Hypothesis:
China's transition to a quasi market economy succeeded because it was gradual and they maintained significant state ownership in key sectors. China also learned from Russia's mistakes in the 1990s.
Russia made the mistake of listening to American self-styled free market economics experts. These intellectual ivory tower consultants recommended Russia implement rapid wholesale privatization and a lassaize-faire economic approach.
This type of cowboy capitalism resulted in oligarchy, corruption, criminal plutocracy, economic inequality, and severe damage to the fledgling Russian democracy of the 1990s.
China's transition to a quasi market economy succeeded because it was gradual and they maintained significant state ownership in key sectors. China also learned from Russia's mistakes in the 1990s.
Russia made the mistake of listening to American self-styled free market economics experts. These intellectual ivory tower consultants recommended Russia implement rapid wholesale privatization and a lassaize-faire economic approach.
This type of cowboy capitalism resulted in oligarchy, corruption, criminal plutocracy, economic inequality, and severe damage to the fledgling Russian democracy of the 1990s.
China—directed by its authoritarian leadership, funded by deep wells of financial capital, and guided by a network of entrepreneurs, both onshore and off—has understood the benefits of gradual economic change. Its planners introduced reform measures one at a time. Often, such reforms were instituted locally and regionally first, rather than throughout the entire country. This way, if the reforms were unsuccessful, they didn’t damage the national economy.
The Chinese gradualist approach was different than advocated by Western “experts” advising the post-Soviet government of President Boris Yeltsin.
These experts were mostly from the United States, and they advocated rapid privatization, the complete freeing of prices, and the dismantling of all economic planning. This neoliberal advice was based on the Washington Consensus, which maintained that what countries needed to grow their economies was to free prices, privatize as much as possible, and reduce the government’s role in the economy.
The fact that this consensus had not been followed by the rich countries of the world and that there was little evidence that the policies had actually worked anywhere didn’t deter legions of economists flocking to Moscow from Washington and many prominent American universities and think tanks. They proclaimed their unproven formulas with almost religious zeal.
Source credit: Edward F. Stuart, Professor of Economics, Northeastern Illinois University