Economist Regrets Push To Make China's Economy More Capitalistic

Aug 26, 2019
Originally published on August 26, 2019 11:09 am
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DAVID GREENE, HOST:

We've been talking a lot about China and its trade conflict with the United States. So China began opening up economically in the late '70s. In the decades since, Western leaders and intellectuals pursued engagement, hoping it would encourage China to open up politically, as well. But now one of them, an economist, says he made a horrible mistake. Here's NPR's Emily Feng.

EMILY FENG, BYLINE: The year was 1985. China's brightest minds gathered at what's now called the Bashan Conference. They wanted to turn China's socialist economy into a more capitalistic one. So they all met on a cruise ship floating down China's Yangtze River. In attendance was a who's who of China's economic reformers, but the star of the show was a Hungarian economist.

JANOS KORNAI: My name is Janos Kornai.

FENG: Kornai witnessed the rise and fall of communism in his native Hungary. He's now 91 years old, and he made a career studying post-Soviet economic transitions, including China's. On the deck of that cruise ship, all eyes were on him as he drew charts and figures on a chalkboard. And he made a pivotal suggestion.

KORNAI: I suggested to go ahead with the marketization of the economy and allow - using today's language - private startups.

FENG: Marketization. Private startups. Historians widely acknowledged Kornai's ideas at that meeting shaped China's current economy - a mix of central control and market-driven policies - and unleashed huge, pent-up growth. Kornai triumphantly watched over the next three decades as China's exports exploded and wages rose.

KORNAI: It was a feeling of great satisfaction.

FENG: But in 2012, a man named Xi Jingping became China's top leader. At first, he promised more market-oriented economic policies, like the ones Kornai supported.

CLAIRE READE: Unfortunately, within a pretty short period of time, Xi Jinping turned.

FENG: Claire Reade is a trade lawyer and former assistant U.S. trade representative in China affairs. She says that after Xi Jingping took control, he not only emphasized a return to a state-run economy but also adopted a more ideological governance style, and hopes faded that China would continue economic and political reforms.

READE: With his hardening of policy, that also became a troubling sign.

FENG: Last year, Xi Jinping changed the constitution, allowing him to remain president for life. Kornai was horrified. He thought the economy he helped build was enabling an authoritarian crackdown. So he penned an editorial in The Financial Times saying he and other economists were responsible for creating a monster.

KORNAI: It is a complete return to Stalinist, Maoist, totalitarian, communist system.

FENG: Kornai's change of heart reflects a profound global shift in attitudes towards China, even among those who first supported China's entry into the world order. The U.S. is debating whether to limit the exchange of technology, trade goods, even people, with China over concerns they strengthen a potential adversary. But Reade, the trade lawyer, says complete disengagement is impossible.

READE: We cannot ignore the problems because they're too big, and they create too many difficulties for the rest of the world. But by the same token, you can't isolate China. The world is too integrated.

FENG: For Kornai, these questions are deeply personal, even moral.

KORNAI: I use a metaphor. It's about Frankenstein, who gave life a monster committing murder and other crimes. Frankenstein did not want to cause harm, but he did.

FENG: Now Kornai says he wants to stop others from doing the same.

Emily Feng, NPR News, Washington. Transcript provided by NPR, Copyright NPR.