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Deng Xiaoping: The Economist Author(s): Barry Naughton Source: The China Quarterly, No.

135, Special Issue: Deng Xiaoping: An Assessment (Sep., 1993), pp. 491-514 Published by: Cambridge University Press on behalf of the School of Oriental and African Studies Stable URL: Accessed: 11/04/2010 19:25
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Deng Xiaoping: The Economist Barry Naughton

Deng Xiaoping'seconomiclegacy is overwhelmingly positive and quite secure-in this, it stands in contrastto his troubled and ambiguous of political legacy. Of all of Deng's achievements,the transformation China'seconomicsystemis the only one thatis currently judgedto have succeeded,andto have benefitedlargenumbers people.Deng presided of over the Chinese governmentduring a period of enormouseconomic change. Under his leadership,the governmentextricateditself from a legacy of massiveeconomicproblemsand begana sustained programme of economic reform. Reforms transformed economic system and the initiateda periodof explosiveeconomicgrowth,bringingthe countryout of isolationand into the modernworld economy. Yet it is deeply paradoxical credit Deng Xiaoping primarilywith to economicsuccess, for he has neversaid anythingoriginalabouteconomics or economicpolicy, andrarelydisplaysany particular insightinto the functioningof the economy. The relatively infrequentdiscussions of economic matters in Deng's speeches are usually either very broad generalities, simplerestatement pointsmadeby others.lThereis no or of Deng Xiaoping vision of the economy or the economic system. Thus, while he has intervened repeatedlyand forcefullyto keep the economic reformprocess moving forward,these interventions have always been preciselycalculated politicaleffect, andextremelyvagueon economic for content.Deng was a politician,a managerand a generalistwhose most successfulrole was as the politicalgodfatherof economicreform. ThoughDeng lacks vision, there are neverthelesscertainareaswhere he is extremelyclear-sighted. most strikingexampleis his insistence The on the need for real incentives and delegationof authority orderto in motivate individualeffort. More broadly, there are several consistent themes that have markedDeng's career in economics. These make it possible to sketchout some aspectsof the economicworld accordingto Deng Xiaoping. Moreover,because the Chinese political system is so hierarchical, themes of the person at the top inevitablyshape longthe term policy outcomes.This is true of China'seconomicreformprocess after 1978: it bearsthe stampof Deng's personality. Like Deng himself, China's economic reformshave consistentthemes,but no over-arching < eslgn or vlslon. To a remarkable degree, the apparent failings of the reformprocess have turnedout to be advantages.Lacking a clear objective, reforms unfoldedin a gradual,evolutionary fashion, avoidingmuch of the economictrauma charactenzed that economicreformsin Eastern Europeand
. . .

1. David Bachman notes that "thereis remarkablylittle discussion in Deng's [1975-1982] Selected Workson economic affairs." Chen Yunand the Chinese Political System (Berkeley: Institute of East Asian Studies, China Research Monograph No. 29, 1985), p. 156. (C) The China Quarterly, 1993


The ChinaQuarterly the formerSoviet Union.2Similarly,absence of vision can be seen as Deng Xiaoping'spersonalstrongpoint. Withouta vision of his own to impose on society, Deng has been willing to adoptpolicies of non-intervention. He has allowed economic (but not political) developmentsto unfoldwithoutconstant interference fromthe Partyor government. Deng was willing to delegateeconomicdecision-malLiing, he used capable and subordinates effectively. He has expressedadmiration foreign ecofor nomic accomplishments without defensiveness.Deng has displayed a personal talent for laissez-faire: he has mastered the ruler' art of s non-acting. The following takes Deng Xiaoping'scareerin roughlychronological order,while looking for patterns thatextendacrossthatcareer.The first section covers his activitiesin 1957-66 when he was an important, but junior, memberof the small group of top leaders.The second section discusses his first brushwith absolutepower in 1975. The bulk of the article covers the post-1978 "era of Deng Xiaoping."Five consistent themesare seen to markDeng's attitudes towardeconomicissues. These are the paramount importanceaccordedto economic development; the need for rapidgrowth;the importance cleardelegationof authority of in orderto utilizehumanresources; importance non-intervention; the of and the need to open to the outsideworld.3 These simple themesdo not add up to muchof a theoryof economicreform,but as generalguidelinesor referencepoints in rapidlychangingsituations,they are probablyadequate.The final sectionsconsiderthe overalllegacy of economicreform, and Deng's role in shapingthe reformprocess.Since Deng may be said to have providedthe basic orientationfor a generally successful programmeof economic reform,we may give him some of the credit for China'srecentstringof economic successes. Deng the Organization Man: 195247 Deng Xiaopinghas been a memberof the small groupof top Communist Partyleadersduringmost of the post-1949period.He was the first of the majorregionalleadersto be broughtto Beijing,in July 1952, and he rose rapidlyto a positionof greatinfluenceunderthe overallcommand of Mao Zedong.By mid-1953,at the latest,Deng was supervising crucial aspectsof economicdecision-making. Vice-Premier, was assigned As he to oversee the transport sector. Moreover,in September1953 he was
2. On this aspect of the reforms, see Cyril Lin, 'sOpen-endedeconomic reform in China," in Victor Nee and David Stark (eds.), Remaking Economiclnstitutions Socialism: the of ChinaandEasternEurope(Stanford: Stanford University Press, 1989); and John McMillan and Barry Naughton, "How to reform a planned economy: lessons from China," Oxford Reviewof EconomicPolicy, Vol. 8, No. 1 (spring 1992). 3. We should note that our list is not too different from the of ficial Chinese list of Deng' s accomplishments. The hagiographic literaturecredits Deng with four economic innovations: legitimizing economic development as the main task of government; setting effective longrun economic objectives; initiating economic reform; and supporting the open door policy. See Yao Ping (ed.), XinshiqiDengXiaoping zhanluesixiangyanjiu(Studies theStrategic in Thought Deng XiaopingduringtheNew Era) (Xi'an: Shaanxi renmin chubanshe, 1989). of

Deng Xiaoping: The Economist


appointedto serve concurrently Ministerof Finance, replacingBo as Yibo, who was under fire for political errors.Dunng late 1953, Deng workedwith ChenYun to implement monopolypurchase grainand the of cotton in the countryside,a key element of state control over the economy. Important these responsibilities as were, they were only one part of Deng's steady rise to a key position as political generalistat Mao's righthand.In April 1954, Deng was appointed Secretary General (mishuzhang) the CCPCentral of Committee headof the organization and department, directlycontrollingthe Partypersonnelfunction.Finally,in September1956, following the EighthPartyCongress,he becameGeneral Secretary(zong shuji) of the Central Cottee, a position he maintained until 1967, when he was deposedduringthe Cultural Revolution. Withthese positionsat the core of the Partyorganization, Deng had responsibility hands-onmanagement an extremelybroadrangeof for of issues, including economic issues. As GeneralSecretary,he routinely controlledthe assignmentof responsibility over important tasks, as well as presidingover promotions demotionsthrough Partypersonnel and the system. Deng was thus a generalistwhose responsibility aspects of for economicpolicy was but one partof his broadportfolio.4 Given Deng's positions, all importanteconomic decisions flowed throughhis management system, and there is evidence that he participatedin virtuallyevery important economicdecisionmadebetween1957 and 1966. Yet the natureof his positionwas such thathe rarelyhad sole authorityover any area of economic policy. Like all central officials, Deng had to ascertainMao Zedong's position on important issues, and fall in line when the Chairmanexpressed his views. Deng's senior colleague Chen Yun had far greaterexpertiseon economic issues, and there is considerableevidence that Deng routinelydeferredto Chen's views on important matters.5 addition, In authority over ordinary management of economic affairs was shared with PremierZhou Enlai, who presided over the government bureaucracy outranked and Deng withinthe Party.Deng was able to maintainremarkably good relationswith these threeindividuals. ZhouandDeng co-operated particularly well, and after December1963 Deng was formallydesignated serveas ActingPremier to in Zhou's absence.6
4. Li Xinzhi and Wang Yuezong, Weida shijian,guanghui sixiang:DengXiaoping de de geming huodongdashiji (GreatPractice and GloriousThought: Chronology Deng A of Xiaoping'sRevolutionary Activity) (Beijing: Hualing chubanshe, 1990), pp. 102, 104, 109. Han Shanbi, Deng Xiaopingpingzhuan(A CriticalBiographyof Deng Xiaoping)(Hong Kong: Dongxi wenhua shiye gongsi, 2nd ed., 1988), p. 283. An interesting perspective on Deng's role and ascent during the early years is provided by Frederick C. Teiwes, Politics at Mao's Court:Gao Gang and Party Factionalismin the Early 1950s (Armonk: M. E. Sharpe, 1990), esp. pp. 21, 70, 87-88, 117, 134, 145, 286. 5. See, for example, Deng Liqun, XiangChenYun tongzhi xuexizuojingJigongzuo(Study Economic Work from ComradeChen Yun) (Beijing: Zhonggong zhongyang dangxiao, 1981), p. 9. 6. Li Xinzhi and Wang Yuezong, GreatPractice and Glorioas Thought, 132. The p. association between Zhou Enlai and Deng Xiaoping dates back to their time in France in the 1920s. Deng Xiaoping had in effect served as Acting Premier on occasion in the late l950s as well. Han Shanbi, A CriticalBiography, 258-59. pp.


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To the extent that an individualDeng Xiaopingcontribution ecoto nomic policy can be discernedduringthis period,it has to do with the design of incentive systems. During his brief tenure as Minister of Finance,Deng supported introduction incentivemeasuresinto the the of fiscal system.He supported havinglower levels of government guarantee (baogan)revenuesand expenditures, allowinglocal governments and to retain surplusesof plannedrevenues over expenditures use in the for followingyear.This last provisionin particular represented modestbut a significantdeparture from the standard Soviet practiceof highly centralized control of the budget.7Anothercase of Deng's individualinput occurredduringthe immediatepost-GreatLeap Forwardcrisis, during 1960 62. At thattime, the top leadersdividedamongthemselvesresponsibility for overseeingdifferentaspects of the economic rehabilitation. Deng's responsibilitywas the reform and rectificationof enterprise management the rehabilitation the labourunionsystem.As partof and of this process, Deng personallysupervisedthe draftingduring 1961 of a documenton enterprise management emphasizedclear definitionof that tasks and responsibility withinindustrial enterprises. This document,the 70 Articles on State Industrial Enterprise Work, stressedthe need for regularization managementsystems (for which it was denounced of duringthe Cultural Revolutionas a conservative bureaucratic and document).8The need for regularsystems of responsibilityand authority, along with appropriate motivational devices, is thus a consistentfeature of Deng's approachto economic problems. Such an emphasis was certainlyrelated to his position in the CommunistParty system. As GeneralSecretary, Deng presidedover the Party'sday-to-day operations, of which arguably most important runningthe Party'spersonnel the was system.The Partycontrolsall important jobs in society, most of themin government urbanenterprises, or with industrya particular focus. By at least 1961, Deng had staked out special expertisein the operationof personnelsystems,andbeganthinkingaboutways to improvesystemsof authority responsibility. and Yet apart from this modest area of specialization,and in spite of Deng's active involvementwith the process of economicdecision-making, thereis remarkably little evidenceof an economicviewpointthatcan be specificallyattributed him. It is worthemphasizing to how surprising this is. During this period of over a decade, the Chinese leadership grappled with economic issues of tremendousimportanceand great complexity.The prevailing policy shiftedseveraltimes, andcreatedgreat successesandenormous disasters. in all theseissues, thereis virtually Yet no case where there can be seen an independent position advocatedby Deng Xiaoping. A short list of the most crucial economic policies developed during this period-the policies toward capitalistbusiness
7. Deng Xiaoping, "Six directions for fiscal work" (12 January 1954), in Deng Xiaoping Wenxuan (1938-1965) (Selected Works of Deng Xiaoping, 1938-1965) (Beijing: Renmin chubanshe, 1989), pp. 182-83. 8. Yu Guangyuan, "Develop economic sciences," Jingji yanjiu, No. 10 (1981), p. 4; Li Xinzhi and Wang Yuezong, Great Practice and Glorious Thought, p. 121.

Deng Xiaoping: The Economist


established during1953, the acceleration collectivization nationalof and ization in 1955-56, the economic readjustment liberal policies of and 195S57, the formationof communesand beginningof the GreatLeap Forwardin 1958, drastic rehabilitation the economy following the of catastrophic GreatLeap collapse,andthen renewedradicalization of first ruralpolicy in late 1962 and subsequently growthpolicy with a new of Five-YearPlan in 1964- shows in each case Deng participating the in implementation policy, but nowhereinfluencing makingof policy. of the In none of these important issues can we discerna viewpointspecifically attnbutable Deng Xiaoping. to Deng always carriedout the establishedpolicy, vigorouslyand effectively, whatever thatpolicy was. This was notoriously truein the case of the GreatLeap,which Deng supported fromthe beginning,as he himself has repeatedlyacknowledged.9 Subsequently,after the Leap collapsed, Deng played an active role in carryingout the effective policies that began China's economic recovery;and Deng's Secretariat produceda draft Third Five-YearPlan in 1964 that stressedcontinuedpriorityto restoring agriculture recoveringpre-Leap and levels of consumption. But in late 1964, in responseto Mao's intervention, Plan was abandoned this and the emphasisshifted sharplytowardmilitarization accelerated and heavy industrialinvestment,and the draftingof the radicallyrevised ThirdFive-YearPlan was also supervisedby Deng's Secretariat.l? is It not unusualto findDeng on bothsides of a single issue at different times; however,he is alwaysfollowingthe prevailing line, withoutregardto his previous position. His record was one of unprincipledbut effective implementation whateverpolicies were adoptedby the Centre. of Deng's approach economicproblemsshouldbe clearlydistinguished to fromwhat we mightterm"principled pragmatism." Deng was pragmatic and effective in carryingout whateverpolicy was set by the central government most cases, ultimately Mao Zedong).But this pragma(in by tism did not apply to the definitionof economic problemsthemselves. Itather,Deng let other top leaders define the economic problems,and then confined his skills to the implementation policies they had of established.The contrasthere is especially greatwith Chen Yun. Chen, like Deng, never overtly opposed any of Mao Zedong's policies, but Chen's activity and visibility among the elite fluctuateddramatically. When policies congenial to Chen's consistently-expressed ideas were being implemented, playeda majorrole;when policies conflictedwith he his views, he tendedto become invisible. As a result,Chen's consistent
9. Deng Xiaoping,"Adhere the Partyline and improvemethodsof work,"Selected to Works(1975-1982), pp. 262-63; "Remarks successive draftsof the 'Resolutionon on Certain Questionsin the Historyof OurParty'," ibid. p. 281. For moreon Deng Xiaoping duringthe GreatLeap Forward, RoderickMacFarquhar, Originsof the Cultural see The Revolution,2: The Great Leap Forward,1958-1960 (New York: ColumbiaUniversity Press, 1983), pp. 6s61, 121, 166, 176, 323. 10. According Li Yue,citedin Jingjixue to dongtai,No. 2 (1981),p. 14, theoriginal plan was drafted "according the ideasof ChenYunandDengXiaoping." Mingfang, to Yan "The compilation fulfilment the ThirdFive-Year and of Plan," Dangshiyanjiu,No. 6 (1986), pp. 38-39; Li XinzhiandWangYuezong,GreatPracticeand GloriousThought, 136, 140. pp.


The ChinaQuarterly views on economicaffairscouldbe fairlyreadilydeduced,even if he had not writtenextensivelyon a wide range of economic issues.l' No such patternsare discerniblein the case of Deng. He played a majorrole as manager, fixer andenforcerundera wide varietyof policy orientations.'2 The view of Deng Xiaoping as above all a pragmatisthas been cruciallybolstered his statement, doesn'tmatterif a cat is blackor by "it white, so long as it catches mice." This statementwas indeed made by Deng, andmoreover madein the contextof a crucialeconomicissue with explosivepoliticalconnotations. was said in July 1962 in the courseof It a speech in which he supported expenmentalpolicy of contracting the farmlandto individualpeasanthouseholds.'3 Subsequently, this policy was condemned Mao Zedongas a senous deviationfrom the correct by Partyline, and dunng the Cultural Revolutionan entirepublic relations offensive against Deng was drummedup on the basis of this one quotation. In fact, in this speech Deng was simply echoing statements that Mao Zedong had been makingover the previousyear and a half. Mao had explicitly supported contracting land to individualhouseholdsin Anhui province on an expenmentalbasis, and he called for a flexible and experimental approach ruralpolicy in general.In March1961, referto nng to an explicitrequestfor guidanceon contracting to households, land Mao told the Partysecretaryof Anhui, "Tryit out! If it doesn't work, you'll do a self-criticism, that'llbe the end of it. If it works,andyou and can producean extra500,000 tons of grain,thatwill be a greatthing.''l4 Mao's commitment open-minded to expenmentation was doubtlessbe11. As a resultof Chen's consistenceand importance, have two excellentEnglish we language studiesof his life. Bachman, ChenYun the Chinese and PoliticalSystem; Nicholas LardyandKenneth Lieberthal, "Introduction" ChenYun Strategy China'sDevelopin 's for ment(Armonk: E. Sharpe,1983). M. 12. Onecommonly-held view is thatafter1962therewasincreasing divergence views of betweenMao andotherleaders,including Deng. See WangNianyi,';Atentative discussion of theoriginsof theCultural Revolution," Dangshiyanjiu,No. 1 ( 1982) pp.24-31 . Thatmay indeedbe true,but thereis no real evidenceto substantiate with the evidencecurrently it available.In fact, it is still difficultto make any confidentassertionaboutDeng's views duringthis periodgiven the current stateof ourknowledge.BecauseDeng was not the top personin the hierarchy, speecheshavebeenless abundantly his published studieduntil and veryrecently. Nearlyall his important statements currently available havebeensubjected to highselectiveediting.See MichaelSchoenhals, "Edited records: comparing versionsof two Deng Xiaoping's '7,000 CadresConferenceSpeech',"CCP ResearchNewsletter,No. 1 (1988), pp. 5-9, andbelow on factorymanager systems.The selectionof documents available is systematically biasedto projectcertainimagesof Deng- for example,the official SelectedWorks contains speechesbetweenMay 1957andMarch1960,in spiteof Deng's no intenseactivityduringthis period.Finally,since the most characteristic featureof Mao's proclamations duringthis periodwas inconsistency, the most characteristic and featureof most otherPartyleaders(includingDeng) was slavish subordination Mao's proclamato tions,it followsthatselectivecompilation produce can almostanykindof historic record. All we can say is that thereis currently reliableevidence to supportthe view thatDeng no independently advocated significant any policy positionbefore 1967. 13. Deng Xiaoping,"How to revive agricultural production," Selected Works(19381965), p. 305. 14. Liu Yishun,"CengXishengandthe responsibility fieldsin Anhui," Dangshiyanjiu, No. 3 (1987),pp.26-27; LiuYishunandZhouDuoli,"Thequestion sresponsibility of fields' in Anhuiin 1961,"Dangshiyanjiu,No. 5, (1983), pp. 3540.

Deng Xiaoping:The Economist ginningto fade somewhatby the following year when Deng spoke, but it was still official Maoistpolicy. Only in the followingmonthsdid Mao reverse Similar conclusions follow whenever Deng's statements are carefullymatchedwith the policy lines prevailingat the time the statements made.For example,Deng as GeneralSecretary are supervised the drafting of a programmatic document on rural policy in September1963, which came to be known as the "SecondTen Points." Denouncedduringthe CulturalRevolutionas a revisionistdocument,it seems clear that it was routinelydraftedunderDeng Xiaoping'sgeneral supervision,and was seen as a refinementand polishing of existing policies, ratherthan a new departure.l6 Thus, in the period before 1967, Deng operatedas the consummate organization man. With a crucialposition in the organization, exemhe plifiedthe effective bureaucrat, acceptinga delegationof authority from above and carryingout tasks with great responsibility. Meanwhile,he gave attentionto extendingeffective bureaucratic mechanismsinto the state-run industrial economy, seekingto expandthe scope for delegation of authority responsibility. the sametime, Deng was the organizaand At tion manin another sense:responding the needs of the organization, to he seems to be without a personalvision, and possibly without personal prlnclpes.
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Deng's Interlude:Power, Purge and Return,1975-78 Deng was recalled to Beijing in February1973 to work in foreign affairs.'7 role gradually His expanded, in December1974 Mao- after and reportedlyconcludingthat Wang Hongwen was not sufficientlycompetent to run the country designated Deng Vice-Chairmanof the 15. In fact, in this speech,Deng is verycarefulto specifythatthe policy of openexperimentation in effectonly untila scheduled is AugustPartymeeting,whichwill developmore specific(andrestrictive) ruralworkmethods.Deng Xiaoping,"Howto revive agricultural production," 305. Much later,Deng specificallynotedthatat thattime "it seemedthat p. Comrade Mao Zedongwas then earnestlycorrecting'Left' mistakes.... At the Beidaihe Meetingof July-August[1962], however,he reversed direction again,layingrenewedand even greater stresson class struggle." "Remarks successivedraftsof the 'Resolution on on Certain Questionsin the Historyof OurParty'," SelectedWorks Deng Xiaoping(1975of 1982), (Beijing:ForeignLanguages Press, 1984),p. 281. 16. Indeed,the document servedas the basisof policyfor overa yearwithoutsignificant controversy, it was swamped theintensifying until by tensionsbetweenMaoandLiuShaoqi, withtheircontrasting "experiences" approaches ruralpolicy formulation. maybe, and to It as somehaveargued, the document that represents subtleshifttowards a greater acceptance of rural commercial activitiesthanmighthavebeenenvisaged Mao,andargued some by for safeguards protect to cadres. Evenif true,suchsubtleshiftsof emphasis werewell withinthe generalpolicy framework. Richard Baum,Preludeto Revolution: Mao, the Partyand the Peasant Question,1962-66 (New York: ColumbiaUniversityPress, 1975), pp. 43-59. Baum'ssummary Deng's positionon p. 165 still seemsright:"Aboveall, Deng seemsto of have been concernedwith establishing routinized bureaucratic normsand procedures and withregularizing channels communication the of betweenhigherandlowerlevels withinthe Party in short,with perfecting instruments 'rational' the of publicadministration." 17. Thefact thatMaowas willingto recallDeng in early 1973mayalso serveas indirect evidencethatDeng played"bythe rules"before 1967.If Mao seriouslybelievedDeng had ignoredMao and pushedhis own agenda,as chargedby Cultural Revolutionradicals,he surelywouldnot have advanced him to positionsof greatpowerduringthe 1970s.


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and Party,Vice-Premier, vice-headof the MilitaryCommisCommunist sion. Deng was effectively replacing Zhou Enlai, who was already by incapacitated the cancerthatwouldprove fatal a year later.Throughout 1975, Deng possessedenormouspower,secondonly to thatof Mao; that Deng would implementthe no longer was there any presumption by constrained what was acceptpolicies of others.He was undoubtedly erraticMao, andby the need to pay lip-serviceto able to an increasingly responsible Revolutionprinciples.But overallhe was primarily Cultural to during1975 and,in sharpcontrast the past,the for the policies adopted stampof Deng Xiaoping. policies adoptedbear the unmistakable 1975 by two throughout In the economicsphere,policy was dominated was growth.Rectification and consistentthemes:rectification accelerated notjust an economicpolicy- it beganwith the militaryandextendedinto Part rectification." of it was nearlyeverypartof societyas partof "overall reshufflingpersonnel:firing incompetentsand political opponentsand But promotingcapableindividualsand loyal supporters. it was also an clearsystemsof it involvedrebuilding economicpolicy, in that important in andincentives.The focus of rectification this responsibility command, complex, and it began with the sense was the industryand transport for railways.Deng's programme the railwaysrestedon explicit centralcombinedwith clearrules governingresponsibilities izationof authority, and power.He turnedto his old friendWan Li, makinghim Ministerof work group.A CentralDocument Railwaysand head of the rectification RailwayWork"(zhongfaNo. 9) gave addi"Decisionon Strengthening to tional authority Wan Li and was also used as a model for extending rectificationto other sectors. It was applied in succession to steel, duringthe firsthalf of the year.l8 petroleumand militaryindustries with After mid-year,Deng soughtto expandthe ongoingrectification sectors.He had thatwould cover all industrial document a programmatic the StatePlanningCommissionbegin drafting"OnSeveralQuestionsof Deng took a directpersonalinterDevelopment." Industrial Accelerating est in the revision of this document,and pointedout that it should be basedon the 70 Articlesof 1961.l9This documentstressescentralization of planning economicactivity.Above all, and of authority comprehensive to though,it can be seen as a return principlesof personnelmanagement The and responsibility authonty.20 stressis thatcall for clearlydelineated thandelegationof and on rules and regulation, on centralcontrol,rather
from de 3: 18. WangNianyi,1949-1989 niande Zhongguo da dongluan niandai(China 1989), chubanshe, Henanrenmin 1949-1989, III: ThePeriodof GreatChaos)(Zhengzhou: a to pp.516-523. I amgrateful KamWingChanfor providing copyof this source.Li Xinzhi pp. andWangYuezong,GreatPracticeand GloriousThought, 178-183, 187. from 1949-1989, p. 526. 19. WangNianyi, China in is versionof thedocument reprinted ChiHsin,TheCaseof theGangof Four 20. A draft SelectedWorks, (HongKong:CosmosBooks, 1977),pp. 239-272. See also DengXiaoping, in pointsout, "Beginning 1975, Deng has 1975-1982, pp. 45, 8-11, 28-31. As Bachman p. ChenYun, Bachman, of rectification leadingbodiesin factories." advocated consistently 156. As we have seen, this advocacy can be traced back to 1961. See also Kenneth with James Tong and Sai-cheungYeung, CentralDocumentsand Politburo Lieberthal, Papersin ChineseStudies,No. 33, 1978),esp. pp. Michigan Politicsin China(AnnArbor: 27, 44-49.

Deng Xiaoping:The Economist authorityand decentralization. This can be seen as the outcome of an attempt establishclear,well-functioning to authority systemsin the wake of Cultural Revolutionchaos. The other consistent theme was the desire to accelerateeconoc growth.In orderto providea broader legitimacyto the growthobjective, Deng reaffirmed goal of the "fourmodernizations." fourmodernthe The izationswere a visionaryprogramme introduced Zhou Enlai in 1965, by designedto be the second stage of a two-stage,long-termdevelopment strategy.During the first stage (1965-80), China would build a selfsufficientindustnal base and be relatively autarkic -out of necessity, since it hadfew exportproducts little hope of aid fromthe superpowand ers. Zhou then envisagedChina emergingfrom isolation around1980, andbeginninga penod of accelerated growthanda renewedopening:this he called the four modernizations. had thus tried to build into the He long-term development strategy the idea that economic growth and opening to the outside world would returnto the top of the agenda. Shuntedaside duringthe CulturalRevolution,the idea was revived by Zhou himself dunng the FourthNPC in January1975, in what was virtuallyhis last majorpersonalinitiative.Deng immediatelyseized on the theme, and madethe idea of the transition the second-stage"four to modernizations" of his majorthemesfrom February1975.21 one Yet the specific strategythat Deng pushed to accelerateeconomic growthwas deeply flawed.PlannersunderDeng in the autumnof 1975 drew up a "Ten-Year Plan"for development the economyfrom 1976 of to 1985. This was a terribleplan:it was unrealistic inconsistent, and and it reflecteda single-minded concentration the heavy industnalsectors on that had been top priontyunderthe Stalinist(and Maoist)development strategyof the past. Very high targetswere set for steel and petroleum, and plannerswere unable to reconcile supplies and demandsfor key commodities even in 1975, the firstyearof implementation.22 any case, In significant improvement the economybecameimpossibleas, in 1976, in Deng was purgedagain and open struggleraged over the successionto Mao. Deng returnedto positions of significant power from July 1977. Between then and December 1978 he exerted substantialinfluence, althoughhe was formallyoutranked Hua Guofeng.23 of the most by One distinctivecharactenstics this penod was the revival of the Ten-Year of Plan drawnup underDeng in 1975, which was dustedoff and declared operationalagain. A few targets were raised to even more unrealistic levels, and the exportof petroleumin exchangefor importsof Western machinery,presentin the onginal plan, was given greaterprominence. But this was essentiallyDeng's plan broughtback to life. It was finally
21. Li Xinzhi and Wang Yuezong, Great Practice and Glorious Thought, pp.l77,179180. 22. Barry Naughton, "China's experience with guidance planning," Journal of Comparative Economics, No. 14 (1990), pp. 74S48. 23. On this period, see Kenneth Lieberthal, "The politic; of modernization in the PRC," Problems of Communism, May-June 1978, l-17. pp.



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abandoned the end of 1978, more or less collapsingunderthe weight at of its own contradictions. was quicklyforgotten, thosewho thought It and of it tendedto pin responsibility the hapless Hua Guofeng.By this on time, Deng was leadingthe way towardeconomicreform,and it would have been unnecessarily backward-looking burdenhim with responsito bility for a failed economicplan.
After 1978: The Era of Deng Xiaoping

At the end of 1978, during the Third Plenum of the 11th Central Committee, Deng emergedas the paramount leader.Fromthatpointuntil the present(1993), no major policies were adopted whichDeng did not of approve,and Deng himself was the initiatorof manyimportant policies. In that sense, the entirereformperiodis legitimatelyseen as the era of Deng Xiaoping. Yet Deng has not managed economic policy on a day-to-daybasis. In spite of occasional interventionsinto economic policy, he must be thoughtof as presidingover policy-making,rather than controllingit directly. In this sense, Deng's role after 1978 is somethingof a mirror image of his role before 1967. Before 1967 he was a hands-onadministrator little abilityactuallyto makepolicy, while with after 1978 he was a hands-offleaderwho establisheda generalorientation for policy, but left the detailsto others. While Deng's direct interventions economic policy-makingwere in rare, they were always crucial. This was particularlyso at the very beginning,when,at the end of 1978 andbeginningof 1979,he alliedwith Chen Yun and Li Xiannianto initiate the twin policies of economic readjustment reform.Chen Yun in particular and was advocatingideas with which he had long been associated,and which he had been vocally upholdingsince mid-1978. Deng, on the other hand, clearly moved to distancehimself from a faultyeconomicplan with which he was closely associated,and embracedeconomic ideas with which he had no past association.Deng's change of heart began the economic reform era. Shortly thereafter,he was able to promote Zhao Ziyang to Premier, placing an effective administrator the key economic policy-making in role. Witha capablesubordinate chargeof daily affairs,Deng resumed in his preferredrole as presiderover the policy process. He intervened forcefullyagain in 1984, laying the groundwork the crucialOctober for 1984 Partydecisionon urbanreformandjump-starting stalledreform the process. Again, during 1987-88, Deng repeatedlymade commentsdesigned to give added momentum to the reform process. Finally, immediately afterthe Tiananmen massacre, begantryingto repairthe he damage to the economic reformprocess. By December 1990, he was actively meeting top leaders, trying to get the economic reform programmegoing again, and at the beginningof 1992 he madehis famous trip to the ShenzhenSpecial Economic Zone in order to re-ignitethe economicreformprocess.Thus, over a 15-yearperiod,Deng personally shapedeconomicpolicy in only four or five instances,but each instance was crucial.

Deng Xiaoping:The Economist Given this general pattern, it makes no sense to survey Deng's fashion.Instead,it is more activitiesover those 15 yearsin chronological to appropriate identify severalconsistentthemesthat have characterized that Deng has created.Five stand out. the generalpolicy environment One of Deng Xiaoof The centralimportance economicdevelopment. was ping's greatestaccomplishments to shift the focus of the Communist Party to economic construction.This new goal was enshrinedin the declarationof the Third Plenum in December 1978, and in various docuhas permutations been included in all successive programmatic ments. Deng was not the first, nor the most articulate,advocate of economic developmentwithin the Chinese CommunistParty. If any But deservesthatcredit,it is ZhouEnlai.24 in any case, giving individual ratherthan an intellectualone. it priorityis a practicalaccomplishment, In the highly politicized atmosphereof the immediate post-Cultural s Revolution, Deng succeeded in making Zhou' objective into Party of was to policy. Central thataccomplishment the effective neutralization competingPartyobjectives.Initiallythere were three competinggoals: equity of income distribution political mobilizationand transformation, Deng was able to pusheach of themto the margins andmilitarystrength. of the political agenda. at in The ThirdPlenumushered an eraof politicalrelaxation, leastuntil incident.Deng describedthis prettywell in the June 1989 Tiananmen 1992: "Notto engage in debates- this was an inventionof mine. Not to debate- this is in order to get more time to accomplish things."25 were effectively sidelinedafterDeng began considerations Distributional proclaimingthe necessity to "let some people get rich first."He never of abandonedthe idea that equity was a fundamentalcharacteristic of superiority socialism socialismand one that showed the fundamental theme of his in 1985-86. But he this became a recurrent to capitalism: redefined notionof equity,movingit away fromsimpleegalitarianism the the notions.He described superiority towardsless politicallyconstricting achievingcommonprosof socialismin termsof avoidingpolarization, Each of these formulationsallowed perity and eliminatingpoverty.26 incomegrowth, to a Deng to maintain long-runcommitment broad-based to while insisting that in the short run equity should be subordinate Finally,he shiftedthe focus of Partyandgoverneconomicconsttuction. mental activity away from the military.Deng's successive declarations duringthe early 1980s that a period of extendedpeace was possiblebackedby his prestigewith the military were essentialin obtaininga
of expressionof the importance 24. Deng's 1957 speech was, however,an articulate is "Fromnow on, the main responsibility to carryout economic economicdevelopment: (1938-1956), pp. 249-257. (8 construction" April 1957) in SelectedWorks 25. Deng Xiaoping,"1992 nian 1 yue 18 hao zhi 2 yue 20 hao Wuchang,Shenzhen, 1992 to ("Speeches givenfrom18 January 20 February shi Zhuhai Shanghai dejianghua" he studymaInternally circulated ZhuhaiandShanghai"). Shenzhen, while visitingWuchang, terials,p. 9. Issues in Present-DayChina(Speeches,1985-1986) 26. Deng Xiaoping,Fundamental Press, 1987), pp. 124, 127, 178. (Beijing:ForeignLanguages



The China Quarterly

substantial reduction the flow of resourcesto the militaryand military in industry. The centralimportance economicconstruction stressedby Deng of is not only in oppositionto political mobilizationby the left, but also in oppositionto active democratization society. Politicalactivityoutside of strictlycontrolledbureaucratic channelsis seen merelyas a diversionof energyfromeconomicconstruction: can createchaos but cannotmake it a positive economiccontribution. Deng told formerUnited StatesPresident GeorgeBush on 26 February 1989:
There are so many Chinese people, and each has his own viewpoint. If there's a demonstration this one today, and that one tomorrow,there'd be a demonstration by every day, 365 days a year. In that case, economic constructionwould be entirely out of the question.27

In a sense, Deng's stresson economicconstruction be seen as another can sign of his lack of an affirmative vision of the good society. Economic development a good thing, but, unusuallyfor a politicalleader,Deng is has never even hinted at his ideas aboutwhat kind of society ought to emerge as its product. Authority and responsibility should be clearly delegated.The importance Deng gave to issues of authorityand responsibility 1961 and in 1975 have already been seen. This focus re-emergedas soon as he returned 1977. Again, in one of the few instancesin which there is in evidence of a distinctpersonalcontribution Deng, it is relatedto the by clarification authorityand responsibility. important of His March 1978 speechon science andtechnologywas drafted aides,but he personally by addedtwo pointsto the draft:the need to rely on science andtechnology to developproduction, the need to adopta research and institutedirector responsibilitysystem.28 This was the first of the various"responsibility systems"that so stronglycharacterized reformdecadeof the 1980s. the Clearlydelineatedauthority, reinforced increasingly by significant material incentivesas the reformprocess went on, is the most characteristic "Dengist" elementof reform. Of the various "responsibility systems,"the most important was the "factorymanagerresponsibilitysystem."Its importance in the fact lay that the alternative factorymanager to responsibility was authority held by the Party secretary,or diffused among the various contendersfor power in the factory.29 a majorspeech on leadershipon 18 August In
27. Li XinzhiandWangYuezong,GreatPracticeandGloriousThought, 297. Cf. ibid. p. p. 282. 28. This is accordingto Lin Zixin, who wrote the originaldraft.Informal remarks at Meridian Houseworkshop economicpolicy-making on during 1980s.Washington, C., the D. 24 October1991;Deng Xiaoping,SelectedWorks (1975-1982), pp. 112-13. 29. A 1980description that"ingeneral, current held the systemis thatthePartysecretary is the numberone man, and the factorymanager the number is two man.Even when the number mandoesn'tgive directorders, number manhasto securehis agreement one the two when managing production doing administrative and work."Yan Chongzong, "Reform of

Deng Xiaoping: The Economist


1980, Deng proposedthat the system in which managerswere subordibe nate to Partycommittees(and secretaries) replaced:
change the system of factory manager [We must] progressivelyand with preparation responsibilityunderthe leadershipof the Partycommittee and, aftertesting, gradually implement the system of factory managerresponsibilityunder the leadershipof the factoly managementcommittee or board of directors.... This reform will take the Partycommittee out of day-to-dayaffairs,and allow it to concentrateon political and ideological work and organizationalsupervision.

This is a clearcase whereDeng is personallysettingthe agenda.Indeed, he was sufficientlyout in fronton this issue thatwhen the publicversion The of his Selected Workswas printed,this passagewas omitted.30 idea was shelved for four years while the focus of work shiftedto enterprise rectificationwithin the existing framework:regularizingmanagement positions and appointinga whole new group of managers.Widespread did responsibility not begin untilMay of implementation factorymanager 1984. Again Deng was personallyinvolved, appointinga work group implementation. underhis close associatePeng Zhento supervisegradual After some delays during 1985-86 caused by political scuffles, the systembecamenearlyuniversalin 1987responsibility factorymanager

A clear sustained pattern emerges from these incidents. Deng is consistentlyconcernedwith the personnelfunction,and just as consistently advocatesclear delegation of authorityto specified individuals. that concernedwith organizations are directly Moreover,he is primarily that chainof command, is, with urban bureaucratic partof the state/Party To organizations. a certainextent this is underratherthan agricultural standable termsof Deng's politicalposition:as the real top leaderof in the CommunistParty, he is the only individual who can order the But, significantly,Deng CommunistParty out of factory management. princias of decentralization authority the fundamental has seen authentic ple of economic reform.As early as 1978 he said: "Whoeveris given Even retrospectively, as shouldbe given authority well."32 responsibility for a Deng has propounded view of responsibility mistakescommitted we underMao:"Whenever had the rightto speak,we mustbearsome of


jingJiguanli congkan,No. 2 systemcannotbe delayed,"Gongye the factorymanagement (1980), p. 26. 30. Deng Xiaoping,Selected Works(1978-1982), pp. 322-24; the originalversion is Zhongguo jingJitizhigaige shinian(Ten Yearsof cited fromSystemReformCommission, EconomicSystemReformin China)(Beijing:Jingi guanli, 1988),p. 24. 31. System Reform Commission,EnterpriseReform Section, Zhongguoqiye gaige Reformin China)(Beijing:Gaige, 1990), pp. 458-59; shinian (Ten Yearsof Enterprise Leadership ZhangZhanbin,Xin Zhongguoqiye lingdao zhidu (New China's Enterprise after System)(Beijing:Chunqiu,1988). Therewas some erosionof this accomplishment 4 June 1989, which is discussedbelow. (1975-1982), p. 163. 32. Deng Xiaoping,SelectedWorks


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for This the responsibility."33 also becameDeng's favouriteexplanation "Themainidea is to delegatepowerto lower the successof raralreforms: levels. The reasonourruralreformhas been so successfulis thatwe gave the peasantsmore power to make decisions, and that stimulatedtheir initiative."34 from clearlines of authority In the reformera, Deng's stressbroadens to encompassincentives- including,but not limited to, materialincentives. Deng is a managerand a leader:he is concernedwith exhortation, disciplineand reward.David Bachmanpoints out that with Deng, "the CCP is a majoractor ... Deng is constantlyexhortingthe Party ... this be view in Deng's thoughtcan probably tracedbackto his mobilizational days as a politicalcommissar... in this sense, he is the most Maoistof This is true, but there is an important China's majorleaders today."35 differencefrom the Maoist view in that Deng appearsto believe genof uinely that real decentralization authorityis essential in order to of initiativethathe seeks. It is his willingnessto achievethe mobilization fromMao. him that this countenance decentralization separates so sharply to Deng appears have recognizedearlyon thatthe existingsystemstifled reformof a fairly creativity,and that only economic and administrative could ever resolve the problem. radicalcharacter Finally, the central importanceof personnel managementin Deng Deng was able Xiaoping'scareercan be tracedin his use of subordinates. to listen to good advice, and willing to let go of controlover economic He matters. has been willing to allow specialistsin economicpolicy-makon ing to makeeconomicdecisionswithoutmuchinterference his part.In 1978-79, the crucialinnovationsin economic policy were made by Li the Xiannianand Chen Yun, with Deng serving ratherto orchestrate overallpoliticalconditionsthat made these changespossible. Beginning in 1981 andextendingto the end of 1988, most concreteeconomicpolicy until the end of was madeby ZhaoZiyang,who enjoyedDeng's support from theirvery differentperspectives,all this period.These individuals, had substantialeconomic expertise, and Deng was wise to rely upon of The stress on his direct management personnelalso draws them.36 that might otherwisebe attentionto an aspect of his accomplishment as missed. Not only did he remove "politicalcorrectness" the criterion he guidingoverallPartypolicy (in favourof economicconstruction); also guidingappointment as largelyremovedpoliticalcorrectness the criterion and promotionwithin the system. During the 1980s, Deng directly or
Mao and attitude Chairman to 33. HuangKecheng,"Onthe questionof the appropriate Dangshiyanjiu,No. 2 (1981), pp. 2-10. Mao ZedongThought," Issues,p. 195. 34. Deng Xiaoping,Fundamental ChenYun,p. 159. 35. Bachman, also Gorbachev is 36. In this respect,the mosttellingcontrast withMikhailGorbachev. withrespect hada weakgraspof economics,butunlikeDenghe did nothavegood instincts jumpedfrom one fashionable Gorbachev in to the use of subordinates economicmatters. Notha eachpromising quicksolutionto economicproblems. economicadviserto another, ing was done, and the Soviet economywent to pieces. By contrast,Deng allowedZhao well to Ziyang to charta consistentpolicy course, and the Chineseeconomyresponded effectivepolicy-making.

Deng Xiaoping: The Economist


indirectly promoted largegroupof qualifiedandeffectivemanagers a and local officialsto replacethe formerPartyhacks.This leadership turnover contributed substantially China'simprovedperformance the 1980s. to in Deng's stresson authority responsibility and may also help explainhis narrow interpretation political reform. He has always supported of "politicalreform"of a sort: "Wheneverwe move a step forwardin economicreform,we are made keenly awareof the need to change the politicalstructure.... unlesswe modifyourpoliticalstructure, shall So we be unableto advancethe economicreformor even to preservethe gains we have made so far."37 But this has rarely gone beyond simple clarification authority of relations which explainswhy he believes it is so closely linkedto economicreform.In another sense, Deng's consistent belief in cleardelegationof authority may explainsome of the problems he had with his subordinates Yaobangand Zhao Ziyang. Because Hu Deng was so effective carryingout policies decided by Mao, he had expected his subordinates carry out his policies, without regardto to broaderprinciplesor alternativevisions of the future.With respect to economic policy, this expectationwas not misplaced.As Deng commentedon ZhaoZiyangandHu Yaobang,'sBoth men failed,andit wasn't because of economic problems. It was on the question of opposing bourgeoisliberalization that both men came a cropper."38 another Put way, both men had visions of a more comprehensive process of social reform to which they attached more importancethan unquestioning obedienceto the views of Deng Xiaoping. Rapideconomicgrowthis best. Deng Xiaopinghas a strongtendency to push for unsustainablyrapid economic growth rates. There was evidenceof this in his supportfor the GreatLeap Forward 1958, and in his advocacyof the unrealistic Ten-YearPlanin 1975 and 1977-78. This was also true generallyin the post-1978 period,but duringone crucial instance,Deng was willing to modifyhis high growthadvocacy.In 1979, he deferred the views of ChenYun andLi Xiannian, supported to and the policy of economicreadjustment resultedin a periodof slow growth. that These policies were implementedeven more strictly in 1981-clearly with Deng's acquiescence and resultedin a brief recession.The readjustmentperiod was essential for Chinas subsequentdevelopment.As Chen Yun argued,the economy needed a "breathing space"to release resourcesfor consumption rebuildingof reservecapacities. and By 1982, though,Deng's eagernessfor morerapidgrowthwas becoming apparent. the 12th PartyCongress,PartySecretaryHu Yaobang At formallyadvancedthe goal of quadrupling China's outputby the year 2000, which clearly reflectedDeng's views. This was an ambitiousbut not entirely unrealistictarget and thus stimulatedrealistic long-term thinkingaboutthe capabilities the Chineseeconomy.DoubtlessDeng's of objectivewas mobilizational rather thanto serveas a stimulusto long-run
37. Deng Xiaoping, Fundamental Issues, p. 149. 38. Deng Xiaoping, "Speeches given in 1992," p. 17.


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planning,but his judgmentwas sufficiently practical enablethe target to to serve as a positive stimulusto realisticplanning. In the mid-1980sDeng pushedrepeatedlyfor more rapidgrowthand reform.Thereis at times a fundamental confusionbetweenrapidgrowth andrapideconomicreformin Deng's mind.Both areseen as the outcome thatprevailswhen minds are liberatedand individualsmove boldly and energeticallytoward their objectives. This confusion was particularly evident dunng 1988, when Deng pushed for additionaleconomic reforms- particularlypnce reform- dunng a period when inflationary pressureswere alreadybuildingup in the economy. The price reforms were desirable, they could be most effectivelyimplemented but dunng a penod of slack economicdemand.Up to at least the end of July, Deng was repeatedly arguingthatofficialsmust be bold in attacking problems of growthandreform- meanwhile inflationwas steadilyaccelerating out of control.Only afterit surgedto annualratesabove 50 per cent and the cnsis was plain to all did Deng finally recognize, in September,that officials were now "boldenough"and more stabilitywas required.39 By 1992, Deng was willing to use the imperative economicgrowth of to cnticize the overly conservative policies of hardliners. Indeed,during 1992-93 the desire for growth was used to divide conservativesand reformers, each time the plannedgrowthratewas increased, was and this ratherbizarrelyinterpreted a tnumphfor the reformcamp. However, as at the same time, Deng's conceptionof growth appearedincreasingly sophisticated.
From our experience of these last years, it is entirely possible for economic developmentto reach a new stage each few years.... During the 1984 to 1988 period ... our national wealth was increased by a large amount and the whole economy reached a new stage.... While the accelerateddevelopment during these five years could be considered a kind of "flying leap," it was different from the Great Leap Forwardbecause it did not harmthe organismor mechanismof economic growth:the achievement was not small.... Rectification of the economic environmentalso has achievements ... but if we had not leaped forwardduringthe precedingyears, if the economy had not reached a new stage, the subsequentthree year rectificationcould not have been smoothly carried out.... It is importantto pay attentionto economic stabilityand co-ordinatedevelopment,but stabilityand co-ordinationare relative, not absolute. Development is the only hard truth (ying daoli).40

Althoughthe political motivationof this statementis transparent, the more importantfact is that it is true. During the 198F88 period the Chlneseeconomybecamemuch bigger,more flexible, more market-oriented and more successful.Those successeshave propelledthe economy through a period of necessary, but uninspired,retrenchment policies withoutseriousdifficulties.Before 1978, Deng pushedfor rapidgrowth in ways that were often harmful; since the 1980s, he has moderated his growth advocacy. More important,though, is that the economy has 291-92.
39. Li XinzhiandWangYuezong,GreatPracticeand GloriousThought, 287, pp. 290,

40. Deng Xiaoping,"Speeches given in 1992,9 1l-12. pp.

Deng Xiaoping:The Economist caughtup with Deng's advocacy.It is now more diverseand capableof here is thus quite perceptive. rapidgrowth.Deng's statement
The importance of non-intervention. Why was Deng willing to abstain from interveningin broadereconomic processes? In a sense, this is of merely an extension of his belief in the decentralization authority. tolerancefor not deciding What is striking,however, is the surprising through" even to acceptthe things,for allowinga periodof "muddling idea that there might not ever be a definitiveresolutionof theoretical principlesis in problems."Notto engage in debates"aboutunresolvable fact one of Deng's guidingprinciples. At crucialjunctureswhen economic policy was changingand uncerThis non-intervention. tain, Deng had the wisdomto proclaimtemporary was most apparentin two episodes, both primarilyinvolving rural to economicpolicy. It is important note at the outset thatDeng initially did not take much interestin ruralreforms.His speech beforethe Third Plenumnever mentionsmarketsor economiclaws, and barelymentions peasantsat all. In 1980, when he does discuss ruralpolicy, he argues But strongly in favour of a continuationof the collective system.41 responsibilitysystemsduringthe spreadof agricultural subsequently, householdfarming during1980 and 1981, Deng was willing to take a hands-offattitude,in spite of his own misgivingsaboutthe process.An at anecdoteabouthis attitude this time is revealing.In early 1980, during a discussionof ruralreforms,Deng Liqunpassed on to Deng Xiaoping that the report the peasantswere saying"Mao rang women shenfan; Deng Mao led us to stand up; but Deng rang women chifan" ("Chairman Xiaoping allowed us to fill our bellies"). An obviously pleased Deng to Xiaopingis reported have nodded,and declaredthatit was necessary to wait and see how the rural reforms unfolded. Deng subsequently systemto spread,even thoughno official allowedthe ruralresponsibility Instead,the fundamental documentto this effect was ever promulgated. throughthe personnelsystem.At the end of decisionwas communicated and to 1980 ZhaoZiyangwas promoted Premier WanLi to headof rural work.Since both men had been closely associatedwith the development of rural responsibilitysystems in their provinces (Sichuanand Anhui impliedofficial acceprespectively),it was obvious thattheirpromotion tance of the new system. Duringthe mid-1980s,as privatebusinessesspread,Deng againcalled for a "waitand see" attitudetowardthe privateeconomy.As he himself describesit:
During the early period of rural reform, there was the question of "Blockhead Melon-seeds" (shaziguazi) in Anhui [a successful private business that sold dried salted melon seeds, and greatly exceeded the stipulated size for household businesses]. At that time, many people were uncomfortable-said this guy's made a million - and advocated intervention.I said, don't intervene, if you intervenepeople will say policy has changed and the benefits would not be worth the costs. There are 41. Bachman,ChenYun,pp. 157-58.



The China Quarterly

still many problems like these and if they are not handled appropriately would be it easy to shake our direction and influence the whole reform situation.42

This is a prettyaccurate recounting events. Deng was instrumental of in allowingrelativelyspontaneous changesto go ahead. Deng's greatestcontribution ruralreformwas simply in allowingit to to go forward.In fact, he does not seem to have ever been much interested involvedin ruralreforms.Particularly or telling is a remark he subsequently made aboutthe growthof ruralindustries.
Our greatest success - and it is one we had by no means anticipated has been the emergenceof a large numberof enterprisesrunby villages and townships. They were like a new force that just came into being spontaneously.... The CentralCommittee takes no credit for this.... If the Central Committee made any contribution,it was only by laying down the correct policy of invigoratingthe domestic economy. The fact that this policy has had such a favourableresult shows that we made a good decision. But this result was not anything that I or any of the other comrades had foreseen; it just came out of the blue.43

This is a charming statement, it is oftenquoted,buthas one problem: and it simplyis not true.The idea thatnobodyanticipated growthof rural the industryis easily refutedif one goes back to the earlierliterature. The StateCouncildocument townshipandvillage enterprises 1979 says on in clearly:"We shouldraise the shareof communeand brigadeenterprises in the totalgrossincomein the three-level ruralsystemfrom29.7 percent in 1978 to aroundSO per cent in 1985." Clearly, policy-makersdid anticipate emergenceof a largenumber enterprises by villages the of run andtownships,andin fact the shareof communeandbrigadeenterprises actuallyfell somewhatshortof this targetin 1985.44 Deng's directpolicy involvement in rural reforms was modest. As usual, he was more concernedwith the more formallyorganizedand predominantly urban Partyandgovernmental system.But he allowedruralreformsto go ahead withoutimposingideologicalobstacles. Openingup to outside.The fifth areain which a specific accomplishmentdirectlylinkedto Deng Xiaopingcan be identifiedis in the areaof openingup to the outside world. Deng's commitment the open door to policy has been earlyandconsistent,andmorethorough thanmost of his colleagues.He appearsto approach foreigncountneswithoutdefensiveness. He is not sensitive about national sovereignty considerations
42. Deng Xiaoping,"Speeches given in 1992,"p. 5. 43. Deng Xiaoping,Fundamental Issues,p. 189. 44. The shareof grossincomeaccounted by ruralenterprises 33%of totalrural for was incomein 1985.Zhongguo tongJi nianjian (Statistical Yearbook China)1986,p. 22 l . The of documentis "Draftregulations relatingto severalproblemsin developingcommuneand brigadeenterprises," (Guofa(1979) No. 170) in SystemReformCommission, Jing/i tizhi gaige wenjianhuibian1977-1983 (Collected EconomicSystem Reform Document.s,977I 1983) (Beijing: Zhongguo caizheng jingji, 1984),pp. 97-104. Thelowerproportion rural of incomeaccounted by rural for enterprises targeted due primarily the morerapid than was to growthof householdagricultural income than anticipated-but clearly rapidgrowthof townshipenterprises been anticipated. had

Deng Xiaoping: The Economist


implied in the policy of Special EconomicZones, and he is willing to give generousand apparently heartfelt praiseto advancedforeignexperiences. Much of this appearsto be relatedto his respectfor science and technology.This was evidentearly on in a March1978 speech:
Profound changes have taken place and new leaps have been made in almost all areas. A whole range of new sciences and technologies is continuouslyemerging ... we have lost a lot of time as a result of the sabotage by Lin Biao and the Gang of Four.... Backwardnessmust be recognized before it can be changed.45

Deng has no problemacknowledging outstanding foreign performance. When he visited Nissan in Japanin 1978 he said, "todayI have learnt what modernization like." When he came to write an inscnption,he is said, "learn from the great, diligent, valiant and intelligent Japanese people."46 This is recognizablythe same Deng Xiaoping who shortly thereaftertoured the United States and was photographed Texas in wearinga cowboy hat. This openness is apparent the policy of Special EconomicZones in (SEZs). Accordingto one authoritative account:
It was Deng Xiaoping who proposed (changdao) the Special Economic Zones. During the April [ 1979] Central Work Conference, Xi Zhongxun and Yang Shangkun,the people in charge of Guangdong,talked about bringing Guangdong's advantagesinto full play. Deng brought up the question of special zones, and said, "we can carve out a patch of land and call it a special zone. Shen-gan-ning [the Communistrevolutionary base area] was a special zone! The Centredoesn't have any money, though, and wants you people to do it by yourselves; squeeze out a bit of precious cash."47

Clearly,this accountoverstates Deng's originality somewhat. Deng could not have been the firstto makethe proposal,since variousconcretesteps hadalready been takenin Shenzhen the firstmonthsof 1979, andDeng in himselfcreditsthe leadersof Guangdong provincewith the idea.48 top But policy-makers not required are actuallyto inventideas- all they need do is quicklyadoptand support good ideas proposedby advisers.In this the sense, the thrustof the anecdote is basically ttue. Deng is seen here giving strong supportto his close associates Xi Zhongxunand Yang Shangkunand legitimizingthe use of the honest term "specialzone." In subsequent years,Deng repeatedly gave supportto the SEZs, using them as a metaphor the economicreformand open doorpolicies as a for whole. During 1984 he responded criticismsof the existing SEZs by to travelling to Shenzhen and declaring the decision to develop them
45. Deng Xiaoping, SelectedWorks (1975-1982), pp. 103, 106. According to Lin Zixin, Deng also said he wished to serve as "general head of logistics" for science and technology work. I have been unable to locate this remark in the published version of the speech. 46. Hua Sheng, Luo Xiaopeng and Zhang Xuejun, "Chinese reform and state socialism," unpublished book manuscript, Oxford University, 1990, ch. 2. 47. Li Zhining, Zhonghua renmingongheguo jingJidashidian1959.10-1987.1 (A Dictionaryof MajorEconomic Eventsin the PRC,October1949-January 1987) (Changchun: Jilin renmin chubanshe, 1987), p. 453. 48. Deng Xiaoping, Fundamental Issues,p. 190; George T. Crane, ThePoliticalEconomy of China'sSpecialEconomic Zones (Armonk: M. E. Sharpe, 1990), pp. 2S27.


The China Quarterly

then moving to extend elements of them to an additional14 "correct," directlyin Again,at the beginningof 1992, he intervened coastalcities.49 Zone.A swing towards to the politicalprocessby travelling the Shenzhen renewedreformhadbeen underway since 1990,butDeng's tripwas used platformfor a symbolicallyto bolsterreformand providean appropriate to manifesto.His commitment opennessseems neverto have pro-reform one wavered.In 1992 he said, "lookingbackward, mistakeI made was thatwhen we developedthe fourSpecialEconomicZones,we didn'tadd on Shanghai."5?
Deng Xiaoping and the Legacy of Economic Reform

personally The foregoinghas outlinedways in whichDeng contributed to the evolution of economic policy in China.In a broadersense, one might ask whetherChina'seconomicreformreflectsany of the personal to of characteristics Deng's approach economicissues. Here the answer is characteristic simply the must be yes. Paradoxically, most important the lack of an over-archingvision of the reform process or its goal. and and China'sreformhas proceededgradually experimentally, without a clear sense of ultimateobjective.Indeed,it was not until the end of 1992 that a CommunistParty Congress even endorsedthe goal of a marketeconomy. Instead,each phase of reform has been directedat solving certainlimitedproblemsand movingthe economyin the general The Chinesehave directionof greateropennessand marketorientation. It called this "crossingthe riverby gropingfor steppingstones."51 is not to unreasonable link the process of reformwithouta clear blueprintto Deng's absenceof vision in the economic realm.52 At the same time, the reformprocesshas turnedout to be remarkably aspectof reformhas meant The experimental resilientand constructive. have had significantlatitudeto experimentwith that local governments economic policies, and successful policies were then adopted on a has basis. Even more fundamental been the growingsphere nation-wide sectors.The state-controlled of economic activityoutsidethe traditional of and growthfirstof ruralenterprises subsequently privateand foreignhas investedenterprises been one of the most dynamicand constructive aspects of the whole reform process. The Chinese governmentunder Deng Xiaopinghas been willing to acceptthe growthof a by now quite large sector of the economy that escapes from direct state control.This can phenomenon surelybe linkedto Deng's willingnessto acceptpolicies
pp. 49. Li Xinzhi and WangYuezong,GreatPracticeand GloriousThought, 254-56. madein 1992,"p. 10. 50. Deng Xiaoping,"Speeches The 51. On this aspectof the reform,see NicholasLardy,"IsChinadifferent? fateof its and (ed.),TheCrisisof Leninism theDeclineof theLeft: in economicreform," DanielChirot Press,1991),pp. 147-162;and of University Washington of TheRevolutions 1989 (Seattle: economicreformin China." Lin, "Open-ended at in acutewithreformers PolandandCzechoslovakia the is 52. Thecontrast particularly processwas endof the 1980s,who statedclearlyat theoutsetthatthe objectiveof thereform on forms,but basedprimarily private to createa marketeconomywith mixed ownership ownership.

Deng Xiaoping:The Economist of non-intervention his general lack of defensiveness,particularly and when it is noted that therehave been many opportunities reversethe to trend. Problemswith corruption, growth of private businesses beyond stipulatedsizes, and competitionbetween non-stateand state firms for scarceinputscould all have been used as the pretextto clamp down on the vigorousnon-statesector.Indeed,China'sconservatives have repeatedly suggesteddoingjust that.But underDeng's generalleadership, most experiments providedonly that they have been reasonablysuccessful economically have been permitted survive. to This growing non-state sector has been crucial in creating a more competitiveand dynamicenvironment even for the state sector. Yet it shouldremainclear that one of the distinctivecharacteristics China's of reformhas been preciselythat the state sectorhas continuedto operate. While its relativesharein the economyhas declined,its absolutesize has increased. At no point has it been cut loose, either abandonedor privatized,as in Eastern Europe. Instead, the governmenthas made persistentefforts to restructure managerialincentives within the state sector.The government triedto prodstateenterprises becomemore has to orientedto profitand the market,by creatingincentivesystemsthatlink managerial to profitability sales. Moreover,there is substantial pay and evidence that this effort has been at least partiallysuccessful, and has producedsignificantimprovements state sector productivity.53 in It is reasonable link the persistenceof a workableincentivesystem to within the state sector to Deng's approachto economic issues. His persistentattentionto personnelmattershas understandably meant that the management system has been a consistentfocus of attentionand of attemptsat reform.As a result, the chain of commandwithin the state sectorhas been maintained intact.The coexistenceof a large state sector with a rapidly growing non-state sector has been the most important single element of China' dual-trackeconomic system. In turn, the s dual-trackeconomic system is the most characteristic element of the patternof China's economic reform.54 Some observersof the Russian reformexperiencearguethat Russia could not follow a Chinesereform strategypreciselybecauseRussiawas unableto maintain disciplineover state firms. Thus, for better and for worse, it is possible to argue that Deng's attention workablepersonnelsystems was an important to factor allowing Chinato follow its more gradualreformstrategy. Anothercharacteristic reform in China has been its persistently of outward-looking character. Bold moves to open the economy to outside forces charactenzed earliest stages, and particularly the since the mid53. On managerial incentive systems, see TheodoreGroves, YongmiaoHong, John McMillan BarryNaughton, and "China's evolvingmanagerial labormarket," University of California,San Diego, Department Economics Discussion Paper 92-36 (September of 1992).On statesectorproductivity, K. Chen,G. Jefferson, Rawski,H. WangandY. see T. Zheng, "Productivity change in Chinese industry,1953-1985,"Journal of Comparative Economics, No. 12 (December1988), pp. 570-591. 54. On these characteristics, McMillanand Naughton,"Howto reforma planned see economy."BarryNaughton,Growing Out of the Plan: Chinese Economic Reform, 19781992 (New York:Cambridge University Press,forthconiing).



The China Quarterly

1980s, impressive progress in foreign trade reforms have paced the progressof reformoverall.55 Finally, China'sreformshave taken place withinthe contextof sustained accelerating and economicgrowth.While all the Eastern EuropecountriesandformerSoviet republicsexperienced sharpcontractions economicactivityfor at least threeyears following in the initiationof theirreformprogrammes, Chinahas reformedgradually with increasingeconomic growth.Of course, that recordreflectsdifferences in the initialeconomicconditionsfacing differentcountries.But it is also an artifactof China'sparticular approach. Indeed,within China, reformand accelerating growthhave gone handin hand,alternating with reformretrenchment slower growth. and China' economic reform can thus be characterized proceeding s as experimentally, without a blueprint.Its most distinctivecharacteristics have includeda dual-track economic system with a resilientstate sector co-existingwith a vibrantgrowingnon-statesector.Pacedby growthof foreigntrade,the entireeconomyhas displayedvigorousgrowththroughout the reformprocess. Each of these characteristics be plausibly can linkedto one of Deng Xiaoping'spersistent themes.Perchedat the top of the Chinesepoliticalsystem,Deng has endedup stampingthe economic reform process with some of his own personalcharacteristics. the In process,economicreformhas inevitablybecome one of the most important partsof his legacy. Not guidedby Deng's vision, economicreform in Chinawas nevertheless shapedby his personality by his characterand istic approach issues. to One way thatis probably usefulin understanding less Deng is to think of him as a pragmatist. is unlikelythat Deng is any more pragmatic It thanmost worldleaders.However,he is a masterat presenting himselfas a pragmatist: nobody cultivates more ardentlythe image of Deng the pragmatist than Deng himself. Some examplesof this self-presentation fromhis talks are the following:"There no othersolutionfor us [than is economicreform].After years of practiceit turnedout thatthe old stuff didn'twork."Or alternatively: "Webeganwith the countryside, applying the open policy there, and we achieved results very quickly. In some places it took only one or two years to get rid of poverty. After accumulating necessaryexperiencein the countryside, shiftedthe the we focus of reformto the cities."56 This "gee-whiz"attitudereally amounts to a cheerful miscasting a wilful misinterpretation- the Chinese of reformexperienceinto a mode of progressivelearningand pragmatism. No doubtit is an attractive image. But it clearlymisrepresents actual the process of economicreformin China,as well as the evolutionof Deng Xiaoping'spersonalattitudes. shouldbe very suspiciousof an overly We simple interpretation Deng as the supremepragmatist. of

55. NicholasLardy,Foreign Tradeand EconomicReformin China,1978-1990 (New York:Cambridge UniversityPress, 1991). 56. Deng Xiaoping,Fundamental Issues,pp. 187, 176.

Deng Xiaoping: The Economist


Deng Xiaopingin Contrastwith Others Deng can be usefullycontrasted with threeotherChineseleaders:Mao Zedong, Chen Yun and Zhao Ziyang. There are a numberof important similaritiesbetween Mao and Deng. Both were superb leaders and manipulators, with an instinctivegrasp of motivation.Mao was able to act as pragmatically Deng when he chose, and Deng was almost- but as not quite- Mao's equalin termsof strategiccunning.Mao howeverwas consumedby his visions, and in the end, in spite of his understanding of humanmotivation,proved utterlyincapableof allowing individualsor partsof society to strikeoff in independent ways outsidethe scope of his vision. He repeatedly laudedthe spontaneity the masses,butultimately of nothingdispleasedhim more than genuine spontaneity the "bottom." at BothMao andDeng possessed,at best, erratic insightinto economics,but Mao insistedon imposinghis flawedeconomicvisions on society, while Deng did not. As a result, Mao led China into repeated economic disasters while Deng, without Mao's presumption, has presided over China'seconomicrevival. Deng can also be contrastedwith Chen Yun. Chen Yun has had an extremelyclear vision of the economy as a whole. Understanding the interactions among the various sectors of the economy, he has persistently seen the dangersof overly rapidgrowth,and also the importance of marketsas a safety valve, co-ordinating resourceswhen plannersfail to makethe rightdecisions.But Chen's macrovision occludeshis micro vision. He pays little attentionto incentives and motivation.He has a ratherbleak view of human nature,stressingthe need for controls to preventselfishnessfrom gettingout of hand.57 Deng, on the otherhand, is primarilya micro-economist: gives attentionto the design of he effective incentive systems. Among China's gerontocrats,only Deng emerges as an individualgenuinely willing to accept spontaneous economic activity amongthe masses. Finally, Deng can be contrasted with Zhao Ziyang. Deng's vision of economic reform never had much content, and as a result, it never changed or evolved very much. His hands-off attitudetowardpolicymakingmeantthat he was never forced to develop a more detailedand practicable notion of what reformwas to mean. He never articulated a conceptionof economic reformthat went beyond the simple notion of decentralization authority. contrast,Zhao Ziyang's understanding of By of economicreformcan be seen growingandevolvingthrough 1980s. the By some time in the mid-1980s, Zhao Ziyang had clearly become convinced that China had to move to a true market economy. He managedrepeatedly push forwardthe processof marketization, to opening up China's economy to the increasinglyopen play of economic forces.Ironically, greatmeritof Zhao'spolicy-making thatit was the was
57. Chen'sreal attitude spontaneous to actionis captured his own simile, comparing by planand market a caged bird:withouta cage, the birdwill fly away. Withoutcontrols, to spontaneous activitywill leadto degeneration chaos.Forfull discussions Chen'srich into of economicthought,see Bachman, ChenYunandLardyandLieberthal, "Introduction."


The China Quarterly

completely "hands-on," continuouslyinvolved in realistic compromise and progress.As a result,Zhao's views and understanding the econof omy also became increasingly sophisticated. His economic vision includedboth the macroand the micro level. He had insightsaboutthe interrelation politics and economics, and understoodthe need for of macroeconomic stability,even when he failed to achieveit. At the micro level, Zhao,like Deng, seemedto understand need for motivation the and diversity; unlikeDeng, this belief led him to acceptthe need for substantially more open society as well as economy. The comparison betweenDeng andZhaomay lead naturally considto eration of the damage to his own economic legacy that Deng did at Tiananmen June 1989. His abandonment of Hu Yaobangandthen in first of Zhao Ziyang was a serious violation-even betrayal-of his own principles about delegation of authority.Moreover, after June 1989 reassertion Communist of Partycontrolled to widespread regressionin the reformof authority relations,with damagemost evident within the state system.Indeed,ironically,the single reformmeasuremost directly attributable Deng personally the factorymanager to responsibility system complete with the sidelining of Party secretaries in the factories- was reversedin 1989. For nearlytwo years, the government advanced silly sloganthatthe factorymanager the shouldbe the "centre" but the Partysecretarythe "core"of the factoryleadershipgroup.This ridiculous distinction incomprehensible most Chinese,butparticuwas to larly meaningless in the context of Deng's long-term drive toward clarification authority of relations.In a broader context,therewas serious regressionas well in the hard-wonbut still tentativeindependenceof state-run enterprises. reassertion politicalcorrectness "equity" The of and in income distribution to a significant led back-pedalling the realmof in stateenterprise reform.Deng in this respectcurtailed undermined and his own most positive legacy. Yet acting againstthese negativeeffects was the undeniable fact that Deng had alreadyfully identifiedhis own legacy with the process of economicreform.His conceptionof economicreformis ratherthin and abstract.Yet preciselybecause he was more associatedwith the vague abstraction "economicreform" rather thanany specificreformmeasures, he has a strongvested interestin seeing that the overall programme of economicreformsucceeds,whatever may turnout to be. As a result, that despitehis own complicityin the post-Tiananmen crackdown, the end by of 1990 Deng was alreadybeginningto interveneagainin a positiveway to reignitethe generalreformprocess.Fortunately, massivechanges the set under way in China under Deng Xiaoping are not subject to the controlof a single leader, and in that sense, Deng's positive economic legacy is likely to survivethe limitations any single individual. of China's society and economyhave become more diverse,more complicated and more resilientafter 15 years of reform.As China'seconomyrepeatedly escapesfromthe limits thatits politicalhandlers attempt imposeon it, to the economicreformprocessappears increasingly well suitedto serve as a positive legacy for Deng Xiaoping.