WEBVTT - Isabella Weber on China’s Vision for Making Markets Work 0:00:10.760 --> 0:00:14.920 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:15.000 --> 0:00:19.720 I'm Joe Wisn't Thal and I'm Tracy all Away. So Tracy, 0:00:19.800 --> 0:00:23.400 we've been talking about China a fair amount lately. We 0:00:23.480 --> 0:00:28.000 had that recent episode with Dan Wong about um some 0:00:28.120 --> 0:00:31.360 of the specific industries that China is cracking down on, 0:00:31.440 --> 0:00:34.760 like online education and video games and so forth. And 0:00:34.840 --> 0:00:40.239 we talked to Travis Lundie specifically about the stress to 0:00:40.360 --> 0:00:43.920 say the least, at the real estate developer developer evergrand 0:00:44.440 --> 0:00:47.400 But really it feels like we can't get enough of 0:00:47.800 --> 0:00:50.839 the China story. And I every time we do one 0:00:50.840 --> 0:00:52.680 of these episodes of My Head is just like filled 0:00:52.720 --> 0:00:57.400 with like a hundred more questions all China, all the time. 0:00:57.480 --> 0:01:02.400 I mean, both of those stories provoke some pretty big, 0:01:02.720 --> 0:01:06.720 sort of existential questions about China and its economy. I 0:01:06.720 --> 0:01:10.600 mean specifically the crackdowns. Uh. You know, we saw a 0:01:10.600 --> 0:01:14.000 lot of people sort of scratching their heads and basically going, well, 0:01:14.440 --> 0:01:17.560 China built up you know this market economy, um, it 0:01:17.600 --> 0:01:21.399 built up it's stock market, it's technology sector. It's all 0:01:21.480 --> 0:01:25.920 supposed to be kind of um capitalist in style, and 0:01:25.959 --> 0:01:28.080 now it seems to be cracking down in a very 0:01:28.319 --> 0:01:32.360 um centrally ordered way, and what does that mean for 0:01:32.720 --> 0:01:35.240 China's market reforms? And then on the other hand, we 0:01:35.280 --> 0:01:37.720 saw a lot of people going, well, you know, it 0:01:37.840 --> 0:01:41.280 was never that free market. It's always been essentially ordered economy, 0:01:41.360 --> 0:01:43.800 and this is everyone just sort of waking up to 0:01:43.880 --> 0:01:46.640 that fact. But I think there is a big question 0:01:46.680 --> 0:01:52.160 mark over where exactly the Chinese model is going right now. Yeah, 0:01:52.280 --> 0:01:54.280 and it kind of occurred to me, like there is 0:01:54.400 --> 0:01:56.320 this tension. So one of these things. One of the 0:01:56.320 --> 0:02:01.600 things that Dan Wong points out is, Okay, China is 0:02:01.680 --> 0:02:06.000 like very keen to remain an industrial powerhouse, to be 0:02:06.080 --> 0:02:08.240 good at manufacturing, and of course that's been a theme 0:02:08.280 --> 0:02:10.960 of all the conversations that we've had with Dan, is like, 0:02:11.120 --> 0:02:13.200 you know, wants to be good at like hard tech 0:02:13.280 --> 0:02:17.440 and building a wide body or planes and semiconductors, etcetera. 0:02:17.800 --> 0:02:20.480 But on the other hand, you know, an ever grand 0:02:20.560 --> 0:02:22.560 is sort of a perhaps a symptom of this. And 0:02:22.639 --> 0:02:25.200 I think that you coined the term the giant wall 0:02:25.280 --> 0:02:28.360 of money that just slashes around China, which is like, 0:02:28.840 --> 0:02:32.440 from at least from my outside perspective, the Chinese economy 0:02:32.639 --> 0:02:35.840 is whether it's real estate or people at home trading 0:02:35.960 --> 0:02:38.560 like iron ore futures. It's an economy that's like it's 0:02:38.680 --> 0:02:43.560 riven with speculation, right, hugely financialized, I think is the 0:02:43.680 --> 0:02:46.160 right word. So like, on the one hand, yes, they 0:02:46.160 --> 0:02:49.200 want to make things, uh, Dan spoke about this idea 0:02:49.200 --> 0:02:52.400 of the German model and getting closer to you know, 0:02:52.880 --> 0:02:57.160 high quality manufacturing. But on the other hand, it seems 0:02:57.240 --> 0:03:00.200 like there is a lot going on in sectors is 0:03:00.240 --> 0:03:05.639 real estate, construction, UM even banking, finance, fintech. Some of 0:03:05.680 --> 0:03:09.160 the biggest companies in China of course have UM financial 0:03:09.360 --> 0:03:12.920 payments arms as well. So it just feels very financialized 0:03:12.919 --> 0:03:16.280 and sort of abstract at the same time. Yeah, and 0:03:16.320 --> 0:03:18.320 I guess the last thing I would say about this 0:03:18.520 --> 0:03:20.919 is putting it all together what we've talked about so far, 0:03:21.040 --> 0:03:23.280 like and this is gonna sound sort of like trite. 0:03:23.360 --> 0:03:27.520 Maybe it feels very real, like you know, it's always 0:03:27.560 --> 0:03:29.760 you know, I feel like over the last several years 0:03:30.120 --> 0:03:32.639 news out of China it's like, Okay, you know, they're 0:03:32.639 --> 0:03:35.600 gonna they want to tamp down on real estate speculation, 0:03:35.720 --> 0:03:37.560 or it's like are gonna make it harder to buy 0:03:37.560 --> 0:03:41.680 a fifth home or whatever. It is something about this 0:03:41.840 --> 0:03:47.200 moment feels extremely real, as in, let's take a turn 0:03:47.400 --> 0:03:49.600 in a different direction. And I don't know if that's true, 0:03:50.200 --> 0:03:53.600 but the combination of things, the letting, letting ever grand 0:03:53.680 --> 0:03:56.360 get to where it is, the effect that that is 0:03:56.400 --> 0:03:59.520 likely to have on the real estate sector, it feels like, um, 0:03:59.560 --> 0:04:02.000 this is a this is a pretty big moment. Well. 0:04:02.040 --> 0:04:05.040 I think also when you wipe out billions of dollars 0:04:05.040 --> 0:04:07.840 worth of market value on some of your biggest companies 0:04:07.880 --> 0:04:11.160 through the crackdowns, that tends to focus people's attention quite 0:04:11.160 --> 0:04:13.960 a bit as well. Exactly right. So I want to 0:04:14.200 --> 0:04:18.320 understand further where China is going, what its goals are, 0:04:18.480 --> 0:04:22.760 how it understands the sort of how it sees economic management. 0:04:22.760 --> 0:04:26.320 So I'm very excited about our guest today. She is 0:04:26.360 --> 0:04:28.240 the author of a new book. We're gonna be speaking 0:04:28.240 --> 0:04:32.040 with Isabella Vabor. She is an assistant professor of economics 0:04:32.160 --> 0:04:36.320 at the University of Massachusetts Amherst and the author of 0:04:36.360 --> 0:04:41.400 the book How China Escaped Shock Therapy the Market Reform Debate. 0:04:41.480 --> 0:04:44.279 This book is getting a lot of praise taking a 0:04:44.320 --> 0:04:48.360 big sweep at the big historical look at China's approach 0:04:48.400 --> 0:04:51.800 to liberalization, or how it thinks about capitalism and markets. 0:04:52.080 --> 0:04:55.080 So maybe the perfect person to contextualize this moment right 0:04:55.080 --> 0:04:58.520 now Isabella. Thank you so much for joining us. Thank 0:04:58.560 --> 0:05:00.680 you so much for having me on this so so 0:05:00.880 --> 0:05:03.400 and crazy and it's a great privilege and honor to 0:05:03.520 --> 0:05:06.920 join you today. Very very kind of you to say, 0:05:07.000 --> 0:05:09.320 you know, let's just start, like, Okay, the title of 0:05:09.360 --> 0:05:14.919 your book, how China Escaped Shock Therapy, What does that mean? 0:05:15.320 --> 0:05:18.360 I mean, I guess I have some sense of shock 0:05:18.480 --> 0:05:21.240 therapy in the development contexts, the idea of like we're 0:05:21.240 --> 0:05:23.960 going to rip the band aids off, the nationalize all 0:05:24.000 --> 0:05:27.200 the industries, free trade. Obviously China hasn't done that. But 0:05:27.720 --> 0:05:32.000 why is this the lens that you've decided to take 0:05:32.040 --> 0:05:36.359 to sort of like understand Chinese capitalism? Yeah, thank you. 0:05:36.440 --> 0:05:39.400 That's a great question. To go back to the ninety 0:05:39.520 --> 0:05:42.520 eighties to understand what's going on with China today is 0:05:42.520 --> 0:05:45.640 a somewhat unorthodox decision. But at the same time, in 0:05:45.680 --> 0:05:48.679 the context of the increasing talk around the new Code 0:05:48.680 --> 0:05:50.479 War and so on, I think it makes sense to 0:05:50.560 --> 0:05:53.279 go back to the end of the previous Code war 0:05:53.640 --> 0:05:58.039 and to go back to the initial decade of market 0:05:58.120 --> 0:06:01.720 reforms in which I think to some extent China's approach 0:06:01.760 --> 0:06:06.600 to marketization and its basic state market relations were shaped. Now, 0:06:06.760 --> 0:06:10.280 why to focus on shock therapy. In the eighties, shock 0:06:10.360 --> 0:06:13.479 therapy was a policy doctrine that really swept the word 0:06:13.640 --> 0:06:16.040 in some sense, even the Foker shock can be thought 0:06:16.080 --> 0:06:19.680 about as as one form of shock therapy. But more concretely, 0:06:19.720 --> 0:06:23.200 in the context of the transitions from socialists or communists 0:06:23.279 --> 0:06:27.320 or whatever you want to call it economies to market economies, 0:06:27.600 --> 0:06:31.080 that kind of was the policy choice of the day. 0:06:31.240 --> 0:06:34.719 This was technically speaking, a policy package that was composed 0:06:34.720 --> 0:06:38.359 of four elements, that is, price liberalization and macro economic 0:06:38.400 --> 0:06:42.640 austerity as the first two elements, which taken together is 0:06:42.680 --> 0:06:45.880 considered the big bank. Where the idea is that liberalizing 0:06:45.880 --> 0:06:48.840 all prices helps you to get prices right, and then 0:06:48.880 --> 0:06:53.520 imposing microeconomic restraint helps you to keep the general price 0:06:53.600 --> 0:06:57.160 level under control. Then this was meant to be complimented 0:06:57.200 --> 0:07:01.680 with trade liberalization to integrate the economies into the global market, 0:07:02.160 --> 0:07:07.080 and with privatization to basically lay the institutional foundations for 0:07:07.279 --> 0:07:11.640 a functioning market economy. Now, even the most diehard shock 0:07:11.720 --> 0:07:16.480 therapist thought that privatization was a slow and complicated process 0:07:16.520 --> 0:07:19.840 of rebuilding institutions, so that the most shocking element of 0:07:19.840 --> 0:07:24.000 shock therapy was really price liberalization and market economic austerity. 0:07:24.080 --> 0:07:28.080 So much on the technical composition of these policies, but 0:07:28.120 --> 0:07:30.640 I think in a more broader sentence, the idea of 0:07:30.640 --> 0:07:35.120 shock therapy and encompasses the idea that you have to 0:07:35.240 --> 0:07:39.880 create markets by having the state withdraw from the economy 0:07:40.040 --> 0:07:43.760 and basically by destroying the plan to make space for 0:07:43.880 --> 0:07:49.200 markets to emerge spontaneously. Now, we think of China's state 0:07:49.480 --> 0:07:54.080 as UM very powerful, and as the recent episodes have showed, 0:07:54.560 --> 0:07:58.720 UM continuing to be incredibly powerful in the economy. Right, 0:07:58.800 --> 0:08:04.080 so we tend to think that gradualism, experimentalism, pragmatism are 0:08:04.160 --> 0:08:08.360 just inherent in China's approach, and therefore this is just 0:08:08.440 --> 0:08:11.880 like somehow what China does, which to some extent is true. 0:08:12.320 --> 0:08:14.640 But by going back to the nineteen eighties and to 0:08:14.760 --> 0:08:19.080 the struggles over market reforms, I'm kind of complicating this 0:08:19.240 --> 0:08:22.920 story by suggesting that in fact, in the first decade 0:08:23.000 --> 0:08:27.640 and to some extent throughout the reform period, that we're 0:08:27.760 --> 0:08:31.920 alternative ways of thinking about marketization and the idea of 0:08:32.080 --> 0:08:35.960 shock therapy or the basic idea of needing to have 0:08:36.480 --> 0:08:39.720 the state withdraw from the economy in order to create 0:08:39.880 --> 0:08:44.440 functioning market economy was very much present in China, um 0:08:44.520 --> 0:08:47.640 and in many ways has been a position. It has 0:08:47.679 --> 0:08:52.600 been advanced throughout the last decade. Could you maybe talk 0:08:52.640 --> 0:08:55.960 a little bit more about how what you just described, 0:08:56.040 --> 0:08:59.360 you know, the market reforms of the eighties under Dang 0:08:59.360 --> 0:09:04.800 Shao Ping, how those actually stacked up against the socialist 0:09:05.040 --> 0:09:08.120 philosophy that was prevalent at the time. Because again, I 0:09:08.400 --> 0:09:11.080 think this is I believe Joe mentioned this in the intro, 0:09:11.160 --> 0:09:13.240 but this is sort of one of the tensions that 0:09:13.400 --> 0:09:16.720 people struggle to understand in China. On the one hand, 0:09:16.760 --> 0:09:21.079 it's a self professed communist state that's trying to take 0:09:21.120 --> 0:09:25.440 care of everyone and wants to centrally direct resources. But 0:09:25.520 --> 0:09:28.120 on the other hand, certainly in the nineteen eighties they 0:09:28.120 --> 0:09:31.640 were talking about price liberalization and other types of things 0:09:31.640 --> 0:09:37.920 that one wouldn't necessarily associate with that kind of socialism. Yeah, 0:09:38.040 --> 0:09:42.120 great question. Um So I think to understand what was 0:09:42.160 --> 0:09:44.520 going on, one kind of has to go back to 0:09:44.559 --> 0:09:48.440 the late nineties seventies and ask oneself where was Chinese 0:09:48.480 --> 0:09:52.280 economy and society yet at the dawn of reform, and 0:09:52.360 --> 0:09:54.960 I mean this is a moment um. A couple of 0:09:55.040 --> 0:09:58.120 years after Male's death in nineteen seventy six, the count 0:09:58.200 --> 0:10:01.839 revolutionists clearly all for people who have been leading the 0:10:01.920 --> 0:10:06.320 Kaich Revolution arrested. But in addition to the failure of 0:10:06.360 --> 0:10:10.800 the idea of continuous revolution and ever more communist forms 0:10:10.840 --> 0:10:16.080 of political organization and mass um mass mobilization during the 0:10:16.120 --> 0:10:22.280 Kaich Revolution, there's also a failure under a mouse dedicated 0:10:22.360 --> 0:10:26.559 hair Hua film, which is a failure of a renewed 0:10:26.760 --> 0:10:32.360 attempt at big push industrialization. Now, a big push industrialization 0:10:32.559 --> 0:10:35.679 in some sense was the Stalinist kind of idea of 0:10:36.120 --> 0:10:40.160 planned industrialization. In that case, there was a big ten 0:10:40.240 --> 0:10:43.880 year plan, and the idea was that China's catch up 0:10:43.920 --> 0:10:47.960 ambition could finally be realized in this ten year plan. 0:10:48.600 --> 0:10:54.360 That ten year plan failed quite dramatically, basically because of 0:10:54.400 --> 0:10:57.160 reasons that in some sense are quite timely, which are 0:10:57.679 --> 0:11:02.920 in the seventies. China was finding quite substantial petroleum resources, 0:11:03.040 --> 0:11:07.240 and the basic plan had been to export petroleum and 0:11:07.280 --> 0:11:12.720 then import um international technology know how in capital goods 0:11:12.800 --> 0:11:18.600 and then basically achieved rapid planned industrialization but fueled with 0:11:18.720 --> 0:11:23.120 foreign knowledge and technology. Now, the projected petroleum findings were 0:11:23.160 --> 0:11:26.880 not forthcoming, so that by the late seventies this model 0:11:26.960 --> 0:11:30.520 had very quickly run out of steam. But China was 0:11:30.559 --> 0:11:34.160 still a very poor country. It yes, it had achieved 0:11:34.480 --> 0:11:39.360 basic industrialization, advancement, its public health, infrastructure and so on 0:11:39.440 --> 0:11:43.920 during the MAOIs period. Nevertheless, just to give you a sense, 0:11:43.960 --> 0:11:47.640 the GDP per capital in China in night was still 0:11:47.720 --> 0:11:50.160 less than that of Sudano Haiti, So we are really 0:11:50.200 --> 0:11:54.760 talking pretty severe poverty for large parts of the country. 0:11:54.840 --> 0:11:58.240 So there's a sense of we need to redo the 0:11:58.280 --> 0:12:02.280 economic system in order to um to move forward, in 0:12:02.360 --> 0:12:04.840 order to realize the ambition of the revolution that was 0:12:05.000 --> 0:12:10.400 not only about creating a non alienated society and all 0:12:10.440 --> 0:12:13.080 of that at least like big political ambitions, but it 0:12:13.160 --> 0:12:19.320 was also about making China escape from backwardness and poverty. Right, 0:12:19.400 --> 0:12:26.040 So in that context, there's basically re orientation in the 0:12:26.160 --> 0:12:30.520 understanding of communism and socialism, where the idea is that 0:12:30.720 --> 0:12:35.880 under Mound China had tried to achieve two revolutionary forms 0:12:35.920 --> 0:12:41.000 of um of organization without having the material foundations in place. 0:12:41.440 --> 0:12:46.120 So ifone goes back to kind of orthodox historical materialism 0:12:46.240 --> 0:12:50.079 or an orthodox reading of marks understanding of the development 0:12:50.120 --> 0:12:55.040 of history. Then there is a sense that the social 0:12:55.080 --> 0:12:59.080 relations or the social organization of society should, to some 0:12:59.240 --> 0:13:03.920 extent plays correspond with the material foundations of society. Right. 0:13:03.960 --> 0:13:09.280 In other words, you cannot leap from a medieval agricultural 0:13:09.400 --> 0:13:13.360 society straight into for communism or something like that. Right. Um. 0:13:13.480 --> 0:13:17.320 So in the late seventies there is basically this huge 0:13:17.440 --> 0:13:21.120 ideological shift where the idea is that in order to 0:13:21.640 --> 0:13:25.680 lay the foundations for socialism and the future UM, China 0:13:25.840 --> 0:13:30.720 had to backtrack on socialist organization in the present and 0:13:30.800 --> 0:13:35.480 had to quote unquote make up lessons from capitalism in 0:13:35.600 --> 0:13:40.120 order to lay the foundations the material foundations that economic 0:13:40.200 --> 0:13:44.679 development foundations um Um that that would be necessary in 0:13:44.800 --> 0:13:51.320 order to achieve um higher forms of socialist organization or 0:13:51.360 --> 0:13:54.560 maybe even in the very long run, eventually some form 0:13:54.600 --> 0:13:57.920 of communism um in the distant future. So as such, 0:13:58.360 --> 0:14:02.720 the socialist ambition has been um in some stence postponed 0:14:03.160 --> 0:14:07.240 to some future date, which then raises a question whether 0:14:07.520 --> 0:14:11.600 this applies that it has actually been given up. So 0:14:11.760 --> 0:14:13.840 this actually no, this is great because this sort of 0:14:13.880 --> 0:14:16.120 gets it where I was going to go with the 0:14:16.200 --> 0:14:19.000 next question. And I think if you like talk to 0:14:19.160 --> 0:14:25.840 people about China, there is this assumption of a linear trajectory. 0:14:25.920 --> 0:14:27.920 And I don't mean experts, I mean just sort of 0:14:27.960 --> 0:14:31.400 like general commenters, people in business, etcetera. That there is 0:14:31.400 --> 0:14:35.960 this assumption of a linear but perhaps slow trajectory towards 0:14:35.960 --> 0:14:40.360 something that looks like a fully liberalized economy, a liberalized 0:14:40.520 --> 0:14:45.560 capital account, an economy in which they're understanding the Chinese 0:14:45.640 --> 0:14:49.640 understanding of IP laws are roughly similar to what they 0:14:49.680 --> 0:14:53.680 are in other they're developed economies, an economy in which 0:14:53.720 --> 0:14:57.560 foreign foreign companies can more or less do business at 0:14:57.560 --> 0:15:01.840 the same level, the same plane field as local companies, 0:15:01.920 --> 0:15:05.600 And obviously China is not there, but it's a sub 0:15:05.600 --> 0:15:09.720 sort of like, Okay, this ongoing process of liberalizing step 0:15:09.720 --> 0:15:12.560 by step and so forth in one day, maybe that's 0:15:12.640 --> 0:15:15.280 where China get to. But you know, it seems like 0:15:15.720 --> 0:15:19.480 both like what you're saying and also what we've seen 0:15:19.600 --> 0:15:23.160 with some of lately is maybe this assumption of a 0:15:23.280 --> 0:15:27.440 straight line liberalization on a slow It's definitely not shocked therapy, 0:15:27.720 --> 0:15:32.200 but a straight line liberalization. However, slow may just be 0:15:33.000 --> 0:15:38.800 the wrong premise to begin with. Yeah, um, so the 0:15:38.840 --> 0:15:41.640 subtitle of the book is the Market Reform Debates, right, 0:15:41.680 --> 0:15:46.800 And it's really about two competing understandings of how market 0:15:46.800 --> 0:15:50.640 economies work. And one understanding of a market economy is 0:15:50.760 --> 0:15:54.080 that basically there's one model of market economies which is 0:15:54.120 --> 0:15:57.880 pretty much what we think of as best than market economies, 0:15:58.000 --> 0:16:00.600 or a form of market economy that can more or 0:16:00.680 --> 0:16:05.280 less capture with one economic model, so that marketization basically 0:16:05.400 --> 0:16:10.360 means moving towards one kind of fully liberalized type of 0:16:10.400 --> 0:16:13.640 market economy, right, which is basically in line with what 0:16:13.680 --> 0:16:15.680 you just said, and which is in some sense the 0:16:15.840 --> 0:16:21.360 underpinning assumptions of the most extreme case that is shock therapy. 0:16:21.440 --> 0:16:25.400 On the other hand, the idea of experimentalist gradualism that 0:16:25.600 --> 0:16:30.960 ultimately prevails in China. These markets not as the goal 0:16:31.080 --> 0:16:35.680 in itself, but these markets as a tool in China's 0:16:35.720 --> 0:16:42.160 own process of transformation, where they are bigger political, developmental, economic, 0:16:42.520 --> 0:16:46.280 social goals in which the market can be used to 0:16:46.520 --> 0:16:53.560 serve China to move towards the implementation of these goals. 0:16:53.600 --> 0:16:58.920 But marketization is not a goal in itself. Now, that 0:16:59.080 --> 0:17:02.920 of course always bears the potential that if you I mean, 0:17:02.960 --> 0:17:07.280 if you pursue the second approach and you have intense marketization, 0:17:07.640 --> 0:17:11.040 it always leaves open the first approach because as you 0:17:11.080 --> 0:17:15.480 get more markets, markets take on their own dynamic they 0:17:15.520 --> 0:17:19.240 I mean, powerful interests are created and so on. So 0:17:20.200 --> 0:17:23.520 in essence, I think that China did try to pursue 0:17:23.600 --> 0:17:27.400 the second approach in the nineteen eighties, but the challenge 0:17:27.480 --> 0:17:31.879 from the first approach kind of has been there all along. UM, 0:17:31.960 --> 0:17:36.120 and the understanding of commentators of what China is doing 0:17:36.160 --> 0:17:40.560 has also often been primarily guided by the first idea 0:17:40.640 --> 0:17:44.880 of marketization being basically the same as for liberalization being 0:17:44.920 --> 0:17:49.960 the same as bestinization. So using maybe the second framework 0:17:50.040 --> 0:17:52.240 and the idea that you touched on earlier of China 0:17:52.400 --> 0:17:56.639 sort of having to postpone some of its socialist goals 0:17:56.680 --> 0:17:59.680 in order to get the market reforms under way. When 0:17:59.720 --> 0:18:03.320 you see what China is doing now, when you look 0:18:03.320 --> 0:18:07.600 at the various crackdowns, um and things going on, I mean, 0:18:07.640 --> 0:18:11.560 there have been so many headlines over the past few weeks, 0:18:11.560 --> 0:18:14.240 but there's certainly been a lot of statements about creating 0:18:14.240 --> 0:18:18.320 a more equal society, making sure that you know, education 0:18:18.440 --> 0:18:22.159 is a priority and parents don't have to necessarily spend 0:18:22.480 --> 0:18:25.560 a ton of money in order to um secure their 0:18:25.600 --> 0:18:28.919 kids education. There are a lot of socialist principles that 0:18:29.000 --> 0:18:33.360 are running through some of these crackdowns. So I'm curious 0:18:33.359 --> 0:18:36.400 how you're viewing that in the context of your historical 0:18:36.440 --> 0:18:39.879 framework and whether or not it is maybe like the 0:18:40.000 --> 0:18:45.840 long awaited return to Chinese socialism. Yeah, well, I'm I'm 0:18:45.880 --> 0:18:49.359 not sure if I can decide, but it's the big 0:18:50.119 --> 0:18:52.760 way to return to social that's fair enough, But I 0:18:52.800 --> 0:18:57.800 can't try to provide some some historic perspective. So part 0:18:57.840 --> 0:19:01.560 of that second approach to market ice station was also 0:19:01.680 --> 0:19:06.040 to start from the non essential parts of the system 0:19:06.119 --> 0:19:09.360 and basically create a market dynamic in ways that allowed 0:19:09.359 --> 0:19:12.560 the state to keep control over the core parts of 0:19:12.600 --> 0:19:17.320 the system. So keep control over the essential strategic industries, 0:19:17.440 --> 0:19:20.919 keep control over, if you want so, the commanding heights 0:19:21.040 --> 0:19:24.480 of the economy. So there is a sense that your 0:19:24.680 --> 0:19:28.520 unleash market dynamics at the margins of the system. But 0:19:28.560 --> 0:19:32.560 then eventually, if these margins actually become core of the system, 0:19:32.720 --> 0:19:37.439 then there might be a re calibration of the relationship 0:19:37.520 --> 0:19:40.320 between the state and the market in these areas. So 0:19:40.359 --> 0:19:44.800 if you take for example, private tutoring, as long as 0:19:44.840 --> 0:19:49.840 private tutoring is just something that a few elites relying 0:19:49.880 --> 0:19:52.360 on in order to make sure that their kids get 0:19:52.400 --> 0:19:56.200 into the right schools. Then this is maybe not socialists, 0:19:56.880 --> 0:19:59.720 but it's a marginal phenomenon. When it comes to a 0:20:00.000 --> 0:20:03.840 point that private tutoring becomes so important that basically all 0:20:04.119 --> 0:20:08.640 middle class families fear that without private tutoring, their children 0:20:08.680 --> 0:20:12.199 have no chance of passing the university entrance exams and 0:20:12.280 --> 0:20:16.320 basically have no future, then suddenly private tutoring becomes part 0:20:16.800 --> 0:20:21.840 of a very essential element of the economy and society. 0:20:21.920 --> 0:20:25.520 It becomes an essential part of the education system. So 0:20:25.600 --> 0:20:28.159 I think that to some extent, what we see what 0:20:28.280 --> 0:20:32.520 these crackdowns is a redefinition of the relationship between the 0:20:32.520 --> 0:20:34.520 state and the market, as some of these sectors that 0:20:34.720 --> 0:20:37.720 used to be much I have crossed the line towards 0:20:37.760 --> 0:20:41.760 becoming really essential. This is I think similar with a 0:20:41.760 --> 0:20:45.320 lot of the e commerce platforms. Where as long as 0:20:45.359 --> 0:20:50.199 this is just a bookshop for some second handbooks, then 0:20:50.240 --> 0:20:53.920 it's a kind of really secondary, right. But once this 0:20:54.080 --> 0:20:57.480 becomes the main form of retail, as the pandemic has 0:20:57.880 --> 0:21:01.960 illustrated quite dramatically, then suddenly this is a platform that 0:21:02.119 --> 0:21:06.240 is basically running the retail economy of the country. Right, 0:21:06.320 --> 0:21:09.560 So from that perspective, I think we can, i mean, 0:21:09.600 --> 0:21:13.679 maybe make sense of why in certain sectors there is 0:21:13.720 --> 0:21:16.960 such a regaining of control that of course does not 0:21:17.160 --> 0:21:19.919 explain the timing and why it's happening. Now, this is 0:21:19.960 --> 0:21:22.080 more like saying okay, kind of fits in a more 0:21:22.119 --> 0:21:25.280 general pattern, but it's it's it's not predictive in the 0:21:25.320 --> 0:21:27.320 sense that we could have said okay, therefore it would 0:21:27.359 --> 0:21:46.800 have happened in So the big thing, you know, you 0:21:46.880 --> 0:21:50.760 mentioned the tutor tutoring and so forth, But the sort 0:21:50.800 --> 0:21:53.560 of the big elephant in the room, at least from 0:21:53.560 --> 0:21:57.800 my perspective, seems to be the sort of extreme level 0:21:57.920 --> 0:22:01.520 of financialization in speculation. And I mentioned this in the intro. 0:22:02.240 --> 0:22:05.479 But you know, I've followed Tracey's writing on China for years, 0:22:05.800 --> 0:22:08.160 and you know, people in the US like to trade 0:22:08.160 --> 0:22:10.800 stocks and cryptocurrencies, but it seems like even like more 0:22:10.840 --> 0:22:13.480 extreme in China. And you have like people at home 0:22:13.880 --> 0:22:17.840 trading iron or futures from their computers and trading oil 0:22:17.960 --> 0:22:20.120 futures in a way that I don't think very many 0:22:20.160 --> 0:22:23.000 people in the US do. And then of course you 0:22:23.119 --> 0:22:26.880 have housing, which okay, on the one hand, is probably 0:22:26.920 --> 0:22:30.359 sort of like a core basic and necessity, but it's 0:22:30.400 --> 0:22:35.720 obviously a highly financialized, speculative world, and we see this 0:22:36.359 --> 0:22:39.200 sort of coming to a head with evergrand how much 0:22:39.560 --> 0:22:44.480 has that financialization essentially been I mean, is that a failure, 0:22:44.680 --> 0:22:47.160 the fact that so much of the economy has been 0:22:47.560 --> 0:22:52.280 so much speculation, so much financialization. Do Chinese elites perceive 0:22:52.440 --> 0:22:55.280 that as having been a failure to let that become 0:22:55.880 --> 0:23:00.359 so rampant? Yeah, that's a great question. Um, certainly, I 0:23:00.400 --> 0:23:03.640 think there is a sense that speculation has gotten out 0:23:03.640 --> 0:23:08.159 of hand, hence the crackdown. Right at the same time, 0:23:08.320 --> 0:23:12.800 I think that this massively rapid marchetization that we have 0:23:12.960 --> 0:23:16.480 observed throughout the last decades is part of the dynamic 0:23:16.520 --> 0:23:20.560 that the party itself has created, and that has led 0:23:20.600 --> 0:23:24.400 also to this massive markeetization of the behavior of individuals 0:23:24.440 --> 0:23:28.120 who have become market oriented in ways. Um, I fully 0:23:28.160 --> 0:23:31.280 agree with what you say, a really unusual now beyond 0:23:31.680 --> 0:23:34.120 what I have seen in the US or I'm from Germany, 0:23:34.200 --> 0:23:37.560 clearly beyond what people in Germany are doing. I think 0:23:37.560 --> 0:23:40.720 that kind of goes back to another point, Um, that 0:23:40.760 --> 0:23:43.120 you made in the intro, which is this idea that 0:23:43.520 --> 0:23:47.359 UM we either see China as being totally capitalists and 0:23:47.480 --> 0:23:52.240 market or UM as the centrally ordered or planned economy. 0:23:52.480 --> 0:23:56.000 So then either we see the fanitialization simply as the 0:23:56.040 --> 0:24:00.560 result of of this um massive capitalist economy, or we 0:24:00.600 --> 0:24:03.679 see it as a totally abnormal phenomenon in relation to 0:24:03.760 --> 0:24:06.640 what is supposed to be a centially ordered economy. Right, 0:24:07.000 --> 0:24:11.320 I'm kind of proposing a third perspective, which is that 0:24:12.160 --> 0:24:16.400 it's a state constituted market economy where the state has 0:24:16.440 --> 0:24:22.320 been the driving force behind marketization, has unleashed markets and 0:24:22.400 --> 0:24:27.000 finance realization in across the economy and across sectors in 0:24:27.119 --> 0:24:30.440 the hope of unleashing in a massive growth dynamic, which 0:24:30.440 --> 0:24:32.720 they have achieved, but always at the danger of kind 0:24:32.760 --> 0:24:36.440 of like dancing with the tiger, where this can take 0:24:36.520 --> 0:24:39.920 on a dynamic of its own that is so so 0:24:40.040 --> 0:24:44.520 powerful that things get out of control. As regards financial 0:24:44.600 --> 0:24:47.680 stability and real estate, there is the sense of being 0:24:47.720 --> 0:24:51.040 at the brink of things getting out of control, hence 0:24:51.960 --> 0:24:55.640 the crackdown. This is actually what I wanted to ask 0:24:55.680 --> 0:24:59.320 you next, which is you know, again using that sort 0:24:59.359 --> 0:25:03.399 of framework that you just describe a sort of middle path, 0:25:04.200 --> 0:25:07.080 how should we be looking at ever, grand So it 0:25:07.359 --> 0:25:10.280 does feel like China is in a tight spot here, 0:25:10.280 --> 0:25:13.640 in a difficult situation, because on the one hand, it 0:25:13.720 --> 0:25:18.040 has said repeatedly that it wants to introduce moral hazard 0:25:18.119 --> 0:25:22.040 into the system, It wants more fiscal discipline from its 0:25:22.040 --> 0:25:26.040 real estate developers, precisely because they've built up so much debt. 0:25:26.200 --> 0:25:28.320 But on the other hand, as you mentioned, a lot 0:25:28.359 --> 0:25:33.320 of that financialization was basically driving China's economic growth. So 0:25:33.640 --> 0:25:37.200 the authorities presumably also want to avoid a really big 0:25:37.240 --> 0:25:42.040 destabilizing shock of a big failure that then cascades through 0:25:42.080 --> 0:25:45.879 the property market. So it seems like they're in a 0:25:46.000 --> 0:25:51.040 really difficult position. Yeah, I've actually been surprised how little 0:25:51.119 --> 0:25:55.560 referenced there is to the seven Asian financial Crisis and 0:25:55.720 --> 0:26:00.720 the Langdong housing market turmoid in that context, and by 0:26:00.720 --> 0:26:03.240 no means an expert of that, I can just really 0:26:03.240 --> 0:26:06.080 talk of the cuff on this topic. But my sense 0:26:06.119 --> 0:26:09.000 is that in the late nineties, UM there was this 0:26:09.400 --> 0:26:13.919 slogan of basically the forest being about to catch fire, 0:26:14.440 --> 0:26:17.760 and there were also big companies that were basically let go, 0:26:18.000 --> 0:26:21.399