Learning From The Economic Legacy Of Mao And Deng

Kung Hei Fat Choi. Well one cannot deny that today is Chinese New Year and I feel like writing another "CoRRECT Philippines" type article. I have previously written articles on Anti-Chinese prejudice, now I feel like writing on the differences between Mao Zedong and Deng Xiaoping when it came the knowledge of economics.

There's no doubt Mao Zedong was a brilliant military man who overthrew the regime of Chiang Kaishek and unified China. But the problem behind his economic policies was that he was idealistic. He simply ignored the basic rules of economics. When he sought to create an "equal society", he failed to see that equality and equity are based on case-to-case basis. By paying everyone whether they worked or not encouraged a system that rewarded the lazy and punished the diligent.

Yes he did succeed in a Great Leap Forward - a great leap forward towards economic oblivion. Worse, with his ultranationalistic policies, China really suffered and its rivals Taiwan and Japan began to prosper. The whole idea of "national industralization" with all the isolationist policies didn't help China. For a time, China really fell into deep slump. Any knowledge of basic economics dictates, "How can you establish a national industralization if you don't accept foreign investment?" That was why Mao's regime failed. 

Deng Xiaoping was a Communist but he knew that Marxist economics won't help support their cause. This is the brand of Communism called "Dengism". Although he was notorious for using violence to squash the Tiananmen Square Revolt, he was also known for reversing Mao's economic idiocy with might be best called as "Communism with a free market".

He knew that the only way China can have its national industrialization was through receiving Foreign Direct Investment. He knew that foreign investors were not necessarily foreign invaders. Even if the number of foreign firms may exceed Chinese firms, they were still under the control of Dengist China nonetheless. Although he was a Communist dictator, he visited Lee Kuan Yew who gave him pointers in how to do economic development. Taking these pointers and modifying them revived China from the slump of his predecessors. He didn't blame his predecessors but instead, chose to clean up the mess left by his predecessors.

China had its start of an economic boom under Deng's free trade dictatorship. The dying dragon became an emerging dragon. China by relaxing its economic protectionist policies by introducing 50% and above joint venture packages made it more attractive. While it didn't immediately go with 100% ownership but Chinese policies were more flexible. Even if you didn't get 100% but you were given an option of having at least 50% to higher in terms of your investment vs. the local Chinese partner. It's far better than 60/40 which restricts ownership of foreigners to merely 40% and Filipinos get 60%. It's also unfair considering many Filipinos tend to demand a bigger share around the world without considering that they are being selfish and inconsiderate.

Do foreigners control China today even if they own 50% and above in terms of investment? Not at all. In fact, it's time to really see how free trade market with proper restrictions work better than the ultranationalist economic model.