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The village of zebras

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Zhang Weiying has a favourite allegory to explain China’s reforms. He tells a story about a village whose residents rely on horses to carry out all their chores. The village elders, who had tirelessly argued that their horses were better than the zebras used in a neighbouring village, would harangue anyone who questioned their claim. Over time, however, the elders realized that the neighbouring zebras were, in fact, superior to the idle and greedy horses which they had so actively promoted. So, after years of hailing the virtues of the horse, they decided to embrace the zebra. The only obstacle was converting the villagers who had been brainwashed over decades into worshipping the horse. The elders developed an ingenious plan. Every night, while the villagers slept, they painted black stripes on a few horses. When the villagers awoke – shocked at the presence of evil beasts in their midst – the leaders reassured them that the animals were not really zebras, just the same old horses adorned with a few harmless stripes. The villagers gradually became accustomed to the presence of the strangely decorated animals in their midst. After a long interval the village leaders began to replace the painted horses with real zebras. These prodigious animals transformed the village’s fortunes, increasing productivity and creating wealth all around. Only many years later – long after all the horses had been replaced with zebras and the village had benefited from many years of prosperity – did the elders summon the citizenry to proclaim that their community was a village of zebras, and that zebras were good and horses bad.

Zhang Weiying’s allegory is an explanation of his most famous idea, the theory of ‘dual-track pricing’ which he first put forward in 1984. He argued that ‘dual-track pricing’ would allow the government to move from an economy where prices were set by government officials to one where they were set by the market, without having to publicly abandon its commitment to socialism or run into the opposition of local governments with a vested interest in central planning. Under Zhang Weiying’s approach some goods and services continued to be sold at state controlled prices while others were sold at market prices. Over time, the proportion of goods sold at market prices was steadily increased until by the early 1990s almost all products were sold at market prices. The ‘dual-track’ approach embodies the combination of pragmatism and incrementalism that has allowed China’s reformers to work around obstacles rather than confronting them head on. Rather than closing down the old central planning system, they first created an alternative reality alongside it. And when things went well, they reformed the old system to give it the best features of the new reforms.

What Does China Think?

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