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Jianyong Yue

November 3rd, 2024

Book Review | Should Gorbachev have learned from state-capitalist China?

0 comments | 1 shares

Estimated reading time: 7 minutes

Jianyong Yue

November 3rd, 2024

Book Review | Should Gorbachev have learned from state-capitalist China?

0 comments | 1 shares

Estimated reading time: 7 minutes

Vladislav Zubok‘s influential book, Collapse: The Fall of the Soviet Union, argues that Gorbachev’s failed attempt at restructuring the USSR could have been more successful had he emulated China’s state-capitalist model. Jianyong Yue posits that Zubok is one of many scholars to misinterpret the China model, claiming that factors like foreign investment which enabled its success would have been difficult to replicate in the Soviet Union.

Collapse: The Fall of the Soviet Union. Vladislav M. Zubok. Yale University Press. 2022.


Collapse Zubok book coverIn Collapse: The Fall of the Soviet Union (2022), Vladislav Zubok provides a compelling analysis of Gorbachev’s perestroika (restructuring), portraying it as a self-destructive strategy that, when combined with the radicalisation of political openness (glasnost), precipitated the downfall of the Soviet Union as a modern empire. Zubok argues that this outcome was by no means inevitable. He suggests that Gorbachev could have pursued alternative paths, either by adopting Yuri Andropov’s approach of conservative reform within an unchanged authoritarian framework or by coupling radical market reforms with strong presidential authority during the process of democratic transformation. Notably, Zubok seems to favour the former, drawing parallels to Deng Xiaoping’s state-capitalist model, which, arguably, has made China an economic superpower.

In actuality, upon assuming power, Gorbachev and his advisors paid close attention to China’s market-socialist reforms and attempted to emulate them, but with limited success. China’s reforms in the 1980s were not entirely new; they largely mirrored earlier efforts in Hungary and Poland, though on a larger scale. What set China apart was its introduction of foreign investment, primarily from a large diaspora. Gorbachev’s Soviet Union lacked this resource and would have struggled to use it effectively.

The China model and its limits

China’s transition to capitalism gained significant momentum after the Soviet Union’s collapse, particularly following Deng Xiaoping’s famous southern tour in early 1992. The decades after 1992 are often called China’s “gilded age,” marked by sustained high growth. This “state-capitalist” success is universally credited to the Chinese Communist Party’s rejection of the neoliberal Washington Consensus, and its embrace of an incremental approach to market reforms under tighter authoritarian rule.

In his work, Zubok critiques the Washington Consensus and the shock therapy reforms implemented in the USSR’s final years, especially the disastrous 500-Day Plan. These reforms nearly crippled the Soviet economy and led to massive deindustrialisation in post-Soviet Russia. As a result, Zubok, like many Western commentators, seems fascinated by the alternative model of Chinese-style state capitalism. He suggests that if Gorbachev had adopted a similarly conservative reform approach, it might have been both feasible and successful.

US strategies of alternating between coercion and inducement after Tiananmen accelerated China’s integration into the global economy.

But would the Chinese model of state capitalism have been the right template for Gorbachev? State capitalism emphasises the central role of the state in driving market-based economic progress. However, the term is vague and open to various interpretations. Labelling China’s economic model as state capitalism often leads to the conclusion that China’s departure from the neoliberal, state-minimalist Washington Consensus in the 1990s was the key to its state-led development.

Yet this view is misleading. The Tiananmen Square crackdown in 1989 created a shock-and-awe effect that enabled Chinese rulers to implement what was almost a shock-therapy version of Washington Consensus reforms starting in 1992. These reforms included major actions like price decontrol, mass privatization of state-owned enterprises (SOEs), and extensive trade and investment liberalisation.

China’s radical embrace of the Washington Consensus was influenced by both domestic and international factors. Unlike the former Soviet Union, China’s history of crude planning and provincial autarky – two flawed legacies from the Mao Zedong era – pushed the country toward global integration starting in the mid-1980s, rendering it vulnerable to the impact of the neoliberal paradigm on its domestic reform agenda. Additionally, US strategies of alternating between coercion and inducement after Tiananmen accelerated China’s integration into the global economy. To gain access to developed countries’ markets, China had to abandon economic nationalism, most notably in the 1992 Sino-US Memorandum of Understanding, where China agreed to permanently cease implementing import substitution on all products.

In 1992, crony capitalism flourished in China, with rent-seeking becoming pervasive across the nation. Nomenklatura privatisation left tens of millions of SOE workers unemployed, significantly widening the income gap. Since then, demand shortfalls have been a persistent challenge for Chinese policymakers. In their quest for post-Tiananmen performance-based legitimacy, they naturally gravitated toward economic internationalism over economic nationalism. To sustain growth, massive liberalisation of trade and investment was carried out, which, ironically, severely impacted Chinese SOEs, causing the country’s industrialisation to falter at the turn of the millennium. This developmental quandary radicalised China’s push for World Trade Organization (WTO) membership at any cost.

Much like the Soviet Union in its final years, China in the late 1990s was heavily influenced by Chicago-School economics. Zubok notes that Soviet elites, out of desperation, were captivated by unrealistic hopes for a “Marshall Plan” from the US. Leading Chinese elites harboured similar aspirations.

China’s Ricardian growth miracle following WTO accession came with significant costs due to its adherence to “anti-developmental” WTO rules. These rules, combined with a persistently ineffective national system of innovation (NSI), have prevented China from experiencing a “Sputnik moment” in scientific and technological development, leaving the country vulnerable to the middle-income trap.

A more creative, market-based, self-reliant approach to development, free from the shackles of “anti-developmental” globalisation, could have helped Gorbachev’s Soviet Union avoid the neoliberal developmental trap of massive deindustrialisation.

Chinese technocrats have recently admitted that while “Chinese manufacturing is big, it is not strong; diversified, but not superior.” They acknowledge that “catching up with the industrial West will take at least three decades.” China’s ongoing technological dependency on Global North countries highlights that despite its massive economic scale – second only to the United States – China is far from becoming another post-1945 Germany or Japan. Its struggle to rebalance the economy by shifting toward a consumption-led, innovation-driven growth model reveals substantial structural weaknesses, uncharacteristic of a high-income industrial economy.

This reality challenges the notion of China as the most successful state capitalist. The failure to rebalance the economy has strained China’s relations with the liberal order, a consequence of its relentless pursuit of global resources and markets – a consequence of “growth without development.” This situation not only makes development hard to achieve but also renders growth difficult to sustain, especially with the advent of the new Cold War.

Being a semi-peripheral economic “superpower” has meant that the China model has not yet produced another East Asian developmental state. Instead, it has fostered a form of crony comprador capitalism, shaped by the party-state’s kleptocratic nature and its obsession with free trade and globalisation. China’s shift toward this “worst form” of capitalism has led its leaders to embrace totalitarianism rather than liberal democracy in response to the Tocquevillian moment that confronted Chinese society at the turn of the 2010s – a time when the world was captivated by a largely misconstrued “China model.” This totalitarian turn has fuelled the new Cold War and casts a long shadow over China’s economic future, with the trend of a “peak China” becoming increasingly apparent in the wake of the pandemic.

Gorbachev’s real alternative

Ostensibly, this widely misinterpreted state-capitalist approach is neither successful nor replicable. For the Soviet Union, with its middle-income, diversified economy, high urbanisation and literacy rates, and a competitive scientific community that had a significant “Sputnik moment” in the 1950s, the conditions were well-suited for furthering import substitution, as opposed to China’s approach of external orientation (deep integration). A more creative, market-based, self-reliant approach to development, free from the shackles of “anti-developmental” globalisation, could have helped Gorbachev’s Soviet Union avoid the neoliberal developmental trap of massive deindustrialisation. Unlike China’s crude planning and provincial autarky, the Soviet Union had a computerised central planning system. This system could have been adapted into an economic general staff, similar to Japan’s Ministry of International Trade and Industry, to guide market-based development.

By adopting a neo-Leninist approach, Gorbachev could have pursued the development of a democratic developmental state.

The Soviet Union’s national-level autarky created a unified domestic market, allowing each region to leverage its comparative advantage. This structure could have prevented issues like industrial isomorphism and diseconomies of scale, which China faced. By utilising its strengths – a unified market, robust scientific and technological capacity, and an educated workforce – Gorbachev could have pursued a gradual market transition with shallow rather than deep integration. This would have involved nurturing national champions within a protected domestic market – a time-consuming but feasible strategy for a patient emergent economic superpower like the Soviet Union.

Zubok’s argument for Andropov’s or even Deng Xiaoping’s approach – “perestroika without glasnost” – might have been valid in the early years of Gorbachev’s tenure. However, as Terry McNeill suggests, “an open market economy is fundamentally incompatible with a closed, repressive polity.”

Instead of emulating Deng Xiaoping and the ultimately flawed China model, Gorbachev should have looked to industrial democracies, particularly post-WWII Western Europe and Japan. By adopting a neo-Leninist approach, Gorbachev could have pursued the development of a democratic developmental state. This path seemed feasible, at least theoretically, given the Soviet Union’s immense potential as a centralised country with a unified domestic market, entirely self-sufficient in almost everything – a distinct advantage that few countries could match –which was entering the era of liberal globalisation and could have integrated into the global economy in a controlled and strategic manner.


About the author

Jianyong Yue

Dr Jianyong Yue holds a PhD in political science at the London School of Economics and Political Science. He formerly taught at King's College London and the LSE, and served as Visiting Fellow at the Department of International Relations, LSE (2023-2024). He published China's Rise in the Age of Globalization: Myth or Reality (Palgrave Macmillan, 2018) and Crony Comprador Capitalism - The Institutional Origins of China Rise and Decline (Palgrave Macmillan, 2024).

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