Chinese and Soviet economic policy of 1980′s has lasting economic consequences

Chinese and Russian Connection

The Chinese and Russian Connection

Many political scientists draw a connection between the Chinese economic reforms in the 1980′s and Gorbachev’s efforts toward the same in the Union of Soviet Socialist Republic—U S.S.R.  Both of these countries along with others are profoundly affected by these events.  The Soviet policy of perestroika begins a movement toward free markets in that country, but does not go far enough to be wholly successful.  The Soviet policy of glasnost is well intentioned but ultimately hinders Soviet economic progress.  As the economies and politics of the world’s countries become more interdependent, the impact of changes within the U.S.S.R. also leaves impressions on China and the United States of America.  The revolutions in the communist countries of Europe of the 1980’s embolden the Chinese government to continue its crackdown on political dissention, but the relaxation of economic regulations during this time gives China one of the fastest growing economies in modern history.

Perestroika is the label given to Mikhail Gorbachev’s economic modernization and political reform policies of the 1980’s.  The approach in the Soviet Union is top-down, whereby the state still clings to economic power, maintains price controls and disallows private property ownership (Library of Congress, 1996).  Foreign investment and trade is also severely hindered.  Although Gorbachev allows private ownership of businesses for the first time since Lenin’s state capitalism of the 1920’s, he also allows the state to set the production quotas and leaves business owners to struggle for funding under stringent regulations (Library of Congress, 1996).   While Perestroika is a groundbreaking first step towards free markets in the Soviet Union—and in many ways is the catalyst for the nationalization of its constituent republics such as Tajikistan, Kyrgyzstan and Kazakhstan—it does not go far enough to fully modernize, and the Soviet economy continues to decline through the 1990’s.

At the same time in China, Deng Xiaoping is also embracing free market ideals and implementing market based economic reforms that are later termed the socialist market economy of modern China.  Unfortunately for Russia, this is where the similarities end.  Unlike Gorbachev, Xiaoping is—in title—neither the head of government or a political party in China (New Learning, 2011).  Nevertheless, he is able to influence economic change China.  Where the Soviet’s discourage relations with entities outside their state, the Chinese embrace such partnerships.  While the Soviet state continues to set prices, the Chinese phase out such measures and allow the sale of goods on more open markets.  While the Soviet Union controls the rate of production, the Chinese grant more production rights to business owners.  While the Soviets handicap private business funding with stifling regulations on foreign investment, the Chinese endorse foreign investment (New Learning, 2011).  The Chinese bottom up approach and recognition of a need to play a role in the global economy are the reasons the Chinese experience better economic growth than the Soviets.

Prior to and during perestroika, Gorbachev is also encouraging more transparency in government with political reforms termed glasnost.  Gorbachev has the right idea with glasnost, but the people of the U.S.S.R. are so frustrated by years of oppression that protests and civil instability increases.  This creates a more tumultuous and unpredictable economic environment (Magstadt, 1989).  Soviet workers protest low pay and poor working conditions; there also is an outcry to end the invasion of Afghanistan (Remington, 1989).  This civil unrest is the precise opposite of what Gorbachev hopes and presumably makes him question—if only to himself—if glasnost is the right course.  The Soviet economy is the recipient of the negative effects of a new voice of the strife within its people, which is ironically tied to the government allowing more freedom.

Unlike the Soviets of the 1980’s, the Chinese government is continuing to crackdown on its opposition.  The Chinese demonstrate this most notably during the protests calling for democracy in Tiananmen Square. Gorbachev’s glasnost policies are a catalyst for the fall of communism in countries such as Poland, Hungary, Easy Germany, Bulgaria and Czechoslovakia.  The Chinese people see the rise of freedom in their neighboring Communist countries and want this for themselves, helping to spark the protests.  Indirectly, Soviet glasnost is a likely source of the Chinese protestor courage. Xiaoping—the father of China’s socialist market economy—is not surprisingly a supporter of the movement, but is later forced by the Chinese Communist Party to denounce the incident (Barboza, 2011).  Ultimately, the events of Tiananmen Square give the Chinese government an excuse to crackdown under the veil of restoring order and work to only temporarily impede the Chinese economic surge.  Counter-intuitively, the continued crackdown in China may very well be the reason the Chinese economy flourished while the Soviets struggle.  Successful free markets require order and rule of law, something the Chinese maintain while the Soviets let slip.

China’s economy is growing rapidly and with that growth U.S. and Chinese trade increases.  Total U.S. trade with China increases from $2 billion in 1979 to $457 billion in 2010 and most of the increase is attributable to the export of Chinese goods (Congressional Research Service, 2011). In 1985—prior to the Chinese economic reforms—the U.S. imports only $3 billion in goods from China.  In 2011, almost $400 billion of U.S. trade with China is in Chinese exports (United States Census Bureau, 2012).  This increase in Chinese output coincides almost perfectly with the Chinese economic reforms of the 1980’s.  Because China realizes the advantages of a worldwide economy in the 1980’s, an increased consumer base for China creates a newfound demand for goods and allows their economy to flourish over the last three decades.

Conversely, the comparatively stagnant trade between the U.S. and Russia demonstrates the failure of the persistent Soviet isolationist economic policies of the 1980’s.  Because of Soviet secrecy and isolationism, reliable trade numbers older than 1992 are not even readily available.  As a contrast to the burgeoning exports of China, the Soviets only increase their exports to the U.S. from $481 million in 1992 to $34 billion in 2011 (United States Census Bureau, 2012).  The difference in China is stark.  Although Soviet economic policies of the 1980’s are not solely to blame for Russia’s failure when compared to China, the complexion of the Russian and Chinese economies would likely be quite different if those policies are reversed.

The transformations in China and the former Soviet Union in the 1980’s extend far beyond the borders of these two countries.  Glasnost paved the way for perestroika in the U.S.S.R.  Glasnost and perestroika awakened the Chinese to begin a transformation of their own in order to stay competitive, and also in an attempt to partially appease the Chinese people.  Chinese exports are decades ahead of what the Russian’s can achieve.  Subsequently, the United States’ trade with Russia remains largely stagnant but is ever increasing with China.  American’s enjoy the benefits of less expensive goods due to the increased supply coming from China.  This development is in large part a result of policies set in motion in the 1980’s revolutions in Communist Europe and China.

References

Library of Congress (July 1996). Russia: the perestroika program.

Retrieved from http://www.country-data.com/cgi-bin/query/r-11441.html

New Learning (2011). Deng Xiaoping: Socialism with Chinese characteristics.

Retrieved from http://newlearningonline.com/new-learning/chapter-4-learning-

civics/deng-xiaoping-socialism-with-chinese-characteristics/

United States Census Bureau (2012).  Trade in goods with Russia.

Retrieved from http://www.census.gov/foreign-trade/balance/c4621.html

United States Census Bureau (2012).  Trade in goods with China.

Retrieved from http://www.census.gov/foreign-trade/balance/c5700.html

Congressional Research Service (30 Sept. 2011). China-U.S. trade issues.

Retrieved from http://www.fas.org/sgp/crs/row/RL33536.pdf

Remington, Thomas (1989).  The Oxford Journals: Renegotiating Soviet federalism:

glasnost and regional autonomy.  Retrieved from

http://publius.oxfordjournals.org/content/19/3/145.abstract

Magstadt, Thomas M., Ph.D (1989).  Cato Institute. Gorbachev and Glasnost—A new Soviet order? Implications for U.S. foreign policy.

Retrieved from  http://www.cato.org/pubs/pas/PA117.HTm

Barboza, David (2011).  The New York Times. The man who took modernity to

China.  Retrieved from http://www.nytimes.com/2011/10/22/books/the-impact-of-deng-xiaoping-beyond-tiananmen-square.html?_r=1

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