How China Became Capitalist [Hardcover]

Ronald Coase (Author), Ning Wang (Author)

Book Description

Release date: April 24, 2012 | ISBN-10: 1137019360 | ISBN-13: 978-1137019363

How China Became Capitalist details the extraordinary, and often accidental, journey that China has taken over the past thirty years in transforming itself from a closed agrarian socialist economy to an indomitable force in the international arena.

The authors revitalize the debate around the development of the Chinese system through the use of primary sources. They persuasively argue that the reforms implemented by the Chinese leaders did not represent a concerted attempt to create a capitalist economy, but that the ideas from the West eventually culminated in a fundamental change to their socialist model, forming an accidental path to capitalism. Coase and Wang argue that the pragmatic approach of "seeking truth from fact" is in fact much more in line with Chinese culture.
 
How China Became Capitalist challenges the received wisdom about the future of the Chinese economy, arguing that while China has enormous potential for growth, this could be hampered by the leaders' propensity for control, both in terms of economics and their monopoly of ideas and power.

Editorial Reviews

Review

"This is a major contribution to the whole literature on economic change as well as on China. Nowhere in all of the literature on economic change and development that I know is there such a detailed study of the fumbling efforts of a society to evolve and particularly one that had as long and as far to go as China did." – Douglass C. North, 1993 Nobel laureate in Economics

"Ronald Coase, now 100 years plus, and Ning Wang have written a compelling and exhaustive commentary about China's fitful transition from Socialism under Mao to today's distinctive capitalist economy. No student of China or socialism can afford to miss this volume." - Richard Epstein, University of Chicago Law School

"This book is one of the greatest works in economics and in studies of China, not only for today, but for the future." – Chenggang Xu, University of Hong Kong

"Coase finds a nation whose philosophy and policy have reflected the same simple principle - 'seeking truth from facts' - that has inspired his own path-breaking analyses of firms, markets and law. A fascinating and exceptionally thought-provoking account of how China, repeatedly seeking more efficient socialism, found itself turning capitalist." - Stephen Littlechild, Emeritus Professor, University of Birmingham, and Fellow, Judge Business School, University of Cambridge

About the Author

RONALD COASE is a Nobel Laureate in Economics. His work has had a profound impact on economics; his work clarified the theory of the firm and gave rise to the field of Law and Economics. The Coase theorem is widely studied in economics. Professor Coase is currently Clifton R. Musser Professor Emeritus of Economics at the University of Chicago Law School, he is also a research advisor at the Ronald Coase Institute.

NING WANG is Assistant Professor at the School of Politics and Global Studies, Arizona State University.

Product Details

• Hardcover: 272 pages
• Publisher: Palgrave Macmillan (April 24, 2012)
• Language: English
• ISBN-10: 1137019360
• ISBN-13: 978-1137019363
• Product Dimensions: 0.9 x 6 x 9.2 inches
• Shipping Weight: 1.3 pounds (View shipping rates and policies)
• Average Customer Review: 3.6 out of 5 stars  See all reviews (10 customer reviews)
• Amazon Best Sellers Rank: #673,577 in Books (See Top 100 in Books)

Most Helpful Customer Reviews

22 of 23 people found the following review helpful

5.0 out of 5 stars A Titan of Economics May 22, 2012

By Rafael Limongi

Format:Hardcover|Amazon Verified Purchase

Few scholars have changed the face of economics like Ronald Coase. His work brought a very rare commodity to the economics profession - clarity. His observations, based on empirical evidence and "old-fashioned" fact-finding, have unearthed a body of work that has transformed the way we think about simple, but crucial, facts. The ways individuals and firms organize and his work on property rights had a profound impact on how we comprehend issues from the inner working of organizations to the use of market tools to address environmental problems. On the latter, his work provide the academic underpinning for the establishment of the Acid Rain program in the United States in the early 1990s, which was so successful that it virtually wiped out the problem of acid rain in America.
At a 101 and not a man to avoid challenges, he now braces himself on an issue that many in the West are puzzled by -"How China Became Capitalist". Again, he brings clarity to a confused picture. Without embracing dogmas from either left or right, he traces the history of Chinese reforms from the rise of Deng Xiaoping to the present. In Coase and co-author Ning Wang's recounting and interpretation, we learn about the unleashing of China's experiment with capitalism. Rather than a top-down approach as many believe, the Chinese government fostered competition between cities and provinces; allowed for experiments and pilots to take place in certain sectors, industries and regions. China after Mao had a blank slate from which to experiment. Throughout this, Coase's work on property rights was critical to many Chinese policy makers. It is no coincidence that alongside Marx and Friedman, Coase is one of the most revered Western economists in China.

Coase is the finest of scholars.... The Nobel committee (belatedly) understood his contribution as a thought leader, not just a servant of mathematical tools and creator of theorems. Teaching is much about pointing the obvious that surrounds us. That he has always done masterfully and does it again in "How China Became Capitalist". A must-read from anyone interested in economics, and in a clear analysis of Chinese political economy. Read more ›

11 of 11 people found the following review helpful

5.0 out of 5 stars Economics: A Humane Science June 12, 2012

By FY

Format:Hardcover

Everyone knows Ronald Coase is a great economist, but "How China Became Capitalist" shows us that he is a great historian too. In his new book, Coase approaches history in the same manner he approaches economics. As an economist, Coase has always guarded against the tendency for grand, scintillating theories to overtake quantifiable facts. In writing about what is arguably one of the most turbulent periods in Chinese history, he again seems to relinquish all presumption by piecing together observable historical evidence and letting the conclusions emerge by themselves. The results were surprising but not altogether unintuitive.

Many regard China's transformation from a communist economy to a capitalist one as one of the greatest paradoxes in the 20th century. The authors, however, are able to provide a persuasive account of how this came to be. The general theory is that the capitalist transformation in China is the product of marginal, or fringe, revolutions that occurred independently of the machinations of the Chinese government. This is not to say that the Chinese government did not play a role in fostering these developments. As illustrated by the authors, in many cases the Chinese government fostered the environment conducive to the flourishing of capitalism without intending to. The emergence of private farming in the 1960s is a good example. Private farming was encouraged by the Chinese government as a temporary measure to quell grain shortages after the failure of the Great Leap Forward became apparent. Such an ad hoc measure however, had lasting, albeit unintended, implications for China's economic development.

The argument is more nuanced than this.... What this book does particularly well is its portrayal of the government's persistent attempt to reconcile the conflict between ideology and pragmatism. Far from being blinded by ideological fervor, the Chinese government was cognizant of the benefits of a capitalist economy. This prompted them to create entities like the Special Economic Zones- market development that can still be controlled by a communist state. In doing so, they hoped to enjoy the perks of capitalism without having to adopt the supposed values of a capitalist state.

The last point is given the reflection it deserves in the closing paragraphs,

"The stupendous loss in the depth and richness of human nature is noticeable part of the price we have paid in transforming economics from a moral science of man creating wealth to a cold logic of choice in resource allocation...As a result modern economists are hard pressed to say much that is coherent and insightful..."

We are reminded here that the creation of wealth is merely a means to attain human goals of creativity and happiness. Accordingly, Economics should be used to cultivate all that is best in human nature: compassion, appreciation of beauty, or the ability to empathize with others. Richard Sandor, whose book Good Derivatives: A Story of Financial and Environmental Innovation I had read recently is a fine example. Modern economics has enabled us to think on the behalf of many generations to come. It does so by providing us with the tools to stop global warming.

"How China Became Capitalist" is a story of many threads, all of which are based on sound historical evidence and sober economic reasoning. It is a book that can be read by a wide audience, as it avoids of technical industry jargon. Instead, it demonstrates many economic principles with real world examples- whether it is asymmetric information caused by a centralized government and decentralized townships, allocative inefficiency induced by subsidizing incompetent manufacturing plants or structural employment through migration laws.

It may surprise you that a book that discusses such a complex issue so effectively is only 207 pages- a feat that is no doubt made possible by the mastery of the authors. Read more ›

9 of 11 people found the following review helpful

5.0 out of 5 stars A Great Story Told by a Great Economist July 10, 2012

By De-Xing Guan

Format:Hardcover|Amazon Verified Purchase

That a socialist economy such as China became capitalist is an amazing story in economic history. As a great economist next only to Adam Smith (my opinion), Ronald Coase has given a wonderful economic interpretation in this book coauthored with Ning Wang. The authors emphasize that the success in China in the past 30 years has been the result of the autonomous fight for survival from numerous starving peasants. Then the household responsibility system replaced the stupid commune system in the early 1980s, which laid the foundation of other three marginal revolutions in the coming years: the rises of township and village enterprises, the individual economy, and the special economic zone. But the marginal revolutions themselves were not enough to support the rise of a well-functioning price system because the price of productive factors was still controlled by the central government and the state-owned enterprises. The second-round reforms came in the 1990s. Two of them were the most important: the 1992 price reform, which gave up the dual-track pricing system for most products, and the 1994 tax reform, which imposed a 17% value-added tax on all enterprises and therefore reduced the negotiating and searching costs between central and local governments. These two reforms strengthened the price system and helped establish the market economy in China. But not all developments in China were good for becoming capitalist. Coase and Wang picked one of them which China has failed to accomplish: an open and free market for ideas, including the freedom of speech, thought, and the exchange of ideas. This is the last as well as the most important problem China has to face in the next decades if it wishes to go further in the way towards capitalism, even the one with Chinese characteristics.