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  • Liberal Voices from ChinaLiberalism, Equal Status, and human rights
  • Mao Yushi (bio)

In Yanan in September 1937, Mao Tse-Tung wrote an article entitled “Opposing Liberalism” that came to play an important role in strengthening the Communist Party and its military as they sought to combat Japanese invaders and establish communist rule throughout China. Today, this article is regarded as an important document of revolutionary history. It was written at a time of foreign invasion, when establishing a strong political party with formidable military power was critical to ensuring the nation’s existence. In the struggle with a powerful enemy, individuals were expected to submit to collective interests and fight without regard to their own safety when commanded to do so. Under such circumstances, discussion of liberalism certainly was not permitted.

Today, 60 years later, things are completely different. We live in peace and our task is to improve the national standard of living and integrate our country into the global economy, while protecting our environment and natural resources. What is more, we have learned a lesson about the planned economy that has cost us tens of millions of lives over the past half-century. This lesson can be summed up in one short statement: A heavy price will have to be paid when individual liberty is infringed upon without due cause.

A planned economy is a very attractive system. It will retain its charm, constantly casting its spell on people who live in a free economy, because they always face, and often personally experience, a number of their own system’s inherent shortcomings—unemployment, poverty, [End Page 20] indifference, and greed, not to mention the tremendous waste generated by such features of free competition in a market economy as advertising and fancy product packaging. Those who put great store in reason, particularly intellectuals who take it upon themselves to change society for the better, tend to prefer a planned economy because it seems to be a more rational system. In a planned economy, production and consumption are carried out methodically; there is no need for bargaining between producer and consumer. This eliminates conflicts of interest and enables people to work together in developing their economy and culture. Based on such a system, an almost perfect human society can be designed. Utopia can become reality. When most people think this way, the planned economy ceases to be a mere theoretical construct; it is put into practice. One can conclude that the planned economy is a victory of human reason.

But the power of human reason is limited. The failure of the planned economy is nothing but a confirmation of this bitter fact. In The Constitution of Liberty, Friedrich Hayek illustrated the limits of human reason from a broad perspective, though economic relations were his starting point. In Law, Legislation and Liberty, he concluded: “We must give up the wishful idea that we can create the future of mankind by careful thinking.” Hayek opposed the ultrarationalist notion that “all social systems are and should be results of careful thinking.” It was just this sort of reasoning that led to the planned economy.

Why did the planned economy fail? Experts in different fields have put forward different explanations. Information theorists believe that economic planners lacked the ability to collect and process the necessary information. Economists believe that the absence of bargaining among different parties led to incorrect pricing. According to Hayek, however, the failure of the planned economy resulted from its opposition to liberalism. At the macroeconomic level, the planned economy deprived people of their freedom of choice. Because the overall distribution between consumption and saving was determined by the state, the family had little room for choice. At the microeconomic level, the family’s consumption structure did not permit free choice either; the family had to accept government decisions regarding sector allocation. When a discrepancy existed between family consumption and government allocation, the government would limit the family’s choices by rationing.

Why did limiting people’s choices lead to failure? Because it divided society into two categories—the powerful and the powerless. Families had their choices limited and thus became the powerless. Others got to do the limiting, and...