Isabella M. Weber's book How China Escaped Shock Therapy is an excellent economic history study that transforms the author's PhD dissertation into a monograph. Understandably from a marketing perspective, the book is titled with an intriguing question. But its coverage is more precisely summarized by the original title of Weber's dissertation: “China's Escape from the ‘Big-Bang’: The 1980s Price Reform Debate in Historical Perspective.” As Weber clearly indicates, the book “offer[s] an historical and analytical account of China's 1980s market reform debate and show[s] how the dual-track system was theorized, contested, and defended against shock therapy” (p. 10). It is a lucid scholarly analysis and a balanced historical review, supported by both a rich collection of historical documents and, more importantly, face-to-face interviews with many key participants in the debate thrity-five to forty years ago.
Weber fuses her outstanding expertise with these unusual oral history interviews, which feature different voices of the politico-economic debates within the first ten years of China's open-market reform beginning in 1978. Some historical facts were rarely disclosed in the existing literature, for example, how China almost embraced the big-bang market reform around 1986 (chapter 7). The book's main argument is an open-ended survey of how the market reform debate actually proceeded in China during the eventful 1980s. It borrows rational choice theory from economics and political science, as underlying analytical tools, to narrate historical events. In addition, its excellent writing reads smoothly along with the checkpoints that offer general readers a clear workflow of the timeline. Thus, this book offers profound analytical history without sophisticated models, which makes it suitable for both general readers and interested scholars.
The book comprises eight chapters plus an introduction and conclusion. Featuring classical writings such as Guanzi and “Salt and Iron,” chapter 1 introduces China's institutional legacy of pragmatic price regulation for political stability. Chapter 2 compares China's post-1976 (i.e., the end of catastrophic Cultural Revolution) economy with the post–World War II Western economy. Chapter 3 chronicles Communist China's 1940s campaign against hyperinflation through welfare redistribution. Chapter 4 analyzes how and why China desperately needed market reforms to transition from a Maoist revolutionary state to a growth-oriented one in the late 1970s.
Chapter 5 traces the early years of China's market reform debate, including the famous 1982 Moganshan World Bank Conference on whether Eastern European institutional reforms could be duplicated in China. Chapter 6 covers the subsequent rural reform and the kickoff of the dual-track price system, which surrounded the heated debates at the second Moganshan Young and Middle-Age Economist Conference in 1984. The consensus out of the conference was that a growing market system could phase out inefficient economy planning without jeopardizing political stability. Chapters 7 and 8 are the final two core chapters, which touch on the intellectual and policy clashes between two alternative patterns—shock therapy or gradual reform. The historical review ends with the 1988 government struggles (rife corruption and formidable inflation) and the 1989 Tiananmen Square protests.
I found the second part of the book (chapters 5–8) particularly relevant. That is probably because the author revived the reticular historical scenes from her numerous coffee hours with those key interviewees. Some of the interviewees never spoke out in Chinese media because of censorship concerns. Note that a Chinese insider might simply skip chapters 2 and 3, which focus on comparisons between post-1978 China and the Western world, and between post-1949 China and post-1978 China, respectively, because China in 1978 was very different, ideologically and economically, from China in 1949 or the United States in 1945.
This book could be further improved in its theoretical framework. I do not recognize a rigorous and coherent theory that drives the analyses. It is meaningful to cite the classical pragmatism philosophy of “control the more important and let go the less important” from Guanzi and “Salt and Iron,” but what about contemporary studies that might also help explain the underlying logic of the dual-track reform? In particular, at least two must-read studies are neglected in the references: one is Gerard Roland's book, among many other studies, which uses formal modeling to compare big-bang and gradual market reforms; another is Chenggang Xu's literature review, which considers China as a “regionally decentralized authoritarianism” regime on the basis of empirical observations.Footnote 1 Both of these studies provide substantial theory-driven evidence of how a market economy could survive under China's authoritarian regime in a modern world. Furthermore, Weber's book does not sufficiently incorporate other institutional pillars of prosperity besides price liberalization, for which “property rights” and “rule of law,” two crucial institutional pillars, do not even show up in the index.
Finally, I wish the author had extended the historical reviews into the 1990s. As the book mentions in many places, gradual reform might gain in the short-term but lose in the long run. China's 1980s dual-track price system hit a wall during the 1988–89 turmoil, but in the 1990s, there was a massive market liberalization movement. Weber's book only briefly evaluates China in the 1990s in the last two pages of the conclusion. Could we know more about the “1980s versus 1990s” comparison?
