I made a promise to read Unlikely Partners, Julian Gewirtz’s book on Chinese reformers, and the role of Western economists in China’s rapid development, before the end of 2019. This is part of my current fixation on China and India, two countries that have delivered serious body blows to global poverty. If you haven’t read it, you should; it’s worth all 389 pages.
Anyway, since my hobby is looking for ways Nigeria can accelerate its stuttering economy, I read this book comparing Deng Xiaoping’s China to today’s Nigeria, and the similarities were as stark as the differences. There were too many things/events to compare, but I decided on the 10 highlights below. If you have read (or plan to read) the book, feel free to add yours.
- A Battle of Ideas: The book is a collection of brutal battles of ideas that started after Mao Zedong died. The first real battle was between Hua Guofeng, Mao’s successor, who established his Two Whatevers policy of following whatever policies Chairman Mao made and whatever instructions he gave before his death, and Deng Xiapoing (my man!), who countered Hua with his own recommendation of Seeking Truth from Facts. You’ll need to read the book for details of how Deng defeated Hua, but throughout the book, there was a constant battle between reformist and conservative ideas fought on the pages of newspapers, at party congresses, and within research institutes. If your ideas did not hold, you had to options: retreat or fall on your sword. This is the most remarkable difference between China and Nigeria, the total absence of intellectual debate in Nigerian public spaces. Our borders have been shut for months, yet I have not seen one research paper from a Nigerian university interrogating the effect of border closures on the Nigerian economy. While you can argue that ThisDay or BusinessDay is our equivalent of People’s Daily, what is our equivalent of the Chinese Academy of Social Science (CASS), whose journal, Economic Research, was often the battlefield of ideas. Our intellectuals have deserted the battlefield.
- Economics of Shortage: One of my 2020 must-reads is Janos Kornai’s Economics of Shortage. Every time this theory gets mentioned in the book, I can’t help but think about NNPC or any of the unprofitable state-owned enterprises in Nigeria. Kornai’s idea is centered around the Soft Budget Constraint. The concept can be summarized by saying that as long as the State is willing to compensate the firm for its losses, the firm does not suffer negative consequences for these losses, which will also ensure excess demand for the firm’s output exists. If you need two examples of this in Nigeria, just look at NNPC with its unprofitable subsidy and refineries; or the railway corporation that gleefully sells train tickets at significant daily losses without consequences. The day we decide to deal with inefficient price controls and state-owned enterprises, is the day we buy our train ticket to prosperity.
- Talent: You can’t help but notice the ridiculous pipeline of talent that flowed through China during this period. My finest example is Zhou Xiaochuan, who presented a paper on the Chinese Banking system in 1985 that suggested China would face a destabilizing cycle between easy and tight monetary policies, unless it developed the institutions for conducting macroeconomic policy. His presentation was described as “incandescently brilliant” and introduced Western economists to the man who has served as the Governor of the Peoples Bank of China (China’s version of the CBN) since 2002. I’m still searching for path that will ensure the brightest Nigerian economies are shaping monetary policy in the next 20 years, let me know if you have any ideas.
- Victor Hugo was Correct: You can be forgiven for not knowing who Zhao Ziyang is. It doesn’t matter that he was a former Chinese Premier, and Deng’s Man Friday. The moment he opposed the Tiananmen Square crackdown, he was removed from office, placed under house arrest till he died, and subsequently airbrushed from Chinese history. It was a temporary victory for his opponents who thought his reforms were going to be locked up with him. Instead, though he is not given any credit in China, the reforms he helped drive form the bedrock of today’s Chinese economy. As Victor Hugo famously said, “On résiste à l’invasion des armées; on ne résiste pas à l’invasion des idées”. Or as we often paraphrase it, “nothing is stronger than an idea whose time has come.” It is a reminder for those of us in Government today to stand for what we believe is correct.
- Feeling for the Stones: One of Deng’s famous proverbs described his Government’s approach as “crossing the river by feeling for the stones.” It was a clear admission that China was going to move forward through trial and error; and a reminder that this reform story was not without turbulence. The price reforms Zhao oversaw led to significant crises, as inflation created scarcity and fear. This is best illustrated by the scene at a Gold Store in Wuhan, where people frantically tried to exchange their cash for gold, to protect the value of their wealth. The Price Reform of 1988, a major policy of the Chinese Communist Party (CCP) had proven to be a spectacular failure. While it reminds us that mistakes will happen in the course of reforming an economy, the real lessons are knowing when to cut your losses, and halt bad (or badly implemented) policies.
- Special Economic Zones: One of Deng’s biggest wins started in 1978, when he sent a delegation led by Gu Mu (the Vice Premier), to gain insight for the implementation of his Four Modernizations agenda from Western Europe. This was Deng walking the talk; he didn’t just argue that China should always seek truth from facts, he also followed it with action, including several missions to understudy countries that had achieved what the Chinese wanted. Before this, he had sent Xi Zhongxun to Guangdong on a rescue mission to curb the migration of people from what was then the backwaters of China to Hong Kong. Anyway, in 1979, Xi got approval for foreign investment in Guangdong to develop export-focused factories. Within months, the Shekou Industrial Zone at the tip of Shenzen was established, and the first project, scrap metal exports to Hong Kong, was approved. This is how to win a gunfight, by shooting. Think about Nigeria, where we are still fighting to see the National Special Economic Zone company come alive, at least three years after it was incorporated. Imagine how many jobs could have been created if we moved at half of China’s pace. The annoying thing is we don’t even have to think too much, some people did the thinking for us 40 years ago.
- Elites Run the World: It is always interesting to read about how deep Chinese networks go. Remember Xi Zhongxun? There’s a reason his name sounds familiar, his son, Xi Jinping is the current President of China. That’s the example I can easily recollect, but names and families mentioned in the book are often recurring. Despite this, the sense you get is one ‘China First.’ It doesn’t suggest the absence of corruption or nepotism, but overall, the collective goal always trumps individual preferences. My simple explanation is that the broad acceptance of socialism helped forge elite unity around a vision of society. Also, I guess it helps to have a society that dates back to 1250BC. Now, tag your favourite Nigerian elites.
- Ideology…What Ideology?: Another one of Deng’s gems perfectly explains why the strongest attribute of Deng’s ideology was its flexibility. “It doesn’t matter if a cat is black or yellow (this later became white), as long as it catches mice, it’s a good cat.” In his opinion, the best ideology was the one that improved the lives of people. This is how China ended up with what sounds like an oxymoron, The Socialist Market Economy. The winners in this account of China’s development are those who treated ideology like Christmas hampers, they took what they liked and ignored the rest. Some like Chen Yun, whose Bird Cage Theory (that suggested the economy should be constrained like a bird in a cage) stuck to their communist and conservative tendencies, and eventually fell on their swords or grudgingly accepted their defeat.
- Deng, Zhao and Zhu: We are often sucked into a trap of believing in the role of the charismatic leader; and it is easy to cast Deng into that role. But as you read the book, you realize the importance of a leadership group that served various roles in China’s development story. A friend of mine suggested the most transformative economic event in China’s recent history was a natural one: Mao’s death, and I am convinced he is correct. But even that was not enough for the reforms to happen. Deng needed Zhou Enlai to rehabilitate and appoint him as First Vice Premier; and also used Zhou’s clout to push Four Modernizations agenda. He needed Zhao Ziyang to encourage the implementation of bold ideas, some of which remain till today. The trio of Hu Quiaomu, Deng Liqun and Yu Guangyuan held top posts at CASS, and became the war commanders of Deng’s ideological battle. Gu Mu, his Vice Premier, led the research and visits eventually gave birth to what we now know as Special Economic Zones. Finally, at his old age, with Zhao imprisoned, he needed Zhu Rongji who was promoted from Mayor of Shanghai to Vice Premier in 1991, and later Premier to finish the job. Zhu was chosen because of his reformist credentials (he launched the Shanghai Stock Exchange as Mayor), and in anointing him Deng said “the current leaders do not know economics, Zhu Rongji is the only one who understands economics.” Why am I sharing this? Nigerian leaders are yet to show the required clarity in developing talent and succession planning. For a brief period, Olusegun Obasanjo looked the part, but he left us with an ailing Umar Musa Yar’Adua, and later, Goodluck Jonathan. Oh well.
- Unlikely Partners: I have left the central theme of the book for last. Nigeria currently has the fixation for “homegrown solutions” that suggests any idea not developed in Nigeria cannot be right for us. If there’s anything to learn, it’s the obvious limitation of such thinking, and how China leveraged Western knowledge to build an economy that is primed to be the largest in the world for a long time. Nothing describes this better than the Bashan Conference where economists like Kornai, Tobin, Brus and Sir Alexander Cairncross sailed the Yangtze on a weeklong path charting conference. Today, Chinese officials like Wang Yi will boldly say the Chinese economy was developed with local experts and ideas, but always remember they needed the World Bank to lend them billions of dollars, and also invited Milton Friedman (who you should expect to be shot for daring to land in Beijing), more than once. China’s success was ultimately driven by an open-minded approach to economic policy. It sought Western insight, adjusted for obvious biases and adapted it to Chinese conditions. The result is clear for all to see.
Akin Oyebode is the Special Adviser, Investment, Trade and Innovation at Ekiti State Government.