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Yellow River Capitalism

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Henan literally means ‘South of the River’, because of its location on the banks of the Yellow River. This is the heart of inland China, the spiritual opposite of Shenzhen. Traditionally regarded as the birthplace of Chinese civilization, it is also home to a village that became the poster boy of the ‘New Left’ in the 1990s: Nanjie. In a deliberate experiment, Nanjie’s leaders created a synthesis of the market and collectivism, as they abandoned their agricultural heritage to embrace industrialization (the authorities built twenty-six factories making everything from instant noodles to plastic wrappers). Village life in Nanjie is resonant of nineteenth-century experiments in ethical capitalism such as Robert Owen’s New Lanark in Britain. The workers are paid above average wages and everyone is given free housing, free healthcare, rations of meat and eggs, and a daily bottle of beer. Primary and even college education is subsidized. The authorities look after the moral welfare of their citizens, not with religious sermons as in New Lanark, but through compulsory study-sessions of Mao’s philosophy and regular ‘criticism and self-criticism’ of each other’s behaviour. In 1996, the village was immortalized in a glowing book by the ‘New Left’ political theorist Cui Zhiyuan.

For him, the village was a living embodiment of an ‘alternative way’. It showed that the market could be used to finance social welfare; that success could be achieved in the rural communities of inland provinces rather than only on the coast. And it showed how government intervention – to provide health and education – could improve economic dynamism. Today some of the sheen has come off Nanjie, which is increasingly seen as an artefact rather than a model. But even in 1996, Cui Zhiyuan did not think that Nanjie could be universalized. Instead, he argued that it showed how China could survive in market conditions without slashing the wages, terms and social protection of its workers. It was an emblem of an alternative form of capitalism to that practised in the Pearl River Delta, one which I will call ‘Yellow River Capitalism’.

Where Wang Hui speaks slowly and deliberately, Cui Zhiyuan can be exhausting to follow. When he talks his sparkling eyes almost pop out of his head. His delivery is breathless with the enthusiasm of a mad scientist intoxicated by the pursuit of knowledge. As he draws on learned quotations to back up his points, one gets the sense that he is holding the ring for a perpetual argument that is going on in his head between his intellectual mentors: Niccolò Machiavelli, Jean-Jacques Rousseau, John Stuart Mill and James Meade. Cui Zhiyuan is one of the most optimistic members of the ‘New Left’, seeing experimentation as a key to solving China’s problems: ‘The present experience of Russia – and the experiences of developing countries around the world – demonstrate that these countries cannot achieve the wealth, strength and freedom of rich industrial democracies by simply imitating the economic and political institutions of these democracies. They must, to succeed, invent different institutions.’ For the ‘New Left’, the key to the Yellow River Capitalism is a philosophy of perpetual innovation – developing new kinds of companies and social institutions that marry competition and co-operation.

What Does China Think?

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