China's Rise, Russia's Fall: Politics, Economics and Planning in the Transition from Stalinism (review)

Reviews 221 Peter Nolan. China's Rise, Russia's Fall: Politics, Economics and Planning in the Transitionfrom Stalinism. New York: St. Martin's Press, 1995. x, 360 pp. Hardcover $45.00, isbn 0-312-12714-6. This book is part ofan increasingly significant trend in writing fhat regards China's incremental economic reforms as far more successful than the "big bang" or "shock therapy" approaches tried in Eastern Europe and the former Soviet Union. Peter Nolan rejects the minimalist role assigned to the state by free-market economists, sharing the view prominent in the literature on East Asian development that a strong state must be able to subordinate group interests to the national interest. The transition from a command to a market economy does not consist simply ofrelinquishing control; it must, in Nolan's view, be guided and planned ifit is to be successful. Nolan, it is important to note, goes beyond a general defense offhe strong state in that he offers an unblushing defense in particular of Communist Party rule in China as essential to the project ofreform. The case for this thesis was made several years ago in Wüliam Overholt's The Rise ofChina; here it is made in the form ofa sustained comparison with the Soviet Union under Gorbachev and Russia under Yeltsin since 1992. Disaster in Russia, according to Nolan, was due first to the destruction ofthe authority and capacity of the Communist Party and state, the result ofdisintegrative forces unleashed by Gorbachev's democratization from below, which left an institutional vacuum that has not yet been filled. This in itselfdoomed the prospects for successful economic reform. The second cause was the wholesale importation of the "transition orthodoxy" from Western free-market ideologues. The resulting effort to create capitalism overnight ironically resembled Maoist crash programs such as the Great Leap Forward. In stark contrast, the Chinese leaders insisted on the maintenance of the authority of the Communist Party and wisely rejected die advice ofWesterners as weU as of some of fheir own economists to adopt the transition orthodoxy. Their incrementalist approach entaüed the maintenance ofcrucial state controls: instead ofthe close integration into the world economy required by orthodoxy, kaifangor opening to fhe outside world consisted of"planned, strategic integration," including protection for uncompetitive industries in order to enable them to restructure rather than to close down, an approach Nolan likens to the protection ofinfant industries. The Russian strategy has led to economic ruin, immense human suffering,© 1997 by University and the emergence ofa "grotesquely" inegalitarian class structure, the result of ofHawai'i Pressme "primitive capitalist accumulation" by insiders who control the privatization of state assets. In contrast, fhe Chinese strategy has been successful by all economic and social indicators. Output, productivity, and incomes have risen in China and 222 China Review International: Vol. 4, No. 1, Spring 1997 declined in Russia; life expectancy has risen in China and fallen in Russia; millions ofRussians have become poor whereas millions ofChinese have risen above the poverty Une. The main reason for these starkly contrasting outcomes is that Chinese leaders made the right choices whereas their Soviet counterparts did not. Nolan contrasts Gorbachev's vacuous ideas about perestroïka and glasnostwith Deng's clearheaded vision. The Russians uncriticaUy swaUowed the "transition orthodoxy," even diough it had nothing to say about the crucial question ofjust how the transition was to be undertaken. Chinese leaders, who had learned from the tragic outcome ofMao's impetuousness, chose to experiment but not to gamble. Nolan reinforces his emphasis on the importance ofpolicy choices by arguing that neither the Chinese nor the Soviet approach was historically or structurally determined. His chapter on "'Catch-up Capabilities,"' examines a range of background variables that in his view influenced but did not determine the course ofreform. Chinese reformers could draw upon a rich entrepreneurial tradition, but Russia, too, was not devoid ofentrepreneurial legacies. Moreover, Nolan claims that entrepreneurship flourished during Soviet rule in fhe form of the vast second economy and the private sector in agriculture. He contrasts Mao's harsh anticapitalist campaigns with Russia's relative tolerance for fhe private sector. When one country had certain advantages that the other didn't have, such...