Chinese lessons

The country performed an economic miracle because it brought the bureaucracy under control in an authoritarian state. There's a lot to learn

“But no analogies!..” our teacher of regional studies warned me sternly before starting to read a course of lectures on the PRC in the early 80s of the last century. And very soon we realized the meaning of his warning. Before us was...

“But no analogies!..” our teacher of regional studies warned me sternly before starting to read a course of lectures on the PRC in the early 80s of the last century. And very soon we realized the meaning of his warning. A country began to open up before us, as if reflecting the USSR in a mirror. The structure of the party-political structure, the principles of the economy, the state ideology, the role of trade unions, youth and children's unions, up to the style and rhetoric of the party-economic asset - everything, down to the smallest detail, was similar to our country. Some really twin brother with slanted eyes ...

But even then, reforms were announced in China that seemed to us ordinary ideological chatter, another “breathing space” before future socialist experiments such as the “three red banners” policy or the “great leap forward” in order to distract people from everyday hopelessness and horrendous poverty. It should be noted that at that time, China's GDP per capita did not exceed 580 yuan (at the official exchange rate of 1:2.8 to the US dollar, the real one was approximately 1:4).

Moreover, it would never have occurred to anyone, even in the worst nightmares, that our country (at that time one of the two superpowers) in a little over 20 years would begin to import cars, machine tools, equipment, communication systems, industrial technologies from China - a complete economic outsider of the time.

Why did the “younger twin brother” (not by age, but by entering the road of socialism) come out of absolutely the same socio-economic development paradigm with such stunning results, and we turned into a primitive “raw material base”, where the ambitions of leaders and the standard of living of people directly depend on the prices of oil, gas, timber and other primary materials?

With all the abundance of arguments, articles, studies on this topic, it is difficult to find a sane answer in Russian publications. All references to "the Klondike of cheap labor", "the special industriousness of the Chinese people", "favorable climatic conditions", "the leading role of the Communist Party" can only convince people who are either very far from Chinese realities, or who deliberately want to "deceive" in order to brush aside unnecessary questions, muttering something awkward about "rice civilization." Let's look at China...

There are indeed a lot of people living in China (over 1.3 billion people). At the same time, the territory of China is several times smaller than ours, and even that is only 1/4 suitable for living, since most of the country is occupied by mountains and waterless deserts. Almost the entire population is concentrated on the Great Chinese Plain (along the east coast) and a few mountain valleys, oases inside the continent. So it can be stated that at the time of the beginning of the reforms, China had the following "advantages" over other countries of "developed" socialism:

- the incredible crowding of the people;
- the depletion of the land by millennia of agriculture;
- low educational level;
- hopeless poverty, reaching the widespread physical starvation;
— lack of any modern infrastructure;
- extremely backward industry;
- low-efficiency agriculture, where "hard-working" Chinese peasants were engaged in almost everything, but only "did not plow";
- dominance from the arbitrariness of the ignorant "ganbu" (cadre workers);
- the almost complete eradication of representatives of the "Chinese intelligentsia" by labor "re-education" in the countryside during the "cultural revolution".

Add to this the historical penchant for bureaucracy, corruption, secret societies in the form of "triads", or rather, for systemic banditry and extortion at the slightest weakening of the central government, and you will understand only a small part of the problems that the then Chinese leadership faced.

With a GDP 1/3 of ours and a population three times that of the USSR, China trudged far behind the world economy with no apparent hope of change for the better. These are the "advantages" that the "fraternal people of China" once had.

And now we can already state that the reforms have taken place. For some thirty years, China's position in the modern world information field has moved from the section of curiosities about "Hongweipings" and "hunting sparrows" to the front pages of the world's leading political and economic publications.

Let's try to figure it all out. Let's start with theory...

Economic science teaches us correctly, and practice confirms that the only known way to overcome poverty and improve the well-being of the population is economic growth. Moreover, growth is not so much physical (although it matters), expressed by the volume of production per capita (steel, tractors, oil, computers, shoes, suitcases, etc.), but primarily cost, that is, confirmed by world market demand .

China is no exception in this matter. The rise in the well-being of the citizens of this country is directly related to this very economic growth. GDP per capita over the past 30 years has increased from $200 to almost $10,000 (based on purchasing power parity).

Of course, under certain conditions, it is possible to achieve economic growth, and after it the growth of the well-being of citizens on the basis of a good market situation for any national natural resource (for example, oil, natural gas, gold, etc.).

In 1978, China had a “surplus” resource, from the point of view of the economy, but no one claimed it. Mostly illiterate (at that time, over 50% of the population either could not read and write, or could only write their own name), corrupted by demagogic slogans about the “soon universal happiness” of communism, more accustomed to meetings than to useful work.

European countries had enough problems with "their" immigrants from former colonies. Yes, and European guest workers from Turkey and Yugoslavia were much more able to work than the Chinese from Chinatowns (other Europeans did not see other thanks to the "bamboo curtain") with their drugs, banditry, playing cards and mutual responsibility, where the height of happiness there was the opening of his own laundry or a restaurant, but not work on the assembly line.

Another well-known way to ensure stable economic growth, confirmed by historical practice, is the consistent maintenance and provision of the following principles within a market economy:

1. Ensuring effective protection of private property.

2. Limiting the arbitrariness of the state bureaucracy.

3. Creation of a transparent (fair) competitive environment.

Of course, everyone knows the classic solution - separation of powers, independent courts, elections and turnover of power, effective public control over executive bodies, etc. The whole set of modern democratic society. Here are just too many historical examples of the unsuccessful "implementation" of all these undoubtedly wonderful principles in real countries. For some reason, instead of progressive and smart elected rulers, demagogues and populists, and even outright bandits and mafia clans, come to power.

Practically all countries of Latin America are a striking example of all this.

In a word, for the Chinese leadership, the path of direct liberalism and the widespread introduction of democratic procedures at that time was unacceptable, although many of the leaders of China had a good Western European education (including Deng Xiaoping himself), spent many years in developed democracies and had a good idea of all its pros and cons.

But nothing could be changed. By the end of the 1970s, China was heading towards economic collapse no less "stably", events could go according to an unmanageable scenario. And no one wanted to imagine an “uncontrollable” situation with almost a billion people, let alone feel it for themselves.

China had no choice but to start modernizing its despotism, turning it from an instrument primarily aimed at maintaining the current “status quo” and exercising the rights and will of the ruling socialist bureaucracy, into an instrument of prosperity and development in a market economy. After 30 years, we can say that China has largely succeeded. Here we will move on to the “Chinese lessons”, which it would also be useful for us to learn.

Lesson 1. Ensuring private property rights in an authoritarian society and market economy

In a society based on a rigid vertical of power and the state's total ownership of resources and means of production (in everyday life - "real socialism"), there is practically no talk of protecting private property. It is narrowed down to the so-called personal property, which is quite effectively protected by ordinary police (militia) forces. And this property itself, by and large, does not represent any attractiveness.

But after the lifting of bans on private business activities, the situation changes dramatically. The temptation to take property away from a legal entrepreneur, who can easily concentrate serious cash flows in his hands, having industrial real estate and a competitive business, is very strong. In addition, a legal entrepreneur is always at a disadvantage in relation to criminal groups. He is in plain sight, he does not have the time and energy to provide himself and his loved ones with the necessary physical protection, as well as to ensure the protection of property. Even if he does this, he will sharply reduce the competitiveness of his product or service in the market due to unforeseen additional costs. In general, he becomes an easy target for criminal structures that do not burden themselves with anything, except for improving the methods of taking money and property.

Criminal business, including forcible seizure of property, destroys this foundation. Moreover, it accumulates funds that will be used for further criminalization of society (including corruption). The Chinese leadership was well aware of the seriousness of this threat, so the protection of a legal entrepreneur, his property has become a priority for the state from the very moment the reforms began. In addition to the necessary police and special events, a broad campaign was launched in society to create a "bright image of the entrepreneur." In connection with the negative connotation of the word "capitalist", they began to be called "businessmen", "entrepreneurs", "employers", etc. The Chinese word "business" itself is translated hieroglyphically as "giving birth to meaning."

In China, you will never encounter a dismissive attitude towards entrepreneurs either from civil servants or from ordinary people, no one calls them words like “huckster”, “commercial”, and even more so “tolerated”. My inquiries among all sorts of Chinese businessmen (from private small entrepreneurs and street vendors to owners of large factories) about "black societies", mafias, or even just individual racketeers did not find a lively response. When asked what you would do if suddenly someone began to extort money from you, everyone answered that they would call the police. Were there times when it didn't work? Did not have. Maybe they are silent because of the total fear of cruel triads? But even among the former entrepreneurs who are now employed, among the same taxi drivers, I did not find a single person who would complain that his business was “strangled by the mafia and racketeering.” They don't need to lie at all. Many taxi drivers express such seditious (from the point of view of the PRC regime) ideas that you can easily go to jail for them ...

Only a very naive person can think that in China there are just good law enforcement agencies, in which disinterested, honest and courageous police officers serve. Such a "positive tone" is supported by a conscious tough policy in law enforcement agencies. This is the most important condition for ensuring an "attractive investment climate", and here the Chinese leadership is not joking at all, especially in relation to its security forces. For example, in the city of Chongqing some time ago there was a deterioration in the business climate. Entrepreneurs began to be harassed, demanded "additional donations", at the same time underground casinos were opened in the city, "tough guys" appeared who established their own rules. The reaction of the central authorities was lightning fast. Within a month, more than 500 senior police officers of this city were arrested and put on trial (and it is one of the four cities of the so-called central subordination with a population well over 10 million people).

After that, the business climate in Chongqing improved "surprisingly". The city has become one of the most peaceful places for investment and entrepreneurship. The "tough guys" disappeared along with the top police officers.

Therefore, the Chinese police are not at all inclined to "befriend" members of criminal communities.

Any criminal encroachment on the property of a legal entrepreneur is considered in China as the gravest state crime. And any "slow reaction" to this on the part of the police is regarded as direct complicity in the gravest crime.

Such real security is well felt in the society. The Chinese themselves are willing to become entrepreneurs, and many foreign private investors who are not associated with powerful corporations also come, which undoubtedly contributes to rapid economic growth.

Another serious aspect of the protection of private property rights is the immutability of contracts between an individual and the state. This means that the state does not change the conditions if it suddenly considers them “unfair” at the moment. For example, fifteen years ago, the rights to long-term lease of land in Pudong (Shanghai) were very inexpensive. Now the market value has soared several times, but this did not give the city authorities a reason to change the lease rights under various pretexts.

But if there is a need for early alienation of this land in the interests of infrastructure construction, then compensation is calculated not only at the current market value, but also taking into account the lost profits of subsequent years of use. There is even some overkill here. The state obviously overpays for this land, which provokes a desire to be expropriated. But it all pays off with investor confidence in China's government, which is hard to win but easy to lose. And then no spells in the most refined English at any high-mountain economic forum will bring it back.

Announcement - In the following issues we will talk about two more lessons - how to turn officials from celestials into partners and how to ensure economic competition under political monopoly.