On Thursday, March 30, the William & Mary Confucius Institute invited Professor Barry Naughton, the Sokwanlok Chair of Chinese International Affairs at the University of California San Diego, to give a lecture on the relationship between the Chinese government and the economy. Professor Naughton is recognized as a worldwide authority on the Chinese economy, with an emphasis on China’s transition to a market economy. At his well-attended lecture, he posed and sought to answer a simple question: Is China socialist?
Professor Naughton began by discussing what socialism was in pre-economic reform China. While socialism under Mao Zedong was in many ways focused on the redistribution of wealth, it was also a vehicle to create a better society. For example, Chinese socialism stresses twelve characteristics that all people should possess: prosperity, democracy, civilization, harmony, independence, equality, fairness, law and order, patriotism, dedication, honesty, and friendliness.
However, Deng Xiaoping, the Chinese leader widely credited with China beginning to transition to a market economy, disagreed with this strict definition. He believed that, if something improved people’s quality of life, it could be considered socialist. Therefore, allowing private enterprises to exist in China, rather than relying on foreign companies, would result in better lives for the common man. China’s economic growth since this decision is literally unprecedented, with the country sustaining more than 10% annual GDP growth for years at a time. Thus, the quality of life for tens of millions of people has improved in metrics as varied as literacy rates, income, and happiness.
Returning to the original question: did these changes move China far enough away from socialism that it is no longer socialist? Professor Naughton presented four criteria to consider if a government is socialist: capacity to shape economic outcomes, intention to reach outcomes that are different than a noninterventionist approach, redistribution of wealth as an outcome, and responsiveness to the changing preferences of the population.
Capacity, the first criteria, is a measure of if the government is a large enough share of the GDP to exert force on the economy. Aside from legislation, government industries can also act in such a way as to affect market forces, such as promoting certain industries. To do this, the government must be a significant player in the free market economy; otherwise, their input can be ignored. For example, in 1996, the government reached a low of only 11% of the GDP, resulting in an inability to shape China’s economic policy. Because of this lack of control, the government enacted policies designed to increase their economic power, which have been successful and resulted in a 23% share of GDP in 2015.
The second measure is intention: the government uses its economic power to create a society based on its goals. If the government is doing something that would have happened regardless, does it show any proof of power? Therefore, the Chinese government must work towards objectives which could not be achieved naturally, in this case the areas of healthcare, education, and industrial restructuring. While capitalism is good for social development, it can lag in the implementation of social programs, which has been the focus of the Chinese government in recent years.
One of the primary outcomes that the government is focused on is redistribution of wealth. Since income tax is low in China and therefore an ineffective method of redistribution, China has needed to employ other methods to reach this goal, such as large-scale changes to the economy and the basics of a social safety net. These actions will, over time, serve to create a more economically equal China, at the very least in that all citizens will have access to a minimum wage, healthcare, and education.
Finally, a socialist government must be responsive to the desires of its people. Although socialism is different from a democracy, the government is still accountable to the people. Two recent examples come to mind: market-oriented reforms and air quality improvement. The government has been successful in the first measure, but not so much with the second one, and the people have voiced their displeasure and discontent. In order to remain in power, the government must remain benevolent and productive in the eyes of its citizens.
Professor Naughton ended his lecture by commenting on how this situation has changed over the last 40 years: 40 years ago, everyone knew China was socialist, while 20 years ago, everyone was sure it was not. Now, people are uncertain; what China becomes will be determined by what it does now. Professor Naughton believes that it would be impossible to predict China’s future, but it is still important to pay attention, so that we may understand China’s place in this new world order.
Professor Naughton’s lecture was very well received, with over 150 people in attendance. In the Q&A session afterwards, members of the audience asked thought-provoking and insightful questions. Participants are all very grateful for the opportunity to benefit from Professor Naughton’s knowledge and experience, especially given the importance that China will occupy in the global economy.