承性的，会影响一代又一代的该文化下的人的行为、群体的行为。例如为何德国人历经两次世界大战，都能很快地将其工业发展起来？非洲各国在人类历史上，文化、政治、经济、科技等等都没有很先进的贡献、成果？.... 美国这样的国家，强行将其自身政治制度、意识形态几乎当成了religion来输出到其他国家，注定是徒劳的，甚至给阿富汗、伊拉克、叙利亚这样的国家带来了深厚的战争灾难。 中国人（历史至今该片大陆上的人）文化上一直都是有传承性的，例如喜欢储蓄，注重子女教育，比较勤劳等等；只要是和平年代，都能很快商贸经济发展起来。 最近的对于科技行业的限制"so called crackdown of tech in china"...也只是因为防止经济空心化。副总理刘鹤（Liu He）提到了Baumol's disease， ”就国家全局而言，互联网不断拓展新边疆，对产业发展、经济结构、社会生活产生深刻影响，为经济社会发展带来广阔新机遇。但其迅猛发展特别是无序扩张，也带来了一系列负面问题。不难看出，鲍莫尔病的分析框架是以追求绝对效率为理论预设，其必然趋势就是资本流向回报率更高的金融行业和实体经济空心化，对数字经济时代而言，就会出现技术与资本合流形成的“技术利维坦”（Tech Leviathan），不断向其他相关行业拓展延伸。如若缺乏规范和监管，势必会出现垄断、窒息竞争、妨害包容性增长。“

Super Vortrag, Frau Weber, Danke aus Freiburg. :-)

Funny thing is when I look at the western history, I see the same logic in our history long ago, including the current conflict between the 2 parties in US, very same as 1620s in Ming Dynasty. The advantage of western civilization is the systemic category of studies. And every branch of the science tree gets strong and fruitful. The advantage of China is we have never been an entity exclusively for short-term money or other kind of wealth. We are a country but not just a country, more or less we have some duty in our gene, to keep our civilization as long as forever and keep our position as we are used to be. And what is the position? It should never be defined as bully, it's always the collaboration, since if we look at our earth from the universe perspective, we human beings and all creatures on earth we are the sole.

in summary, any policy and institution should be implemented precisely, it depends on the country's condition

She couldn't have said it better in the first 1 min, that there is no one system that works for all country. US should learn from this and not try to impose its political and economical ideals on others.

Long terms strategy's, unlike in capitalism where's every new administration takeovers, policies changes as well, meaning short term policy.

Deng XiaoPing's reform principle was 'cross the river along the step stones', there were moments the country almost got drowned (1989), but he quickly realized and rectify the mistakes.

She has done her homework! The background is that Deng saw Mao's Shock Therapy in the 1950's that made China to become the poorest country in the world. Deng is not a believer in Shock Therapy.

It was never a shock therapy in the Soviet Union's sense. The whole process was throughoutly designed, monitored and supervised. The top leaders in China were not like their Russian counterparts who apprantly completely fell for the idea of "Westernization".

A bright, smart German lady. They have so many ❤️❤️

It was a shock destruction not a therapy.

Don't forget: shock therapy=unfettered exploitation of market by private capital 😱

By being a humble student of recent history

Really good example of macroeconomics not being a science but more of different magical schools of economical thinking.

To China with Love all ❤️🌹and many more years to come.

Thank you

The classical role of government is to tax away economic rents and use it to lower the cost of production. This is done through subsidies for such things as public infrastructure, education, and health care, not raising the cost of living and therefore the cost of labor, as with monopolistic privatization. The problem with economics as it is understood in America, is that there is no distinction between wealth production and wealth extraction. Production of goods and services speaks for itself, but monopolies and the banks (FIRE, finance, insurance, and real estate) extract what is called economic rent. The free market Adam Smith talked about is free FROM economic rent, not free FOR economic rent. This is Chinese Economic Policy as opposed to American Financial Capitalism favoring the rentier class, and it is what the conflict is really all about. American democracy is entirely theatrical with the majority having no more effect on the rentier oligarchy than the Chinese majority on the Communist Party of China. If the US was a democracy, we would have a decent minimum wage, public health care, free education, parental leave, and gun control, to name a few, all by popular demand.

The West is talk and talk and talk and plan. Chinese is do first.... and plan later. Chinese mentality is total different from West. Even in sentence structure, Chinese is opposite of English. Chinese understand both way of structure.... but do his own things.

Every country has its own unique social, cultural, economic and historical conditions. Ofcourse shock therapy is first and foremost about western capitalist/neocolonialist expansion. It's then no surprise to see the wrong policies applied "You cannot simply take a policy implemented iin one country and apply in another".

It always fasinates me how these non Chinese speaking scholars get their first hand data, do their work actually add onto what the Chinese scholars has already studied so extensive or just serve as an English translation?

Isabela Weber is such a creat scholar and amazing person. Invite her more.

thanks for comrade Gobachev, he showed us what happens when u trust the west.😎

One of the biggest takeaways of this book is that the East European "dissidents" who also advised the Chinese during reform were as neoliberal or more than the openly capitalist Western Friedmanites. Thank God they listened to Chen Yizi instead lol.

Yes, its reasonable. Chinese leaders, probably not very lovely or respectable, realized in 1980s the real problems among chinese and the nation itself, and keyed to it. And luckily it worked. Ten years of hard working under right policy has changed everything through the country.

Excellent food for thought

Its simple, china strongly supported the communism party while USSR did not.

How did China learn nothing from USSR's collapse? That's imposible no to learn from other's failure.

Actually the assessment of China in 80 is not quite accurate. Chinese value calculation is different but China has had massive and complete industry system already, even though the level of technology and productivity are low due to its compensation system. In fact, the state owned corporations never changed or dissapeared, and are still main part of the economy. One thing is changed is the market openness, and China imposed private economic elements in areas that the government is not directly in control. Most private companies today are due to the help or corruption from those big companies. One you won't miss, like Huawei.

The foundation of economy is people's hard work, and Chinese are diligent. That is why China economy is booming, not some magic.

Isn't the question of how China escaped "shock therapy" a question more in the realm of politics rather than economics? Logic flows from values. I assume the disaster created by shock therapy was more of a feature of the policy for its advocates rather than a bug.

You seem to be an amazing German Professor.

Without China z usa regime would have lost humiliatingly horrible to the mighty ussr then

China did not just liberalised it economy, instead it created Shenzhen SEZ. the reason is simple, if Shenzhen fails, it doesn't hurt the country economy, if it succeed, it is a proof of concept to be replicated. but that is risk management, what drove China highspeed development is really what everyone know: Education. China made Education a public good. even before Deng Xiaoping, education and healthcare has been improving, these are the base to which development is carried. Healthcare > Education > Market LIberalisation > Infrastructure > Standardization.

Ask Michael Hudson.... China is a mixed economy, the state controls key industries to keep living coasts down while allowing private companies to grow...the West is sick of financial capitalism and rentire economy....where a small group of people drives living costs and salaries up, a result the west loses competitiveness. It's simple look at Ricardo and Adam Smith and you see you have to make a difference between productive income and unproductive speculative income, the west took the wrong road in the 80s with Regan and Tatcher make money with money since then everything went down the road...China doesn't win because of communism but because of industrial capitalism.

I would like to suggest the one who want to analysis China, please study the history of China first. I do like to listen the analysis from different point of view, which may help us to reconize something we may miss.

Secret: just not hearing US tips

At 14mins or so, I think she meant Zhao Ziyang, then Premier of China, but not Deng Xiaoping.

How China escaped Jeffrey Sachs. Honestly, how does JS sleep at night?

Its not Shock Therapy , it is just shock

The worry should be how some of the Western societies are actively trying to disrupt how China becomes economically powerful. The competitive nature of the West is all based on how to make other people look bad, and oneself better. Whereas Chinese society does not exault competition, rather they prefer cooperation. Since competition comes from the human motivator of vengence, it is based on a emotional rational, rather than an intellectual one. The Silk Road was a mature supply chain allowing people to prosper all along it. That was a historically known trade market for thousands of years. It was disrupted, only in the recent few hundreds of year resulting in chaos in many parts of the Silk Road, of which only in recent times being reestablished. A free market that stretched thousands of miles, which affected millions of people, endured historically as a good source for trade to a significant number of the human population across the world, should be encouraged by all, and expanded to new markets that were not on the Old Silk Road.

Russia jumped into the trap set by USA. China freaked out, bolted and survived. LOL

Limits to Growth explains everything. We're screwed and tattooed.

Why doesn't the US practice what it preach and undergo 'shock therapy' after the last crisis?

for a second there I was very confused regarding this "ketchup development"

All of these were not the ultimate test. In fact many countries overcame those challenges or they've had better foundations of economic structures and industrial capabilities .but they all crumbled facing the final boss: beacon of freedom and democracy To survive him you need to be able to do the following 1 . Prove that you can hold up a conventional war (with allies if you can find any) against him&its allies .So that he would fear the cost of a full on world war to going after you and your allies. Two . prove that you can hold up an unconventional war a guerilla war that could drag him in the mud (in the case if 1 is not an option ) .So that there is a chance he would leave you alone eventually . 3 . Surviving though sanctions & isolation Sanctions are designed to make ppl poor so that they would agree to go against their own government similar with short a company with capital Isolating you from the world by exporting ideology & misinformation in order to make countries with possible interventions stand by. 4 . handling unofficial activities lead by agencies with diverse options (Assassination / funding terrorism/separatism in the country/ planning movement/colour revolution by coaching their leaders who were puppets/corrupt your government officials.) Well .. that's about it So shock therapy Wasn't really that hard right?😮

soviets became overconfidant because they had been so successful. china was defensive and cautious because 100 years of modernization had all failed.

“All I know is this: nobody's very big in the first place, and it looks to me like everybody spends their whole life tearing everybody else down.” - One Flew Over the Cuckoo's Nest

Oh shit! China didn't run into our trap!

what is Shock Therapy

China is the most successful one among all the economies transferred from planned economy to market economy.

I feel sorry for all the countries stuck in the IMF trap.

You know what, in the past 30 years, they keep talking Chinese economic is crashing.

作为一个1980年出生的中国人，中国的经济发展给全世界欠发达国家提供一个案例，研究发展经济的必要条件和过程。As a Chinese born in 1980, China's economic development provides a case study for less developed countries around the world to study the necessary conditions and processes of economic development.

Insightful

I wonder why Zhao's name was replaced by Deng's in the caption