Doing economics differently

Abstract

The article introduces a book forum on Isabella Weber’s book, “How China Escaped Shock Therapy.” The book is notable not only for the way that it reinterprets, substantively and theoretically, the story of China’s world-altering economic transformation, but also for the truly original kind of book that it is.

Isabella Weber’s How China Escaped Shock Therapy is a remarkable book, both for the way that it reinterprets, substantively and theoretically, the story of China’s world-altering economic transformation during the first decade of the reform era, and no less, for the truly original kind of book that it is. In this introduction to a roundtable discussion of Weber’s book—with contributions from Chris Meulbroek, Kean Fan Lim, Wenying Fu, and Steven Rolf, followed by a response from the author—I will comment on both sides of this distinctive contribution, drawing out some of the distinctive features of what has been properly credited as an innovative and highly suggestive model of heterodox economic scholarship (see Andreas, 2021; Liu et al., 2023; Scheiring, 2021; Werner, 2021). The book takes apart many of the dualisms that have animated, but at the same time obfuscated, interpretations of China’s path-making transformation (liberalism vs statism; neoliberalism or not; market versus plan; convergence or uneven development; China model vs the United States qua supposedly standard-issue liberal capitalism; and gradualism as a singular alternative to shock therapy), superseding these with a provocative and scrupulously documented account that goes far beyond assertions of vagarious complexity and contingency. Weber engages the longue durée, doing so not via sweeping generalization but through meticulous attention to texts, protagonists, and debates, zeroing in on the decisive decade of the 1980s in order to deconstruct and then reconstruct the dynamics of the reform process. And yet for all of this close attention, the narrative is not a Sinocentric one. Instead, it works “to trace several different ways of doing economics that provided competing depositories of knowledge [for] reformers” (Weber, 2021b: 38). In the process, Weber herself models a different way of doing economics, presenting a richly contextualized history of economic ideas and practices that can be aptly described as a relational one.

In contrast to those treatments of the reform process that characterize China’s experience of “crossing the river by feeling for stones” as a one-way journey to a practically preordained future, departing from statism and planning on one bank and navigating toward liberalized markets and global integration on the other, the zigzagging, stop-start path of reform described in Weber’s book is constantly debated and recalibrated, being informed more by inductive learning and experimental practice than by grand design or world-historical destiny: “The Chinese approach was to make the path while walking” (Weber, 2021b: 146). In the years following Mao’s death, it was widely understood that a change of course on economic governance was almost inevitable, but there was nothing inevitable about the means, method, sequencing or speed of the reform process, all of which would become sites of protracted struggle. In the words of economist Zhao Renwei, the China of the late 1970s “could not have gone on without change. [This] was not a possibility. But how to reform. This was not clear” (quoted in Weber, 2021b: 104).

A central motif in Weber’s book is an account of what did not happen (big-bang price reform, even though on occasion it came close), and how a path quite different to the Washington-consensus prescription was then made. The path (and fate) narrowly avoided would have been initiated by a massive dose of shock therapy—structural adjustment by means of big-bang applications of privatization, deregulation, liberalization, tax cuts, public-sector austerity—as notoriously indicated in the first edition of the neoliberal playbook. Now, shock therapy certainly had its advocates within China, many of them determined and well connected, so this was never simply a matter of heeding the siren call of Milton Friedman, or the recommendations of policy advisers from the IMF and World Bank. Those advocating a big-bang approach, fording the river as fast as possible by means of rapid marketization and radical price liberalization, included influential Chinese economists like Wu Jinglian and Guo Shuqing; on the other side stood the advocates of “gradualism,” such as Chen Yizi, Li Yining, and Wang Xiaoqiang, and a newer generation of economists associated with the System Reform Institute, arguably the first independent think tank ever established in the socialist world. This is not, then, simply a struggle between conservative defenders of the old ways and young-turk advocates of reform; it is a struggle over different approaches to reform, and over the form, character, and sequencing of the reform process itself. And it is also, as Weber revealingly demonstrates, a contest between different economic epistemologies: the advocates of shock therapy tended to favor deductive reasoning, axiomatic assumptions, and the cold logic of classical models; the gradualists on the other hand, in their own way(s) a more diverse group, were more inclined to pragmatism, incrementalism, and the drawing of inductive lessons from experiments, empirical experience, and indeed history.

The gradualists were not, however, just muddling through, or making it up as they went along. They were also reworking venerable traditions of Chinese marketcraft, which Weber traces back to the Guanzi economics of the Han era, when a broad distinction was established between those economic processes and commodities that could be considered “heavy” (i.e., essential to production and well-being, warranting oversight or control by the state) and those deemed to be less essential or relatively marginal, which might otherwise be left to the market, in other words, “light.” This method of characterizing, weighing, and balancing economic phenomena, moreover, is not definitive, essentialized, and fixed, but somewhat-qualitative, relational, and contextual. As Weber (2021b) argues, “economic phenomena can only be understood relationally; things can be heavy or light only in relation to other things,” their respective weight being subject to “concrete circumstances,” nothing being universally heavy or light, these designations themselves “depending on the context” (pp. 21, 23, emphasis added). Weber (2021b: 7) traces the lineage of this idea through to the experimentalism and incrementalism of the reform era, when a “dual-track” pricing system was adopted, as the “state gradually re-created markets on the margins of the old system,” instead of a wholesale, one-time shift to market pricing. Reworking Naughton’s (1995) famous formulation, “growing out of the plan,” Weber (2021b: 269) characterizes this as a process of growing into the market, by means of which “China grew into global capitalism without ever losing control over its domestic economy.”

Drawing on an extensive program of interviews as well as archival materials, Weber reconstructs a vivid account of the contestation of economic policy debates during the long 1980s, a time when neither side could have truly known how the course of history would play out, no matter what the strength of their convictions. China’s economic transformation defied neoliberal orthodoxy and mainstream “transitology,” its course being neither preordained nor externally imposed; the country’s transformative pathway was very much made (and Weber has the receipts). What is especially impressive about the book is how it moves from the almost microsociological through to the macroeconomic, tackling big-picture issues while carefully contextualizing the downstream effects of economic ideas, along the way dramatizing the roles played by individual actors, specific organizations, and particular events. With an eye to pluralistic ways of knowing and intervening in a transforming economy, the book documents the fashioning of what Imogen Liu has called “an essentially institutionalist solution to the problem of market transition” (Liu et al., 2023: 2), not as a universal template, let alone some automatic process, but as a conjunctural accomplishment. Of course, the wider conjunctural circumstances—that is, world-historical conditions—were in many ways propitious (see Rolf, 2021; Rosenberg and Boyle, 2019), but still, there were no guarantees. And Weber delivers what may prove to be the definitive account of the sociopolitical dynamics of reform debates during the critical period between the initiation of China’s opening up in the late 1970s and the turning point that was Tiananmen. On this account, the making of the Chinese reform process was in part a product of some very long, endogenous histories of experimentation (both theoretical and practical) with methods of marketization and models of economic governance, in part a product of intensified wars of position between political elites and economist-reformers of different stripes, and in part a product of contested interpretations of the history and geography of economic transformation, both within China and beyond.

“Seeking truth from facts,” the gradualist reformers took their cues not from abstract models or textbook axioms but from the actually existing effects of price reforms, drawing on the experience of rural economies during the Cultural Revolution, for example, but also from the historical experiences of wartime price controls in the West, and from a program of fact-finding tours of Hungary, Yugoslavia, Brazil, Argentina, Mexico, and elsewhere, supplemented by (re)assessments of some of the “original” experiments in neoliberal governance, such as Pinochet’s Chile and the West Germany of Erhard’s postwar “miracle.” As Chris Meulbroek emphasizes in his commentary on the book, these grounded investigations of real-world transitions helped to build the case for gradualism in ongoing debates with the shock therapists, Weber’s analysis calling attention to the (often consequential) ways in which economic ideas are variously translated, mediated, and (re)contextualized—even supposedly “universal” ideas. Deng Xiaoping himself had warned against the perils of “book worship,” advocating instead a method of learning through practice with its own lineage to what Sebastien Heilmann and Elizabeth Perry have called the “guerilla style” of policymaking, a heterodox model of reform based on a dynamic ecology of localized experiments (see Heilmann, 2018; Weber, 2021b: 70–71). Weber’s carefully formulated account of “marketization from the margins,” beginning with those processes considered “light” and experimenting along the way, is in many ways complementary, explaining a lot without resort to the usual binarisms or other crass categories. “China’s deviation from the neoliberal ideal primarily lies,” Weber explains in this vein, “not in the size of the Chinese state but in the nature of its economic governance” (Weber, 2021b; 3; see also Weber, 2018).

In these and other ways, as Kean Fan Lim and Wenying Fu comment in their responses to the book, the question of uneven spatial development is never far from the surface in Weber’s account, even if it is not necessarily prioritized. Mao had embraced a version of Trotsky’s argument, against the Leninist line, that in the transition from capitalism to socialism so-called backward countries might possess some advantages, insisting on the fundamentally political means to this end, which Deng would later pursue by means of economic development. Advocating coastal economic development and the role of special economic zones as forcing houses for market-oriented reform, Deng (1978) espoused the notion that, “In economic policy, . . . we should allow some regions and enterprises and some workers and peasants to earn more and enjoy more benefits sooner than others.” The management of uneven development (and what would become stubbornly entrenched, rather than transitory, sociospatial inequalities) would be just some of the challenges subsequently to confront Chinese reformers. Time and time again, Weber demonstrates, alternate means and methods of reform were debated between the radical advocates of big-bang reform, whose recourse was to mathematical models and ideal-typical principles, and the pragmatic defenders of a gradualist, dual-track approach, who in many respects are the heroes of this story. Her account of these debates through the 1980s is remarkably engaging, even as for readers of the book of course “the outcome is known” (Riskin, 2021: 906). China’s gradualist reformers constructed their own version of a model, incrementally, that would subsequently underwrite decades of double-digit economic growth, deep global integration, and large-scale poverty alleviation. Fatefully, the dogmatic advocates of shock treatment would get to run their own experiments, albeit somewhere else, in the transition economies of the former Soviet bloc, where in contrast to China, the socialist state was comprehensively dismantled. Weber captures the difference between this big-bang approach and China’s gradualist alternative with reference to a telling metaphor, that of rebuilding a tower:

The [shock treatment] approach suggests we destroy the whole tower in order to build up a new tower based on a grand plan—no matter how much immediate pain results from the destruction. From this perspective, the given system must be destroyed in one big bang, to provide space to build the new utopia. The [Chinese] approach is like the game of “Jenga,” in which players take turns removing one block at a time from a tower, aiming to prevent its collapse. Only those blocks that can be pulled out without causing the structure to collapse should be removed—and only after cautious testing to determine whether they are loose enough not to destroy the tower’s balance. The blocks so acquired can then be used to build on the given tower and transform its size, shape, and eventually its whole nature. Yet, since removing blocks changes the statics of the tower, this gradual approach cannot avoid the looming danger of collapse (Weber, 2021b: 179).

The compelling story that Weber tells about China’s conjunctural transformation during the first decade of the reform era ends with the fallout after Tiananmen, but if the immediate outcome can indeed be said to be “known,” the longer-term trajectory continues to unfold, while debates around economic governance remain anything but settled. Through the course of China’s long boom, the party-state did indeed remain intact—the Jenga tower did not fall—but the shape of the tower itself has nevertheless been continuously reconstructed, brick by brick, in tandem with ongoing transformations in socioeconomic conditions, domestically and abroad. If the reform era proper can be said to have run its course, even before the global financial crisis and the ascendancy of Xi Jinping (see Minzner, 2018; Pei, 2021), the subsequent trajectory of China’s sui generis version of party-state capitalism surely confirms, if nothing else, that the twin processes of marketization and capitalist integration were never a guarantor (or predictor) of continuing liberalization, nor convergence toward “global norms.” The contests around different ways of knowing the Chinese economy, its transformative dynamics, and its place in the world are therefore ongoing—and if anything the stakes are increasing.

As if to underscore the point that hers were arguments not “only” about China, but also about the role of ideas, expertise, and intra-elite struggle in the endless work of (macro)economic governance, in the months after the book came out Weber would find herself in the middle of an even battle over a neoliberal article of fatih. Drawing on her extensive experience of price-control policies, Weber (2021a) published an op-ed in the Guardian, making the case for strategic price controls in the face of an escalating inflation problem rooted, she argued, in supply-chain bottlenecks and corporate profiteering. This challenge to orthodox thinking set off a firestorm, apparently causing the Economics profession to lose its mind. Prominent figures attacked the messenger with a ferocity that said more about the discipline’s dysfunctional monoculture than it did about the issues at hand. (Some public apologies, and several climbdowns, followed, although not nearly enough.) In due course, the world soon caught up with Weber on the issue of post-pandemic inflation, even as orthodox Economics has remained predictably resistant to changing its mind. As Steven Rolf observes in his commentary, just as there is no such thing as a general theory of inflation, there is no generalized, all-purpose remedy either. Adequate responses call for the kind of probing, institutionally situated analysis that Weber provides in How China Escaped Shock Therapy. This is not to say, as Weber comments in the response that follows, that each case is unique and irreducibly idiosyncratic; theorizing across cases and conjunctures is both a stubborn challenge and a significant opportunity for heterodox political economy—perhaps informed by more retroductive modes of analysis, such as the kind of approach, cited approvingly in the book, that proceeds by “feeling its way from case to case” (Taussig, 1919).

The confluence of circumstances that for a while thrust upon Weber the unwarranted status of “the most hated woman in economics” (Carter, 2023; Grothe, 2023) have since passed, although not entirely without trace, as so many of her arguments have been roundly vindicated in practice. Today, Weber’s counsel is sought by economics ministries and media platforms around the world, as in the process she has also become a different kind of public economist—and not the more familiar type, the peddler of quick fixes or one-size-fits-all solutions. As Weber told Zachary Carter (2023) of the New Yorker, “There will be more shocks . . . [T]he research has become impossible to ignore. We are finally trying to develop a stabilization policy that grapples with what is really happening in the economy—instead of what the old textbooks say should be happening.”