The Economics of China’s Reform: Policy Paradigm versus Academic Discipline

Isabella Weber, University of Massachusetts Amherst

China's economics discipline has been completely transformed in the course of the last forty years and now largely conforms with the global mainstream. Yet, China’s economic policies and governance institutions substantially diverges from the recommendations derived from the dominant free market economics. This is a puzzle, since most theories of economic change would hold that in periods of transition after initial uncertainty and crisis, eventually a new policy paradigm emerges that underpins both academic economics and policy making. This paper traces the origins of this seeming contraction to the first decade of reform and opening up. At the dawn of reform, economics was reinstated after it had been banned as a bourgeois discipline during the Cultural Revolution. In this process, economics was transformed form Soviet Marxist economics to neoclassical economics. Extensive exchanges with leading American economists involving the Ford Foundation, the World Bank and others resulted in the restructuring of the economics curriculum and research practices. However, despite this transformation of academic economics, key recommendations that were articulated in the 1980s based on mainstream economics were not implemented. In particular, China did not pursue shock therapy but instead marketized in a state-led fashion using the old planning institutions as market creators in core sectors while liberalizing the margins of the system. This created a new kind of mode of economic policy making that conditioned the logic of bureaucratic decision making. To the extent that China marketized, mainstream economics became relevant to China’s reform policy making, yet as the state kept control over the commanding heights the boundaries of this marketization have been constantly renegotiated but never radically altered in a way that would have led to a convergence of academic economics and policy practice.

No extended abstract or paper available

 Presented in Session 155. Capitalizing on the Crisis of Socialism: The Pathways of China's Reform Reconsidered