To illustrate the stakes of market-reform debates in China in the 1980s, Isabella Weber begins her book with some dramatic graphs. The first (below) compares Russian and Chinese shares of world gdp between 1990 and 2017. It shows that Russia’s proportion halved in this period, whereas China’s grew nearly seven-fold.

This dramatic divergence, Weber argues, was a consequence of the shock-therapy policies carried out in Russia after 1991, starting with the wholesale liberalization of prices. As prescribed by neoliberal economists, the goal was to make the transition from state-socialist to capitalist economy as rapidly as possible. In this view, gradual market reforms would simply lead to backsliding. The only guarantee of success was to eliminate price controls and social subsidies in one fell swoop—to compel existing enterprises to survive in a harshly competitive environment, eliminate old practices and clean out dead wood, preparing the ground for sounder, market-based development. Russia followed this path and saw its economy collapse. Since then, its growth has been uneven, but generally slow. China, however, resisted the prescription and has done much better. The prc is deeply integrated into global capitalism, yet Weber argues, it has not undergone ‘wholesale assimilation’ or ‘full-fledged institutional convergence’ with neoliberal norms. This tension between China’s rise and its only ‘partial assimilation’ defines our present moment, she writes. The purpose of How China Escaped Shock Therapy is to explain this divergence, which Weber does very well.

Drawing on her interviews with many of the policy intellectuals involved, Weber shows how close Beijing came to adopting shock therapy in the 1980s. Enticed by the confident theories of leading Western neoliberal thinkers—and reassured by émigré Central European economists like János Kornai, Włodzimierz Brus and Ota Šik, who led reform attempts in Hungary, Poland and Czechoslovakia before fleeing to the West—Chinese leaders actually took the first steps, before pulling back in the face of severe social and political reactions. They were saved, Weber argues, by the ccp’s long tradition of pragmatism. To borrow the metaphor made famous by Deng Xiaoping, they waded boldly out into the river, felt the pull of its fast, deep currents and stepped back just in time, to take a different path. This is not a new story, but Weber’s research provides fresh and compelling insights into the experience and world outlooks of the participants in the fiercely fought economic debates of the 1980s. Born in the frg just two years before the fall of the Wall, Weber studied in Berlin and at Peking University, going on to read economics at the New School and to take her PhD at Cambridge with Peter Nolan. She now teaches economics at the University of Massachusetts Amherst and is Research Leader in China Studies at its storied Political Economy Research Institute. Her investigation draws upon insights from many different angles in the discussion over China’s economic reforms—grizzled ccp cadre, young liberal-minded economists, sent-down students, World Bank officials, émigré free marketeers. By any measure, this is an impressive contribution.

In Weber’s telling, the choices made by the veteran ccp leaders after Mao’s death in 1976 were profoundly informed by their experience in restoring economic activity in the liberated areas during the Civil War—which in turn was shaped by deeply ingrained traditions of Chinese classical thinking about economic statecraft. She delves deep into the Han-era treatises on economic intervention collected in the Guanzi, a major compilation from 26 bc by the polymath scholar Liu Xiang of philosophical, political and scientific writings dating back many centuries before. In her account, the theories of the Guanzi economists sprang from the need to calibrate new state–market relations during the Warring States era, a period of technological advance and inter-state competition. The writers emphasized the importance of public granaries and state intervention to stabilize prices and create ‘equable markets’, buying grain when prices were low and selling when they were high—policies institutionalized under the Han emperor Wu (157–87 bc) by his minister Sang Hongyang, who also revived state monopolies over salt and iron to replenish Wu’s war-depleted treasury. Wealthy merchants and rebel aristocrats were thereby weakened, and their lands confiscated for small farmers to work.

A key concept for the Guanzi economists was the distinction between qing (light) and zhong (heavy). These terms could refer respectively to small and weighty coins, and qingzhong as a compound could mean price intervention; more broadly, it was used for a whole range of economic policies, from state monopolies to work incentives and currency control. Crucially for Weber’s argument, the Guanzi writers distinguished between economic processes and commodities that were ‘heavy’, in the sense of central or important, over which the state should exercise control, and those that were ‘light’: marginal or inconsequential goods and practices, which could be left to the market. Yet these categories might vary according to the surrounding conditions, the locality, the season. The injunction to state officials to ‘grasp what is heavy and let go of what is light’ therefore demanded an inductive, experimental approach, using empirical surveys and data-gathering to ascertain prevailing circumstances and adapt the balance of heavy and light accordingly. After Emperor Wu’s death a major conclave was held, resulting in the famous ‘Salt and Iron Debate’ between the supporters of Sang Hongyang’s interventionist approach and the traditionalist scholar-literati, who aimed to reinstate a vanished golden age of ritual order and dutiful behaviour, in which state regulation would be unnecessary and a laissez-faire approach might prevail (to the benefit of large landowners). These ‘idealist’ literati, Weber reports, typically saw state intervention as a source of corruption and favoured self-regulation through moral conviction; ‘pragmatic’ officials, by contrast, saw state regulation as vital to avoid fluctuating prices and socio-economic chaos. These debates were successively renewed in the millennia that followed; Weber cites in particular the high Qing-era investigations that influenced Mao and the enduring practice of the Ever-Normal Granary, to smooth food prices.

After laying out these legacies, How China Escaped Shock Therapy turns to the policies of the Mao era. Here Weber highlights the tension between proponents of a Soviet-style plan for heavy industrialization and others, including the economic strategist Chen Yun, who stressed the importance of studying on-the-ground conditions and following an inductive approach, developing agriculture and light industry first as a basis from which to industrialize. She argues that the initial measures deployed in the liberated areas in the 1940s—reintegrating war-shattered economies through state cooperatives, indirect price regulation through market intervention—drew in part on Guanzi-style traditions. Chen Yun, charged with financial policy for the northern border regions during the Civil War, prioritized controls over grain and cotton, ‘heavy’ commodities, to help stabilize prices during the hyperinflation. In Shandong, Xue Muqiao took control of the salt tax—a crucial move in establishing a stable fiscal base for the ccp currency, as against that of the kmt. Chen Yun may have been the first to invoke the famous piece of folk wisdom about crossing a river as a guide for ccp economic policy, telling a State Council meeting as early as April 1950 that if rising prices were bad, falling prices could also be deleterious for production, and the money supply should be adjusted accordingly: ‘It is better to be feeling for stones to cross the river more steadily.’

For most of the Mao era, the prevailing approach was instead that of a command economy, Weber argues, although she depicts Mao initially tacking from one side to the other. After welcoming Soviet planners, his 1956 speech, ‘On the Ten Major Relationships’, backed an emphasis on agriculture and light industry, before he switched to the disastrous voluntarism of the Great Leap Forward, followed by the Great Famine. In its wake, Chen Yun was put in charge of the recovery and began to reintroduce rural markets and family-worked plots, proposing his ‘birdcage’ model—the market singing within the encompassing state plan—before being sidelined as a capitalist roader during the Cultural Revolution. By the time Mao died, socialist policies had brought about impressive advances in industrialization, as well as public health and education. Prices were stable, set by the state in a fashion that extracted wealth from the countryside to build industry. But the overall growth of the economy was no more than average for developing countries and living standards remained low, especially in rural areas.