China's Rocket to Modernity

Why "socialism with Chinese characteristics" looks a lot like capitalism

SHANGHAI—You know those time-lapse videos of sunflowers sprouting, zipping straight up, and bursting into bloom in the space of a few seconds? While flipping the TV channels in my hotel room, I saw a Chinese-language ad featuring a new variation: an entire city of skyscrapers popping out of the ground and rising heavenward at a miraculous speed.

Maybe that ad was created with modern technology. Or maybe it was just a real-time video of what has happened here in Shanghai. It has transformed itself from a decaying industrial city to a gleaming, futuristic metropolis in the historical equivalent of the blink of an eye.

The gaudiest results of the metamorphosis lie in the area east of the Huangpu River. That area, known as Pudong, is the home of the Shanghai Stock Exchange, a magnetic levitation train that goes 250 mph, and, a year from now, Expo 2010—what we used to call a world's fair. Its annual economic output of $38 billion surpasses not only that of most cities but most countries. Yet fewer than 20 years ago, it was a sleepy farm region dotted with rice paddies, offering a lovely home for frogs.

Given its proximity to one of China's biggest cities, what has happened may sound natural and inevitable in retrospect. It wasn't. As long ago as the 1950s, I'm told, Shanghai's first communist mayor, Chen Yi, used to lament that such nice real estate couldn't be developed because it was on the wrong side of the river.

What kept the area backward was the economic system he served: communism. What freed its potential was removing the shackles imposed when Mao Tse-tung and his party gained power in 1949.

Since its inception, the Chinese government has carried out some gigantic economic experiments, most of them catastrophic. In the 1950s, Mao launched a crash program in industrialization that devastated the economy and caused some 15 million people to starve to death.

In the 1960s, he initiated the Cultural Revolution, which encouraged violent rampages by young ideological fanatics and banished anyone with an education, above-average skills, or managerial experience into the countryside to shovel manure. Results: more economic destruction and millions more dead.

But in 1979, the government decided to try a different approach: creating special zones where normal markets would be permitted to operate. They called it "socialism with Chinese characteristics," but it looked an awful lot like capitalism. The one in Pudong was created in 1990.

This time, disaster failed to ensue. On the contrary, the broad reversal succeeded beyond Ayn Rand's wildest dreams.

In the ensuing three decades, the Chinese economy has tripled in size—and then tripled again. The World Bank says that in 1981, 65 percent of Chinese were poor. Today the figure is 4 percent.

In less than 30 years, China's economic miracle has raised half a billion people—one out of every 10 people on the planet—out of poverty. Nothing in human history comes close to that achievement.

This year, like every other country, China is feeling the effects of the global recession. So its economy will probably expand by only 6 or 7 percent this year—which would represent eye-popping growth almost anywhere else.

Economic progress, of course, has side effects, and lately those have gotten China plenty of attention—for producing clouds of greenhouse-gas emissions, putting pressure on oil supplies, exporting like mad, and becoming the U.S. government's biggest creditor. China as an economic powerhouse gives some Westerners nightmares.

But next to mass chaos, poverty, and famine, those problems look pretty manageable, if not mythical. And it would be the height of perversity to conclude that the rest of the world suffers because 1.3 billion Chinese are now free to make constructive use of their energy and talent.

Not all of them have seen the benefits of that opportunity. But it is safe to bet that few of them would trade the economic experiment going on today for the harebrained exercises that preceded it.

Over the last few decades, China has demonstrated definitively how to generate either want or wealth. Zhang Min, a senior official of the Chinese People's Institute of Foreign Affairs, worked Pudong's rice fields as a boy and marvels at what it has become.

What accounts for the change, I ask. He recalls what was said by a Chinese leader: "Same earth. Same sky. Same people. Different policy."

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