Dan Snow's History Hit - The Rise of China

Episode Date: December 6, 2022

How has China become the economic superpower that it is today? The decades since the death of Chairman Mao Zedong have seen an unprecedented economic transformation, but how has this been achieved? And how credible is the idea that China’s long-term, strategic vision is the key to the nation’s future? Dan is joined by historian Frank Dikötter, a specialist in modern China and author of China After Mao: The Rise of a Superpower, to find out how China has changed, and where it might be going.Produced by James Hickmann and edited by Dougal Patmore.If you'd like to learn more, we have hundreds of history documentaries, ad-free podcasts and audiobooks at History Hit - subscribe to History Hit today!Download History Hit app from the Google Play store.Download History Hit app from the Apple Store.

Hi everyone, welcome to Dan Snow's History. We're talking about China today, right here on the podcast, and it's a pretty important episode because either China has worked out, has unlocked the key to the future, an authoritarian state with a controlled economy capable of generating vast amounts of money for people who can live in material comfort while enjoying no political and civil rights whatsoever, in which case, well done them, or it's a gigantic bankrupt racket run by kleptocrats and cronies benefiting only the very fewest at the top with political power. This is probably the great question of our age, really. And professor of humanities at the University of Hong Kong, Frank de Cotta, is the man to talk to

about it. He's just written a new book called China After Mao, The Rise of a Superpower. He's been on the podcast before. It's good to have him here again. I'm going to be talking about what happened after Mao died. He died in 1976. And typically the date given for the start of China's economic miracle, when Deng Xiaoping, the new leader, emerged and transformed the economy is 1978. So the Chinese economic miracle, it's as old as Dan Snow. So really very young.

We're really only in the earliest stages of it, you could say. But this is a fascinating corrective to all those articles you'll have been reading about how China's long-term strategic visionary thinking puts Western democracies weak and vacillating to shame. Frank, spoiler alert, not a fan. Not a fan of how things are going down in China. Not a fan. And you'll hear him explain brilliantly why on this podcast. It's a big one, folks. T-minus 10. Atomic bomb dropped on Hiroshima. God save the king.

No black-white unity till there is first and black unity. Never to go to war with one another again. And lift off. And the shuttle has cleared the tower. Frank, thank you very much for coming back on the podcast. Delighted to be here. Tell me, in the mid-1970s, how did the Chinese organize their economy? Well, it is what you refer to as a planned economy. Now, very few of us actually have any notion of what that is.

We understand that there is a plan, and we understand that in Marxist-Leninist states, including China, there's a planned economy, but what exactly does it imply? It really means that the state not only owns everything, capital, energy, land, housing, labor, but it also defines all prices and all quantities. For instance, if you're going to buy a pair of shoes, it will mean that there is a plan that decides which factory will make what kind of shoes in which quantities, in what size and what color, and will also determine at what cost these shoes will be sold in which shops. In other words, not a great deal of choice for consumers.

What was the effect? Because of course, that has its attractions. You think, well, that must be very efficient. That sounds like it might work very well. What was the reality for people in mid-1970s China? What did their world look like? Did the shoe fit? Well, exactly. The reality is that not only might you have to queue up for a great amount of time just to get hold of a pair of shoes, which have never been produced in sufficient quantities, but it might turn out also not only that you will not find the kind of shoes you like, but a size that actually fits. A plan sounds great, but the truth is that in planned economies, the plan is very rarely executed in the way it is envisaged by the planners. In other words, on the ground, it is chaos with shortages at every level.

And what triggered, well, we're going to talk about how dramatic the change was, but what triggered this transformation? And when was it? In the late 1970s, what happened? Why did the Chinese change course? Well, of course, when we talk about a planned economy, I've described it rather roughly. But of course, there are great variations. Just to go back, for instance, to the country that started to planify its economy, the Soviet Union, it varies enormously, for instance, from Stalin to Khrushchev in the 1950s, and then Brezhnev later on. So it's not a static system. Generally, regimes who try to planify every aspect of the economy realize very quickly that this does not work very well. So the moment that most people in charge in Beijing realize that something is very wrong is during the great leap forward to 1958, when everything in the countryside is also

radically collectivized. Farmers have to surrender their tools, their beds. Everything is done collectively, collective dormitories, collective canteens, work assigned by party officials who would tell you what you should do for how long you should do it. It results in a famine that claims the lives of tens of millions of lives, a great, huge catastrophe. And that moment, of course, a number of party officials realized that that sort of very radical collectivization does not work. But this is followed by the Cultural Revolution under Mao. Now, the point I wish to make is that we generally believe that change only started when the old man, Chairman Mao, dies in 1976. But in the countryside,

already round about 1971-72, for reasons we don't really have time to discuss, but one is the death of Lin Biao and the retreat of the army from the forefront in every aspect of daily life. From 71-72 onwards, a great number of people in the countryside start undermining the plant economy. In other words, farmers, all of them having survived the famine from 58 to 62, start very quietly undermining the collective economy by taking back their tools, by quietly dividing the land, by operating underground factories, which they are obviously not allowed to do since the state determines who produces what in which quantities, and also take back to land and open black markets to sell their produce at black market prices to others. And as a result, they started lifting

themselves out of the misery and poverty caused by this planned economy. This is well before Mao dies in 76. This trend accelerates afterwards. In other words, what I'm trying to say here is that it's not a decision at the top who determines change for literally hundreds of millions of people on the countryside. It's the people themselves who've had enough of decades of mismanagement and who start lifting themselves out of poverty from 71, 72 onwards. This is a trend which will accelerate after Mao dies in 76. And how radical is this trend? Because it's often said it's one of the most important transformations in history. It's helped to lift hundreds of millions of people out of poverty.

It's transformed China's economic might and its hard power standing in the world. What is your analysis of the change that goes on in the late 70s and early 80s? How sweeping is it? Well, it's very interesting because, of course, we've been told for decades, I've had to listen to this story a thousand times, that Deng Xiaoping at the Third Plenum in December 1978 starts what will be 40 years of reform and opening up, all in capital letters, reform and opening up. And he starts this huge momentous change away from the planned economy by giving contracts to the people's communes. The people's communes are these huge collectives in the countryside. And as a result of these contracts, the people's communes are allowed to retain any surplus they produce over and above

state procurement quotas. In other words, once these people's communes have delivered their grain in state-mandated quantities, any surplus they can keep and dispose of as they wish. And that is seen to mark a move towards individual initiative. That's the story. But unfortunately, it's not at all what happens. When in December 78, contracts are given to the people's communes, the state time and again in 78, 79, 80, 81 says, make sure that the people's communes are the backbone of the socialist to till the land. In other words, it's a move designed to reinforce the collective economy, not undermine it. But of course, in reality, what happens is very different. The people's communes are also fed up with planified economies. They hand the contracts

over to villages. The villagers hand them over to individual households. By 1981, more than half of all individual households in a large number of provinces actually decide what they wish to plant, how they will plant it, and what they will do with the produce on their own plots. In other words, they have taken back the land and then make all the individual decisions by themselves. In effect, the people's communes, the collective economy is undermined, sapped from below by ordinary villagers. The people's communes collapsed in 1982. And as a result, the income of ordinary people in the countryside has doubled. So Deng Xiaoping, who outmaneuvers a few people, effectively takes over from Mao. This is not some top-down, expert-led reform. What is going on on the periphery and in the

regions, on the land, is actually just as important as anything that's being decided in Beijing. Well, you might go much further than that. I'm not denying that there are not decisions, and no doubt we will talk about this in a moment, that there are decisions taken by the top leadership which have momentous consequences. The one-child policy would be one example. But in this particular case, it is the precise opposite. It is hundreds of millions of ordinary people in the countryside who have decided throughout the 1970s that they have had enough of living in poverty. it throughout the 1970s that they have had enough of living in poverty. They've seen their relatives, neighbors, other villagers die of hunger from 58 to 62. They've had enough. They undermine the planned economy. Deng Xiaoping and others merely follow what is happening in the countryside.

Their hand is forced, so to speak. The directives they issue when they are positive, so to speak, merely give the stamp of approval to changes that have already happened in the countryside. So again, let me repeat, when this all starts with the third plenum in December 1978, the plan is to reinforce the collective economy in the people's communes. But these collapsed in 1982. They've been undermined by ordinary people. It's the exact opposite of what the party was hoping for. So when we say that hundreds of millions have been lifted out of poverty by the party,

it's simply not true. Nobody was waiting for an invitation from above. Least of all by Mr. Deng Xiaoping. Listen to Dan Snow's history talking about China. More coming up. Aeroplanes, spacesuits, condoms, coffee, plastic surgery, warships.

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your podcasts this is an important conversation here because we need to work out what's happened in China, because if the Chinese have successfully created an engine of prosperity, of scientific and engineering endeavor, of military might, by ignoring Adam Smith, John Locke, and all the people that came after, by ignoring the fact you need an independent judiciary to rule on contract law without fear or favour, that you need the voices of the people you need to be able to seek redress in a democratically elected parliament. If all of those things are not necessary, then the 21st century could look very different indeed to the

optimists of the 1990s who said liberal democracy is going to win out. How has China then managed to create this economic miracle whilst refusing to relinquish control over things like the judiciary? Well, it hasn't. That's a short answer. To rephrase it slightly, for the sake of clarity, your question, you point out, or certainly this is my view, and I think you agree with it, that's implied by your question, there is a system based on separation of powers, and that runs through the entire 20th century, and it has produced wealth, prosperity. It now appears that there's another system based on a monopoly of a power that also manages to produce wealth and prosperity. But the point I'm trying to make here is that it appears to work on the surface.

In other words, the People's Republic of China, like other regimes throughout the 20th century, whether it is the one put in place by Lenin in 1917, or by Mussolini, or by Hitler, or by North Korea, or Cambodia, all these regimes wish to have a monopoly over power because they believe they can do much better. And it would appear now that the PRC has indeed succeeded in showing that socialism works better than so-called capitalism, that there is no need for a separation of powers. And indeed, what is so striking is that throughout the last 40 years, time and again, even a foremost reformer like Johnson Young in the 1980s, that made it very clear that there will never be any separation of powers. They oppose that system repeatedly and forcefully. So has it produced an economic miracle? The answer is no, they have not.

They have managed to enrich the state, in other words, the party, and create relative wealth for a certain number of people. And it is no doubt true that overall living standards have increased. But this is a very long story, and we don't have all that much time. So let me just fast forward to the year 2000, because just a moment ago, we were still in the 1970s. The World Bank determines on the basis of statistics, which personally, I wouldn't believe, but they're in China's favor, because of course, they're based on statistics furnished by the propaganda department in Beijing. On the basis of these figures, the World Bank determines that in 1976, as the old man dies, when it comes to China's rating in terms of gross domestic product per capita,

the country ranks number 123 in the world. By the turn of the millennium, after a good quarter of a century of obsessive pursuit of economic growth as opposed to economic development, by the year 2000, the World Bank determines that that rank has dropped to 130. In other words, even at the turn of the millennium, China has a hard time keeping up with the rest of the world. Not only that, even at the turn of the millennium, China has a hard time keeping up with the rest of the world. Not only that, but at the turn of the millennium, as you can find out from all sorts of party documents inside the archives, and as is reasonably well known, I think, the entire countryside is more or less bankrupt. In other words, the contribution of village enterprises, millions of them, is negative, not positive.

These state enterprises in the cities and along the coast as a whole are unable to make a profit. The four state banks, all banks are controlled by the state, the four state banks are awash in red. These central coffers are exhausted. This is a country which, again, at the end of the millennium, the year 2000, is pretty much bankrupt. So what happens? What really makes that difference from the year 2000 till now? And I think you can really summarize it in three letters. It's W followed by T,

and then there is an O. In 2001, China is allowed to join the WTO, World Trade Organization, exporting to all member states. And from that point onwards, really, revenue increases drastically. Why is that? Well, it is because China at that point, and to this very date, remains a socialist economy. Now, what is a socialist economy? I hate to use Marxist jargon, but it is one in which what I'll refer to as the means of production, in other words, everything that goes into the factory as opposed to what comes out of it, is directly or indirectly controlled by the state. That means the soil belongs to the state. It means capital belongs to the state banks. It means energy is controlled by the state. It means labor, which is poor,

without the right to strike, and needless to say, without any unions. Migrant workers can be fired, hired at will. Very little protection there. So since the state can control so many of the means of production, it can give state enterprises endless subsidies, hidden or otherwise. It can cheapen the price of energy. It can lease the land for free. It can come up with cheap labor. It can provide raw materials below cost of production. So no one can compete. Not even Bangladesh can endless pledges and promises about the rule of law, about more transparent governance, about protection of intellectual property, about opening up the market further. But the exact opposite happens after 2001, with the result that, as I said, not even Bangladesh can compete. No one can compete. In fact, not even enterprises in China can compete with each other. It's a sort of race towards the bottom, with the fact that what is exported is frequently exported below cost of production. Okay, so Frank, let me be stupid for a second here. Let's take a

well-known phone brand. They can say, let's open up a factory in China. The Chinese government make that as attractive as possible for that phone brand to create the phones in China. The workers are paid a pittance. The phone brand are happy because they get these handsets made very cheap. They can sell over the world. And the owner of the factory, effectively some state adjacent person or senior Communist Party member, the owner of that factory is making some money there, right? Because their electricity, their various everything else is being subsidized by the state. Is that right? You% of all the assets of the 500 largest companies in China belong to the state. Let me put it from a slightly different angle.

So clearly state enterprises are the big winners here. Let me put it slightly differently. Barriers go up against foreign products. And let me say something else, because of course, we do know that foreigners produce in China, and they have done so basically since the 1980s, have been trying to establish themselves in China. What happens with the WTO is that China exports a flood of cheap commodities to the rest of the world, the country that suffers from oversupply. But it also exports deflation. So in 2001, 2002, you can buy a pair of trousers or a dress at the prices of 1982, and that's deflation.

And foreign producers then have a very simple choice. They can either go bankrupt, or they can outsource labor to the People's Republic of China, which of course they do. And they're quite pleased about it. Of course, some of them are unhappy, but what producer would not be happy to have unprotected labor, to have very lax safety and environmental standards, to have help from a one-party state. But there is an issue there too. As most foreign producers find out rather quickly, when they come up with a new product, whether it's a very simple one, like say a thermos bottle, or what is something much more complex, like a car, within a very short span of time, the exact copy of that product appears in a factory across the street. It's called counterfeiting

piracy. And piracy is the very heart of China's boom after it joins the WTO. Now, everything is copied locally. And of course, local producers copy each other. Now, by the year 2005, this is estimated to cost foreign producers some 60 billion60 billion, which is more than the amount of capital investment into the country. Huge amount of money. There's not a lot you can do. Of course, certain foreign producers do well. Sony does well. Others do well.

But overall, it is an extraordinarily difficult market to penetrate. It is probably the most unlevel playing field created in the last 30 years or so. I think I know the answer to this question, Frank. But I've had friends that have been to China and they've been so impressed by the long-term nature of their policymaking. And they say, look, they're building ring roads outside Beijing where there's not even any suburbs yet, because they know that one day that'll be a big Sydney to put the infrastructure in first. Now that sounds to me like they're just throwing money at make work projects for people and just laying a load of concrete down with no demand at all. But maybe

I'm wrong. In your analysis, is the Chinese government blessed with this sort of long-term thinking, perhaps a product of their millennium-long history? Or are they just scratching around like politicians everywhere else trying to work out how to get through the next week? I understand the question, and it's a very good one. We do frequently get the impression not only that regimes like the POC and North Korea have this ability to really plan in the long term. They don't have to worry about elections. They don't have to worry about what the electorate thinks. They can really pursue something in the long term.

And, of course, there is another related idea, namely that when you are in a one-party state, you have a monopoly over power. It's not that you just have the time to do it. You've got the clout to do it. You wish to address environmental problems. You can do it. You don't have to go through an election. You don't have to pass laws. You don't have to convince factory owners that they should curb their emissions. You issue a directive, and the job is done. Well, that's the image. The reality, of course, is very different. In fact, one might go so far as to say that these regimes tend to be far more unstable than democratic ones. Why would that be? Because, of course, well, there's several

things to bear in mind. But first of all, from Lenin onwards, 1917, all the way till now, From London onwards, 1917, all the way till now, these one-party states spend a tremendous amount of time, money, effort into projecting an image of stability. Far more effort and time than any democracy ever has time for. What does this imply? It implies controlling information, harassing journalists or putting them in jail as they come up with negative news, trying to come up with propaganda at every level for every aspect of society, complete and utter control, an attempt to completely control everything when it comes to the image that country projects. But there's something else happening. And this is why it is so important

to use archives. If you wish to go beyond that image of stability, beyond that propaganda machine, you have to get hold of good documentation. And that's what I've been trying to do by going into the archives. Party documents that are frequently secret, confidential, they do not circulate in public. And then you really find out what is happening behind that image. And what you see in a nutshell is all sorts of unpredicted consequences to decisions made by the regime, abrupt changes of direction every second year, an almost obsessive pursuit of a single number, which is growth regardless of development, backstabbing, political fights, the politics in the corridors of power, people constantly watching their backs, afraid of being purged. And purges, official ones and official ones, every second, third year.

The last purge started in 2012, hasn't come to a stop yet. We're still going on. So what this creates is fear. Fear on the part of number one, whether it's Deng Xiaoping or Xi Jinping, fear that they might be pushed aside, fear that something might happen, that power might slip away. And as a result, fear also among number two, three, four, all the way down. And as a result, all sorts of unpredictable changes and policies that are sometimes implemented in the long term, like the onechild policy, but others that really change every second year. Now, let me give you an example that relates to the China of today. It's not the one-child policy. It's a decision made in 1984 by Zhao Ziyang that central banks should no longer be the ones to make decisions about local lending, that local branches of the four-state banks should be allowed to lend. Now, what happens is that there is a scramble for money because, of course,

who has power is your local party secretary, not your local bank manager. Your local party secretary in the one-party state is the man who's got the clout to say what will happen. Well, the man, generally not a woman, the man approaches the bank and wants money to build a new restaurant, a new office, a swimming pool, a sanatorium, get credit to buy a color television, and a brand new car. And this goes on and on. By 1988, the Bank of Agriculture in the countryside is bankrupt. You remember what I said about the contract system that was put in place in December 1978. Well, 10 years later in 88, the state is no longer able to pay the farmers for their compulsory contractual deliveries of grain, pork, and other resources. They issued them with promissory notes, contractual deliveries of grain, pork, and other resources. They issued them with promissory notes,

IOUs. Not only that, but there's also a scramble for resources. So the country changes. It's not a unified domestic market. It changes into a patchwork of independent fiefdoms as every little county, every province erects boundaries to protect their own resources from outsiders. And as a result, to this very day, it's very difficult to sell a product in China from one region to another. There are endless barriers and taxes and checkpoints. You can find the German-produced Volkswagen in Shanghai, but not elsewhere. And it's the same for a whole range of products. In other words, when we think of China today, we think of domestic market and international market. It doesn't have an integrated domestic market. You cannot sell from Wenzhou to Yangzhou or from

Yangzhou to Shanzhou, whatever it is. You can sell from Wenzhou to any part of the WTO, but it's more difficult to sell to the rest of the country. So this is one example of a consequence of a decision made back in the 1980s with momentous consequences the party cannot control. So frequently decisions are made with consequences the party is not in a position to control. So what emerges is that when you have a one-party state, it actually creates a great amount of instability. And the reason is very simple. You never know who your opponent is in a one-party state. In a democracy, you do know who he is. Not only that, but you never know what the problems are. In a democracy, you do know what the problems are because your opponents will point

them out, because the journalists will point them them out because there is a whole system that makes sure that every problem comes to light and will be focused on, but not so in a one-party state. So beneath that image of stability, this is a country that accumulates enormous problems, doesn't have a domestic market, has a declining population as a result of the one-child policy, has accumulated a wall of debt that is unlikely to go away at any one point. Frank, listening to you, I'm mindful of the fact you live in Hong Kong, and I'm wondering why on earth the Chinese government let you go on operating? What's going on with you, if you don't mind me asking? Well, absolutely nothing is going on with me. I'll tell you what, it's a deep misconception that the best scholarship

on the history of the People's Republic of China comes from foreigners, people based in the United States or Japan or Europe or South Asia. The best scholarship on the history of the People's Republic of China is done by historians inside the People's Republic of China as done by historians inside the People's Republic of China, historians in Beijing, Shanghai, elsewhere. They are the true pioneers. And they are frequently party members, might I add. And why does the government allow them? Has history just been a bit of an oversight? We've seen Vladimir Putin in the years leading up to 2022 be very, very tough on history and archival access? Well, I understand. Archival access has, of course, changed over time. And the pressure put on historians in the POC has, of course, never abated. And right now is enormous,

absolutely enormous. So very little has been published. But if you take a long-term perspective, you know, I've been working now since, what, 1987 on the history of modern China. So I know a few people in Shanghai and Beijing. The pressure changes enormously. It's ups and downs. The people who are in their 50s and 60s, the more senior historians, know very well that you just have to sit tight and wait. There's an excellent historian, Chow Pei Huang, a good friend of mine, who produced this excellent manuscript on the famine from 58 to 62 in Hebei province, a province which was very, very badly hit. She was ready with the manuscript in 1988, 1989, of course, massacre Tiananmen Square, 200 tanks, 100,000 soldiers move in to crush the

population. The manuscript was put on ice. It was published some 20 years later. The manuscript is there. It was published. Work continues. Well, I'm glad to hear that. Frank, tell us how people can read more about your work. Tell us about the new book. Well, I would say buy the book. It's there in hardback. It will probably be there in Kindle right away and also audio. What I can say is that it is a story. It is not a dry thesis. It is not an academic monograph. There are footnotes, needless to say, so you can check what I say. But it's a story and it's a riveting one and it's all about telling detail.

Brilliant. Thank you very much, Frank D'Cotta, for coming on the podcast. Thank you. you