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How China Became Capitalist Hardcover – 20 Mar 2012

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Product details

  • Hardcover: 272 pages
  • Publisher: Palgrave Macmillan (20 Mar. 2012)
  • Language: English
  • ISBN-10: 1137019360
  • ISBN-13: 978-1137019363
  • Product Dimensions: 15.2 x 1.6 x 22.9 cm
  • Average Customer Review: 4.0 out of 5 stars  See all reviews (1 customer review)
  • Amazon Bestsellers Rank: 1,509,346 in Books (See Top 100 in Books)
  • See Complete Table of Contents

Product Description


'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

'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
'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

'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

'The authors provide a clear analysis of the path that China took from the centrally planned poverty that Mao Zedong left behind when he died in 1976 to the country's current status as the world's second-largest economy.' - Survival

Book Description

This book will detail the origins and development of China's extraordinary market transformation

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1 of 8 people found the following review helpful By Ivo Cerckel on 3 Jun. 2012
Format: Hardcover Verified Purchase
For realists, our human mind has the external world as its object and the objects of the material world subsist independently of this mind. The first act of our intelligence is to grasp being, to grasp "that which is". Being is the first notion of our intelligence. The first thing which falls in the intellect is being ("primo in intellectu cadit ens"), said Thomas Aquinas (1225 - 1274 A.D.). The notion of being is implied in any consequent notion. It is upon this notion of being - not upon practice - that truth is founded ("veritas supra ens fundatur"). Aquinas went on to define truth as ad-equation between the thing and the intellect ("adaequatio rei et intellectus"). (Thomas Aquinas, "On the Truth", ("De Veritate"), article 1).

The book which is hereby being reviewed quotes chairman Mao Zedong, the architect and founding father of the People's Republic of China from its establishment in 1949, who held authoritarian control over the nation until his death in 1976, as saying that a return to barter would eliminate economic inequality once and for all. (p. 81)

After the death of Mao, Deng Xiaoping, the paramount leader of the People's Republic of China from 1978 to 1992, resolved the fundamental challenge of reconciling socialism with its policies of economic reform and opening up by returning to the traditional Chinese principle of "seeking truth from facts". Unimpeachable truth does not exist. Truth emerges only in an endless struggle against ignorance and bigotry and it rarely wins by a single, decisive, once-and-for-all battle. And it is only through this struggle that truth can be tested. The only truth which exists is testable truth and truth can only be tested in or through practice.
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Most Helpful Customer Reviews on (beta) 20 reviews
28 of 29 people found the following review helpful
A Titan of Economics 22 May 2012
By Rafael Limongi - Published on
Format: Hardcover 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.
15 of 16 people found the following review helpful
Economics: A Humane Science 12 Jun. 2012
By FY - Published on
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.
14 of 15 people found the following review helpful
Important but difficult book 14 May 2013
By etienne53 - Published on
Format: Paperback
This is a book about an important topic, and the authors know their material. There are few books out there with this much substance this well analyzed, and the lessons the authors teach, and probably more importantly the false lessons they refute, need to be understood by policy makers.

Unfortunately, it is almost impenetrable, and I have a strong background in economics and am so old that I lived through the Cultural Revolution, Nixon going to China, et. al. The story is not told chronological order and there are quite literally dozens of names that are introduced, often with no background. I found that I had to make a list of characters, look many of them up in Wikipedia, and then make chronological notes as I read.

There is also a strong tendency to draw conclusions without citing much evidence within the text, which weakens their arguments. This is especially unfortunate because I think they draw the right conclusions.

Coase and Ning Wang needed a better editor.
13 of 16 people found the following review helpful
A Great Story Told by a Great Economist 11 July 2012
By De-Xing Guan - Published on
Format: Hardcover 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.
12 of 17 people found the following review helpful
Interesting, but Suspect 7 May 2013
By Loyd E. Eskildson - Published on
Format: Hardcover
Deng Xiaoping was the key leader in China's economic reform, and brought Chen Yun back to power with him in 1978. Chen previously had laid out China's first Five Year Plan in 1953 and was a strong believer in central planning. He also believed that the Chinese economy had suffered from too much investment in heavy industry relative to light industry and agriculture, as well as insufficient involvement of private sectors and markets. Early on private farming was allowed to return, purchasing prices for agricultural products were raised over 20% in 1979, and township/state enterprises were given profitability incentives - though not given guaranteed access to raw materials at low state-set prices. Another post-Mao change was re-embracing pragmatism and stressing the acquisition of knowledge - both technical (how to make things) and institutional (how various market-supporting institutions work).

The authors see this as having occurred largely without central government leadership; yet, Coase also wants to give central economic leader Chen much more credit than he's been given and label Deng Xiaoping as a 'strongman.' They also fail to realize that when China's economic transformation began, the nation had just moved past Mao's 'Cultural Revolution' in which everything that even looked like capitalism had been targeted for violence - many of its top leaders still had supportive views. Thus, it took Deng's careful political management to navigate through those hostile times - his only real advantage being that China was tired of conflict and the failures of Maoism, and Deng's strong ties to the military. Fundamental to that success was his emphasis on experimentation and 'seeking truth from facts,' rather than incessant arguing over ideology. (Deng is well-known for continually repeating the aphorism 'It doesn't matter whether it is a white cat or a black cat, a cat that catches mice is a good cat.')

One of Deng's key strategies was establishing a limited number of Special Economic Zones in which experiments could take place without risking the entire populace's living standards. Another was his nationwide reopening universities, libraries and schools that had shut down during the Cultural Revolution, as well as moving the nation past Mao's xenophobia to allow outside knowledge (and money) in. Still another - having the insight and status to hold the military's requests for more money at bay until the nation could regain its financial footing, as well as avoiding international conflicts and involvements. Finally, China's eventual move away from heavy economic reliance on massive state-owned enterprises (SOEs) created enormous disruption and loss of jobs - getting through that period required a careful sequencing of events that could not possibly have been accomplished at local levels.

Bottom-Line: Coase and Wang's book is interesting, but twists reality to meet its own ideological bent. Readers are better served by Vogel's 'Deng Xiaoping and the Transformation of China,' Brandt's 'China's Great Economic Transformation,' Naughton's 'The Chinese Economy: Transitions and Growth,' Wo-Lap Lam's 'China After Deng Xiaoping: The Power Struggle in Beijing Since Tiananmen,' Chen's 'Transition and Development in China,' and Hung's 'China and the Transformation of Global Capitalism.' Finally, the authors give insufficient emphasis to the fact that China's leaders have never described their economic system as 'capitalism,' nor would I - its 'Socialism with Chinese characteristics.'
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