This essay analyzes the big idea at the heart of Dan Wang’s new book Breakneck: that China is an “engineering state” facing off against America, the “lawyerly society.” Breakneck is well-informed, creative, and filled with wit. It also hinges heavily on vibes and intuition. Much of the intuition is compelling, but I wanted more data. So I assembled some. Inspired by Wang’s ability to fuse memoir with political-economy, the essay starts with an anecdote of my own and then gets into the data and analysis.

The Lost County of Wushan (巫山)

I ended up in Wushan on a whim.

It was 2024 and I had been staying in Chongqing, the World War II capital of China, for just over a month. Captivated by its cyberpunk aesthetic and multi-level streetscape, internet parvenus have lately been busy churning out a flood of near-identical videos like “The Biggest City on Earth You’ve Never Heard Of.”

Chongqing is, technically, the largest city on earth. But it is a “city” in name only: sprawling across 32,000 square miles, Chongqing would edge out Maine as America’s 38th largest state. While there, I decided to test Chongqing’s scale. From the city center, I hopped on one of China’s high-speed rail lines and rode out to the farthest county still within Chongqing’s jurisdiction (with an HSR stop). That put me in Wushan.

If waterworks and canals were once the marvel that “impressed the early modern European travelers [in China] more than any other,” today that distinction must belong to the country’s 42,000 kilometer HSR system.1 In less than two hours I was in Wushan, 500 kilometers from metropolitan Chongqing. By contrast, it takes 3 hours on Amtrak’s Acela to go 350 kilometers from NYC to DC—assuming, and it is not a safe assumption, that the train does not break down.2

Stepping off the train in Wushan, the oppressive furnace of Chongqing—routinely hitting 105°F with very high humidity during my stay—gives way to air slightly softened by the area’s mythic mountain gorges. The county sprawls, but the county seat rests compactly on a steep hill that seems to rise straight from the water, perched atop the spot where the Daning river meets the Yangtze. A steep, grand staircase ascends from the river’s edge straight into the urban center above.

Wandering into town, I ask a man if people ever swim in the river. “Not really,” he misinforms me. A more enlightened fellow, overhearing, interjects. Locals gather at the base of the grand staircase around 6 p.m., after school and work. Off I go. It is a beautiful late summer evening as I arrive. Local kids and I have a swimming race as the sun slowly sets over the Yangtze.3

I knew next to nothing about the place prior to my arrival, aside from one thing: Wushan was not what it used to be.

Or, more precisely, it was not where it used to be. For we were swimming above the place it once was.

Swimming over what was once a city is a bit surreal—a sensation befitting a place called Shaman (Wu 巫) Mountain (Shan 山). At times I half expected to open my eyes underwater and glimpse a hidden Atlantis.

Wushan’s county seat was lost beneath the Yangtze as a consequence of the world’s largest dam: the Three Gorges. When the reservoir filled in the early 2000s, it swallowed 8 county seats, Wushan among them, and 116 towns. Over a span of hundreds of miles upstream, the river rose a staggering 100 meters, from roughly 80 to 175 above sea level.4 Had the Statue of Liberty stood where Wushan’s county seat once did, it too would have been fully submerged.

Before the dam, the Yangtze’s floods routinely swept eastward across the countryside—disasters that, over the centuries, claimed the lives of millions.5 The costs and benefits of building the dam have been debated endlessly.6 Not least of which was the 1.5 million so-called reservoir migrants (水库移民) who would be displaced—greater than the population of Estonia. Once the dam project was finalized in 1994, those in its wake had but one option: move. Or as the Party-state slogan put it “move out, settle down, and achieve prosperity.” The entire seat was rebuilt where I now found it: a hundred meters higher, still perched upon the Yangtze.7

Loss and rebirth is nothing new for Wushan. The county seat has ostensibly been burned down or destroyed by floods many times in its two thousand year history.8 In a way, rising above is routine, and fits with a certain view of Chinese building and time, as historian F.W. Mote summarized:

“Chinese civilization seems not to have regarded its history as violated or abused when the historic monuments collapsed or burned, as long as those could be replaced or restored, and their functions regained.”9

Or, as Simon Leys put it:

“The transient nature of the construction is like an offering to the voracity of time.”10

The loss of old Wushan could be considered an offering to the future. As difficult as the changes have been for many, they have likely been very positive on balance. In her 2002 book Before the Deluge, Deirdre Chetham describes her travels through the region just prior to its inundation. She wrote of Wushan as a hard place breeding hard people; one of China’s poorest counties, a river town known for its chaos—beset by street fights, ‘tearoom brawls,’ and even murders. For many, change, even the impending doom of their once home, was set against a new hope, embodied by a shining city upon a hill:

“Far above the riverbank, also visible from the river, is the new town of Wushan, where the city residents will move when the Yangtze waters rise. Located on the highest hill in the city, it shimmers in the distance, a brilliant white in a town where almost everything else is gray and brown. In Wushan, when people talk about the future, they point upward, gesturing vaguely in the direction of what will be left when everything else is underwater… For what might be called the middle class of Wushan, the educated and salaried people who work for the government, man the hospitals, write the newspapers, and run the hotels, the new city on the hill represents a future they want. It means that change in China is not just something that they see in a snowy TV newscast from Beijing but, they hope, an apartment with indoor plumbing and jobs for their children that might stop the exodus to Wanxian and factories in the south. It means, the wheeler-dealers think, a time when the houses they build will be sold on a private market and there will be people who can afford to buy them, and there will be an express bus to the center of Chongqing.”11

Today, over 20 years later, that hope for a better future seemed largely justified. Now firmly a middle-income county, the place feels relatively vibrant. Neon-lit building façades line the river and frame the main streets; in the evening people dance in the square, bathing in a technicolor glow from the evening light shows. And although the waterline is higher now, the scenery in the Gorges remains a sight to behold. (A video for context.)

One gregarious local I met while swimming spent the better part of a day darting me around on the back of his moped. We stopped at a village, swam across the river, and then he proudly took me along miles of pristinely paved new roads, showcasing the county’s recent transformations: a high-speed rail station completed in 2022 (the one I arrived and departed from), a number of bridges, and part of an expressway slated to cut the driving trip to Chongqing from five hours to three by 2029. It’s hard to escape the sense that the hopes of the residents Chetham once encountered have been met, if not well surpassed.12

Many kids in the county are nearly as stressed and overloaded with school and cram classes as their peers in China’s tier-one, -two, and -three city centers. There’s no college in Wushan, and a pressure to out-migrate to Wuxian or Chongqing remains. Come nightfall in Wushan, boredom sets in. Many wander the streets, restless, and searching for entertainment. In sharp contrast to the big cities, for quite a few my presence was one of the more entertaining developments. One evening, two high school kids stopped me and, after a chat, insisted on taking me to lunch the next day. They brought ten friends. We swapped questions. One boy, the group’s most direct, asked: “How many genders are there in America? In China we have two.” I replied: “Which of the two are you?” His friends were amused.

One thing that stayed with me was their response when I asked about their plans for the future. Nearly all happily declared an intent to go to college and major in physics, chemistry, or engineering.13

Tourist brochures insist no one can visit Wushan without feeling compelled to write poetry. Statues of 21 famous poets such as Du Fu and Li Bai line a prominent street. The natural beauty is indeed alluring. But as for me and the kids I chatted with, interest in poetry receded before beckoning feats of development and engineering.

Yu The Engineer

In a prominent local legend, the shamanic goddess Yao Ji, guardian of Wushan’s peaks, aids Yu the Great—first Emperor of the Xia dynasty and a legendary flood-tamer sometimes called Yu the Engineer—by quelling dragons that had been summoning torrential downpours, flooding the Yangtze river, and causing mayhem and destruction. In death the dragons took the shape of mountains, blocking the river’s eastward flow. Yu the Engineer set to work to save and marshal his people, recruiting them to split the mountains and dredge the river to create an eastern path for the water. Progress was terribly slow because his tools and techniques were crude, while floods and disasters stalked them constantly.

But, legend tells us, the shamanic guardian then bestowed upon Yu a divine flood-control manual (治水天书, “黄绫宝卷”). Within its silk pages were diagrams for hammers, chisels, wheelbarrows, transport boats—tools to dramatically increase the capacity to break and move rock and dredge channels. A cliff now called the Book-Giving Platform (授书台) is heralded as the location marking this celestial transfer of engineering knowledge. It is a myth befitting a hydraulic empire and a testament to man—or, more accurately, groups of corvée labor—and his ability to engineer the world around him.14 But the contributions of Yu the Engineer extend well beyond hydraulic engineering:

According to early accounts, his taming of the waters bolstered the centralization of state power, led to the creation of an empire-wide travel network, and established a system of tribute and taxation. Yu’s dredging and clearing were seen as civilizing acts that definitively inscribed the boundary between watery chaos and the (spatial and moral) order of a society grounded in agriculture and ruled by a bureaucracy.15

Legends that connect particular places to Yu the Great and other towering figures are endemic across the mainland. In the retelling, these stories have grown and changed, tending to create or reinforce narratives that serve the reigning authorities. In Science and Civilization in China, for example, Needham and his co-author’s suggest we can “find in the legends distinct traces of the connection of Yu with the origins of feudalism,” engineering myths thus mirroring China’s centralizing political evolution.16

The legends speak to China’s long-standing interest and experience in reshaping the material world on a monumental scale. From canal digging to terraforming, wall building to social engineering, no civilization possesses a longer history or memory of such undertakings.17 In 1997, Jiang Zemin rose to speak, his backdrop the rising scaffolding of the Three Gorges, and reflected on this theme:

Since ancient times, the Chinese nation has undertaken grand endeavors to conquer, shape, and harness nature. The legends of Jingwei filling the sea, the Foolish Old Man moving mountains, and Yu the Great taming the floods all embody the ancient Chinese people’s tenacious resolve that humankind can prevail over nature (人定胜天). Water-control achievements such as the Dujiangyan Irrigation System, completed more than two millennia ago, and the Grand Canal, greatly expanded and unified in the Sui dynasty, have left a lasting imprint on China’s economic and social development. Today, in the Three Gorges of the Yangtze River, we are building the world’s largest water conservancy and hydroelectric project, with the broadest and most far-reaching benefits of any such work in history, an enterprise that will powerfully spur our nation’s development. It is a monumental undertaking that will benefit the people of today and bless countless generations to come, embodying the industrious, resilient, and self-reliant spirit of the Chinese nation, and expressing the bold ambition of the Chinese people, in the era of reform and opening, to transform the land and create the future.18

Yu the Engineer now tends to serve as something of an allegory to national power. A massive statue park in Wuhan is demonstrative (pictured below). Built in 2006, the same year the Three Gorges dam was completed, it is also an homage to the potency of the Party-state, which had just replicated Yu’s legendary and “superhuman feat of quelling the floods” of the mighty Yangtze.19 Bearing witness to such development, is it any wonder the youth of Wushan are jazzed on the world of atoms?

The People’s Engineering State of China

I thought of the lost county seat of Wushan as I read Dan Wang’s new book Breakneck, and of how well Jiang Zemin’s speech in the shadow of the Three Gorges reflects its subtitle: China’s Quest to Engineer the Future.

Wang opens Breakneck with his story of cycling from Guizhou to Chongqing. Guizhou is often trotted out as a poster child of China’s “over-investment.” Remote, mountainous, and still among the country’s poorest provinces, it is nonetheless filled with engineering marvels: 45 of the world’s 100 tallest bridges grace its valleys. It was this new infrastructure that made his bike journey possible. He notes the locals “were prouder of their bridges than anything else” (p. 27). He nods at the very real debt overhang, as I have. But the author’s overriding impression—whether in Guizhou or Chongqing—is similar to mine: despite much waste, overall the building has been worth the while.20

If China has allegedly overbuilt, then America has under built. Whether housing, infrastructure, or business capital expenditure: development of the built environment too often feels stagnant. One big piece of evidence: investment in equipment and structures as a share of American GNP is down 3 percentage points from where it was in the 1970s.

All of this relates to Dan Wang’s “big idea” in Breakneck:

“China is an engineering state, building big at breakneck speed, in contrast to the United States’ lawyerly society, blocking everything it can, good and bad.” (p. xv)

The “engineering state” label captures something real. It almost evokes Karl Wittfogel’s “hydraulic empire.” And the term speaks not only to China’s deep history as a nation obsessed with transforming the material world, as embodied in legends such as those surrounding Yu the Engineer, but also to the realities and fixations of the current rulers: a Party-state that dreams big engineering dreams, and which sometimes turns them into social engineering nightmares.

Prosecuting the Case: “Engineering State” vs. “Lawyerly Society”

The book never really defines the contours or empirically tests the “engineering” vs. “lawyerly” frame. The author notes of “engineering state” and “lawyerly society” that he aims to be “inventive and even playful with these terms,” as opposed to rigorous and pedantic. New ways are needed, Wang argues to “think about how both countries function and how they fail,” that are not merely “amalgamations from political science texts.”

In true American spirit, I will be a bit lawyerly about prosecuting how well these labels fit and whether they do a better job than existing terminology.

What, for example, constitutes “engineering” in Wang’s sense? Must one be formally trained, or can any kind of technical-administrative training and work experience produce an engineering mindset? And “lawyerly”—does that refer strictly to law graduates, or to a broader proceduralist habit of mind found among social scientists, policy professionals, and administrators? The book offers few definitions or empirical tests. In terms of impact, what are the pathways by which engineers and lawyers ingratiate themselves into the halls of power, or more broadly influence state and society? Must they be members of the elite (corporate and government) or is there a broader ethos that diffuses from their sheer numbers? Again, little by way of specifics.

So, as a start, I compiled some data.

Today, China’s undergraduates overwhelmingly continue to choose engineering as their major (34%), down slightly as share from the 1990s but likely due to reclassification (creating a management discipline). Over that same period, China experienced an unprecedented explosion in undergraduate enrollment: from 3.17 million students in 1997 to 19.7 million in 2022. While questions remain about quality, the old Napoleon line applies: quantity has a quality all its own. In a year, there are nearly 7 million undergraduates studying engineering in China (mostly mechanical, electric, and civil).21 The closest competitor is management (管理学) at 3 million (15%).

And even as enrollment has grown, the split between humanities / social sciences (philosophy, economics, law, education, literature, history, art) vs science / engineering (science, engineering, agriculture, medicine, management) remains roughly one-third to two-thirds. And the funniest stat: Engineering: 6,742,664 vs. Philosophy: 12,400.

The engineering tilt is even more intense at the graduate level. The data below compare the evolution of masters and PhD enrollments between 2011 and 2022. Over 43% of China’s 556,000 PhD students in 2022 and 35% of China’s 3 million masters students were studying engineering, both up from 2011.

Breakneck also makes a big to-do about the supposedly engineering dominated Politburo and its Standing Committee (PBSC). It notes, for example, that under Jiang Zemin—an electrical engineer by background—the entire PBSC was filled with engineers. The book also points out, accurately, that Hu Jintao was a hydraulic engineer specializing in water management, while Xi Jinping studied chemical engineering at Tsinghua. Unmentioned, however, is the ironic fact that Xi’s PhD, attained in-field, is actually a doctorate in law (in Marxist theory and political thought education).

When you look at the data the story is not so neat. I compiled the educational backgrounds of China’s Politburo members from 2002 to the present. In 2002, a stunning 70% of Politburo members had undergraduate engineering degrees. But by 2017 the share had fallen to just 20%, before rising again to 33% in 2022. The book does not observe or point out this rise and fall. Instead, it skips any mention of this quite drastic fall and jumps immediately to pointing out the rise of an ostensible aerospace engineering clique at the 20th Central Committee.

The graduate-level training Politburo members have received, meanwhile, shows a long-standing tilt toward social science and managerialism. Most of this education comes via the Party school system. Fieldwork at lower levels, mostly done under Hu Jintao, confirms this system wide focus on management, social science, and law (though there are also technocratic/engineering classes). Overall, graduate training for China’s elite leaders is mostly a balance of ideology instilling “Leninist party discipline” with education on becoming “modern, competent managers of increasingly complex organizations.”22

For the sake of completeness I wanted to extend the analysis to the entire Central Committee. But data completeness issues stopped me. Still, from the 12th Central Committee (1982) up to the 16th (2002), we do see a similar trend of increasing pluralization in educational backgrounds (there does seem to be a shift back toward engineering in the less comprehensive data thereafter).23

There is a broader story here as well of increasing managerial specialization across the bureaucracy. The education background of China’s elite economic bureaucrats, for example, was once engineering dominated, but now reflects more specialization in economics. (MIIT, the main industrial policy organ, is dominated by engineers, befitting its role).

Overall the picture that comes into focus—particularly at China’s apex—is a Party-state more professional-managerial than strictly engineering. Perhaps pedantic, but “managerial elite,” “managerial class” a-la James Burnham, or technocracy, or John Kenneth Galbraith’s “technostructure,” etc could all be more comprehensive.24

The Engineering State — and Its Limits

Breakneck’s first two chapters, following the introduction of the “big idea,” focus on building infrastructure—“Building Big”— and China’s manufacturing and tech ecosystem—”Tech Power”. Guizhou and Shenzhen the respective stars of the show.25

Building Big ultimately culminates in a didactic point: “China has shown that financial constraints are less binding than they are cracked up to be… China’s policymakers have declined to be bound by some of the fundamental tenets of Wall Street investors—reduce investment, shrink assets, produce profitability…Perhaps it will trigger financial distress in the future. So far, however, building big has improved the lives of regular people, not just a narrow set of elites” (p. 54-55).

Meanwhile, the chapter on Shenzhen becomes a paean to manufacturing, to the world of atoms over bits, to “physical and industrial technologies over virtual ones like social media or e-commerce platforms,” and to the communities of engineering practice enabled by a thriving manufacturing ecosystem (p. 59).26

The book wants to argue that America must care more about its industrial structure, its industrial base, and its technical talent pool. These are characterized, in large measure, by communities and networks of engineering and technical expertise laden with tacit knowledge—what James C. Scott would have called mētis, or what Willy Shih and Gary Pisano described as the “industrial commons.” These intangibles are real, and they can disappear to the detriment of the broader economy and innovation ecosystem.27 Knock-on innovations follow from seemingly “traditional industries,” such as production of LCD displays, and as Intel’s CEO Andy Grove similarly argued in 2010, by offshoring so much so fast America “broke the chain of experience.”

“American manufactures spent the better part of three decades unwinding its stock of process knowledge when it opened so many factories in China. Every US factory closure represents a likely permanent loss of production skill and knowledge. Line workers, machinists, and product designers are thrown out of work; then their suppliers and technical advisers struggle as well. Entire American communities of engineering practice have dissolved, leaving behind a region known as the Rust belt. But they were continuously scorned by economists and executives, who sought low-wage production in the name of globalization. Still today, many American economists doubt there is anything special about manufacturing and put their faith in the inevitable march to a service economy.” (p. 78).28

Why, Wang asks, has the American manufacturing base “rusted from top to bottom? Why have so many manufacturers crumbled?” Part of the reason, he suggests, is “financialization.” Namely, “the culture of financial investors. Wall Street has been far keener to invest in capital-light businesses.” But most importantly: “the problem lies with American policy-makers and executives who fail to grasp the importance of process knowledge” (p. 77-78). The way forward, Wang argues, is this:

"The United States must regain, at a minimum, the manufacturing capacity to scale up production that emerges from its own industrial labs. If it does not, continuing to value scientific breakthroughs rather than mass manufacturing, then it might lose whole industries once more—as it did by inventing the solar photovoltaic panel but relying on China to produce them. The United States likes to celebrate the light-bulb moment of genius innovators. But there is, I submit, more glory in having big firms making a product rather than a science lab claiming its invention. Otherwise, US scientists would once again build a ladder toward technological leadership only to have Chinese firms climb it” (p. 92).

I am on board. But I wonder: will these chapters end up as sermons for an Abundance-pilled choir? For a steel-manned counter argument to the most common objections, one would have to look elsewhere.29 Breakneck probably does not help its case when witticism veers into bombast. At one point, for example, the book declares that the “departure of manufacturing has created economic and political ruination for the United States. We are still only beginning to understand how much it set the country back technologically” (p. 76).30 Given that the cases are prosecuted more by vibes than rigor, such a declarative statement rings hollow. The entire book has only 232 endnotes and suffers from a paucity of data. I appreciate that this is a “big think” kind of book, and I largely nodded in agreement while reading these sections, but here as in other places more data would have been helpful.

Re-Engineering The Big Idea

But my bigger qualm remains whether “engineering state” is the best label for China, and the book’s two chapters on social engineering—the one-child policy and Zero Covid—brought it to a head.

Breakneck recounts the story of Song Jian, a cybernetician specialized in missile control systems, and his influence in pushing China over the monstrous “social engineering” edge of strict population control (a story retold largely via recourse to Susan Greenhalgh’s research).31 Alongside Qian Xuesen, Song is China’s most famous scientist. Wang analogizes Song’s influence in China to Albert Einstein’s in America. Most are familiar with the story in broad-strokes. I will not attempt to recapitulate the story’s details here (it was my unexpected favorite in the book, and people should read it themselves).

The most nihilism-inducing part of the entire saga is that China’s fertility rate, like most of the world and particularly East Asia, was already rapidly declining. Over 300 million abortions and 130 million sterilizations were forced down people’s throats—inflicting often unspeakable trauma across an entire generation of people—with practically no impact on the trajectory. It is ironic that this was the first major policy initiative of the allegedly more “pragmatic” post-Mao leaders, almost all of whom, from Deng on down, pushed for it with enthusiasm.

But was this a story of the engineering state? Or, as Greenhalgh would have it, of scientism?32 Is there a distinction worth pursuing here? What about James C. Scott and his “high-modernist” terminology, which fits this case precisely?33 Does “engineering state” effectively convey how and why China pursued the one-child policy? America was filled with Paul Ehrlichs and eugenicists, and for a time got away with implementing atrocious sterilization campaigns, if never at China’s scale.34 Breakneck states that “Chinese leaders were just enough exposed to the West to absorb [their] neo-Malthusian doomerism, without being exposed enough to the Western pushback against it” (p. 118).

Yet the most fundamental enabler of this policy was not that the idea found a receptive audience of high-modernists, but rather that it found them in a state unconstrained by checks on power. Indeed, the theory and organizational practice of politics at the core of China’s Party-state—Leninism—glorifies rejection of “bourgeois constraints” on executive power, leaving the Leviathan of the so-called people’s dictatorship unencumbered to do as it will. Much as German idealism achieved full odious bloom in places lacking and/or rejecting constraints on the state, so too did Western neo-Malthusian doomerism.

Breakneck’s subsequent chapter applies the “engineering state” frame to Zero-COVID less convincingly. It is a strange engineering mindset that would deliver the single-minded, often whacky, all-of-society mobilization that lasted so long past its expiration date. Shouldn’t an “engineering state” have prioritized the more obvious technocratic solution of forcibly vaccinating everyone, particularly the elderly?

The issue at bottom is of course more political. It all went awry not because of an engineering mindset, but because of the excesses of campaign-style mobilization centered around all too simple goals. A pattern that recurs regularly in unconstrained Leninist systems. In fact, a little bit more technocratic engineering around vaccine uptake among the elderly would have been helpful.35

Beyond Engineering: The Leninist Developmental State

I prefer the term Leninist developmental state (with Chinese characteristics). Both “Leninist” and “developmental” are freighted words: they convey the drive to transform not only the material world but also the social, moral, and psychological world of man. Leninist also signals a prescribed organizational form for carrying out this project. It proscribes rival centers of power or organizational centers that might intermediate between the Party and the citizenry or otherwise mobilize them. That is why the Party leads all, why every major state organ, every large company, and any influential organization is shadowed by a Party committee.

“Engineering state” hints at, but does not quite encapsulate, the totality of the Party-state’s transformation imperative. Anyone who has walked through China and seen the ubiquitous, sometimes comical, exhortations to behave in a more “civilized” fashion will recognize a bit of the impulse. Stalin’s line about writers as “engineers of the human soul” captures part of it, but only obliquely. A more fitting label should speak to the comprehensive project of material, psychological, and spiritual cultivation at play: an amalgam of Confucian moralism, Marxist-Leninist theorizing, and high-modernist ambition, all harnessed toward scaling the contemporary heights of wealth and power. These are captivations that stretch back decades, centuries, if not in some ways millennia. Xi Jinping’s emphasis on “spiritual civilization” is merely the latest manifestation.

The Party-state’s modus operandi often veers into crude political mobilization rather than anything resembling technocratic engineering. This reflects the persistent, irresolvable tension between red and expert. While Xi Jinping is more Liuist than Maoist—favoring bureaucrats, technocrats, and specialists—the tension endures. Elizabeth Perry has traced the same dynamic in her studies of “managed” campaigns and work teams: Mao-era governance retooled in a more professionalized, controlled manner.36 This is also visible in Mao and Xi’s respective answers to the big question: how can China “escape the dynastic cycle of rise and fall?” Mao’s first answer: popular supervision of the state. Xi’s second: a controlled, professionalized, one might even say bureaucratized, “self-revolution” of the Party-state.

China’s rapid growth, meanwhile, has been as much about the Leninist system re-tooling itself to be market compatible as it has been about an engineering state building infrastructure. A developmentalist impulse was propagated from on high and penetrated all levels of the Party-state. Officials, even those with no obvious economic function, raced to meet breakneck growth targets, often enriching themselves in the process. In this sense, China’s developmental state diverged from the smaller East Asian cases: it bore “Chinese characteristics,” defined less by a singularly competent central bureaucracy than by a broad, productionist ethos replicated at national, provincial, and local levels.

Over time, however, the Party-state has become more professionalized and technocratic, drawing not only on engineers but also on a growing cadre of managers, economists, and other experts. The NDRC, for example, was consolidated in 2003 and MIIT in 2008 (the latter perhaps China’s closest equivalents to Japan’s MITI). Concepts like “managerial elite,” “technostructure,” or Wang Yingyao’s Markets with Bureaucratic Characteristics illuminate facets of this system, but like “engineering state,” they remain incomplete.

Leninist developmental state speaks to the immutable tension, despite a shared aspiration for development, between reds and experts. It also does not occlude the very real engineering imperative that one can see stretching from the dynastic era to the present. But most importantly: it captures the organizational imperative at the heart of China’s Party-state.

There is something else: over the last few years, China’s most breakneck construction era—a defining feature of Wang’s engineering state—has already begun receding into the past. One of the most profound symbols, China’s private property developers have, like Wushan’s old county seat, largely vanished.

Beyond Breakneck?

Over the past four decades, China has accomplished an infrastructure and industrial buildout that took the United States nearly a century, from 1870 to 1960. Steel, cement, railways, highways, ports, power generation—the entire built environment has been remade at a pace and scale the world has never seen. In effect, China speed-ran the Second Industrial Revolution. Its youth—like those I met in Wushan—are unabashedly enthusiastic about the world of atoms, as the country’s education system and political structure heavily orient toward building, sustaining, and managing a techno-industrial society.

Yet the labels “breakneck” and “engineering state” fit less neatly today than they did in the 1980s through the 2010s. The diversification of Politburo members’ educational backgrounds hints at this shift, but the deeper reason is that China has passed an inflection point in investment and manufacturing growth. Even the 14th Five-Year Plan’s modest pledge to keep manufacturing’s share of GDP “basically stable” requires an almost herculean push against the historical tide. China had already lost the equivalent of America’s entire manufacturing labor force in a decade, prior to stabilizing or increasing (depending on measurement method) around the time of the 14th FYP.

This is not an argument that China has “over-invested.” It is a recognition of a near-universal pattern: as countries climb beyond middle income, their industrial and manufacturing share of GDP shrinks. China’s global industrial and manufacturing shares—astonishing at more than 30 percent—are peaking.

As I wrote, they are unlikely to come anywhere near the 45 percent nonsensically projected by UNIDO (a forecast Wang and others have repeated with insufficient skepticism). China’s capital intensity, as Glenn Luk has depicted, is entering an inevitable phase of decline.

Just as the U.S. hit a plateau in physical buildout in the mid-20th century, as China closes on completing its speed-run through the second industrial revolution, its priorities are shifting. Since Hu Jintao, and especially under Xi Jinping, the Party-state has moved from single-minded industrial blitz to a proliferating set of mobilization goals: environmental cleanup, tech self-reliance, rural revitalization, etc. This is even visible in the new CPC history museum exhibits on these leaders!

Today is the era of so-called “high-quality” development. Very strangely this does not get a single mention in Breakneck, despite the fact that it is not only Xi’s most frequently harped on economic policy tifa (提法) but also the singular hottest topic on China’s research agenda (per CNKI)—even surpassing artificial intelligence:

In 2025, a fresh wave of anti-involution policies is rolling out, extending the lineage of Xi Jinping’s supply side structural reform campaigns all the way back to 2004 when Hu Jintao’s Premier Wen Jiabao first announced the “Four Uns.” GDP remains high priority, but cadre evaluation forms now track a far broader set of indicators. New organizations and ideologies steer China toward “Chinese-style modernization,” which however inchoate means moving beyond breakneck growth. “Engineering state” is, in many ways, already appearing timestamped. But so long as the Party retains its uncontested hold on power, Leninist developmental state will remain apt.

Et Tu, America? The Lawyerly Society

Although Breakneck is mostly focused on China, the big idea extends via comparison to America.

Ironically, whereas the data I assembled paints Chinese society as disproportionately engineering-oriented (as measured by educational background), it is the American state that is disproportionately lawyer dominated while the education background of society at large is varied. Perhaps we have an Engineering Society facing off against a Lawyerly State?

Below I re-group US college majors according to Chinese disciplines to allow for rough comparison. Surprisingly, the ratio of science/engineering to humanities/social sciences is 2:1, the same as in China (if one groups management with science/engineering, as I also do for China). There are more American undergraduates in STEM than one might expect from news headlines—or from reading Breakneck.

Meanwhile, I also re-group America’s 3.2 million graduate students into Chinese disciplines for comparability. In any one year, America has roughly 120,000 students enrolled J.D. degree programs (and ~20,000 other non J.D. programs). In other words, only 4% of American graduate students are enrolled in law. America thus has a roughly equivalent number of PhDs enrolled in engineering and physical sciences (not including masters) as it does in law schools.

(Note: This was a far heavier lift than the undergraduate data, as a result these estimates are ball-park! Unlike the undergrad data which at least had enrollment numbers for 2019-20, the U.S. graduate enrollment data is not well aggregated. To deal with this, I scaled up from single year graduation totals. See image caption for methodology overview. I also uploaded the spreadsheet to google so others can see specific choices/estimates. As is standard practice, MBAs are included within management under Masters enrollment, while MDs and JDs are included under medicine and law respectively within PhD enrollment.)

Whatever the case may be in education, lawyers have absolutely dominated the American state.

From the signing of the Constitution in 1789 to 2016, 63% of all Cabinet members have been lawyers. While I don’t have time series data, the disproportionate share likely still holds. And, as Wang points out in the book, "from 1984 to 2020, every single Democratic presidential and vice-presidential nominee went to law school” (p. 4). Only two Presidents, Jimmy Carter and Herbert Hoover (who lived in China for a time), ever worked as engineers. The United States, Wang writes, “has a government of the lawyers, by the lawyers, and for the lawyers.”

And yet, the United States used to build, perhaps even build like China. Then in the 1960s or 70s, we stopped:

The United States used to be, like China, an engineering state. But in the 1960s, the priorities of elite lawyers took a sharp turn. As Americans grew alarmed by the unpleasant by-products of growth—environmental destruction, excessive highway construction, corporate interests above public interests—the focus of lawyers turned to litigation and regulation. The mission became to stop as many things as possible. As the United States lost its enthusiasm for engineers, China embraced engineering in all its dimensions.” (p. 4-5).

The rise of America’s lawyers as a share of population jives well with the interpretation that the spread of lawyers may relate to the building / investment slowdown that started after the 1970s. Data from the American Bar Association show an astounding uptick in lawyers around that period—in absolute numbers and as a share of the population.

Breakneck is a bit more singular in pinning the blame on lawyers, but the diagnosis is fundamentally the same as several recent books, from Abundance to Why Nothing Works to Public Citizen. Breakneck joins this chorus. It was not only the rise in lawyer numbers, they posit, but more importantly a comprehensive shift in lawyerly focus in the 60s/70s toward oppositional litigation.

Certainly, something did alter America’s ability or desire to develop its material environment beginning around the 1970s.

Consider America’s hydraulic construction (dams). Or America’s expressway buildout. Or nuclear facilities—where from 1955 to 1979 we went from 1 to 177 approved reactor units, and then approved not a single new one until 2011 (today, China is currently building 29 reactors, America zero). One can point to any number of indicators demonstrating the slowdown in the built environment.37

Breakneck is not shy about spelling out the results of this slowdown:

“Americans live today in the ruins of an industrial civilization, whose infrastructure is just barely maintained and rarely expanded” (p. 11).

“Americans are no longer able to appreciate that a physically dynamic landscape creates a sense of progress” [Which] “contributes to a blind spot that Americans have for China. People unable to appreciate the benefits of material improvements also don’t understand how it produces pride and satisfaction” (p. 33).

“What New York has lost since the 1960s are updates to its physical environment” (p. 223).

“What the United States has lost sight of is that the public might prefer a government that does something rather than one that’s so exquisite about process” (p. 228).

Anyone who has ridden Amtrak, taken New York subways, lived in the Bay Area or Los Angeles, or driven across the interstate highway system can sympathize.

Aside from pointing at lawyers, the book does not dwell much on the deeper causes.38

Where it does, the main target and focus is ideational, pointing the finger at an overzealous shift in societal priorities, engineered in large part by activists and authors. Robert Caro’s (1974) book the The Power Broker: The Rise and Fall of New York comes in for particular scrutiny (as it does in Why Nothing Works). Wang suggests that Caro’s book, along with Jane Jacob’s (1961) The Death and Life of Great American Cities, Rachel Carson’s (1962) Silent Spring and Ralph Nader’s (1965) Unsafe at Any Speed, were too successful in turning the tide of public opinion against Moses and his ilk. Wang writes: “the imperative that drove Moses—improving society through large-scale, government-led projects—had gone to the grave with him.” These books “taught Americans to fear and loathe engineers” (p. 220-1).39

While sympathetic to Breakneck’s argument, there are at least two big complicating factors.

First, as with China today, America’s breakneck building phase was decidedly winding down by the 1960s. Urbanization went from 40% in 1900 to 70% by 1960, and grew much more incrementally over the next 60 years to 85% by 2020. The country simply did not need to continue building dams, expressways, and energy production facilities at breakneck pace. It became much more a matter of maintaining and upgrading (which has not gone well, at least according to the American Society of Civil Engineers’ report card). The story may be more about structural economic shifts than lawyers.

The second complicating factor is how much deeper this all runs.

There was never a period in American government when lawyers did not dominate. If anything, lawyers may be less prevalent today in terms of background. Data on the composition of Congress, for example, is one hint. The Congressional share of lawyers has actually plunged to 34% over the last several decades (though it still has very few engineers: the Senate, the more lawyerly body, has 47 lawyers and 1 engineer). Meanwhile, the professionalization of the federal bureaucracy (which is not to say expansion—it has not expanded at all numerically since the 1960s) means executive agencies are probably staffed by a greater share of engineers, technocrats, and non-lawyer professional managerial personnel (though this is speculation).40

Overall, I think the proliferation of lawyerly proceduralism that Abundance, Why Nothing Works, Public Citizens, and now Breakneck all focus on is a major part of the answer. It is harder to think of a better term than “lawyerly society” to succinctly describe America. But one must keep in mind the 1960s/70s and the rise of litigation nation was part of a process, done in a uniquely American manner, of the country progressing beyond its own breakneck growth era.

Mandarin, Cadre, Lawyer, Bureaucrat

It can be hard to assess all of this without historical grounding. The most fundamental point is this: China has never, in thousands of years, known true constraints on the executive. China pioneered the world’s first centralized state, and with interruptions, has maintained a professionalized bureaucracy since the Qin dynasty in 221 BCE. China’s precocious state development could hardly differ more from America.41

America’s centralized state was born late and weak. For much of its short history, the United States barely had one. Only with the Civil War and its aftermath did a national administrative apparatus take shape—one that quickly receded, only to be rebuilt in fits and starts by a succession of statist presidents (Teddy, Wilson, FDR) largely under the pressures of the Spanish-American War, World War I, the Depression, and World War II.42 In its short two hundred some years, America has never known an unconstrained executive (despite what some conservatives may believe about FDR).

China today inherits the world’s most sophisticated dynastic bureaucratic tradition, layered with Soviet organizational templates, osmotically infused with East Asian developmentalism, and supplemented more recently by Western markets, capital, and FDI-linked technology transfer. The Chinese state may still suffer from fragmentation and all sorts of principal agent problems involved in administrating such a large territory, but is almost wholly unconstrained by alternative, organized centers of power and influence (i.e., intermediating organizations). The Chinese Party-state remains among the most autonomous executives in the world.43

America’s path to modernity, meanwhile, ran in the opposite direction. Before a centralized state or modern bureaucracy congealed in the 1860s, government rested almost entirely on judicial and legislative institutions. In nineteenth-century America, the courthouse was the citizen’s main point of contact with government. Contrast with China, where that role was filled by the county magistrate, creature of the imperial exam, serving at the emperor’s pleasure.44

“It is only a slight oversimplification,” Robert Kagan wrote in his opus on America’s system of adversarial legalism, “to say that in the United States, lawyers, legal rights, judges, and lawsuits became functional equivalents for the large central bureaucracies that dominate governance in the activist states of Western Europe,” to say nothing of China.45 America has been defined by legislation and the Constitution (Skocpol’s Bringing the State Back In) and ruled by courts and parties (Fukuyama, Origins of Political Order), hardly by a central bureaucracy.

This is backdrop for Tocqueville’s passage in Democracy in America:

If I were asked where I place the American aristocracy, I should reply without hesitation that it is not composed of the rich, who are united together by no common tie, but that it occupies the judicial bench and the bar. The more we reflect upon all that occurs in the United States the more shall we be persuaded that the lawyers as a body form the most powerful, if not the only, counterpoise to the democratic element. In that country we perceive how eminently the legal profession is qualified by its powers, and even by its defects, to neutralize the vices which are inherent in popular government. When the American people is intoxicated by passion, or carried away by the impetuosity of its ideas, it is checked and stopped by the almost invisible influence of its legal counsellors, who secretly oppose their aristocratic propensities to its democratic instincts, their superstitious attachment to what is antique to its love of novelty, their narrow views to its immense designs, and their habitual procrastination to its ardent impatience… Scarcely any question arises in the United States which does not become, sooner or later, a subject of judicial debate; hence all parties are obliged to borrow the ideas, and even the language, usual in judicial proceedings in their daily controversies. As most public men are, or have been, legal practitioners, they introduce the customs and technicalities of their profession into the affairs of the country. [emphasis added].

A lawyerly affinity is hardwired into America’s political DNA. The American executive is checked by congress, it is checked by the judiciary, it is checked by a free press, it is checked by elections, and it is checked by onerous proceduralism, incoherence, and capacity constraints. There are so many checks, so many veto points within the political system and arising through its interface with society, that American government can be accurately described as a “vetocracy.”

One must look beyond the 1970s to understand why America struggles to build today. As Wang observes, “Chinese would recognize something in Robert Moses.” But they would not have recognized the obstacles he faced even in the period we recall as America’s breakneck growth era. To build, Moses had to become “the greatest bill drafter in Albany,” outmaneuver scores of lawyers and legislators, position himself as a node linking federal, state, and city government, assemble perhaps the most capable team of engineers and architects (and legal advisors) in the world ready with detailed blueprints at a moments notice to seize public funds and deploy them, embed public authority charters into bond issuances to entrench his dominion, and consolidate and discipline a comprehensive pro-building coalition.

The backlash against him, for better and worse, closed off the loopholes and avenues he created or exploited, making it that much harder to build. It is fitting that Why Nothing Works opens with this blunt epigraph: “We are at a moment of history. You could have Robert Moses come back from the dead and he wouldn’t be able to do shit.” Thus my own hypothesis:

A tentative conclusion from reading Power Broker (1974) in conjunction with Abundance and Why Nothing Works (2025): American inability to build (esp. public projects) is a much deeper feature than the adversarial legalism and regulatory expansion of the 1970s, which the latter books finger. Before Moses arrived no new bridge had been built in NYC in a quarter century. No new arterial highway in fifteen years. The people cheered as he demagogued about cutting through “old hacks” and “red tape” bureaucrats back in the 1930s. The building bonanza of the 1930s and 40s seems the deviation. An inability to build more like the norm. Perhaps exceptional circumstances permit one or two major bursts and deviation from trend per century.46

A Developmental State with American Characteristics?

In one of my favorite bits in the book, Wang notes China’s People’s Daily has declared that “no matter how developed China becomes, it will always remain a developing country.”47 America should follow suit, he argues—and I agree. Forego the false consciousness of having arrived at some terminal stage of development. Embrace developing! Maybe America should even pursue developing country status in the WTO?

As China moves beyond its breakneck era, calls for an American industrial policy are back, with some urging an “industrial policy with American characteristics.” This is a position Breakneck’s author supports. One could even borrow from de Tocqueville in saying a fair few Americans today are “intoxicated by passion” for industrial policy. And is it so wrong? To spike economists’ post-industrial, service economy Kool-Aid with a little industrial-fetishism? If we all get a little intoxicated, the lawyers will sober us up.

Yet the more pertinent question remains not whether America ought to pursue such a policy, but rather our “lawyerly society,” where vetocracy has long substituted for developmental bureaucracy, can. Looking to China can provide only the most cursory of inspiration. In times like this, one sometimes recalls the misbegotten pining of European elites like Voltaire for the system of the Qing mandarinate.48

China cannot and should not serve as a model to imitate, as Breakneck notes. But it can serve as a spur to return to the real wellspring for imagination: our own history.

I still remember my middle school visit to the Hoover Dam. A project begun in the late 1920s and early 30s and which stood at the gateway of America’s growth era. Joseph Stevens’ 1983 history of that project concludes with a rousing reflection on his subject that remains strikingly apropos today:

In the shadow of the Hoover Dam one feels that the future is limitless, that no obstacle is insurmountable, that we have in our gasp the power to achieve anything if we can but summon the will. Some try to suppress this feeling, thinking that it is naive to be enthralled by an engineering marvel, dangerous to be seduced by twentieth-century technology, which cynics say is untrustworthy, exploitative, and destructive of the environment and the human spirit. But in the clear desert light of Black Canyon, guilt about the deeds of the past and doubt about the promise of the future shrivel. The romance of the engineer still lives in the graceful lines and brute strength of Hoover Dam.49

Despite this poetic elegy to the engineer, one feels today that our great developmental landmarks are more like relics of the past. Though these sites are still destinations for tourists and school field trips, where children stare up at massive concrete walls and and walk around giant turbines, they are more like a trip down memory lane than inspiration for the future. If today one wanted the inspiration of a modern monument to American development, where should one go? (Half-sarcastic answer: China).

One need not submerge a county like Wushan to keep alive a sense of developmental dynamism. But it would be nice if America could render Dan Wang’s sadly accurate statement—“Americans are no longer able to appreciate that a physically dynamic landscape creates a sense of progress”—a relic of a bygone era.

Concluding Thoughts

One way to think of Breakneck is as an introductory China book. I myself thought multiple times: “my parents should read this.” I hope Breakneck succeeds in getting people to think about China and America in the manner it aspires. If I overhear people chatting about “engineering states” and “lawyerly societies,” I would be happy.

Another , related, way of reading Breakneck is a China focused version of Abundance, tempered in its middle chapters with requisite cautionary tales (One Child Policy and Zero COVID). I can already envision the media circuit and an appearance on the Ezra Klein Podcast. The book wants America to build abundantly again and to take inspiration from China in doing so. I am sympathetic. But in so far as the book aims at a more specialized policy-making audience whose views are less malleable to Breakneck’s vibes, I’m not sure if the book will find converts. We will see!

But a final way, my preferred way, to read Breakneck is as a memoir deftly interwoven with the broader political-economic tumults of the day. The final chapter—which I will not spoil nor do the disservice of re-rendering here—is a touching reflection on the author’s family history, on paths taken and not taken, and on what the pursuit of happiness, human flourishing, and the good life might mean in different cultural contexts and across generations. The ability of the author to weave personal experience into broader stories and relatable heuristics, making them memorable for a general audience, is the great feat of the book.

For my own purposes, though, I’ll forego calling China an “engineering state” and stick with the much less sexy heuristic: a Leninist developmental state with Chinese characteristics. One that is moving beyond its breakneck industrial prime, facing similar dilemmas America confronted in the 1960s and 70s, and improvising its own Leninist answers.

References

7

For the terminology used in the paragraph, and for a good review of both Chinese and English literature on the subject of Three Gorges resettlement (albeit from an overwhelmingly critical deconstructivist lens), see this very interesting recent master’s thesis: Jingyi Chai, The Role of Law in Shaping Resettled Identity: A Case Study of the Three Gorges Project, Lund University, 2025, https://lup.lub.lu.se/luur/download?func=downloadFile&recordOId=9192790&fileOId=9192791.

Interestingly, even in this critical review, the author notes (p. 10-11) that much of the literature notes that “long-term outcomes might have been better than initially expected.”

Of the dozen or so residents I chatted with, everyone—and everyone they knew—claimed to be very happy with the results. Part of the reason, no doubt, is that many of the original inhabitants liable to be least satisfied were resettled elsewhere years ago.

Relevant to later discussion in this essay, the author also argues that: “a managerial tendency can be observed in Chinese literature, where studies often follow a problem-solving pattern, concluding with suggestions for improving legal or policy frameworks…the problem-solving paradigm sometimes views them [residents] and not the resettlement as the problem. For example, Liu and Lei (1999) claimed that the government should strengthen publicity and education to help resettled people lower their expectations and actively adapt to the new environment. The temporal overlap between influential Chinese literature and the implementation of resettlement projects also suggests the effect of a managerial approach— attention to the resettled population diminishes once the relocation is concluded” (p. 11-12).

23

Data source: https://xiao-ma.me/data

Datacode: https://faculty.washington.edu/cadolph/data/ssl/shih_shan_liu_CC_codebook.pdf

40

OPM does keep very good data on the occupational backgrounds of the American federial civilian workforce.

China vs 1950s America

Most striking is the convergence in urbanization rates. In 2024, China stood exactly where the United States did in the 1950s.

Vehicle penetration per capita fits a post-WWI interpretation as well.

Now consider 1) the United States and China’s share of manufacturing exports and 2) share of total global manufacturing by value added:

If China were truly in the position America occupied before World War I, we should expect its share of global manufacturing to continue surging. At the very least, we might expect it to reach a 45 percent share of global manufacturing—a level the U.S. only attained after Europe’s industrial capacity had been devastated by World War II.

Rightsizing China’s Global Manufacturing Share

The claim that China will account for 45 percent of global manufacturing in 2030 has gained surprising traction, despite the fact that it is completely implausible.

The statistic comes from a 2024 UN Industrial Development Organization (UNIDO) report on the future of industrialization. Inexplicably the authors chose to extrapolate a linear trend from 2024 to 2030 … based on average growth rates from 2010 to 2019.

But as the data—UNIDO’s own data, in fact—make clear, China’s growth in global manufacturing share has slowed dramatically. In the early 2010s, China was gaining roughly 1.5 percentage points per year (based on a five-year rolling average); today, that rate has fallen to just over 0.5 percentage points annually—about one-third the previous pace.

When using more reasonable assumptions, it quickly becomes clear just how far-fetched the idea of China reaching a 45% share of global manufacturing truly is—especially given how sharply it diverges from the current best-fit trajectory.

Below are three scenarios: the UN’s projection (which requires a 1.2 percentage point annual increase), a best-fit extrapolation, and a bear case that assumes a 0.6 percentage point decline per year.

Eagle eyed observers may have noticed the UNIDO report uses industrial value added (IVA) rather than manufacturing value added (MVA). Though commentators tend to casually conflate them, they are in fact two different series.

But using manufacturing value added, as I did above, is actually generous to UNIDO: China's global share of industrial value add is lower than its global share of manufacturing value add.

China’s industrial might is impressive enough without resorting to faulty analogies or inappropriate data projections. Yet, despite the ambitions of industrial maximalists and the bullish projections from organizations like the UN, China’s share of global manufacturing is likely near its peak.

There are global and domestic reasons to think this:

The Global Scramble for Industrial Power

Globally, since Reform and Opening, economic conditions have been uniquely encouraging of China’s industrial upgrading. Whether it be flying geese model technological upgrading, American outsourcing and free trade maximalism, or the opening of the WTO—trends have been uniquely accommodative. It seems unlikely the next two decades will be as accommodative of China’s manufacturing growth as the previous two have been. The medium-term future will most likely be marked by deepening economic fragmentation and a resurgence of economic nationalism.

The very fact of China’s rise as an industrial colossus contributes to the growing global scramble for production capacity. Developed countries will continue moving to protect their own industries and expand industrial policy. Developing countries will continue to strategically shield their markets and increasingly adopt the same type of playbook used by China and earlier industrializers—manipulating globalization to serve national goals and using targeted trade and industrial policies to climb the value chain, a process that for many countries China’s own rapid industrial rise seems to have suppressed. Countries are now launching unprecedented numbers of counter measures against China, according to the PRC’s own data. In the future, I suspect, the orderly free trade world of the WTO will continue to recede in relevance.

A global scramble for industrial might is on, unfolding in the shadow of a fading neoliberal world order. Is China’s manufacturing share really likely to surge again under these conditions?

The US and China: Back to the Post-Moses Future?

Domestically, consider that America began intensively counteracting the consequences of its own production-centric model in the 1960s and 70s—environmental degradation, regional, wealth, and income inequality, abuses of corporate power, and other negative externalities. Over the last few years, China has similarly grown serious about tackling the costs of its industrial ascent, with the common prosperity campaign only the most recent high visibility case.

A Gilded Age analogy between America and China remains popular, but a more interesting comparison is the 1960s–70s regulatory backlash that erupted in the shadow of Robert Moses. This era in America saw the creation of EPA, NEPA, and OSHA; the rise of innumerable other environmental and regulatory protections; growing anti-monopoly sentiment; and a broader backlash against the growth machine. The U.S. entered a phase of self-correction that brought many sorely needed quality of life improvements as well as constraints on local power brokers. But it also metastasized into an era of adversarial legalism and procedural fetishization that has made building anything difficult.

In some ways, China’s current turn mirrors this—marked by heightened scrutiny of local governments, a renewed focus on inequality, and regulatory crackdowns on large tech firms. It is China’s own post-Moses moment: a bid to constrain local discretion and tighten hierarchical control in the name of (Chinese-style) modernization. As Xi himself often puts it, power (by which he means other peoples’ power) must be "locked in the cage of institutions" (把权力关进制度的笼子里). A Leninist-inflected form of legalism and proceduralization?2

But where American dysfunction is defined more by ossification and encrustation of rules, procedural expansion, and innumerable veto points, China’s version of a post-Moses Leninist order is producing a different form of dysfunction—uncertainty born of increasingly pervasive yet fluctuating demands from above that leave local governments and firms groping through a fog of modernization mandates and diktats.

Volume 1: Stalin, Paradoxes of Power tells the tale of Stalin's rise, his consolidation of dictatorship, and how early 20th century geopolitical history influenced these processes.

This essay is a thematic review and analysis of the book. It draws out themes and insights—mostly Kotkin’s, a few of my own—focused on Soviet state and institution building, how intra-party disputes worked in the earliest Leninist system, how specific instruments within the Leninist apparatus were originally birthed and used (e.g. OrgBureau), the nature of top-level decision making, among other things.

It is long. Reader discretion advised.

1. The Making of a Bolshevik

The man who would become among the most vile dictators in human history had a fairly normal upbringing and, throughout his youth, evinced little evidence of socio or psychopathy. As a youth he did suffer from multiple diseases, a crippled arm and a limp (caused by an accident), and a permanently pock marked face from smallpox. The kids made up nicknames for him (pocky). His dad abandoned the family and despite being born into the middle class, would mostly grow up poor.

But Iosef Jughashvili—Stalin’s real name—also had many blessings, including benefactors who helped put him through good schools. He also had affectionate nicknames, some given to him (Soso) and others he would choose for himself (Koba, a heroic character from a Georgian novel). By the standards of his time and place, his childhood was not particularly bad.

Kotkin does not believe, after excavating the sources on his early life and placing them into context, that one is liable to find the seeds of the future monster there. The fundamental issue was rather this: he would grow up in a period of revolutionary ferment.

Stalin became a revolutionary because he lived in revolutionary times.

The would be Stalin, like Hitler, was born on the periphery of Empire. Iosef was born in Gori, a small-town in Georgia. While Hitler was born in central European Austria, Stalin’s birthplace was on the periphery of an Empire that was itself a periphery. Russia, situated uneasily on the outer flank of Europe and sprawling into the Eurasian steppe, existed in a difficult, expansive, and not clearly delineated geographical area—the latter of which contributed to its seemingly ceaseless expansion. Geopolitical exigencies can transcend empires, and perhaps even regime type.

The early 20th century was an era of radical upheaval (the great changes unseen in a century the CPC now harkens back to 百年未有之大变局). Modernity, rather than a simple sociological development, is reframed by Kotkin as an enforced geopolitical imperative. From 1905 to 1911, Mexico, Iran, the Ottoman Empire, China, Russia, and more would experience revolutions (p. 131). Industrialization ripped countries apart and reshaped traditional structures internally. Colonial great powers tore the world apart externally. The “deal” facing many a traditional empire was simple, if brutal: either you modernize, or you die.

Suffering would find its way into the lives of many ordinary people, including Stalin.

Tsarist Russia: Trapped Between Tradition and Modernity

The Tsarist regime should have died in 1905, Kotkin argues. Floundering after the regime’s shocking defeats against Japan, massive strikes broke out numbering in the millions, shuttering rail and infrastructure. The Tsar caved to concessions, including a Duma (Parliament) that would be narrowly elected. But in Tocquevillian fashion, opposition only became more intense (p. 85).

In one of the most interesting parts of the book, Kotkin submits that it was Pyotr Durnovo, the newly appointed interior minister and head of police, who singularly bought the Tsarist regime another decade. He mobilized nearly 300,000 police / militia to suppress domestic unrest. The show of strength brought the masses back on-sides—willing to protest in the streets when the regime seemed weak, they were subdued quickly once the regime showed even modest resolve [this insight dovetails with Kotkin’s earlier book Uncivil Society, where he argued the proximate reason Eastern bloc communist regimes fell apart was that nobody was interested in or willing to defend them when push came to shove in the late 1980s].

Durnovo’s efforts to rescue Russia’s autocracy when it should have fallen may have created “the perverse consequence of preparing the country for a far worse crash during a far worse war” (p. 87). Perhaps, Kotkin suggests, there would have been no Stalinist dictatorship had the regime simply collapsed in 1905. Unfortunately, though, violence sometimes is an answer. Without it, the regime almost certainly would have died then and there in 1905.

Russia's authoritarian government institutions lacked bureaucratic rationality. Even simple rationalizing efforts like instituting a Council of Ministers (1857) were undermined by incompetent Tsars that guarded autocratic prerogatives by, for example, having ministers report directly to them instead of the prime minister (p. 60). “For some, including Nicholas II, the mere existence of a prime minister was an affront to autocracy” (p. 101). Not to speak of representative institutions, such as a parliament, which were rejected until conditions were already revolutionary (1905).

The politics in the Tsarist autocracy were archaic and haphazard (p. 120) Almost completely incompatible with the kinds of modernizing state and bureaucratic institutions (authoritarian or democratic) that have proved necessary in all other places for facilitating modernizing industrialization.

Serfdom, an economic system more akin to slavery than European feudalism, had only formally ended in 1860. But it left impactful legacies and in many places persisted de facto. A disempowered mass of Russian peasants had only just been afforded independent agency by the time the Bolsheviks arrived. A stark contrast to China, where small holding, agentic farming was a deep historical legacy. Indeed, Russian serfdom was much more despotic than the Chinese peasant, landed-gentry, dynastic state triadic relationship—a fact likely relevant to each country’s subsequent trajectory.

The machinations involving Rasputin were just the most obscene example of autocratic incompetence. Rasputin was an uneducated mystic from Siberia who managed to rise into the heart of court politics. He advocated bacchanal while posing as a “holy man.” He was there principally because of the Tsar’s wife, Tsaritsa Alexandra. As Kotkin notes, “whatever Nicholas II’s personal shortcomings, Alexandra was several magnitudes below him as would-be autocrat” (p. 159). She kept the “Siberian tramp” around not only because she believed he helped treat her son’s incurable hemophilia, but also because she “used the pretend monk” to “voice her personnel and policy preferences as ‘God’s will,’ thereby rendering what she wanted more palatable to the pious Nicholas II” (p. 160)

Despite the credulity of the bumbling autocrats, Rasputin was seen as a lustful, crazed lunatic by the elites and masses alike. Worse for the regime, Tsaritsa Alexandra’s Germanic roots combined to give rise to widespread rumors of treason. Lurid and treacherous tales, some true but many not, pervaded elite circles and discredited the regime.

The regime’s incompetent existence also forestalled rightist coalitions from independently organizing and vying for power, yielding the field to the leftists. Kotkin reminds us that the lack of a rightist coalition is particularly surprising given the array of social interests in Russia that leaned not only conservative, but downright supportive of monarchist autocracy and serfdom.

“If anyone alive had been informed during the Romanov tercentenary celebrations of 1913 that soon a fascist right-wing dictatorship and a socialist left-wing dictatorship would assume power in different countries, would he or she have guessed that the hopelessly schismatic Russian Social Democrats dispersed across Siberia and Europe would be the ones to seize and hold power, and not the German Social Democrats, who in the 1912 elections had become the largest political party in the German parliament? Conversely, would anyone have predicted that Germany would eventually develop a successful anti-Semitic fascism rather than imperial Russia, the home of the world’s largest population of Jews and of the infamous Protocols of the Elders of Zion?” (p. 129).

Repression via the political police, the okhrana, was one of the only things that kept things from unraveling and arguably one of the few effective institutions the regime possessed. The okhrana were legendary for brutality. But also tactically effective, infiltrating revolutionary organizations and sowing chaos, confusion, and dissension among the ranks of would be revolutionary organizations.

Allegations would dog Stalin all his life that he was a secret okhrana agent. Though unsubstantiated, they stemmed in part from the fact that he was often able to escape internal exile and prison quickly.

Kotkin notes that in comparison to political police in France and other European countries, Russia’s were not especially nefarious. They were, however, a harbinger for an even darker political police state to come. In another Tocquevilian symmetry, the Bolsheviks would “relentlessly reproduce the pathologies and predations of the old regime state in new forms (even more than had their French Revolution forerunners)”. (p. 736)

A select number of skilled statesmen, Sergei Witte and Pyotr Stolypin, did manage to rise above the morass and push through some modernizing and industrializing efforts—not least of which was the Trans-siberian railroad (p. 68-69). But the country was economically and politically backward, trapped between an incompetent autocracy and an entrenched nobility and landed gentry that preferred to uphold the retarding institutions of serfdom and Tsarism. Witte and Stolypin’s nascent financial, industrial, and political institution building did end up furnishing the Soviet Party-state with some basic building blocks—but they were limited.

Most fundamentally, Tsarist autocracy was its own worst enemy. "The tsarist political system and conditions in the empire promoted militancy," Kotkin notes. This context prodded a young Stalin, like so many of his youthful and ambitious contemporaries, into diverting his life course away from traditional pathways (agricultural, clergy, craftsman, etc.) and emerging commercial occupations to rather dive headlong into revolution.

Unwilling to liberalize, and even unwilling to rationalize, ferment spread. The ancien regime would eventually die in a liminal space between tradition and modernity—but it would take a global conflagration to push it over the edge.

The old world was dying. The new struggled to be born. It was the time of Stalin.

2. Marxist Machiavelli

Stalin, a successful student, made it out of his hometown and to one of the few Georgian seminary schools. It was there, in his teens, that he began to read Marx. Soon he would fully exchange the ecclesiastical Orthodox Christianity of his youth for the quasi-religious sociology of Marx (p. 107).

He was a diligent reader and a precocious ideologue. He cherished books even as a youth and later on maintained an “enormous library” on eclectic subjects that was, Kotkin notes, “not for demonstration but for work.” His ravenous reading was married to a “searing ambition to be a person of consequence…he worked at it relentlessly” (p. 463). Stalin’s intellectual diet was heavy on Marx and other Marxist thinkers, none more important than Lenin.

Jughashvili fell in with the Bolshevik faction against the Mensheviks, favoring the former’s two distinguishing Leninist conceits: 1) that a period of bourgeois capitalist revolution could be skipped and a socialist revolution directly launched and 2) that an exclusive Party structure comprising only “professional revolutionaries” was needed to accomplish this, rather than one more inclusive of broad swaths of workers (p. 81).

The rapaciousness of early modernization helped radicalize and dispose him toward Leninism. In the Georgian capital of Tiflis he saw first-hand the cruel working conditions and exploitation of newly urbanized workers—a universal dark side of industrialization experienced round the world. This period included a brief reunion with his estranged father, who worked in a massive shoe factory dedicated to supplying the Russian army. Exposed not only to the viciousness of Tsarism, but also to the undeniable exploitation of early urbanization and industrialization, he began agitating and organizing.

His early days in the underground revolution left him hardened. His first personal hero and mentor, a young Marxist named Lado, was shot in the head by the okhranka in his early 20s. Already a committed Marxist, he also began forging a pragmatic and conspiratorial mindset. Kotkin repeatedly shows that for Stalin, as for Lenin and many radicals in their circles, the rotten state of the present combined with a belief in a magnificent communist future justified nearly all means of gaining power in the name of the exploited.

Contrary to some popular interpretations, Kotkin takes pains to argue the point that Stalin was a true believing Marxist, not simply a maniacal and cynical Machiavellian. While Stalin was, to be sure a man who “lived for the revolution and Russian state power” (p. 667), he self-justified his actions via recourse to what seems like an unyielding, genuine belief in Marxism and communism—and the future cornucopia of social justice and abundance they would usher in. As if ivied maidens and garlanded youths were to herald the four horsemen of the apocalypse.

Kotkin specifically decries the misguided interpretation of Stalin offered by the first major Soviet defector, Boris Bazhanov. Bazhanov wrote that “he had only one passion, absolute and devouring: lust for power.” Bazhanov, Kotkin plainly states, “got Stalin wrong” (p. 667).

“The fundamental fact about [Stalin],” Kotkin maintains, “was that he viewed the world through Marxism” (p. 462). One of the dictator’s arch cronies, Lazar Kaganovich, enunciated: “Stalin was an ideological person…For him the idea was the main thing” (p. 661).

Humans rationally organizing society. Self-created abundance. Science and utopia, in the here and now. Freedom from spontaneity, disorder and randomness. Social justice. An end to capitalism and the imperialism and war it was seen as inevitably and perpetually creating. The heroic spirit, the big push. Immanentizing the eschaton. These were things the young, self-styled Koba could abide.

Stalin understood and interpreted his world ideologically. His goals were ideological. But because goals could only be achieved through power, the two became inseparable. Stalin lusted for power so he could turn communist dreams into reality. He became a Marxist Machiavelli.

3. Rolling The Iron Dice. Or, How Regimes Die.

Perhaps the most important event to the Bolsheviks rise to power, and thus Stalin’s ability to become one of history’s most notorious dictators, was the first world war. The Bolsheviks had helped form the first Soviets (local workers counsels) in 1905 in response to massive unrest following Russia’s embarrassment against Japan. But Durnovo’s violence rendered their early coup plotting stillborn. The okhranka killed many revolutionaries, and scattered many of the rest into forced internal (Stalin) or external (Lenin, Trotsky) exile. Stalin did “little or nothing” in years of tedious and lonely exile (p. 138). But World War 1 would enable these revolutionaries to come back with a vengeance.

Contrary to popular and superficially plausible accounts, Kotkin contends that Russia did not delve headlong into the war because of a web of alliances. Yes, Germany was allied with Austria-Hungary, which was chomping at the bit to attack Serbia, whose military intelligence had ostensibly trained the terrorists that assassinated Archduke Franz Ferdinand in Sarajevo.

And yes, “some damned foolish thing in the Balkans” did seem to be setting off war in 1914,  just as Bismarck had warned in 1888. But Kotkin argues that there were two unrelated reasons, one external and one domestic, for Russia’s choice to ultimately “roll the iron dice.”

Externally: status, prestige, and reputation preoccupied the Tsar and his entourage. “Russia and Serbia did not even have a formal alliance, and Cousin Nicky [the nickname German ruler Kaiser Wilhem used for his cousin Tsar Nicholas II] would never go to war out of some supposed Pan-Slavic romantic nonsense…the bottom line was that Russia would not allow German power to humiliate Serbia because of the repercussions for Russia’s reputation” (p.144). Russia and its leadership thought its prestige would be devastated should a group perceived to be under Russian protection get slaughtered with German help. It was more about identity and status than alliance.

Domestically, meanwhile, a bumbling Cousin Nicky saw a chance to reclaim greater authority: “the decision for war was Nicholas II’s sideways coup against the Duma he despised. War would allow his reclamation of unmediated mystical union between Tsar and people…[and he] fantasized about a domestic patriotic upsurge” (p. 145). The Tsar, in other words, wanted to reclaim power that had begun to be rationalized (into more technocratic state bodies) or liberalized (via parliament). Foreign policy decisions, it is true, are mostly domestic policy by other means.

Cousin Nicky would come to regret his choice to roll the iron dice in 1914. Three years later he would abdicate under duress as masses thronged the streets.

Kotkin, however, helpfully reminds us that “revolution results not from determined crowds in the street but from elite abandonment of the existing  political order.” Elite loss of faith  in the regime, and fragmentation at the top, causes authoritarian regimes to crumble. Fractious elites can leverage popular unrest to their benefit, but without elite disaffection purely bottom up popular revolts rarely succeed. One Tsarist official wrote similarly: “Every revolution begins at the top, and our government had succeeded in transforming the most loyal elements of the country into critics.” With masses having seized capital streets, Kotkin writes, “elites seized the opportunity to abandon the autocrat” (p. 166).

Regime insiders, aids closest to the Tsar, organized in early February 1917 for all the generals to unanimously call on Tsar Nicholas to abdicate, which he did. Not much more than a year later he would be dead, along with his whole family (wife and five children). Brutally murdered in the basement of a house somewhere in Siberia. Tsarism, along with the Russian Empire, was dust and ashes. Such is the fate of those who roll the iron dice and lose.

The fatal flaw, ultimately, of the Tsarist regime “had proven to be its inability to incorporate the masses into the polity.” The mass mobilization of Russian army conscripts created a newly active strata in society, capable of participating—however obliquely—in the political arena,  demanding certain recompense for their service (which was often compelled in the most barbaric of ways).  Ironically, these Russian conscripts, Kotkin avers, “would steamroll not Germany but the country’s own political system” (p. 175). “Of all the failures of Russia’s autocracy with regard to modernity, none would be as great as its failure at authoritarian mass politics” (p. 130).

Thus did the February Revolution of 1917 bring down Tsarism.

The haphazard creation of a Provisional Government following the Tsar’s February 1917 resignation—manifestation of compromises among more or less regime-adjacent elements—was beset by the stultifying political legacy and civil society vacuum under Tsarism, and faced a devastating war and newly mobilized masses. A situation likely more conducive to radicals than moderates.

Yet the Provision Government, Kotkin argues, was not an earnest effort at incorporating the masses and encouraging political participation. Rather than seek to reconstitute the Duma to ground its rule, the Provisional Government tried to rule by decree. “The Provisional Government was not a well-intentioned but hapless bunch that would be undone by unprecedented economic collapse and Bolshevik sedition. The rebellious old-regime insiders had long claimed to want a constitutional monarchy with a ‘responsible’ government, by which they meant a government rooted in parliamentary majorities, but in their great historical moment, they immediately created another central government suspended in the air” (p. 179). In fact, an illegitimate “abdication manifesto” issued not by the Tsar but by “non-Tsar Mikhail Romanov provided the only “constitution” that would ever undergird the unelected Provisional Government” (p. 178). As a result, Kotkin argues, the “February Revolution was a liberal coup” (p. 180).

Still, however illegitimate its base, impotent its structures, and unequal to the moment its leader—Alexander Kerensky—the structural deck was stacked against it and all moderates.

4. The Rising Star of the Organizational Tsar

During the war the soon to be leaders of the Marxist-Leninist state had been either writing or idle. Lenin and Trotsky (and Zinoviev) were authoring texts in comfortable foreign exile, Stalin (as well as Kamenev) in mind numbingly boring Siberian exile. Stalin himself did not find time to write anything—a serious lacuna among the intellectual-revolutionary leaders—though he did find time to “engage in the exiled revolutionary’s pastime of seducing and abandoning peasant girls.” In particular, Kotkin notes, he “impregnated one of his landlord’s daughters, the thirteen year-old Lidiya Pereprygina.” The later Stalin would “recall his dog in Siberia, Tishka, but not his female companions and bastards” (p. 155). A rather telling example of the grotesque coldness already in the man’s heart.

Stalin got his training in Party building in the post-February 1917 chaos. After Tsarism’s collapse, Stalin quickly returned to Moscow where he began contributing to what would culminate as the Bolshevik coup of October 1917. He was far from the organizational mastermind he would become. His main contribution was as an agitator and propagandist. He wrote 40 lead articles in Pravda during that period (p. 176).

Yakov Sverdlov—who had twice roomed together with Stalin in Siberian exile—was then the disputed organizational mastermind of the Bolshevik Party. He almost single handedly worked to keep together the far flung Bolshevik organization in the run up to the October coup. In exile, Trotsky would call Sverdlov “the general secretary of the October insurrection”’ (p. 224). Sverdlov had a quasi-photographic memory, an internalized rolodex of party members, a keen understanding of how to use and allocate men for purpose, and an indefatigable attention to detail.

Sverdlov, the first head of the Secretariat, worked largely behind the scenes on matters of personnel and organization. He relied on “manipulation of rules, suasion, and favors” to get things done. In effect, he “provided a kind of school in party building for Stalin as they left speechifying to the orators, such as Zinoviev” and Trotsky. He “showed his helpmate Stalin how to organize a loyal Leninist faction” p. 194).”

But in 1919, at just 33 years of age, Sverdlov would die. An unimaginably boost to Stalin’s star—as he soon became the inheritor of Sverdlov’s organizational throne.

5. A Coup and A Revolution

The October Revolution—the Bolshevik Revolution—occurred primarily in St. Petersburg and Moscow, as well as a few other cities. A simultaneously peasant revolution in the countryside, however, occurred largely autonomously. These two separate “revolutions”, as Kotkin frames it, were destined for a tragic clash.   

In the cities, it was a coup. And without Lenin, it never would have happened. That is amply confirmed in Kotkin’s research, as elsewhere. The vast majority of Bolsheviks in 1917 were in favor of letting the Provisional Government consolidate its rule, settle things, and let bourgeois capitalism progress before they would ultimately overthrow it. This was an ironic position the Bolsheviks were taking: advocating for the persistence of a regime/system they were publicly claiming was doomed to fail and eventually be overthrown, by them!

Lenin, after arriving from Germany in March, was forced into retreat to Finland in May. But from there he wrote devastating critiques of the attitudes and positions of the Bolsheviks currently in Russia. He was demanding a seizure of power in the name of the Bolsheviks. Most thought him unwell and even insane in his isolated insistence—including his own wife. At a decisive moment in October, he snuck back into St. Petersburg and rallied the revolutionaries himself, where they were organized in the Smolny, an old money all girls boarding school (comically, the female headmaster was still in residence).

Trotsky, newly converted to the Bolshevik cause, assisted him—Lenin seemed to be the only person the egotistical Trotsky ever deferred to (though he often did not, viewing him as more of an equal—a stance Stalin would later exploit). Most Bolsheviks involved, and most historians I’ve read, agree that without Lenin, it is highly unlikely there would have been such a coup. Largely by force of will and personality, Lenin changed history.

Stalin played a lesser but still useful role. Zinoviev and Kamenev’s determined opposition to the Bolshevik coup against the Provisional Government would dog both their future power struggles with Stalin. Stalin’s choice to faithfully ally himself with the seemingly crazed Lenin proved a masterful stroke of luck for his future power struggle.

The coup, however, haphazard worked. In St. Petersburg the resistance was so minimal, supporters of the Provisional Government so scattered, a few thousand poorly organized Bolshevik supporters with guns pulled it off. The first of what would prove a litany of instances wherein weakness of the opposition was the most decisive factor.

In practice, of course, the coup was not just against the flailing Provisional Government, but also the nascently emerging democratic Soviets as well as the Constituent Assembly—a planned meeting of multiple other parties in late 1917 (including Mensheviks, Socialist Revolutionaries, and others) that was intended to create a genuinely democratic government. Lenin and the Bolsheviks would use strong arm tactics to dissolve it, along with Russia’s hope for democratic governance.

The mass mobilization at the front, and the unspeakably awful conditions, were fomenting revolutionary energy. Peasants began their own upheaval. “October may have been a coup in the capital,” one historian has written, “but at the front it was a revolution.” (p. 224).

In the countryside, the peasants began seizing land en masse, killing landed gentry, and upending the remnants of de facto serfdom. Only 11 percent of gentry landowners would remain by the 1920s (p. 190). The Reds encouraged this insofar as it helped undermine their Civil War enemy, the Whites, who were filled with upper class elements of the old order.

But when the peasants new found autonomy led them to deny Bolshevik demands for grain requisition, the guns would just as soon be turned on them again.

6. Civil War Forges the Party-state and Stalin.

“Civil war was not something that deformed the Bolsheviks; it formed them…the civil war provided the opportunity to develop and to validate the struggle against “exploiting classes” and “enemies” (domestic and international)…The “seizure of power” would be enacted anew, every day.”

“From bottom to top, and places in between, the ideas and practices of revolutionary class war produced the Soviet state” (p. 291). Lenin himself averred: “The Civil War has taught and tempered us (p. 336). Ultimately, Kotkin writes, “it was a combination of ideas or habits of thought, especially profound antipathy to markets and all things bourgeois, as well as no-holds-barred revolutionary methods, which exacerbated the catastrophe in a self-reinforcing loop” (p. 290). Despite Stalin and Lenin’s idolatry of power, their view of the state itself did not drive Bolshevik state building (Lenin, echoing Marx, wrote a tract about the inevitable withering away of the state—a view that would itself whither away under Stalin).

The roots of Trotsky’s demise and Stalin’s aggrandizement, at the formers expense, is found in their stance toward old regime professionals and former Tsarist military officers. Trotsky advocated in favor of their use, Stalin against. In Kotkin’s telling, while this stance undoubtedly was crucial to Red victory in the civil war—and Trotsky himself played the largest role in this victory—it sowed the seeds of Trotsky’s unpopularity within the party-state. “The engagement of former Tsarist officers, and of ‘bourgeois’ specialists in  other realms, helped focus the widely gathering negativity about Trotsky, who became a lightning rod, widely disliked in the regime that he helped bring to victory, much earlier than usually recognized” (p. 340). Stalin would exploit this and seek to develop and push up new, more loyal cadres at the specialists expense.

During the Civil War, Stalin’s deployment to Tsaritsyn by Lenin and the Military Revolutionary Committee to requisition grain offered a glimpse at Stalin’s future rule. “The Tsaritsyn episode of 1918…provided a preview of Stalin’s recourse to publicizing conspiracies by “enemies” and enacting summary executions in order to enforce discipline and rally political support” (p. 340) A former Tsarist military officer who defected from the Reds wrote an exposé that summed up Stalin’s reign of terror: “clever, smart, educated, and extremely shifty, [Stalin] is the evil genius of Tsaritsyn and its inhabitants. All manner of requisitioning, apartment evictions, searches accompanied by shameless thievery, arrests, and other violence used against civilians became everyday phenomena in the life of Tsaritsyn.” That included extensive use of the Cheka—the Soviet secret police copy of the okhranka. The officer went on: “Stalin’s energy could be envied by any of the old administrators, and his ability to get things done in whatever circumstance was something to go to school for” (p. 307)

Both his military incompetence, as well as a brutal bureaucratic competence were on display, as Kotkin writes: “Stalin revealed himself in depth: rabidly partisan toward class thinking and autodidacts; headstrong and prickly; attentive to political lessons but militarily ignorant” (p. 306). Trotsky would conclude that “The ability ‘to exert pressure’ was what Lenin prized so highly in Stalin” (p. 335).

7. On Stalin’s Inevitability from Marx and Lenin.

Stalin, Kotkin submits, did not come to power despite Lenin, but because of him.

In 1911, when a Menshevik “poured poison into Lenin’s ear about Jughashvili” and his questionable past illegal activities, Lenin is said to have exclaimed “This is exactly the kind of person I need!” (p. 123).

Many of Stalin’s most dangerous pathologies were also Lenin’s. “Lenin could not have been put off by Stalin’s use of indiscriminate terror designed to deter enemies and rally the worker base because Lenin was the principal promoter of shoot first, ask questions later as a way to impart political lessons…Lenin was also not naïve: he saw through Stalin’s self-centered, intrigue-prone personality, but Lenin valued Stalin’s combination of unwavering revolutionary convictions and get-things-done style, a fitting skill set for all-out revolutionary class warfare…Stalin was both the highest ranking member of Lenin’s grouping and the belated builder of his own faction, which overlapped Lenin’s” (p. 341). Lenin, the arch factionalist who outlawed factions, would only make life easier for the most well placed member of his own.

Like Marx, Lenin saw rule of law, separation of powers, and the entire edifice of state as a mere mask for class interest and power. Such is the dangerous core of Marx’s philosophy: if at root all politics is just the enactment of power by a certain class, then all that matters is that the righteous class has all the power. Thus did Marx argue for a dictatorship of the proletariat. This thinking leaves one a mere hop, skip, and a jump away from Stalinism.

For Lenin, much like Marx: “Behind mundane disagreement he saw not legitimate opinion but malevolent forces. His conception of politics did not even allow for politics. Lenin railed against the idea that society was made up of multiple interests that deserved competitive political representation…He repudiated any separation of powers among executive, legislature, and judicial branches as a bourgeois sham. He rejected the idea of rule of law as an instrument of class domination, not a protection against the state. He dismissed the self-organization of society to hold the state in check.”

“The upshot,” Kotkin continues, “was brutal intensification of Tsarism’s many debilitating features: emasculation of parliament, metastasizing of parasitic state functionaries…in short unaccountable executive power, which was vastly enhanced in its grim arbitrariness by a radiant ideology of social justice and progress.”

“But then, Lenin fell fatally ill” (p. 410).

Lenin’s death would seed the most dramatic period for the regime: succession.

In one of the most striking stances in the book, Kotkin calls into question the veracity of the “Lenin Testament” — which supposedly had Lenin calling for Stalin to be removed as General Secretary because he was too “rude.” Kotkin in fact suggests that Lenin’s Testament was most likely a forgery written up by Lenin’s wife, Krupskaya, when Lenin was already too incapacitated to have done so himself.

Yet mere months prior to the supposed Testament, Lenin had just pushed to make Stalin the person who organized all the arrangements, paperwork, meetings, etc. of the Central Committee, on top of his existing position as head of the OrgBureau, which decides personnel. Lenin’s last indisputable act was to give Stalin his powerful Party position! Stalin was also Lenin’s closest associate (Lenin had no friends aside from his female caretakers—and Stalin was one of only two people allowed into Lenin’s private apartment) [p. 226].

“Lenin never named a successor. But in a momentous act in March 1922, he created a new post “general secretary” of the party, expressly for Stalin. Stories would be invented, for understandable reasons, about how Lenin had never really intended to give Stalin so much power. These stories, however, are belied by the facts” (p. 411). Stalin was “no accidental figure raised up by circumstances. Lenin put him in the inner circle” (p. 124).

Lenin, in other words, had intentionally given Stalin control over the Party apparatus—the instrument of power and influence more central than the state, the military, or any other.

“What stands out most about Stalin’s ascendancy is that, structurally, he was handed the possibility of a personal dictatorship, and he began to realize that just by fulfilling the duties of general secretary” (p. 425).

Stalin’s consolidation of a “dictatorship within the dictatorship” — which took off after the 11th Party Congress in 1922 — was not accidental, but followed logically from Lenin’s actions and fit perfectly within the institutional set up Lenin had pioneered.

8. The Praxis of Dictatorship

By the 8th Party Congress in 1919 the Bolsheviks had formalized the major elements of power that would characterize Leninist regimes: the organization bureau (Orgburo) which determines personnel, the Politburo (a select group from the Central Committee) that determines policy, and a Secretariat that organizes and manages the activities of the central committee and Politburo.

By 1923, Stalin—Sverdlov’s heir—was the only leader simultaneously in the Politburo, the Secretariat, and the Orgburo. Stalin’s overlapping positions in the party gave him hugely asymmetric organizational advantages. “Despite the politburo’s decision-making power, none of its members had the wherewithal to ensure that Stalin was implementing its formal decisions (and not implementing others)” (p. 687).

Politburo meetings, wherein Stalin was just one of 7 or 9 leading members, were sprawling and occurred only a few times a month. But Orgburo meetings were daily and the Secretariat was constantly working, and he had much more influence in those settings. The Orgburo “met more frequently than any party body, and its sessions sometimes lasted days—they were known as orgies. And the party secretariat was essentially in continuous session” (p. 430).

Bureaucratic Control Far and Wide

Still, Stalin was constrained by the country’s “great distances and by mutual [local] protection rackets.” So he utilized purges, discipline campaigns, and centralized appointment powers to consolidate personnel-based control. “Stalin could never centralize the whole country himself, but he could effectively centralize the bosses who were centralizing their own provinces” (p. 432).

He also made use of Lenin’s recent creation: the Control Commission—forerunner to China’s CCDI. Created in 1918 and originally called the Commissariat for State Control, and then Workers and Peoples Inspectorate, Stalin would be appointed its head (on top of his duties as nationalities commissar) and given broad investigatory powers to oversee state administration (p. 322). The Inspectorate would be merged with the Central Control Commission, and Stalin in late 1923 named his ally Kuibyshev to head it. Particular attention was paid to disciplining the bureaucracy to ensure its attentiveness to central directives. The apparatus “had been established as a neutral court of appeal, but under Stalin became a bludgeon to punish party members. Kuibyshev viciously went after local resistance, perceived and real, to central directives and lined up officials behind Stalin in the regions and the center” (p. 454).

Personnel Power

Stalin’s influence over personnel decisions in the Orgburo was critical to his consolidation of power, most importantly with regard to the selection of regional party secretaries. These secretaries would become the core of the Central Committee, the Party’s highest formal authority. In what has been described as a system of “circular power,” Stalin’s ability to shape the composition of the Central Committee allowed him to reinforce and legitimize his own dominance.

He developed the “nomenklatura” system, or lists of appointments across the country that only the Party center (Orgburo) controlled and could not be altered without its approval. The central nomenklatura initially included ~4,000 positions of republic, province, and state-run industry leaders. In turn, “provincial party organizations emulated the center with their own nomenklatura of appointments.” Stalin, by controlling selection of local leaders, was then able to enact trickle down influence.

In the post–Civil War period, he increasingly favored the promotion of younger, loyal cadres over the more independent veterans of the Society of Old Bolsheviks (p. 453). “Stalin put a premium on competence, which he interpreted in terms of loyalty.” He wanted people to faithfully and energetically execute his decisions. “We need to assemble functionaries so that people who occupy these positions are capable of implementing directives, comprehending those directives, accepting those directives as their own and bringing them to life,” Stalin said at the 1923 12th Party Congress (p. 433).

“The Soviet state emerged as a labyrinth of patron-client relationships that cut across formal institutions. But Stalin’s patron-client relationships were strongly institutional…the vast collection of personal followings that composed the party-state converged on a single person, the party’s leader” (p. 469).

However, consolidating the dictatorship required not just bureaucratic machinations, but people skills: “[Stalin] demonstrated surpassing organizational abilities…[but] too often often his power, including over personnel, has been viewed as that of an impersonal machine. What Trotsky and others missed or refused to acknowledge was that Stalin had a deft political touch: he recalled names and  episodes of people’s biographies, impressing them with his familiarity, concern, and attentiveness, no matter where they stood in the hierarchy, even if they were just service staff…he was, for all his moodiness, a people person, a ward-boss style politician, albeit one in command of instruments beyond a ward boss’s dreams—the Communist party’s reach, discipline, and radiant-future ideology” (p. 424-5). This tyrant of history was also a people person.

Bukharin would note that Stalin “is like the symbol of the party, the lower strata trust him.” Indeed, Kotkin avers, “if Stalin had limited contact with the masses, he had an extraordinary degree of contact with young regime functionaries.” “Stalin identified with these people.” He also “developed a romantic view of the Soviet system that he would hold his entire life … Thrust into power, Stalin found himself on a lifelong quest not only for personal glory but also for deciphering the secrets to ruling over men and things in order to further Russian power in the world” (p. 469).

Kotkin fingers the following Stalin loyalists as particularly influential: Vyacheslav Skryabin “Molotov”; Valerian Kuibyshev; and Lazar Kaganovich. “Molotov, Kuibyshev, and Kaganovich constituted the innermost core of Stalin’s political clan. Observers began to say these men walked under Stalin’s wing” (p. 456).

Information, Informants, and Ideology

In addition to control over personnel, Stalin uniquely controlled the flow of information throughout the regime, largely by dint of his General Secretary position in the Secretariat. “Only Stalin, in the name of the Central Committee, could issue directives to every locale and institution, while anything sent to the politburo or Central Committee from commissariats, secret police, or the military went to the party secretariat” (p. 434). He even instituted a special phone system, the “vertushka system,” which “reinforced the party apparatus as a nodal point” (p. 433). “Stalin dominated all official channels and established informal sources of information, while his personal functionaries performed tasks often not formally specified” (p. 687).

As important to control over personnel and information flows was control over the power ministry: the secret police, or the Cheka, which became the OGPU. He cultivated of special reports, information channels, and informants via the secret police that only he saw. While some reports, such as secret police mood summaries, were distributed to politburo members until the early 1920s, Stalin was even earlier creating reports that only he saw (p. 441). “Above all, Stalin alone had the means to secretly monitor the other top officials for their own “security” and to recruit their subordinates as informants, because he alone, in the name of the Central Committee, liaisoned with the OGPU” (p. 687).

Ideology was both a wellspring for commitment to the cause as well as a vital instrument of power. Stalin’s command of the Marxist-Leninist canon, grounded in years of rigorous study and sincere conviction, gave him a critical source of influence in a Party-state that often resembled a theocracy: a system in which many were genuinely motivated by belief. His mastery of Leninist texts became especially powerful after Lenin’s death, when Party elites obsequiously scrambled to build a reputation as Lenin’s most “faithful pupil.” As one Soviet literary critic observed: “Kamenev, Zinoviev, Bukharin, even Trotsky are much less familiar with the texts of Lenin’s writings than Stalin… Unlike them, Stalin studied Lenin’s texts and knew the printed Lenin intimately. He had no trouble selecting a quotation from Lenin if he needed it” (p. 591). Kotkin declares that “Stalin’s role as guardian of the ideology was as important in his ascendancy as brute bureaucratic force” (p. 419). Knowledge of the cannon was quite literally power.

By the mid-1920s, no one in the Party leadership stood outside the web of organizational control and information flow that Stalin could manipulate at will. Between 1922 and 1928, his “dictatorship within the dictatorship” materialized.

Welcome to the Dark Side

Stalin molded political power, but the pursuit and use of power also molded him.

His multiple fierce political struggles shaped his personality: “The Trotsky struggle had exerted a deep influence on Stalin’s character. No less profound an impact came in Stalin’s struggle with Lenin’s dictation” (p. 735).

Stalin’s information diet, which he largely curated, also warped his mind. It wasn’t that he was getting bad information per se, but rather that the material he was most routinely submerged in fed his dark side. “Stalin lived immersed in the grim OGPU summaries of the country’s political mood, which his worldview shaped in a feedback loop, and which brimmed with antiregime quotations from eavesdropped conversations and other reminders that the USSR was encircled by hostile forces and honeycombed with internal enemies” (p. 668).

9. The New Economic Policy

The New Economic Policy was a pivot point around which the contest for power was fought. It was also—and this Kotkin calls the “far more important story”—a series of “attempts in the Bolshevik inner circle to overcome the unforeseen yet inbuilt structural circumstance of the ability of the party’s general secretary to build a dictatorship within the dictatorship” (p. 474).

Lenin admitted the need for markets, amid mass starvation of 5-7 million brought on in part by requisition policies, failed state development, lingering effects of civil war, and poor weather conditions. Stalin became one of Lenin’s most staunch supporters in his turn toward markets. Trotsky would oppose the NEP, favoring instead a beefed up economic planning agency, which he wanted to head, and a speedier rush into forced industrialization. Trotsky would argue for an “economic dictatorship” and propose to vastly expand the powers of the “tiny state planning commission, which did not do economic planning, only ad hoc consultation with managers.” Trotsky stated that “Without the emancipation of the party, as a party, from direct governing and supervision, it is impossible to cleanse the party from bureaucratism and the economy from dissoluteness” (p. 481). Provincial party organizations in his view were improperly concerning themselves with economic issues such as agricultural or factory leasing.

Viewed from the perspective of a fight for power, of course, Trotsky was effectively fighting against Stalin’s party-based control and advocating for state mechanisms more pliable to his own will. From an ideational perspective, Kotkin argues that Stalin remained a committed leftist, a believer in military encirclement by the capitalist word, and was likely much more inclined towards Trotsky’s position than he let on at first.

The Trotsky vs. Stalin positioning on NEP thus reflected political logic more than anything, per Kotkin: “Trotsky’s desire for a dictatorship of industry and an end to the party’s oversight of the economy had both a policy aspect (planning, super industrialization) and a political aspect: it was his answer to Stalin’s dictatorship of the party apparatus. But Stalin, who did not like the NEP anymore than Trotsky did, crucially, like Lenin, and because of Lenin understood the necessity of flexible tactics for the greater cause: Stalin accepted the NEP. To put the matter  another way, in 1922, Stalin could have his party dictatorship and Lenin’s NEP. Trotsky could not have his economic dictatorship and the NEP. This means that the charges of Trotskyism that Stalin would level, with all manner of distortions, nonetheless had some basis: Trotsky on the economy was forcefully pushing against Lenin’s foundational policy” (p. 487). “Attacks on Trotsky, in other words, translated into strong support for the NEP” (p. 569).

In Kotkin’s account, policy positioning is largely subordinated to power positioning, aligning closely with Torigian’s argument in Prestige, Manipulation, and Coercion. During succession struggles, policy stances appear more as epiphenomena—tools of elite maneuvering rather than genuine ideological commitments. Kotkin’s evidence thus stands in marked contrast to the assumptions of rational choice and selectorate theory as advanced by Bueno de Mesquita, which treat policy as a central axis of strategic behavior.

In 1928, well after kicking Trotsky out of the party, Stalin would attack Bukharin and turn decisively against the NEP. In that situation, Kotkin describes Bukharin’s eventual messy plotting against Stalin as having “been goaded by desperation.” Kamenev, for example, said Bukharin’s “lips sometimes shook from emotion. Sometimes he gave the impression of a person who knows he is doomed” (p. 715).

10. The Mystery of Collectivization

Despite his exhaustive research, Kotkin struggles to pinpoint exactly why and when Stalin decided to make his insane mad dash away from NEP and toward forced collectivization of the entire countryside. An even more extreme variant of the Trotskyite position he had just been attacking. What’s more, the party still had little penetration of the countryside, much like its Tsarist forebear (and even in 1917/8 it was much less popular than the SRs in the countryside). In Siberia, there were “only 1,331 party cells even in its 4,009 village soviets (and far from every village had a functioning soviet). Moreover,  what constituted a “party cell” remained unclear…[one] rural party cell was found to be holding seances to communicate with the spirit of Karl Marx” (p. 675).

What would impel Stalin to rush head long into forced collectivization of 120 million people? It was “not merely the unmodernized technical level of small, divided plots of Soviet agriculture, which produced harvests insufficient to support the kinds of grain exports necessary to finance imports of machines.” And the “dilemma was not even just the fact that the regime lacked control over the food supply or the countryside, rendering it hostage to the actions and decisions of the peasantry.”

Rather the core issue behind Stalin’s abandoning of NEP, in Kotkin’s view, was ideological. “Exactly when Stalin had concluded that it was not time to force the village onto the path of socialism remains unclear,” but NEP had always “amounted to grudgingly tolerated capitalism in a country that had had an avowedly anticapitalist or socialist revolution” (p. 672-3). And by 1928 Stalin apparently determined it was time to return to the party’s heroic revolutionary spirit and make good on the ideology.

The village was “the key to Russia’s destiny” – just as under the Tsars (p. 675). “Stalin had connected the ideological dots, reaching the full logic of a class-based outlook. Everything would be improvised, of course. But Stalin would not improvise the introduction of the rule of law and a constitutional order; he would not improvise granting the peasants freedom; he would not improvise restricting police power. He would improvise a program of building socialism: forcing into being large-scale collective farms, absent private property” (p. 676). Stalin had exiled the left, only so he could then enact leftism.

A slightly different perspective, mine not Kotkin’s, would suggest that ideology and power are often so interlinked—what are dreams without the power to see them through?—that it’s often impossible to fully distinguish them. Stalin, Kotkin himself notes, lived for revolution AND Russian state power. The headlong rush into collectivization was not just ideologically motivated at its core, but also a drive to further Party-state power: to temper, discipline, and even expand the organizational weapon of the Party-state.

Stalin himself noted of the problems around NEP: “the cause is in ourselves, in our organizations” (p. 680). “Soviet officialdom,” Kotkin writes, “was becoming dependent materially, and hence, in his Marxist mind, politically, on the rural wealthy.” Half of new communists in Siberia “had joined the party since 1924, during the New Economic Policy” (p. 681).

Stalin was thus looking upon a massively expanded party-state apparatus that was beset by lack of ideological commitment, as well as drunkenness and other petty ailments. This was no longer the small, tight-knit band of revolutionaries.

Ideology and power were bloodily linked. Officials “who not only possessed strong stomachs for bloodshed against their own people, but could shift with the new political winds” would rise high under Stalin (p. 683).

Rash political efforts would, I imagine Stalin believing, mobilize and condition new party members, deepen top-down control, and contribute to a socialist breakthrough. Kuibyshev, head of the Central Control Commission and loyal Stalinist, would push the party-state apparatus particularly hard to fulfill “unrealistic industrialized goals” (p. 686). Stalin commended his own undertakings, saying he had “wound everyone up, the way it’s supposed to be done” (p. 684).

Kotkin sums it all up: “For Stalin, Shakhty [a show trial against old regime technocrats and engineers] and the “emergency-ism” in the village were of a piece.  He was unleashing a new topsy-turvy of class warfare to expand the regime’s social base and his own political leverage in order to accelerate industrialization and to collectivize agriculture” (p. 688).

Collectivization, ideology, and the dark rise of the Bolshevik police state, according to Kotkin, were interlinked. It was not merely “circumstance” that led events to unfold as they did, “but intentional political monopoly as well as Communist convictions, which deepened the debilitating circumstances cited to justify ever more statization and violence” (p. 736).

In his sole explicit rebuke of a historian, he cites E.H. Carr who said: “More than almost any other great man in history, Stalin illustrates the thesis that circumstances make the man, not the man the circumstances.”

Kotkin’s response: “Utterly, eternally wrong” (p. 739).

Political circumstances shaped Stalin, but Stalin also uniquely shaped Soviet political evolution. “Stalin’s marked personal traits, which colored his momentous political decisions, emerged as a result of politics” (p. 735).

Without Stalin and his leftist conviction to revivify the revolution and the party-state apparatus, “the likelihood of forced wholesale collectivization—the only kind—would have been near zero, and the likelihood that the Soviet regime would have been transformed into something else or fallen apart would have been high” (p. 739)

11. A New Class, A Cultural Revolution.

Stalin understood something about creating a new coterie of people loyal to him, and loyal to the regime. In a passage reminiscent of Jerry Hough’s views, Kotkin writes: “Stalin was  going to wager on young, male strivers from the urban lower orders to spearhead a socialist remake of the village many of them had only recently left behind…It was a mass mobilization whose message was seductive: the regime would not allow worker dreams to be surrendered, lost in a lack of vigilance, sold for Judas coins” (p. 697).

Heightening tensions and contradictions to create a trial by fire for new party-state recruits. A pact sealed in blood. “About one third of party members by the late 1920s had once been Youth League members. Stalin’s apparatus was dispatching armed Youth League militants, among, others, to villages, where they measured “surpluses” by the eye, smashed villagers on the head with revolvers, and locked peasants in  latrines until they yielded their grain stores.” Predictably, “the siege Stalin was imposing generated evidence of the need for a siege” (p. 707).

A propaganda pamphlet circulated after the Shakhty trials evidenced the other part of this emergent cultural revolution: it “exhorted the party to bring the workers close to  production, enhance self-criticism to fight bureaucratism, become better “commissars” watching over bourgeois specialists, and produce new Soviet cadres of engineers” (p. 709).

A new youthful generation was being cultivated and unleashed against the peasants and the extensive remnants of what Stalin considered the unreliable, bourgeois, old regime technocrats. Stalin would cultivate a new expert class out of the recently urbanized. One loyal to him and his goals.

And he would heighten tensions and spur campaigns—collectivization, de-kulakization—to assist in this goal. Creating artificial distinctions between poor peasants and rich peasants (kulaks), and demanding blood-letting of the latter. Something akin to the blooding of new recruits in the Japanese imperial army.

12. Conjuring Enemies and Stoking Tensions.

Stalin recognized the benefits of conflict and heightened tensions in securing himself and his regime. In line with the books subtitle, paradoxes of power, the regime fed on a combustible mix of anxiety and aspiration.

Mao asserted after his bombing of Jinmen and Matsui islands that heightening tensions can help the cause—a rising tension he put to use mobilizing for the great leap forward. This type of strategy, however, was also Stalin’s specialty. Stalin appreciated this early on but demonstrated it throughout his career, stoking fears of war, conjuring internal enemies, cultivating siege mentality.

Kotkin writes of “the paradoxes of Stalin’s vertiginous ascent.” A “supremacy-insecurity dyad defined his inner regime, and shaped his character. It also paralleled the Bolshevik dictatorship’s own fraught relationship to the outside world: the  supposed global inevitability of the revolutionary cause amid perilous capitalist encirclement. Of course, such a combination of aggressive ambition and siege mentality was well known from the long sweep of Russia’s history, a great power whose aspirations always seemed to exceed its capabilities in that complicated Eurasian space. But this predicament also derived from Lenin’s handiwork—a monopoly party’s seizure of power and a cynical approach to international relations. Both the revolution as a whole, and Stalin’s personal dictatorship within it, found themselves locked in a kind of in-built, structural paranoia, triumphant yet enveloped by ill-wishers and enemies. The revolution’s predicament and Stalin’s personality began to reinforce each other” (p. 530).

Stalin saw Soviet economic development as inevitably leading to conflict with capitalist  states—which were also destined to be overthrown by socialist revolution. This inevitable view of conflict was core to Stalin’s worldview and the regimes approach to international relations.

Many leaders viewed war as potentially immediately on the horizon. But Stalin above all was “driving the USSR into a state of siege” (p. 624). A Soviet official (Chicherin) told the American foreign correspondent and Soviet sympathizer Louis Fischer the following in June 1927: “Everybody in Moscow was talking war.  I tried to dissuade them.  ‘Nobody is planning to attack us,’ I insisted. Then a colleague enlightened me. He said, ‘Shh. We know that. But we need this against Trotsky’” (p. 635).

13. Lost Chances

In Stalin’s early life he could have died many times, whether by disease, accident (he was partially run over by a horse carriage as a child) or political police. Many family (first wife, illness), idols (Lado, ohkranka bullet) and associates would die. As fate would have it, Stalin did not.

Luck would continue to play a major factor in Stalin’s rise, but equally important were the missteps and overall weakness of his opponents.

The Lenin Testament, which called for Stalin to be removed from general secretary post Lenin had just made for him, despite being of questionable authenticity was widely credited—and it should have “radicalized the political dynamic” more than it in fact did, as it was “perhaps the most momentous document of the entire regime’s history” (p. 505). A key reason it did not was because those few power players initially in possession of its knowledge, Zinoviev and Bukharin, held a secret conspiratorial cave meeting rather than coordinating more intensively to figure out how to actually remove Stalin.

In 1923, one of the last moments to strike Stalin down, people froze. “Zinoviev’s behavior is the grand  mystery,” Lenin’s wife “Krupskaya had handed him a letter from Lenin advising that they remove Stalin.” Yet “Zinoviev did no such thing. He had been afforded an opportunity to alter the course of history, and did not seize it…He could have demanded a Central  Committee plenum on the subject, even an extraordinary party congress. Instead, Zinoviev had called a meeting in a cave, then signed his name to some letters to Stalin Bukharin wrote, then did not even one of them.” This  “was arguably the most consequential action (or  inaction)  by a politburo member after Lenin had become irreversibly sidelined” (p. 513). Lev Kamenev, too, chose to tepidly support Stalin at this moment against the complaints of Zinoviev and Bukharin.

Another missed turning point was Zinoviev and Kamenev’s near recruitment of the head of the OGPU secret police, Felix Dzierzynski, to their faction in 1925. As the “head of the political police and someone whose stout reputation made him invulnerable to removal” he “occupied a potentially decisive position.” Ultimately, he chose not to support their faction, and even wrote an exculpatory letter to Stalin expecting to be relieved of his duties: “I am leaving the [opposition] faction, remaining a Leninist, for I do not wish to be a participant in a schism, which brings death to the party” (p. 577-578). What would have happened had the head of the secret police sided against Stalin at this point? A provocative but academic question.

Kotkin does not give Stalin particularly high marks for his political maneuvering.  “Stalin’s shifting political alliance to undercut rivals—with Zinoviev and Kamenev against Trotsky; with Bukharin, Rykov, and Tomsky against Zinoviev and Kamenev—hardly constituted evidence of special genius: it was no more than Personal Dictatorship 101” (p. 564).

More important for Kotkin was the questionable quality of Stalin’s rivals. “That Stalin was fortunate in his rivals, from Trotsky on down, has long been understood” (p. 531). “Even had Trotsky been more adept politically, his biography (a former Menshevik, an intellectual), his personality (condescending, aloof) and his position (war commissar) afforded him little chance to succeed Lenin, especially against a formidable rival” (p. 590-1). Bukharin—see final subsection—was even more hopeless.

Resignation Warfare

Stalin offers to resign many, many times. “There had been clear resignation statements on six known occasions” (p. 658) In a plenum in May 1924, in response to ongoing clamoring over the so-called Lenin Testimony calling for Stalin to be removed, Stalin offered to step down (p. 547). The plenum did have the power, in fact, to remove him. But due to the circularity of power—his OrgBuro empowered appointment of the central committee members—the hall was packed with  supporters.  The plenum voted to retain him, as did the next post-congress Central Committee—the latter voting unanimously to reelect him general secretary (p. 548).

The subsequent 13^th Party Congress could have been another turning point, but again it was not (p. 552). In December 1927, Stalin theatrically calls to be dismissed as General Secretary: “Now it is time, in my view, to heed Lenin’s instructions. Therefore I ask the plenum to relieve me of the post of Central Committee General Secretary. I assure you, comrades, the party will only gain from this” (p. 594). By this time, however, “Stalin had appointed the provincial party bosses who composed two thirds of the voting members of the Central Committee.” Though Kotkin suggests “that body could still act against him if he manifestly failed to safeguard the revolution” (p. 637).

Bukharin: No Alternative

Kotkin is not kind to Bukharin. He strenuously rejects the idea put forward by some, most forthrightly Stephen Cohen, that Bukharin was the last best hope for a more moderate regime. In fact, he takes pains to suggest Bukharin was neither a particularly decent human, nor a shrewd enough political operator to run the regime.

Kotkin routinely describes Bukharin as vicious, or some other unkind term. “As for Bukharin, having saved Trotsky, he turned his fluent viciousness against Kamenev and Zinoviev with gusto. Wholly under Stalin’s patronage, Bukharin became half of an emerging duumvirate” (p. 564).  “Bukharin’s typically inflammatory rhetoric” (p. 570). Bukharin “was not a person of strong character or perspciacity” (p. 686). Ultimately Kotkin concludes “Bukharin presented no genuine alternative to Stalin, even leaving aside the fact that he lacked political heft or an organizational power base” (p. 728).

Was there an alternative? The only member of the Central Committee to reject the anti-capitalist/market dogma, and thus central planning, was former finance minister Sokolnikov—who basically favored market socialism. But he “was a mere individual, not a faction.” Ultimately a “Rykov-Sokolnikov political-intellectual leadership,” the only viable alternative Kotkin sees by 1928, “would have offered a genuine alternative to Stalin only if Rykov and others in a ruling coalition came around to capitulating on the commitment to anti-capitalism in the village” (p. 730). Otherwise a coercive planning regime would have been in the offing all the same.

Conclusion

“History, for better and for worse, is made by those who never give up” (p. 739).

And Suffering Will Be Your Teacher

Xi Zhongxun was born into a fallen world. That, at least, is something the father and the son, whose youth was forged in the Cultural Revolution, have in common. But if we speak literally rather than metaphorically, the world of the elder Xi was not fallen, but falling apart. He was born in 1913, in the desolate northwest of China, as a scourge of European guns, germs, and steel was unleashing forces that would sweep the world’s great agrarian empires—Ottoman Turkey, Romanov Russia, and of course Qing China—into the dustbin of history. These same forces would pull Zhongxun, like so many young radicals of his time, into the dark vortex from which modernity would crawl. The birth of modernity in China was a bloody and terrifying upheaval. Anything, Mao quipped, but a dinner party.

Modern minds may struggle to comprehend the youthful Zhongxun. One could begin, as The Party’s Interests Come First does, with the shocking story of how he tried to murder his teacher at the tender age of 14. One could describe how famine stalked Zhongxun’s family, distending his belly and those of his orphaned siblings, claiming several of them. One could note that Zhongxun’s first wife was only eligible because her first husband had his head severed from his body by one of the various warlords and militias—and it was she, an eighteen year old girl, who had to find and bury the carcass.

Images of death and suffering have burst on to our social media feeds in the 21^st century. For most of us they disappear as quickly as they arrive, a flash on the screen sent away by the next swipe of the finger. Inhabiting the mindscape of Xi Zhongxun is hard, perhaps impossible—it would require experiencing things we never have, lingering on them for more time than we are comfortable or perhaps capable. Terrible and turbulent days of unceasing insecurity, death, and suffering are mercifully, for most of us, foreign.

But Zhongxun and his revolutionary kin came to know suffering like a first language. It spawned in them a zeal for purpose and meaning; a drive to find something that could not only bring order to a chaotic present, but something that could redeem a fallen world, that could make sense of seemingly senseless suffering. Suffering shaped and inexorably drew people toward causes bigger than themselves. Toward things that, as Viktor Frankl would have understood, transformed the very meaning of suffering. For some, like Zhongxun, suffering became the crucible in which the meaning of their lives was forged.

There was nothing inevitable about Xi’s trajectory, however. Subjected to similar suffering, any number of men or women might have chosen a different path. For Xi, the road he walked was shaped as much by happenstance as by conviction—introduced to the basic concepts of communism, almost by accident, first by a teacher and then by an educated prison mate. As Torigian reveals in his prodigious excavation of Zhongxun’s life, Xi would later recall that he knew nothing of communism when he first joined the cause. It was not the Communist Manifesto, Lenin’s Imperialism, or any other Marxist-Leninist tract that first kindled his passion. It was his own suffering, reflected back to him in the pages of a novel: The Young Wanderer. “If other poets,” the author, Jiang Guangci, would write, “pride themselves on being artists ahead of their time—creators of beauty—then I pride myself on being a true son of the age, a singer of the storm.” Much as Stalin drew strength from Georgian heroic tales (from which he also took a nickname, Koba), Xi, too, found inspiration in literature. By chance and circumstance, his creed became the communist one, and his devotion was given to the Communist Party.

If Zhongxun’s conversion to the communist cause was shaped by chance and far from foreordained, it was also part of a larger pattern. Like the old Bolsheviks profiled in Slezkine’s House of Government, Xi was one of many youths who gave themselves wholly to a cause. And once he made that choice, he never wavered. The many bloody trials and tribulations he endured in service of the Party—the only force he genuinely came to believe that could save China—hardened a commitment that would prove unshakable. Part of this devotion was deeply personal. With both parents dead and little family to call his own, the Party became his surrogate kin. The “forging” he underwent in those early revolutionary years—from infiltrating the Nationalists in his teens and twenties, surviving multiple assassination attempts, to becoming one of the youngest pioneers of the northwest base where the Communists would eventually settle in Yan’an, a place where he would both purge and be purged—took on a fetishistic significance in later memory.

For many Chinese Communists, and revolutionaries the world over, suffering was their teacher. And it taught them that only total devotion to the cause, of which the Party was the sacred embodiment, could deliver salvation. A close reading of Torigian’s biography enables the modern mind to feel this.

Do Not Wait Until The Evening to See How Splendid the Day Has Been

As Torigian reminds us, Zhongxun is often remembered in popular conception as one of the most humane figures the Party ever produced—held up as a symbol of reform at its most principled, a legacy now sometimes invoked to cast Xi Jinping as an unfilial son who has betrayed his father’s path. But as Torigian painstakingly shows, Zhongxun defies easy categorization. The elder Xi’s life, Torigian writes, is “a powerful statement about the misleading nature of grand narratives” (page 535).

Xi the “reformer” initially opposed the household responsibility system. He despised materialism. He railed against the corrosive threat of individualism. As Torigian writes, quoting him intermittently:

“Individualism was a ‘germ.’ Even if small, this germ ‘does not fear the heavens, does not fear the earth, and it is extraordinarily daring.’ He continued, ‘Even if you weigh eighty kilograms, even if today you have only a tiny, tiny bit of individualism in your body, once it develops, it will devour you whole.’” (p. 194)

Zhongxun, for his part, routinely and enthusiastically affirmed his commitment to Deng’s Four Cardinal Principles. The tension between the “Three” and the “Four”—as Torigian frames it, the economically reformist spirit of the 1978 3rd Plenum versus the enduring imperative of the Four Cardinal Principles to uphold the Party’s authoritarian core—runs through the Party as well as Xi.

A Lighter Side to Xi Zhongxun: At Disney Land (1980)

Underlying it all is the deeper tension at the core of Zhongxun’s life—the conflict between humaneness (人性) and Partyness (党性)—between what one thinks is right and what the party demands or deems acceptable. Despite his difficult youth, Zhongxun somehow sustained a gentler, more conciliatory side. It was further honed through years working in the United Front, where he often favored dialogue and co-optation of local power brokers over coercion in dealings with ethnic minorities, religious groups, and other non-Party actors. One striking example comes from policy in Xinjiang, where, as head of the Northwest Bureau, Xi intervened all the way to the top to overturn a hardline approach pushed by Deng Liqun and Wang Zhen, figures typically cast as staunch conservatives. In doing so, he was willing to bear the enmity of Deng and Wang (which would surface in due time) so as to forestall a more repressive campaign against religious believers and nomads there, favoring instead a more peaceful strategy of co-opting and courting local power brokers.

And yet, as the aptly named book reflects, when the Party’s interests were on the line, they always came first. If the Party needed someone eliminated, Zhongxun would—and did—comply. As he did in Xi’an in the early 1950s, fulfilling Mao’s mandated execution quotas, and earlier still during the Shaanxi base area purges of the 1940s, when Xi was county secretary of Suide. Zhongxun also remained conspicuously silent during the Tiananmen crisis, despite holding the prominent, and at the time very relevant, post of NPC Vice Chair—perhaps shrewdly foreseeing Deng’s violent verdict and not wanting, once more, to end up on the wrong side of Party history.

A Tougher Side of Xi Zhongxun: His Portrayal In Hagiographic New 39 Episode Miniseries (2024)

The prodigious depth of Torigian’s research invites comparison with Robert Caro. In Working, Caro recounts a formative piece of advice from his early days: “Turn every page.” Across roughly 2,000 endnotes and an extraordinary range of Chinese-language sources, Torigian shows the same tireless commitment. His book is not only a biography, but a repository of primary sources and a work of translation, with many materials rendered into English in full or in part for the first time.

Amid the mosaic of sources, three stood out to me. First is Xi’s official Chinese biographer, Jia Juchuan, whose three-volume life of Zhongxun is thoroughly mined. Torigian describes Jia as “more likely to omit than mislead,” and his account is triangulated with other key works like The Chronicle of Xi Zhongxun (习仲勋年谱) and Biography of Xi Zhongxun (习仲勋传). Second is Li Rui—former Mao secretary and high-level Party insider—whose private diaries, now archived at Stanford, offer invaluable glimpses into elite politics. Torigian draws on them carefully to add texture and insight. Third is Warren Sun, a towering figure in Australian China studies. Alongside Fred Teiwes, Sun has long set the standard for rigorous political analysis, and has done more than most to recalibrate Deng’s legacy—as both architect of reform and calculating autocrat, including his role in sidelining the more consensus-minded Hua Guofeng.

But if Torigian’s research ethic recalls Caro, his narrative style diverges sharply. There is no luminous epigraph urging readers to “wait until the evening to see how splendid the day has been,” as in The Power Broker. Instead, contradictions are foregrounded, ambiguities embraced, and tidy storylines deliberately refused. This is a book that resists resolution. Considering how often—and for how long—both internal participants and outside observers have misunderstood Chinese politics, such caution is not only reasonable but necessary. So many statements must remain provisional, with multiple streams of evidence pointing in suggestive directions but rarely converging into certainty. Such are the realities of writing about a man operating at the center of a system that is built around secrecy.

One of the central lessons of The Party’s Interests Come First is that the familiar labels used in China-watching—reformer versus conservative, or more morally charged binaries like good versus bad—often collapse under scrutiny. Torigian dismantles these categories, showing how supposed heroes were less heroic than assumed, and villains less villainous. At the top of the regime, everyone was, at one time or another, sometimes simultaneously, a victim and a perpetrator. That is the nature of the Party system. No one’s hands are clean, though some are more stained than others.

Inside the Leninist Machine

A focus on the characteristics and pathologies of Leninist systems, central to Torigian’s excellent first book on succession in China and the USSR, remains at the forefront of The Party’s Interests Come First. This new work, however, offers a more intimate portrait of how easily one can misplay their hand in the murky world of Leninist power politics—a setting in which prestige, manipulation, and coercion prevail. The intentionally hierarchical design of these regimes makes them especially leader-friendly: the top leader reliably stands above the rules and norms, able to reshape them at will. As a result, institutionalization at the apex is exceedingly difficult, if not impossible. Even among the highest ranks, elites operate in an environment of profound opacity, often unsure of the core leader’s true intentions, the current alignment of political forces, or what must be said or done to maintain their position.

Twice in his career, Xi Zhongxun served as a chief implementer to the regime’s chief implementers: first under Zhou Enlai in the State Council of the 1950s, and later under Hu Yaobang in the Secretariat of the 1980s. In both roles, Xi witnessed firsthand how precarious elite politics could be. In early 1958, Mao turned sharply against Zhou for trying to moderate the Great Leap Forward (“Oppose Rash Advance”), stripping the State Council of its economic authority, creating five new small groups to oversee government work, and handing control over the economy to Deng Xiaoping and the Secretariat (who then presided over the most unrestrained phase of the disastrous campaign). Decades later, as a member of the Secretariat, Xi again observed how the Secretariat and the State Council, now under Zhao Ziyang, vied for influence, and how Hu Yaobang—often described as the conscience of the Party—was ultimately purged by Deng. Ironically, as Torigian determines, Deng repeated a pattern he had twice suffered himself under Mao: purging a deputy not for disloyalty or policy differences, but simply because his confidence in him had mercurially wavered (pp. 472–3).

The Old Revolutionaries, Before Their Scattering, On Their Way to Physical Labor

The much-touted “institutionalization” of Chinese politics under Deng Xiaoping is revealed as largely illusory. Torigian’s detailed reconstruction of events surrounding Deng’s autocratic and often arbitrary purges—of Hua Guofeng, Hu Yaobang, Zhao Ziyang (and, as an aside, nearly Jiang Zemin)—paints a far less orderly picture. Deng emerges, in the words of Li Rui, as “half a Mao”: a leader who deliberately preserved a two-line system that concentrated immense discretionary power in his own hands while leaving others to operate in a state of calculated uncertainty. When he did intervene, as in the decision to use force at Tiananmen, it was often abrupt, unconsultative, and final. In this light, elite politics under Xi Jinping appears less an aberration than return to form.

Throughout the book, Torigian revisits key inflection points in Party history: the fall of Gao Gang, the Great Leap Forward, the purge of Peng Dehuai, the emergence of the Special Economic Zones (SEZs), and the ouster of Hu Yaobang, among others. In each case, he draws on an extensive array of sources, often supplemented by anonymous interviews with insiders, to show just how easily both outsiders and insiders have misunderstood events. One striking example is the birth of the SEZs, where Hua Guofeng—alongside Xi Zhongxun in Guangdong—emerges as a central architect. Deng Xiaoping, contrary to the prevailing view, did not formally endorse the zones until relatively late in 1984, after their early success had become evident. “By then,” Torigian notes, “Deng was taking credit for everything. “I proposed setting up special economic zones,” he said. “It appears that the correct path was taken” (page 285). Western textbooks have since gone along with Deng and Party historiography in doing Hua a lasting disservice, reducing him to a caricature as the Maoist ideologue clinging to the “Two Whatevers,” remembered if at all through a dismissive throwaway line.

Factions play a surprisingly minor role in this account, in contrast to works like Victor Shih’s Coalitions of the Weak or Cheng Li’s earlier scholarship, which emphasize the role of patronage networks and elite affiliations. Patronage networks, often assumed to be relatively coherent, emerge here as more fluid and contingent. While factional analysis remains appealing—particularly because ties can be quantified through shared hometowns, schools, or bureaucratic overlap—Torigian shows that many presumed alignments, such as Xi Zhongxun’s with Gao Gang or Peng Dehuai, were overstated, misunderstood, even among Party insiders. Old networks did matter, but they were also often unreliable. Just as typical, power and alignment shifted through opportunism or convenience, as in the case of Ye Jianying’s unexpected role in restoring Xi Zhongxun and landing him in charge of Guangdong, and in the case of Wang Zhen who, despite the seeming historical enmity regarding Xinjiang policy, became the first person to speak up for Zhongxun’s rehabilitation in 1977 (page 251).

Ideology, too, comes in for scrutiny. The arbitrariness of ideological labels often obscures more than it reveals. Party leaders, like the institution itself, frequently held contradictory positions simultaneously. As today, this does not tend to produce dialectical synthesis so much as oscillation and confusion on the part of internal participants and external observers. Torigian is especially pointed in one aside: “Guessing about whether Jinping cares more about ‘ideology/security’ or ‘development’ is a distraction from the basic point that the Party has always cared about both, even though the pursuit of two such goals simultaneously inevitably creates tensions” (p. 543).

What It Is, And What It Isn’t

This is not a book about Xi Jinping—though, if judging by much of the popular media coverage thus far, one could be forgiven for thinking otherwise. There are, to be sure, sections that probe deeply into the younger Xi, most notably Chapter 21, Princeling Politics, which unearths fascinating details about his early rise through the Party in the 1980s. Torigian draws on sources affiliated with the Organization Department and the Young Cadre Bureau (a bureau responsible for identifying and fast tracking promising cadres) to reconstruct how Xi was perceived by contemporaries at the time, including revealing diary entries from Li Rui, who was then working in the OrgDep.

There are also moments of striking personal detail I had never encountered before—such as a scene near the end of the Cultural Revolution, when Xi Jinping visits his father in exile. In a sweltering apartment in Luoyang, where the elder Xi had been sent to labor in a tractor factory, father and son sit smoking cigarettes in their underwear as the younger Xi recites Mao’s speeches from memory, with Qi Xin watching.

The book does not examine Xi Jinping’s policies today, but it offers a window into how he has internalized his commitment to the Party. Jinping once spoke of confronting profound doubt during his years as a sent-down youth in Liangjiahe. But as with his father, it ultimately appears to not have shaken but deepened commitment to the party. Suffering, for him, became meaningful when understood as a sacrifice. His father never abandoned his loyalty to the Party, despite being purged over a novel, spending sixteen years (1962-1978) in the political wilderness, and suffering greatly during the Cultural Revolution. Torigian counsels: “While some may wonder why Jinping would remain so devoted to an organization that severely persecuted his own father, perhaps the better question is, How could Jinping betray the Party for which his father sacrificed so much?” (p. 539).

Xi Zhongxun and Xi Jinping in Luoyang (1975)

Finally, beyond Xi Jinping, the book is not even best understood as a biography of Xi Zhongxun. Its deeper purpose is in using Zhongxun as a lens through which to examine the history and internal contradictions of the Chinese Communist Party itself. What the book delivers is not just a portrait of the man who fathered China’s current leader, but a window into the moral and political structure of the Party that shaped them both.

Forging Red Genes

If there is a single throughline in Xi Zhongxun’s life, it is this: devotion to the Party above all else. The forging of loyalty through suffering did not remain his legacy alone. It reverberates in Xi Jinping’s own mythology as well. For both father and son, “struggle” and transformation into a loyal cadre take on a near-fetishistic significance, each held up as a model of what a true revolutionary should endure, and ultimately become.

Yet, as Torigian warns, there is no determinism in this process of forging. There is no guarantee that those who “suffer for a cause” emerge more committed. Just as easily, they may come out disillusioned, embittered, or broken. Zhongxun’s own children illustrate this variance: one committed suicide, one became a rule-of-law advocate, several chased money and pleasure, and one pursued power. Xi Jinping may have internalized his father’s legacy—may even have “inherited the red genes”—but the real cliffhanger is whether the next generations can or will.

This remains a central quandary for the Communist Party today: how to cultivate loyalty through struggle in an era defined not by war or revolution, but by peace and development, and how to do so without alienating the very people it seeks to inspire. In China today one frequently encounters the slogan 永远跟党走—“Forever walk with the Party.” But one finds it hard to imagine that China’s increasingly urbane, educated, and independently-minded elite dream of goose-stepping into eternity.

One wonders if Xi Jinping sees the germ of individualism spreading, as his father once did, threatening to devour the party whole. In 2017, a new slogan was popularized: 幸福都是奋斗出来的—“All happiness comes from struggle.” But what kind of meaningful struggle do today’s rising cadres face? What crucible of hardship might shape them into passionately devoted party members, as it once did their leader? And to what lengths might Xi be willing to go to find out?

Coda

Be warned: Torigian’s is not a beginner-friendly book. Readers unfamiliar with the terrain of modern Chinese history or the historiography laid down by earlier giants like Roderick MacFarquhar, Ezra Vogel, and Richard Baum may find themselves overwhelmed by the detail, unsure of the stakes, and unaware of previous interpretations in the field. Likewise, media headline writers and soundbite chasers will find little to grasp onto—and what they do seize upon, as early evidence indicates, may not well reflect the book’s actual content. Torigian refuses sweeping statements, brash generalizations, or seductive narrative arcs. “In many cases,” Torigian writes, “the vagaries of evidence and intention simply cannot bear the weight of the big questions we would most like to ask” (page 536). But those willing to forge insight and meaning out of complexity, contradiction, and contingency will likely recognize The Party’s Interests Come First as a major achievement—one of the finest works on China in the past decade, written by one of the greatest American China scholars of his generation.

“A nation so poorly prepared to act independently could not attempt total reform without total destruction. An absolute monarch would have been a less dangerous innovator.” – Alexis de Tocqueville

“History is a capricious lady. But I hope that it will judge me fairly.” – Mikhail Gorbachev1

The Helpless and the Reckless

The Soviet reform experience remains a repository of historical lessons. But are we learning the right ones? This essay will assess the role of one such debate: that of entrenched interests in the demise of the USSR.

Most agree deep problems in the economic system were at the root of the Soviet downfall. But the direct and proximate cause of collapse remains an object of debate. Did powerful bureaucratic interests make reform impossible, or was the reform process botched? How responsible was Gorbachev for the collapse? How much power did he even have in a late-stage Soviet system?

These questions run through the heart of a debate between two accounts of the Soviet demise, which I term “helpless” and “reckless” narratives. They find their clearest expression, respectively, in Chris Miller’s (2016) Struggle to Save the Soviet Economy and Jerry Hough’s (1997) Democratization and Revolution. This essay puts these narratives into combative dialogue.2

At the center of this analysis are assessments of the General Secretary’s power as well as the role and influence of “entrenched bureaucratic interests” within a Leninist system. Throughout, the essay suggests potential lessons—and pitfalls—relevant to China analysis today. It concludes with my summary of what went fatally wrong in the USSR.

The Power of the General Secretary

The question of the General Secretary’s power and capacity is fundamental to an analysis of the Soviet reform failure.

The “helpless” narrative in Struggle does not mince words in its characterization of Gorbachev’s relative power: “The archival material presented here…shows that Gorbachev was just one actor among many in the fragmented Soviet political system. He was far weaker than nearly anyone realized. The policies of the perestroika era can only be understood with reference to the political forces that obstructed Gorbachev at every turn.”3 In the conclusion, we are told: “Gorbachev inherited a system in which economic lobby groups played a larger role than ever before. Yet his powers as head of the Communist Party were weaker than any Soviet leader since the Bolsheviks took power in 1917.”4

This framing of the Soviet General Secretary as weak is, as Jerry Hough contends, “a striking reversal of our older view of the Soviet leadership” that saw the leader as a potent dictator of a totalitarian system.5 Hough was himself a leader of the revisionist, pluralistic interest school of Soviet politics that sought to undermine the overly simplistic totalitarian model.6 Then, however, Hough began warning that the field, beginning in the 1980s, was erring too far the other way. The “helpless” narrative lineage thus traces back to a framing that took hold in Western analysis around the time of Gorbachev’s ascension in the 1980s, in a manner not entirely dissimilar to the rise of the “collective leadership” and “fragmented authoritarianism” frameworks in the China field in the 80s and 90s.7

The assumption that Gorbachev was but one weak player in a fragmented political system demands investigation. The theoretical basis for this claim of Gorbachev’s weakness is at best suspect. Leninist systems are more often considered leader friendly, with the General Secretary particularly powerful.8 But it is not always the case that General Secretaries dominate the scene, as the example of Hu Jintao in China demonstrates.9 So a close analysis is warranted. But the evidentiary basis seems only to cast further doubt on this fundamental assumption of the “helpless” narrative. The evidence suggests, rather, that Gorbachev—somewhat like Xi Jinping today—was not just “one actor among many in the fragmented Soviet political system,” but rather a very powerful man in a uniquely powerful position.

Personnel as Power

Gorbachev became the secretary in charge of personnel selection under Andropov in 1983. In that perch he got to work selecting and replacing top-level regional party secretaries.10 Following two quick deaths—Andropov and Chernenko—Gorbachev was General Secretary by 1985, at the ripe young age of 54, and just one year out from a Party Congress. The February 1986 Party Congress would afford him the ability to make even more drastic personnel changes early in his tenure. Brezhnev’s “stability of the cadres” also meant the Politburo and broader Party-state administrative apparatus was filled with geriatrics ripe for forced retirement. Gorbachev, Hough writes:

“was quite fortunate in a number of respects…the mortality rate among members of the 1980 Politburo was high, and there were relatively few of the top officials of the Brezhnev era with whom Gorbachev had to deal. Moreover, Chernenko was a much easier man to follow than Andropov. Andropov accomplished little in his year in office, but he created the feeling that he would do something. Since he had made no compromises, his legend was larger than life, and no actual successor could match it. Chernenko, by contrast, cut such a pathetic figure that any successor would have seemed charismatic. The elite was worried about the political consequences of continuing stagnation, and there was a hunger for leadership after a decade of ill leadership.”11

Gorbachev quickly removed three out of ten full Politburo members, including his presumed main rivals (Romanov, who he was able to remove even prior to the Congress, and Grishin) and got five new members added who would come to form his core leadership team. Gorbachev got another three Politburo members added during a plenum in mid-1987.12 After additional reshuffling, “by November 1987 Gorbachev had laid waste to the old Politburo and Secretariat with a speed never seen before in Soviet history: eight of thirteen voting members had been newly elected since he came to power and nine of twelve Central Committee secretaries (and he himself, of course, was one of the survivors in each group).”13

Elite USSR Personnel Turnover (1982-1987)

By way of comparison, below you can see data on elite personnel turnover in the initial periods of power consolidation under each of the last four Soviet leaders.

Leadership turnover in leading party organs under Brezhnev, Andropov, Chernenko, and Gorbachev (initial months of power consolidation)

Personnel turnover across all ranks under Gorbachev (1982-1987) was nothing short of remarkable: 69 of 83 members of the Council of Ministers, the state’s executive body, were replaced; 9 out of 14 republican first secretaries; and 108 of 150 obkom (i.e. provincial-level) first secretaries were replaced.14 By 1990, “all but four of the twenty-five members of the Politburo and Secretariat had been elevated to their positions during his tenure. Likewise all but one CC department head, all republic party first secretaries, and 129 of 143 regional party first secretaries had been recruited since Gorbachev's rise.”15 Gorbachev was cleaning house.

Perhaps such rapid turnover is meaningless. Undoubtedly, not all of these replacements were simple Gorbachevian sycophants. But Gorbachev’s ability to undertake such massive personnel reshuffling does not comport well with an image of a “helpless” leader beset by entrenched bureaucratic enemies. More than likely, it points to the obvious: that the General Secretary was powerful.

Power’s Purpose: Slashing the Bureaucracy

What did Gorbachev do with this seeming consolidation of personnel-based power? He radically restructured and reduced the bureaucracy, seemingly at will. By early 1990, the number of central commissions and ministries were reduced from nearly 100 to 57. In 1987-1988 alone, ministerial bureaucratic staff at the center was slashed by a third, and between 30 to 40 percent of all ministry staff at the republic and oblast (provincial/state) levels were removed—millions of people.16 Meanwhile, in 1988, even the Party’s own full time staff at the center—the central committee apparatus of the CPSU in Moscow—was slashed by roughly a third, from ~2200 to ~1500.17

More importantly, Gorbachev neutered the traditional power of the Politburo and Secretariat by creating six new top-level decision-making commissions in September 1988. A divide and conquer approach, he distributed top-level decision-making power into more controllable spheres. Some may recognize this as the very same strategy Xi Jinping has pursued in China with the rise of LSGs and Commissions, which has helped him dominate the policy-making process.

Streamlining the Apparatus (1988)

One move was particularly demonstrative of Gorbachev’s power over major bureaucratic interests. He abolished all seven of the branch economic departments in the Central Committee (aside from agriculture and defense) e.g., the Machine Building Industry Department, the Chemical Industry Department, and so forth (see figure above).18 In their stead, a singular “socioeconomic commission” was established. Gorbachev excluded every single major industrial minister from membership on the new economic commission, save one—the Minister of the Electronics Industry. As the CIA noted in their analysis at the time,

“Sovietologists believe that the industrial ministers on the Central Committee represent one of the most virulent sources of resistance to economic reform. Gorbachev appears to have scored a major victory in forming the commissions by managing to exclude from membership nearly all of these officials, including representatives of the following heavy and defense Industrial ministries [see figure].”19

Excluding Nearly All of the Industrial Ministers, Including the Following:

The decisive reorganization, the intelligence assessment concluded, “proved that he [Gorbachev] had the political strength to impose radical change on the party apparatus.”20 It went on to observe that “Gorbachev may hope that the commissions will facilitate reform of the Soviet system, but his overall goals appear to go far beyond simply creating a new administrative apparatus, extending to reducing party control in general and enhancing his own power.”21

The large-scale downsizing of the bureaucracy, major organizational restructuring, and minimization of top-level industrial ministerial influence do not sit well with the idea that Gorbachev was “weaker than any Soviet leader since the Bolsheviks took power in 1917,” as Miller asserts in Struggle. The opposite may actually be closer to the truth. John Willerton, a Soviet scholar who looked at this data in 1992, wrote: “Gorbachev's institutional powers as General Secretary and President have been vast; arguably, they have been greater than those of any Soviet leader since Stalin.”22

This recapitulation only scratches the surface of the organizational and institutional aspects of Gorbachev’s power. Yet this kind of discussion is missing entirely from Struggle. Gorbachev’s weakness is merely assumed. Hough, however, warned back in 1997 that this was not a safe assumption to make: it “is crucial to understand the basic point about Gorbachev's great power in 1985-86. Otherwise one would grossly exaggerate the ability of the conservative opposition to resist change, which Gorbachev's minions were emphasizing at the time to deflect criticism from him and to explain the decisions he was not taking.”23

The cavalry of archival material that Struggle promises never quite seems to substantiate the claims of Gorbachev’s great weakness. Instead, his weakness is either assumed or quotes from memoirs, particularly those friendly to Gorbachev, are mobilized in support of the narrative.24 Yet in the introduction to Struggle we are warned: “much of our understanding of Soviet politics during the perestroika era is based on poorly sourced media reports and untrustworthy memoirs” [Emphasis added].25

No doubt the institutional apparatus was unwieldy, complex, and resistant to some of Gorbachev’s restructuring. But that did not stop him from turning over most of the top personnel, undertaking major restructuring, and slashing the bureaucracy’s size substantially. This does not necessarily mean he made it work better, but it does indicate he had quite a bit of power.

Fear and Loathing in the Kremlin: The Case of the Coup Against Comrade Khrushchev

The 1964 coup against Khrushchev serves as a core pillar of the “helpless” narrative.26 In Struggle, Miller writes: “If he [Gorbachev] crossed too many powerful interests, he could have easily been forced out, retired, jailed, perhaps even shot. Gorbachev’s predecessor Nikita Khrushchev was toppled in a military backed coup…Gorbachev knew he always stood on a knife’s edge. Any wrong move could cost him his job, or worse. Many were surprised that the August 1991 coup against Gorbachev took so long to come. Within the USSR, it was no secret that Gorbachev’s policies were controversial and the politics treacherous.”27 He considers the validity of this fear determinative of Gorbachev’s economic reform choices:

“Gorbachev’s embrace of market reform was dangerous, politically and economically. The immense power of economic interest groups in Soviet politics severely limited the number of policy choices that were realistically possible. By the end of 1988, Gorbachev had gone all-in on a risky gamble. Balancing the budget with tax increases, spending cuts, or price increases would have been politically devastating. Both he and his allies believed such a strategy would have resulted in his removal from power, like Khrushchev before him.”28

The underlying assumption appears to be that Khruschev’s economic reforms ruffled the feathers of so many entrenched interests that it galvanized a coup against him. Hough contends that this framing is quite questionable, as “the conventional analysis of the Khrushchev era never adequately distinguished between conflicts over policy and conflict aimed at a change in leadership.”29 There was, he writes:

“a failure to distinguish style from substance. Various Politburo members disagreed with different parts of Khrushchev's policies, but they all hated his way of operating. Khrushchev was impulsive. He conducted a new reorganization every year. He announced decisions without having the staff investigate and prepare them properly, let alone the Politburo fully discuss them. In short, he was a lousy boss to work for, even if you agreed with many of his policies. A good deal of the so-called conservative opposition to Khrushchev simply wanted a more cautious approach—that is, more consistency, more consultation, less risk-taking. Much of the early analysis of the Brezhnev period labeled it "Khrushchevism without Khrushchev.””30

The most recent and authoritative compilation of evidence on the motives of the coup plotters, meanwhile, finds that the coup was not about policy at all, nor a result of Khruschev galvanizing entrenched interests against him with his disruptive bureaucratic reforms. As the author, Joseph Torigian, writes: “the main factor behind Khrushchev's removal was not policy differences or failures but his increasingly aggressive position, which forced his opponents to fight for their political lives.”31 Namely, Khrushchev seemed to be planning to “push up” a new group of young cadres and spoke incerasingly openly—and rudely—of replacing Presidium members, including Brezhnev.32 In this account, while there was generalized discontent with Khruschev’s bullying and dictatorial style of the sort highlighted by Hough, what most galvanized the plotters was fear that they were themselves on the verge of being ousted by Khrushchev.

Even still, the entire coup was far from inevitable and beset with contingency. Khrushchev was even informed about it by his son but, skeptical of the claim, did not act with urgency to counter it—missing a chance to stop it. Shortly before the decisive moment of action, Brezhnev was so afraid that he broke down crying and nearly bowed out of it:

“According to Moscow party boss Nikolai Egorychev, when Khrushchev told Mikoyan to investigate the evidence of a plot, Brezhnev started crying and said, “Kolya, Khrushchev knows everything. He will shoot all of us.” When Egorychev told him they were not violating any party rules, Brezhnev responded: “You don't know Khrushchev well.” Egorychev even had to take Brezhnev to a sink and tell him to clean himself up.”33

The internal politics and constellation of forces within Leninist regimes are vague even to those at the top. Khruschev, Torigian’s narrative argues, was overconfident in his position. Gorbachev, meanwhile, may have been paranoid. Hough writes in his book that “According to Ligachev, he [Gorbachev] seemed to have had a "Khrushchev complex," a memory of the removal of Khrushchev as party leader by the Central Committee in 1964 and an almost irrational fear that the same might happen to him.”

Ultimately, though, the presumption in Struggle that Khruschev’s upending of ministerial, agricultural, and industrial bureaucratic interests would reliably and inevitably produce a coup is unfounded. The case of the coup against comrade Khrushchev cannot serve as a load bearing pillar in the “helpless” narrative. Indeed, Gorbachev massively slashed and attacked the bureaucracy for years and faced no coup until August 19, 1991. And even then the plotters apparently intervened for a different reason (because they perceived, correctly, that the new Union treaty Gorbachev was about to sign was suicidal).

One can make arguments about Gorbachev’s psychology and its impact on policy while realizing that his views do not necessarily reflect reality. If anything, the structural realities of Leninist political systems provide an asymmetric array of tools to the leader over and against coup plotters (only the General Secretary, for instance, is formally empowered to engage in comprehensive institutional coordination).34 At the very least, the claim in Struggle that Gorbachev “could have easily been forced out, retired, jailed, perhaps even shot” is more reflective of Gorbachev’s statements (perhaps genuine beliefs) than a true fact about politics in the late Soviet Union’s Leninist system—or in any Leninist system.

Economic Reforms: Blocked or Botched?

The real politics in Leninist regimes happens inside the system. As Stephen Kotkin’s book Uncivil Society argued, when it comes to the Soviet Union and its satellites, scholars looking for the collapse via recourse to civil society were under sway of a false consciousness. The really core and interesting dynamics happened inside the all-encompassing regimes; that is, within “uncivil society.”35 If we want to understand the economic reform process (and ultimately the political reform process), Miller’s focus in Struggle is well-placed: we need to look at the complex constellation of bureaucratic forces and interest groups within the regime. The action is largely concealed, but nonetheless crucial to the determinants of policy.36

Some have noted their hope that revelations about the role of entrenched interests in blocking reform, as recounted in Struggle, may hold lessons for China analysis today.37 Indeed, entrenched bureaucratic interests (“vested” interests is the preferred term among China-focused analysts) are today often invoked as key impediments to productive reforms in China.38 Unfortunately Struggle does not seem to get the history right, and relying on it may mislead more than inform. Let’s see why.

In one review of Struggle, Oscar Sanchez-Sibony, a historian of the Soviet economy, acknowledges that “a fully built, industrial environment requires governance, and opaque, authoritarian governance has often managed to entrench obdurate interest groups.”39 But, he goes on, the bureaucratic politics and entrenched interest analysis in Struggle is

“rendered fallow by a lack of concern in investigating and documenting the reality of the society’s political economy…The linchpin of the argument is the existence of what Miller calls lobby groups in the Soviet Union. It is these, rather than Gorbachev, that the book makes accountable for the collapse of the Soviet Union. Their power and intransigence made reform impossible, Miller argues. Given the book’s reliance on memoir literature and published Politburo transcripts—that is, on the voices of Gorbachev and his team—this is perhaps no great surprise.”40

There is a presumed, but not well evidenced, bureaucratic hostility to reform, and a lack of scrutiny given to delineating the bureaucratic entrenched interests it argues blocked reform. Struggle, Sanchez-Sibony notes, provides precious little information on the contours of the entrenched interest groups identified:

“Miller speaks of three lobby groups in particular: the military-industrial complex, the collective farm lobby, and the energy industry. These entities, however, remain thoroughly impenetrable. The study does not succeed in illuminating what these lobbies are and how they function with any kind of evidentiary concreteness.”41

Staggeringly, the only evidentiary support offered in Struggle for why it takes military, agriculture, and energy as coherent anti-reform complexes is a single endnote that directs the reader to an essay in the 1998 book The Destruction of the Soviet Economic System.42 Sergei Guriev, another Soviet scholar, calls out this questionable and unsubstantiated categorization of anti-reform complexes in his review of Struggle:

“even if one accepts Miller’s political economy argument, it is not immediately clear whether his categorization of interest groups is correct. Why and how does he arrive at the “unholy trinity” of TEK, OPK, and APK [energy-, defense-, and agro-industrial complexes]? Miller describes the size of OPK (pp. 59–60), but not of the other two— and not of other potential lobbies. Given the centrality of the TEK–OPK–APK story to the book’s argument, it is striking that the justification of the choice of the three as the main powerful antireform lobbies is based on a single reference to page 157 in a book edited by Ellman and Kontorovich (1998). The latter is a compilation of essays of 1990s reform insiders. Page 157 is a part of Yevgeny Yassin’s essay, … [but it also] does not justify the choice of the three “powerful blocs.” Nor is this choice discussed in other essays in the book.”43

Vladislav Zubok, in his review of Struggle, highlights the same problems of unsubstantiated imputation of motives, lack of archival evidence, and a missing delineation of the contours of the USSR’s entrenched interest groups:

“The concept of ‘entrenched elites’ occupies a central role in the book. These groups, ranging from the agrarian collective farms’ lobby to the military-industrial complex, are presented as the main culprits of the excessive monetary demands, the inflationary pressures on the budget, and ultimately the political gridlock that destroyed Soviet finances and the economy. People in these groups, Miller tells us, were purely reactionary, anti-reform, and anti-market. Gorbachev was a captive of entrenched elites rather than a bold, determined reformer. The book presents him as “far weaker than nearly anyone realized,” because of “political forces that obstructed Gorbachev at every turn.” (9). This is where my dissatisfaction with Miller’s book begins. It starts with sources. The claim about entrenched elites requires ample empirical confirmation. And at a minimum one expects background information on the abovementioned groups and the nature of their obstruction of Gorbachev’s reforms. Yet the book does not provide such information. Miller seems to take the opposition to Gorbachev for granted, as if taking a leaf from the anti-bureaucratic perestroika rhetoric, and from statements by Gorbachev, radical economists, and the ‘democratic’ opposition.”44

Little archival evidence is presented in favor of the “helpless” narrative, despite claims that it does. Sanchez-Sibony goes on to contend that a “nod and wink” argumentation style in Struggle substitutes for evidence:

“In Miller’s description of how lobbying works in the “energy industry,” the logic seems to be that because Nikolai Baibakov had been oil minister and identified himself with that industry well into his old age, he systematically privileged it in his all-powerful role as Gosplan chairman. Rather than proving the case, the argument is made through a wink of complicity: “Is it any surprise that, as head of Gosplan, Baibakov looked kindly upon requests for more investment in the energy sector?” we are asked. This, however, runs against the headwinds of Douglas Rogers’s prizewinning book on Russian oil, which shows that, far from a coherent industry able to develop lobbying power, what Miller denominates as “the energy industry” was a fragmented set of managerial bureaucracies surprisingly inconsequential to domestic and regional politics…Although the energy industry and its man Baibakov serve the book as the general example for how lobbying might work, the individual cases end up focusing on enterprise and agricultural reforms, but with no particular evidence other than exasperated commentary from Gorbachev and his team that blocking these were coherent antireform lobbies.”45

The “wink and nod” reasoning is deployed in discussion of agricultural reforms, or rather the lack thereof. Struggle suggests condemnation of Gorbachev for failing to begin his reform process with agriculture is off the mark. He served as secretary in charge of agriculture prior to his ascension, his wife wrote a dissertation on collective farms, his family was negatively impacted by them. Of course he would be aware of and want to address the core problems, right?46 Such reasoning could be correct, but could just as well be told in a way that leads one to conclude that Gorbachev was himself an entrenched interest for collectivized agriculture. That line of inquiry is not pursued.

Meanwhile, much as Sanchez-Sibony calls into question the coherence of a singular energy “complex,” Jerry Hough warned decades ago that speaking of a coherent Soviet military-industrial complex made only limited sense, as the ministries in charge of producing materiel faced quite different, and often conflicting, incentives from the military itself.47 Delineating entrenched interests groups is difficult and, at minimum, requires attention to the differing incentives at play.

All of these critiques ultimately mirror what Hough had already written in his 1997 book Democratization and Revolution. Namely, that the “helpless” type narrative advanced in Struggle was ridden with “old assumptions about Soviet bureaucrats [that] have become part of the historical conventional wisdom.”48 Hough suggests a more accurate view might actually be the inverse: that “as soon as the bureaucrats and the nomenklatura became confident that economic reform was possible, they understood how they could benefit and they supported it.”49 That roughly 80% of private companies in 1993 were run by former Party-state managerial personnel in what some have called “the revolution of the deputies,” provides support for this.50 Zubok’s own assessment of the evidence is in alignment with Hough’s:

“It is hard for me to find in the records of Politburo discussions exactly which of the Politburo members provided, as Miller claims, “fierce opposition” to Gorbachev’s reform initiatives, and where these records appear…There is plenty of evidence that Gorbachev’s reforms initially evoked considerable support among a great number of Soviet factory directors (Prime Minister Nikolai Ryzhkov, Gorbachev’s supporter in 1985-1990, was one of them), and from the party-economic managers (partiino-khoziaistvennyi apparat) in many regions and localities.”

The fragmented authority narrative may actually be a more apt descriptor of the limited power of any given bureaucratic group, rather than of the power of the General Secretary. Entrenched interests within Soviet uncivil society—even if they were unified—would have faced a massive collective action problem. But bureaucrat groups were far from unified. As Kotkin wrote in Uncivil Society terms like “red bourgeoisie” or “new class,” which conveyed a sort of collective group consciousness and interest,

“went out of fashion long ago. Its power [that of the term “new class”] consisted in wielding Marxism against Marxist regimes, but, as Djilas himself later conceded, that was also its limitation. Far from acting coherently, let alone out of class consciousness, the Communist establishments were often incoherent, riven by turf wars and hyper secrecy.”51

As with China today, one must be conscientious and skeptical when it comes to analyzing the dark and murky world of entrenched interests and internal Leninist bureaucratic politics.

Reconsidering the Contours of the USSR’s Bureaucratic and Interest Group Politics

A more fulsome exploration of bureaucratic politics within the Soviet Union’s “uncivil society” is found in Hough (1997). He identifies three critical cleavages: (1) between economic sectors, most notably between the highly favored heavy industry and those in professions and the service sector52; (2) within the bureaucracy along generational lines, e.g., between status-hungry yet more liberal youth (Shestydesiatnyky or sixtiers, born between 1925-45, who ascended during the Khruschev thaw) vs. older conservatives pushed up under Stalin53; (3) and between the ministerial officials in Moscow and the Party officials in the provinces.

One can refine the cleavages even more. For example, within the state’s ministerial chain of command, those at the top and those at the bottom were mutually dissatisfied with the massive layer in between. Hough recounts the analysis of Tatiana Zaslavskaia in 1985, a sociologist typically associated with radical reform. She argued:

“the real structure of bureaucratic power was very different from the formal structure. State officials, she believed, were divided among three groups: those at the highest levels of government; those in the middle, "the employees of the branch ministries and departments and their territorial administrations"; and "the employees of the enterprises." The problem in the Soviet Union was not a concentration of power at the top, but "the clear overgrowth (gipertrofiia) of the intermediate link and the relative weakness of the lower and often the higher links." Economic reform, she said, "raises the prestige and influence of the first and third level, and lowers that of the second."54

The bureaucratic politics in the USSR were complicated but exploitable in a way the “helpless” narrative never explores. As Hough puts it: “Any scholar who had studied the provincial party secretaries knew they hated the ministries and Gosplan; they would support a leader who attacked the power of these Moscow institutions.”55 Indeed, “the party apparatus was not unified…the regional party organs are often divided among themselves and within themselves, [and] they agree on only one thing: they hate the ministries in Moscow.”56

This situation was amenable to a classic pinscher movement: where the top goes around the middle and aligns with the bottom. This, as Mark Lupher laid out in his book Power Restructuring in China and Russia, is precisely how multiple revolutionaries and reformers in both China and the USSR have gone about their power restructurings. And, in fact, this appeared to describe much of the logic of Gorbachev’s reform and restructuring.

The above overview just scratches the surface but hopefully offers a hint at alternative contours within the bureaucracy and bureaucratic politics (see Appendix 1 for a deeper overview of and cut into the USSR’s bureaucratic structure).

Reformable or No? The Core Divide

The most important and comprehensive bureaucratic divide—yet one that is controversial among Soviet analysts—was that between the ministries and the party apparatus. It is controversial because one’s assessment here—i.e., whether one thinks the party is divisible from the ministerial state apparatus—has very direct implications for how one views the USSR’s reformability, and thus the Soviet ability to follow the Chinese path of “market Leninism.”57 In the USSR’s administrative-command economy, the state ministries formally ran the “planned economy,” so in theory the Party could have persisted largely intact while overseeing a major diminution of the ministries’ role and a transition to the market—i.e., followed China’s path. This divide runs through the “helpless” and the “reckless” narratives.

In Struggle, Miller concludes the Party was compromised beyond hope:

“By the time Gorbachev came to power…there was no way out. The Soviet system gave power to a new ruling class: generals, collective farm managers, and industrial bosses, all of whom benefitted from waste and inefficiency. They dominated the Communist Party and hijacked its policymaking process, so that by the 1980s, there was no longer a boundary between industrial lobbies and the Communist Party itself. The political clout of these interest groups proved far more significant than anyone expected. Gorbachev’s legacy—and the entirety of Soviet history during the perestroika period—cannot be understood without a clear view of the vicious infighting that determined which policies ­ were implemented and which were discarded.”58

But Hough in Democratization and Revolution thought this was not the case:

“the Communist party is the only institution with the power to challenge the ministries. In much of the Western literature, this fact has been taken to mean that reform is impossible. Party officials are often described as an especially conservative and ideological group who are counterpoised to a more reform-minded, pragmatic group in the governmental machinery. In reality, the traditional Western interpretation should be reversed. The Central Committee apparatus, headed by the Central Committee secretaries, has some fifteen hundred officials, who are directly supervised by the general secretary and have a special relationship to him. Moreover, many of these officials do not have a power comparable to that of the ministries and develop a resentment toward them… Not surprisingly, almost every article published by the provincial party secretaries for thirty years has contained complaints about the ministries and the State Planning Committee. If "their" general secretary calls for the support of the provincial first secretaries in an attack on the ministries, their sheer pleasure will overshadow any lingering doubt about their own self-interest.”59

My guess: Hough is right, it was possible to deconstruct most of the ministerial system and much of the planned economy without deconstructing the party. In fact, the party may have been necessary in this process (more on this at the end). But that was not the path Gorbachev chose to pursue.

A Revolution from Above… and Below

Gorbachev routinely referred to perestroika as a “revolution.” This was perhaps the most prominent theme of his 1987 book Perestroika, which he took the time to produce for a Western readership smack in the middle of his reform process. “Perestroika,” Gorbachev wrote, “is a word with many meanings. But if we are to choose from its many possible synonyms the key one which expresses its essence most accurately, then we can say thus: perestroika is a revolution.”60 He argues “it is precisely measures of a revolutionary character that are necessary for overcoming a crisis or pre-crisis situation.”61

While his bureaucratic and personnel changes focused on increasing his own power, many of his key economic reforms—most importantly the 1987 Law on State Enterprises62—were in fact centered on devolving power downward. Economic reform was, in Gorbachev’s understanding, about making socialism work. In his own words, “Perestroika…means the combination of the achievements of the scientific and technological revolution with a planned economy.”63 Gorbachev’s crude, changing, and often contradictory vision was of unleashing bottom-up enthusiasm to implement technological advance while maintaining core aspects of a planned economy. If that sounds terribly confused, that is because it was. In a passage from his 1996 memoirs that is both revealing and believable, Gorbachev himself admits as much:

“Independent specialists believed that the basic reason for the country's backwardness was that we had missed a new stage in the scientific and technological revolution, while the Western countries had moved far ahead both in restructuring their economies and in technological progress. The problem did not lie only in errors or in undervaluing science and technology, but rather in the archaic nature of our economic mechanisms, in the rigid centralization of administration, in over-reliance on planning and in the lack of genuine economic incentives. However, the recognition of the need to improve the economic mechanism did not go beyond the formula of 'more complete use of the potentialities of the socialist system'… For some time we indeed hoped to overcome stagnation by relying on such 'advantages of Socialism' as planned mobilization of reserve capacities, organizational work, and evoking conscientiousness and a more active attitude from the workers…The fact was that the extremely alarming economic situation that we had inherited required immediate measures. We felt that we could fix things, pull ourselves out of this hole by the old methods, and then begin significant reforms. This was probably a mistake that wasted time, but that was our thinking then… While I was aware of the importance of economic reforms, I also believed that it was first necessary to try to modernize the economy so as to set up conditions for radical economic reform by the early 1990s. This was the aim of the all-Union conference on scientific and technological progress. I note for clarity that these ideas were similar to Deng Xiaoping's reform methods in China.”64

Properly utilizing incentives and carefully reconstructing institutional mechanisms, as Gorbachev himself admits, often took a backseat to vacuous sloganeering, which appeared to serve as a stopgap in thinking. Gorbachev repeated ad infinitum that he sought to activate the “human element,” unleashing the latent “potentialities of socialism,” fully realize the so-called “advantages of Socialism,” and on and on. Socialism and democracy were inseparably bound, in Gorbachev’s view—a formula he would also repeat ad nauseum. This all seemed to reflect a hope that mobilizing the bottom up spirit of Soviet citizens and workers would be, if not a panacea, at least a route to Pareto improvements.

Such preoccupations with mobilizing a revolutionary human spirit are something of a common pattern among Marxist-Leninists. “Khruschev,” for example, “railed against Soviet scientists for failure to understand the latent potential of the masses.” In China, not wanting to be outdone, “Mao complained that the Soviets underrated the power of the human spirit.”65 Gorbachev was infected with something of the same strain. A belief in the power of the human spirit. A disregard for material incentives. A lingering faith in the ability to leap to a kingdom of freedom in a single bound.

One consequence of the strain that infected Gorbachev, however, was an anti-bureaucratism that sought to make good on something like Marx’s withering away of the state. Indeed, Gorbachev blamed the bureaucracy—not unjustly, of course—for squashing popular enthusiasm. He wrote in 1987 that the USSR was beset by and subject to “bureaucracy-ridden public structures and to expansion at every level of bureaucracy. And this bureaucracy acquired too great an influence in all state, administrative and even public affairs.”66 As a result, “little room was left for Lenin's idea of the working people's self-management.”67 He publicly deployed rhetorical fire to match and encouraged Yakovlev and those who controlled state media—as well as emerging free voices in glasnost—to critique the bureaucrats as much as possible. Miller notes this, quoting Gorbachev and adding his own flair:

“Gorbachev argued, the government and the party should openly support individual workers against tyrannical bureaucrats. “In communication about this meeting of the Politburo, let’s make clear what has been said. And Afanasiev [editor of the newspaper Pravda] and Skliarov [of the Propaganda Department] should make use of all methods—­ press, radio—to debunk local bosses, local bureaucrats, who squeeze individual activity.”68

Gorbachev was explicitly aiming for that classic pinscher movement of the top (i.e., himself) and lower stratums against the middle, as he himself wrote: “It is a distinctive feature and strength of perestroika that it is simultaneously a revolution "from above" and "from below."”69

For Gorbachev then, consolidation of power was for a purpose: to mobilize bottom up enthusiasm and unleash the latent potentialities of socialism that were being bureaucratically stifled.

It was Gorbachev’s own beliefs about how perestroika would work—the importance of empowering the people against the bureaucracy—that deterred him from critical reforms, most importantly price reform, and thereby undermined the program’s overall efficacy.70

Reforms: Botched, Not Blocked.

The Soviet economic system had an emergent logic at the intersection of planning, party intervention, and an underground market economy (see Appendix 1). There is no doubt that there were many entrenched interests that were resistant to certain reforms, and there is no doubt that Gorbachev faced a massively complex challenge in fundamentally fixing the USSR’s economic problems. The bureaucracy was pervasive, and the array of interests and incentives propelling its behavior bewildering. It is certainly not out of the question that the system was unreformable.

But rather than a well-considered reform—involving a meticulous understanding of institutions and incentives, axing where appropriate, and using a scalpel otherwise—a solipsistic revolutionary approach was pursued (particularly after 1988). One reviewer of Hough’s summarizes this view well:

“For Hough…Gorbachev is both a shrewd political operator, putting himself in power through the adroit use of patronage politics and Kremlin maneuvering, and at the same time staggeringly naive about the importance of institutions to managing a modern state and economy… Rather than carefully thinking through the institutional requirements of transition, Gorbachev simply torched existing institutions of party and state in the hope that a new Soviet society would rise from the ashes… Behind this neglect of institutions lay a streak of anarchism. Gorbachev, like Yeltsin, "came to accept Karl Marx's assumption that the state does not play a crucial or even useful role in economic performance, that it is parasitic and that planning can be achieved as it withers away" (p. 2). This, combined with an irrational fear of the power of the Soviet bureaucracy, made Gorbachev demolish the power of the state in a misguided attempt to thereby revitalize a stagnant system.”71

If this view is correct, one lesson for those seeking to understand reforms in China today is that the leader, his competence, and his perceptions of how to enact reform can, at times, prove even more important than the underlying realities of bureaucratic politics or structural issues.

In this view, the key questions become:

· What problems does the leader perceive in the current system?

· What types of reforms does the leader think will fix those problems?

· Who or what does the leader think stands in his way?

· What are his strategy and tactics for implementing those reforms and getting around entrenched interests, road blocks, and obstructions?

An objective, first order analysis may help analysts determine whether or not the leader’s diagnosis is correct and whether or not his reform approach is likely to be efficacious. But one should not be confused into thinking that there is no gap between reality and perception. Leaders can always misdiagnose problems, or respond to real problems in less than optimal ways.

A quick look at two of the most pivotal reform issues in the USSR will help to show that this is in fact what happened under Gorbachev, that the “helpless” and “stymied” narrative falls short, and that a “botched” narrative seems to make more sense.

The Case of the Missing Price Reform

Of the many reforms on the table under Gorbachev, arguably none was more crucial than price reform. While others, like the Law on State Enterprises (1987) and the Law on Cooperatives (1988) that sought to increase bottom-up autonomy and initiative were very important, without price reform they would not work properly.72

Without prices that better reflected supply and demand, enterprises remained trapped within the confines of the administrative-command system and unable to act autonomously and spontaneously.73 This was so not because of bureaucratic resistance or the desires of entrenched interests, but because the critical reform enabling transition out of an administrative-command system never came. Lacking this basic ingredient of functional autonomy, how could enterprises stay alert and adapt to changing circumstances, fund capacity expansion, take costly risks on technological upgrading and quality improvement?

Hardly any price reform occurred prior to 1991, by which time the Union was being torn asunder due to the consequences of Gorbachev’s political reforms, and there were far bigger issues to contend with.74 It was a core failing of perestroika, as agreed upon by multiple insiders in their contributions to Ellman’s (1998) Destruction of the Soviet Economic System. In their memoirs, many of the highest leaders also agreed not pursuing price reform earlier was a mistake—including Gorbachev!

How does Struggle narrative deal with this failure? While it demonstrates quite well that Gorbachev understood the central significance of price reform, it also shows that he was paralyzed by his idiosyncratic—and ultimately self-harming—belief that it would undermine the mass enthusiasm he deemed even more important to the success of perestroika. But Struggle tortures this fairly self-evident explanation into compliance with its “helpless” narrative. An extended quote is needed to do the contortion justice:

“As Gorbachev told the Politburo in May 1987, “the question about prices is principle, fundamental. If it’s not solved, there won’t be self-accounting for enterprises, nor self-financing, and perestroika will not work. But you know how hard it is to start a new policy [perestroika] with price increases!” … The Politburo and Council of Ministers regularly discussed price increases during 1987 and 1988. Yet Gorbachev was deathly afraid of the political consequences… Gorbachev advocated price revisions in principle, but never proposed a concrete policy. “On the subject of price controls. If we don’t come to an agreement, it means that we’re afraid,” he argued. But he was afraid, and sensibly so. Gorbachev realized, as he explained to the Politburo, that if prices do not “correspond with reality, we won’t have any mechanism of economic governance. But most importantly: changes in prices shouldn’t undermine the standards of living of the population, or economic development at the present time.”75 … “But Gorbachev believed, probably correctly, that raising prices was politically impossible. “Some people are demanding price increases,” he [Gorbachev] said. “We won’t do that. The people have not yet received anything from perestroika. They haven’t felt it materially. And if we raised prices, you can imagine the political results: we would discredit perestroika.” Discrediting perestroika meant discrediting himself. It also meant empowering those among the Soviet leadership who opposed any economic reform. Gorbachev was unwilling to take that risk. Soviet leaders remembered the riots in the southern city of Novocherkassk after the price increases of 1962. Gorbachev knew that a similar revolt could easily cause his opponents to oust him.”76…“This was the basic dilemma: raising prices to approximate free market levels would help resolve the country’s growing economic problems, but price hikes were opposed by many in the Politburo. Even if Gorbachev had been able to push through price increases over his opponents’ objections, the public backlash against higher prices would give Gorbachev’s rivals a propaganda coup and let them derail perestroika... “Increase prices?” he asked at one Politburo meeting. “That means social tensions, threatening perestroika.” The opposition was just too strong, Gorbachev believed, to ram through price increases.”77

This interpretation of Gorbachev’s own quotes seems to stray from their face-value meaning. Gorbachev is quite literally saying he will not do price reform because he does not want to impose costs upon people before the imagined benefits of perestroika arrive (i.e., Pareto improvements from achieving the potentialities of socialism). Rooting Gorbachev’s actions in fear of entrenched bureaucratic interests and hostile elite co-conspirators is simply a tortured telling of this story that strays from face-value.

The narrative in Struggle is not even particularly consistent with Gorbachev’s post-hoc account. Indeed, Gorbachev’s own post-mortem on the price issue, written a decade later, seems to directly contradict it. Gorbachev seems to lament the fact he did not simply force it through: “We had allowed the most favorable period for this (1988-90) to slip through our hands.”78 Gorbachev then expounds upon this in his Memoirs, heaping blame upon the populists and radical democrats that he himself had unleashed—not upon supposedly powerful and recalcitrant entrenched elites or bureaucratic resistance:

“it was obvious that, with time, the conditions for major price reform would only deteriorate. However, those in the government [as if he were not in charge…] were afraid to tackle this highly sensitive issue. Thus we lost several months in senseless bureaucratic wrangling. Meanwhile, rumors of an attack on stable prices trickled through society and caused growing alarm. This issue was eventually picked up by populists and politicized. In spite of many assurances that the revenue from price increases would be returned to the people (primarily to low-paid workers through wage increases) and that the decision on prices would not be made without discussing it with the people, a noisy campaign against price reform being counter to the interests of the people was carried on in the press. “'Hands off prices!' was the first slogan of the emerging radical democratic opposition. They were not at all bothered by the fact that this attitude blocked economic reform and that they themselves could not avoid taking this action if they came into power. As in many other instances, the interests of the nation were sacrificed to the desire to win cheap popularity. Radical newspapers published letters and wrathful diatribes, and in only a few weeks public opinion changed to total rejection of price reform.”79

But memoirs are often unreliable sources, as we know. Hough, therefore, contends that Gorbachev’s Memoirs are more than a little bit self-serving in their framing the issue of the missing price reform. It was, in Hough’s view, neither entrenched interests nor democratic opposition: it was Gorbachev. Had Gorbachev been decisively in favor of price reforms, or even just fiscally responsible increases, he almost certainly could have gotten his way. Far from being hemmed in by others, and far from “those in the government” stalling on the issue of price reform, it was Gorbachev himself who continuously prevaricated or actively intervened against. Many on the politburo were supportive.80 Most important was premier Nikolai Ryzhkov—something of an unheralded hero for Hough—who pushed for strong retail price increases to better reflect actual supply and demand, if not yet full price reform (i.e., ending administrative price setting).81 But Gorbachev intervened decisively at key movement to prevent retail price hikes, not out of fear of entrenched interests, but because he had a particular belief about how reform should work: the people, as Struggle itself quotes Gorbachev saying, should first see benefits from perestroika before the pain of price increases, lest mobilization of the “human factor” be dampened. Unfortunately, those benefits never came, nor did price reform.

On the critical issue of the missing price reform, not even Gorbachev is as sympathetic to Gorbachev as Miller is in Struggle. The “helpless” narrative of Gorbachev cowed by fiercely powerful entrenched interests seems largely foreign to what actually transpired.82

Blowing out the Budget: Who Done It?

In 1985, when Gorbachev took over, the budget was nearly balanced, as the Soviets defined it. Within a few short years the budget deficit ballooned and by 1989 it was, seemingly overnight, 90 billion rubles, or 10 percent of Soviet gross national product.83 As Gur Ofer noted in 1989, by this time “the leadership and economists in the Soviet Union regard[ed] the fiscal crisis as the country's most acutely pressing economic problem, not only because of its effect on the current economic situation, but also because many critical elements of the reforms depend[ed] on establishing a solid fiscal and monetary infrastructure.”84

We are told in Struggle that it was entrenched interests and their “demands for handouts [that] tore a hole in the Soviet budget.” Gorbachev, as usual, “lacked the power to resist.” This in turn meant “Chinese-style authoritarian politics could never have supported Soviet economic reform, because the most reactionary institutions—above all, the military—were the most opposed to the measures needed to stabilize the economy.”85

Yet while the military was undoubtedly bloated beyond any reasonable size given the USSR’s underlying capacity, Gur Ofer, one of the foremost experts on Soviet budget data, noted by the late 1980s it was “generally agreed that defense budgets have been going down and can decline further.”86 Estimates were that defense spending was somewhere around 10-15 of Soviet GNP, though it is still heavily debated.87

So was it really entrenched interests that “tore a hole in the budget”?

Revenue barely increased under Gorbachev’s tenure. Yet this was not the doing of entrenched interests—at least not of the sort Struggle has in mind. It was rather due mostly to Gorbachev’s own policies: (1) to allow enterprises more autonomy and to keep more of what they earned (Law on State Enterprises); (2) refusal to increase retail prices; (3) anti-alcohol campaign; (4) as well as a collapse in global commodity prices (not, of course, Gorbachev’s fault).

Profit transfer from enterprises to the budget, point (1), was “the single most important source of tax revenue” but was “lower in 1989 than in 1986, owing mainly to the economic reform provision that permitted enterprises to keep a much larger share of their profits in order to finance their own investments.” An intended result of the Law on State Enterprise.

The second most important revenue source, point (2), was the turnover tax—the amount the state adds on between the wholesale and retail sale price and takes for itself. Turnover tax revenue barely budged from 1984 to 1989.88 We have already seen Gorbachev refused nearly all fiscally responsible price increases or reforms.

The anti-alcohol campaign (3) and the fall in commodity prices (4) each had a roughly equivalent negative impact on the budget. Revenue from alcohol sales had made up roughly 12-13 percent of budget revenue in 1982, and was down at least 25 percent by 1986.89 Miller cites Finance Minister Boris Gostev as saying, in 1987, that “losses due to falling oil prices on the world market were 15 billion. From [falling sales of] vodka—also 15 billion.”90 Combined these two hits to Soviet revenue account for perhaps a third of the 90 billion deficit.

Expenditures, meanwhile, increased sharply. The main spending areas were the following: (1) The industrial modernization program, (2) planned losses of enterprises, (3) rising subsidies on food and other consumer related items, (4) expansion of welfare programs, and (5) defense outlays.91

Points (1) and (2) are similarly direct consequences of Gorbachev’s actions. Planned losses are related to the 1987 law, and acceleration to Gorbachev’s self-admitted move to make good on the scientific technological revolution via the “old methods,” as discussed earlier.92

Yet Struggle seeks to explain away Gorbachev’s “acceleration.” Allegedly, Gorbachev got the Law on State Enterprises only by placating entrenched interests with increased capital spending. 93 But there is no evidence this was a quid pro quo, nor that Gorbachev thought this way. As Yakov Feygin suggests a rather more convincing argument, that Gorbachev was earnestly trying to make good on the scientific and technology revolution his predecessors had promised.94 Gorbachev, as we saw, says as much in his Memoirs (attributing acceleration to a mistaken belief in the old ways).

Points (3) and (4) further conflict with the bureaucratic entrenched interest explanation. Gorbachev himself refused to raise retail prices, but did increase the wholesale price for grain—not because the “agriculture complex” forced him to, but more because urban citizens’ were complaining about meat consumption levels, while the USSR was so short on grain that it needed to import agricultural product to feed livestock. The pricing system under Gorbachev remained so irrational that it was cheaper for farmers to buy finished bread to feed their farm animals than it was to purchase their own grain.

Urban consumer subsidies were far larger and more devastating to the budget than just about anything else. Gorbachev and the regime, which still maintained its household registration system limiting internal migration, nurtured a massive urban consumer bias. It was Gorbachev’s revenue cuts combined with an unwillingness to impinge upon this broad group that exploded the budget deficit, not the complexes of entrenched interests pointed to in Struggle. In fact, Gorbachev massively expanded subsidies to them. Social expenditures stayed below 20 percent of Soviet GNP until 1980. But “then the economic growth came to an end and the fulfilment of the social contract obligations resulted in a rapid increase in the relative volume of social expenditures: their ratio to GNP increased from 20.7 percent in 1980 to 25.4 percent in 1985, 30.2 percent in 1990 and 33.9 percent in 1991.”95 Thus the biggest budgetary problem may have been that decades of rhetoric about a proletarian workers paradise actually had an impact.

The USSR was a welfare state of a peculiar sort. Most of the increase came via urban consumer price subsidies: “The greatest growth was in price subsidies. In absolute terms, they increased six-fold during 1976-1990, and their share in total [social] expenditures (including hidden budget outlays on subsidies) increased from 19 percent to 44 percent during the same period.” More broadly, “the ratio of consumer subsidies to GNP increased from 4 - 5 percent in 1976-1980 to 13 percent in 1990. This was the price paid for the social illusion of low and stable consumer prices.”96 No other portion of the budget increased anywhere near as fast.

Structure of Expenditures in the Soviet Budget

The USSR had become a welfare state of a peculiar sort, mostly via subsidization of benefitting relatively well-off urbanites, as Hough had correctly noted.97 Highly desired and promised staple foods like butter, milk, beef, and pork.98 If “powerful interest groups obstructed Gorbachev’s policies,” as Miller contends, it was not principally the bureaucratic complexes he points to in Struggle.99 Rather it was the broad interests of a heavily subsidized urban populous. He gets quite close to making this point in Struggle, but then backs off in favor of a return to the helpless narrative:

“Soviet leaders knew that government programs to subsidize food and other consumer prices constituted a multi-billion ruble annual spending program, eating up 10 percent of the USSR’s GDP. Food subsidies were by far the largest component of the Soviet welfare state, dwarfing spending on pensions or education, for ex- ample. Through subsidized prices, the government paid nearly one-third of the cost of every loaf of bread that was purchased, over half the cost of every gallon of milk, two thirds of the cost of butter, and a whopping 72 percent of every kilogram of beef. The main beneficiaries of this spending were not the poor, but the wealthy. Slashing consumer subsidies would have resolved the Soviet budget crisis. It would have reduced, Finance Minister Gostev noted, expenditure levels by 100 billion rubles per year by the end of the 1980s. But Gorbachev believed, probably correctly, that raising prices was politically impossible.”100

Instead Struggle goes on:

“Gorbachev was left with a terrible dilemma. The budget could not be balanced. Raising consumer prices would have been politically fatal, resulting in Gorbachev’s political marginalization, if not complete removal from power. That would have frozen efforts to liberalize industry and agriculture. At the same time, Gorbachev lacked the political influence to reduce spending on the parts of Soviet society most able to absorb cuts—the USSR’s massive military-­ industrial complex, its bloated industrial ministries, or its perennially inefficient agriculture sector. Reducing ­ these groups’ subsidies was so politically untenable that it was not seriously discussed.”101… “The immense power of economic interest groups in Soviet politics severely limited the number of policy choices that were realistically possible. Balancing the budget with tax increases, spending cuts, or price increases would have been politically devastating.”102

Entrenched interests did not tear a hole in the budget, it was a consequence of botched reforms.103 Philip Hanson, in his The Rise and Fall of the Soviet Economy, cites a contemporaneous CIA overview approvingly, when he concludes that “in short, it was Gorbachevian policies, for the most part, that created the problem.”104

Miller acknowledges at multiple points that what Gorbachev was doing was a gamble, but says he had no choice—he had to print money, he had to do what he did—he was “helpless.” But that is wrong. Gorbachev’s gambles were not necessary, they were “reckless.”

The Soviet budget then spiraled from crisis in the late 1980s into fully blown catastrophe in 1990 as new, democratically elected Republican-level parliaments came into existence and absolute chaos in the budgeting process was introduced. Most importantly, the new Russian legislature under Boris Yeltsin fought doggedly with the Union for control over the budget, over tax resources, and over control of enterprises. The budget for 1991 was barely even drawn up, but estimates of the deficit suggest it expanded from a massive 10% of GNP to a mind boggling 30% of GNP.

It is unfortunate that the “helpless” narrative advanced in Struggle, due its scope of focus, does not include discussion of the most spectacular change in the Soviet system under Gorbachev: the fact that there were genuine, democratic institutions in the USSR beginning in 1989/1990.

Let There Be Democracy! Avatar Mikhail Gorbachev: The Last Reformer Airbender

Gorbachev’s real revolution began in June 1988 when he convened a special Party Conference for the first time in nearly five decades.105 It was here Gorbachev began a rapid effort to intentionally undermine his existing base of institutional power, the Communist Party, and create a new institutional power base: a democratic “super parliament,” the Congress of People’s Deputies (CPD). The gathering of thousands of specially elected Party representatives served to legitimate the process Gorbachev was about to launch into. It was here that Gorbachev explicitly stated he was cutting “the umbilical cord tying [the party] to the command-administrative system” and earnestly began slashing the bureaucracy.106

The first CPD elections were held in March 1989, and its first meeting was May 1989. The national CPD elections were the closest thing to free, fair, and authentically democratic elections since the Constituent Assembly elections following the Bolshevik’s October coup in 1917.107 This development in the USSR cut a stark contrast with the martial law declared in China at the same moment. In fact, the Tiananmen massacre only deepened Gorbachev’s resolve to move faster and avoid the Chinese path of market Leninism.108

Yet much like the coercive Bolshevik dissolution of the Constituent Assembly in January 1918 spelled the beginning of the communist dictatorship, so the CPD’s convocation signalled the end of party control over the USSR. The electoral process stimulated all manner of nascent nationalisms. It brought together an emerging set of more educated, and more nationalistic, elite and showed them their common grievances. Unfortunately, as Stephen Kotkin noted of it: “Ultimately, the only unambiguous results of the elections, which were carried out against the astonishing deepening of glasnost, were to discredit the prevailing Soviet system of one-party rule and magnify the general disgust with all political authority.”109

In March 1990 Gorbachev got the new democratic super-legislature to amend the USSR’s constitution, formally removing Article 6 and thus renouncing the CPSU’s political monopoly and “leading role.” The party, it was decreed, was to stay out of the economy—a development that was seeded by Gorbachev’s massive bureaucratic downsizing and abolition of nearly all industrial departments, a restructuring mirrored at all levels of the Party bureaucracy.

Simultaneously, he got the CPD to create him a new position of peak power: the Presidency of the Soviet Union. And rather than campaign and face a popular election, the CPD internally elected him—a move some consider a critical error. Many in the democratic intelligentsia he was trying to court saw his new position as illegitimate.

The aim of all this, as Miller himself rightly noted, was to continue reforms without the party. Gorbachev was intentionally torching his communist party power base while trying to rapidly switch to a new base of executive authority rooted under the CPD. In practice, he seemed to evince a belief that the party could have little to no productive role in the reform process.110 As Stephen Cohen wrote in a retrospective:

“The election of a national parliament and the creation of Gorbachev’s executive presidency in 1989 and 1990 were turning points in Soviet history. They broke the Communist Party’s seven-decade monopoly on political life and thus fundamentally eroded the Leninist political system. Much that now ensued…was aftermath. The democratization process greatly outran Gorbachev’s economic reforms while generating popular protests against growing consumer shortages, rising inflation, and longstanding elite privileges. Even more destabilizing, the political change allowed nationalist discontent in several of the fifteen republics to develop into anti-Soviet movements for independence.”111

Gorbachev succeeded in undermining the institutional power of the party, as well as its remaining legitimacy, and its economic coordination function (i.e., picking up the pieces of a dysfunctional planning system).

The spiral into chaos already underway became truly catastrophic in March 1990, as the Union-level CPD was replicated at the Republican level and voting occurred in Russia. Boris Yeltsin resigned from the Union-level CPD to run in the Russian Republic CPD and won his seat in Moscow overwhelmingly (in what is widely considered a completely free and genuinely democratic election). In June 1990 the Russian CPD, in a highly contested internal election, then made him chairman over and above Gorbachev’s meek efforts to intercede. This spelled doom for the USSR.

On June 12, 1990 the Russian CPD under Yeltsin officially adopted the Declaration of State Sovereignty, declaring that its laws took precedence over Soviet laws, that it, not the USSR, was to take effective control over the many SOEs and industries within its territory, including the rights to enterprise profits / tax revenue.

The famous “war of laws” between the Russian Soviet Federative Socialist Republic (RSFSR) and the USSR quickly broke out—the real dagger in the heart of Gorbachev, the USSR, and the reform process. The Russian Republic, comprised 75 percent of the Soviet Union’s territory, 60 percent of its production, and 50 percent of its population. For the entirety of the Soviet period, the CPSU had denied Russia the right to establish its own communist party and central committee out of fear that an autonomous, empowered leadership group in the Russian Republic would have been uniquely equipped to undermine Soviet rule. This long-standing fear was rapidly validated.

Less than a year later in April 1991 the Russian CPD established a new post of Russian President, providing an even more autonomous center of power. In June 1991, in a free election based on direct popular vote, Yeltsin won resoundingly with 57 percent support (Ryzhkov, Gorbachev’s former premier, was next with 16.9 percent).

Russia was now sovereign, declaring its right to basically everything formerly controlled by the USSR, and had its own President in direct confrontation with the USSR and its President. The logic and control mechanisms of the existing system unraveled.

The conservative coup against Gorbachev in August 1991 was a last ditch measure that proved farcical. Yeltsin bolstered his populist democratic persona, furthering his image as media darling, by standing in front of the new Russian parliament in front of hostile military forces who never used any serious force. The fall out gave Yeltsin carte blanche to do as he wished.

Yeltsin immediately suspended all CPSU activities and then on November 6, 1991 issued a decree banning the Communist Party from Russian soil, dissolving its structures, prohibiting operations, and seizing its assets. Yeltsin finished what Gorbachev started. The Party was over.

Then he moved on to the USSR, which Gorbachev had intended to save with the new union treaty that would have been signed August 20^th—devolving substantial fiscal and other authorities to the Republics—had the coup not prevented it. Instead, Yeltsin, with the heads of the Ukrainian and Belorussian Republics, simply declared the Soviet Union dissolved. Gorbachev’s power fully lost, he resigned on December 25^th. The Gorbachev revolution was over.

This therefore was the mechanistic collapse of the Soviet Union—the proximate cause: Gorbachev’ intentional undermining and shifting of institutional power and the Russian secession it enabled under Yeltsin.

Gorbachev’s reforms began with the aim of resuscitating the Soviet economy. But instead they brought ruin, destroying the Soviet economy along with Soviet state capacity. This did not occur because Gorbachev was “helpless” and trapped by entrenched interests, but rather because he proved to be a well-intentioned reformer with great power that was used in a reckless manner.

Reforming From Weakness

Several events made Gorbachev’s political reform timing particularly disadvantageous: (1) an ongoing catastrophe of the Afghan War and extrication attempt (1981-1989); (2) the Chernobyl disaster and its fallout (1986); (3) commodity price tailwinds became headwinds 70s and early 80s turned into serious headwinds. As institutions crumbled, economic performance was going from bad to worse and multiple other crises were converging (a polycrisis, as they say).

Attempting a rapid transition from a closed, quasi-totalitarian, single party political system to a multi-party quasi-democratic system at a moment of acute challenge was a recipe for disaster. The historical record is littered with regimes who long delayed major reform only to seek salvation via radical reform in periods of weakness. Soviet reforms tragi-comically mirrored aspects of the collapse of the Ancien Regime in France and the Qing Dynasty in China. Both conceded radical institutional reforms, including creating a new “super parliament” representing a disgruntled elite stratum, in moments of economic and systemic crisis.

Newly empowered elites in the Soviet case may not have been able to cohere around or introduce a positive reform agenda for the economy, but they did seem to agree on a negative program: do away with the old system. It seems to be a truism that it is easier to cohere around and against a common evil than in favor of a common good. This is particularly true when there are so many justified grievances to go around–a failing economy, decades of political oppression, forceful subjugation of many far flung territories…the list goes on.

There was an element of the Tocquevillian paradox at work as well. Even as democratic concession after democratic concession was forthcoming, the mood was only growing more radical. The regime was less oppressive than ever yet each and every injustice that remained felt, with removal now conceivable, more and more unbearable.

Authoritarian regimes, according to Dan Slater and Joseph Wong’s From Development to Democracy, have the best chance of shifting to a stable democratic institutional set up when they do so voluntarily and from a position of strength, not weakness.112 Gorbachev’s radical effort to undermine the party and try to secure a more democratic basis of power was unlikely to work out well in a moment of acute and growing weakness.

Summing Up: The Suicidal Struggle to Save the Soviet Economy

“This radical revolution, which was to join together in one and the same destruction of both what was worst and what was best in the Ancien Regime, was unavoidable. A nation so poorly prepared to act independently could not attempt total reform without total destruction. An absolute monarch would have been a less dangerous innovator. For myself, I observe that this same revolution, while it destroyed so many institutions, ideas and habits opposed to liberty, on the other hand it abolished so many others that freedom could hardly do without. Then I am inclined to believe that, had it been achieved by a despot, it might perhaps have left us less incompetent to become one day a free nation than one effected in the name of the sovereignty of the people and by their own hand. We must never lose sight of the above if we wish to understand the history of our Revolution.”113

Structural political economy explanations, captivating as they are, seem incapable of taking us over the threshold of an explanation for what went wrong. Upon closer inspection one is forced back, as I was, kicking and screaming, to the Gorbachev factor.

The great man theory of history has gone out of fashion, yet there are moments where the acts of singular individuals determine the fate of nations. This is an inevitable risk in any large-scale, hierarchical human social arrangement. Captains can crash ships.

Gorbachev was a good man. In fact, some argue, and I agree, he was in many ways a heroic figure. As one sympathetic Russian who became involved in the Yeltsin administration put it: “Mikhail Gorbachev freed us — his contemporaries. . . . He liberated us. And he did this of his own volition. We didn’t even ask him. At the time only a miniscule number of people were fighting for freedom, while even fewer believed that this was actually possible. Gorbachev gave us all freedom. He is not to blame for what we did with this freedom.”114

Gorbachev’s good intentions are important but should not blind one to reality. As today with Xi Jinping, an analyst’s own unchecked moral or ideological dispositions can easily bias or undermine analysis. The same risk applies to historical analysis of Gorbachev and his reform efforts.

Certainly Gorbachev, was far from clueless about how power worked in the USSR. Yet he nonetheless came to adopt a conception about human agency and the importance of institutional state capacity that proved devastating. A strain of foolhardy idealism ignorant and/or dismissive of material and institutional incentives that appears quite strong in the lineage of Marxist-Leninist leaders.

Gorbachev was seeking Pareto improvements—reforms that would leave everyone better off—when there were no such improvements to be had. Lacking in understanding of economics, as he himself admits, he initially leaned on the old mechanisms of the administrative-command economy to achieve the “scientific technological revolution” and activate the “potentialities of socialism.” But Gorbachev quickly grew discouraged and soon reached for more ambitious reforms, the Law on State Enterprises and Law on Cooperatives, among others, that would devolve economic decision-making, empower and activate lower strata, while somehow also meshing into and sustaining a planned economy. Unfortunately, Gorbachev’s own confused priorities led him to reject critical changes—price reform—for far too long.115 Devolution of decision-making consequently took place in a wantonly irrational environment, and produced autonomous actors who simply made nonsensical and typically deleterious (though oft self-aggrandizing) choices.116

More importantly, Gorbachev pursued political reform at nearly the same time he began implementing more substantive economic changes. By 1989 economic reform took a backseat to political reform, and by mid-1990—little more than a year or two after the first substantive economic reform efforts took effect—evolutionary reform became effectively impossible as party-state capacity to mediate it was gone.117

In the economic domain, the situation prior to 1985 was inefficient but stable. A low-level equilibrium. “It cannot be emphasized too strongly,” Philip Hanson wrote, that economic chaos “was not the 'old Soviet system' failing but the old Soviet system being abandoned. It was the product of a collapse of the rules of the economic game and of economic warfare between the Soviet republics and the Union.”118

“The real mystery,” as Hough rightfully noted back in 1997, “is why Mikhail Gorbachev addressed the problems he inherited the way he did and created a revolutionary situation instead of defusing an incipient revolutionary one.”119 But Gorbachev told us why a decade earlier in his 1987 book Perestroika: the way to resolve a pre-crisis situation is via revolution!

As Ken Jowitt penetratingly assessed: Gorbachev was the last Leninist, a revolutionary who turned the revolutionary spirit against the neo-traditional, encrusted husk of a revolutionary party that the Bolsheviks had become. Unlike Lenin, though, Gorbachev was a fundamentally decent man—adamantly opposed to the use of terror, force, and violence. He wanted a genuinely democratic system. And for a brief moment, the Soviet system almost was. Unfortunately, but predictably, trying to do everything at once—political reform, ideological transformation, and economic restructuring—unleashed sorcerer’s apprentice dynamics.120

Local communities were not well prepared for radical change in the rules of the game. Highly segmented and integrated on non-market principles, localities descended into trade wars and all sorts of machinations. A path dependency of Stalinist industrialization, the USSR’s economic landscape was warped by gigantism and monopoly. “As a measure of how pervasive monopolies were, Gossnab, the state supply agency, reported that in 1991, out of 7,664 products manufactured in the machine-building, metallurgical, chemical, timber, and construction sectors, 77 percent, or 5,884, were monopolies.”121

Lacking any coherent top-down structure, newly emancipated local agents—Party prefects and state enterprise managers—engaged in what Steve Solnick in his book Stealing the State analogized to a massive bank run. As Hanson summarizes well, “many middle-level and senior officials, if they had effective control of useful assets, began to see their way clear to doing very nicely out of them: usually by some form of asset stripping. This was not a new activity for Soviet officials, but it rapidly became less risky, as Party control withered away.”122 George Soros would aptly write in 1989 that the Soviet Union had become “a centrally planned economy with the center knocked out.”123

In some ways Gorbachev’s undermining of the party, and Yeltin’s subsequent banning of it, is akin to the disastrous de-Ba’athification process the United States pursued in Iraq from 2003-2004. Rather than harness the partocrats, Gorbachev and Yeltsin set them loose, and they stole the state. Much as defenestrated Ba’athist members—including the entirety of the army, police, and intelligence services—engaged in all manner of deleterious actions, not least of which was forming armed insurgencies like ISIS.124

Well before “shock therapy” under Yeltsin and Gaidar, effective control over much of the economy was already lost, and governance and state capacity decimated.125 The derisive post-mortem focus in the West on shock therapy thus misses the mark. The really important thing, as Andrew Walder (2015) noted, was that state capacity was severely compromised.126

Unfortunately, good intentions only get you so far. China could make Pareto improving reforms at the outset; the USSR did not have that luxury. Instead, what the USSR needed was an inevitably costly, large-scale restructuring of its rust-belt industrial and agriculturally collectivized economy. Some powerful institution would have needed to oversee this process to allow the Soviet economic ruin to be deconstructed in a manner that would maintain some semblance of order and fairness in the process of transitioning to the market. But this did not happen, because Gorbachev thought mobilization of the “human factor” could somehow unlock Pareto improvements and rapid democratization in a period of crisis would enable wise shepherding of palliative reforms.

In the dark void of Party-state collapse and economic chaos and scarcity that followed, there was little hope that a stable liberal democracy would consolidate. One could have hardly created a more perfect petri dish to cultivate fascism, as Jerry Hough warned back in the 1990s.

The price of Gorbachev’s poorly conceived good intentions was Vladimir Putin.

Conclusion: Did It Have to Come to This?

A number of historians have indulged alternative, counter-factual histories. What if Bukharin’s vision of Soviet economic development had not been snuffed out by Stalin, Stephen Cohen wonders. What if Stalin had been killed amid any of the seemingly innumerable close calls he experienced earlier in his life, Stephen Kotkin ponders. What if Malenkov and his more consumer oriented program had overcome Khruschev’s productionist approach, Yakov Feygin asks. If only Andropov had lived longer, Zubok regrets. And finally, what if Gorbachev had been a more effective economic reformer—more like his premier, Nikolai Ryzhkov—or was at least willing to halt slide into chaos that he was fomenting, Jerry Hough implores one to consider.

In Red Sunset, Philip Roeder argues that institutional rigidity led to an “inability to change piecemeal” and thus made the system brittle and prone to collapse.127 Yet, the track record of reform seems rather different to me. Substantial changes were made under all Soviet leaders, they were not simply defeated by a recalcitrant bureaucracy. As Mark Beissinnger more convincingly argued back in 1988, the Soviet’s perpetually searched for bureaucratic fixes. Decentralization, restructuring, reshuffling, etc. all occurred routinely.128

What remained unchanged, however, was a belief in the fundamental viability of an administrative-command system. But a fundamental shift of the economic system from planning to market logic only emerged as a reform goal among the Soviet elite in the mid- to late-1980s. Even Gorbachev only came around to this view somewhere in mid-stream of his reforms.129

Red Sunset, much like Steven Solnick’s Stealing the State, does do a commendable job of showing how Gorbachev’s political reforms changed the rules of the political game, undermined the party-state’s institutional structure, and imploded the regime. Much like the “helpless” narrative, however, these books tend to smuggle in a Gorbachevian assumption that fundamental economic reform could only occur alongside fundamental political reform and, therefore, the USSR was doomed to collapse.

But as historian Stephen Cohen once said, “history written without defeated alternatives is neither a full account of the past nor a real explanation of what happened. It is only the story of the winners made to seem inevitable.”130 There are some plausible minimal re-rewrites of history that take us down a very different historical timeline.

One could imagine, for instance, the USSR losing East Germany and the Baltics and maintaining its functionality–in truth, one could even imagine the entirety of the empire aside from Russia seceding. But what is the USSR without Russia?

The really interesting question, and most pertinent to this essay, remains what would have happened had Gorbachev tried to manage a transition to the market under Party guidance. In other words, keeping the Party intact but dismantling the ministerial planning institutions—i.e., transitioning, at least initially, via market Leninism, rather than all at once to a market-based social democracy.

Hough, for example, suggested re-introducing Khruschev’s sovnarkhoz reforms, wherein regional party bodies would be empowered over and against the ministerial system to oversee the transition. Under Khruschev this change was aimed to perfect and improve the planning system, but under Gorbachev it could have aimed to oversee the transition to the market.

Zubok’s Collapse portrays almost every Gorbachevian economic reform as a disaster. But any transition from the dilapidated and dysfunctional administrative-command—from plan to market rational—was going to be chaotic. There is no avoiding that. Gorbachev erred in thinking there were Pareto improvements to be made, in thinking he could avoid pain. But some of Gorbachev’s reforms had positive elements.

One can imagine an alternative history where an Andropov type figure shepherded a less painful authoritarian restructuring toward Chinese-style market Leninism. Had the Party been kept intact and given a mission to oversee market reforms (and benefit on the side, as happened amply in China), perhaps a messy transition to the market could have occurred without a collapse in governance or systematic looting of state assets.

On the other hand, one could also imagine Gorbachev having even more decisively pursued democratization, seeking direct popular election and legitimacy, and outflanking Yeltsin.

Or, and this is perhaps most realistic—it was the presumed base case for many analysts—one could imagine the Soviet Union muddling along in its inefficient, low-level equilibrium for many more decades, neither fundamentally reforming nor collapsing. The Soviets were doing far better economically than North Korea is even today, yet the former is gone while the latter remains. Perhaps we underestimate how strange and unlikely the Soviet suicide was.

While we can imagine alternatives, everything happens only once, just as it did. Whether the outcome—the collapse of the USSR and the attendant dislocations that went along with it—was better than other plausible options is unknowable. One recalls the old apocryphal story of Zhou Enlai telling Kissinger that it is too early to know how the French Revolution turned out (Zhou was actually referencing more recent student protests in France). The CPSU and Soviet Union’s unwinding has thus far averted a nuclear Armageddon, and from the ashes of a failed empire many free nations have risen.131 How confident can one be that our timeline is not one of the better ones? Whatever the case may be, we should neither be blinded by idealistic counterfactuals nor suffer false convictions about historical inevitabilities.

APPENDIX 1

The Political-Economic Landscape

One needs at least a basic understanding of the USSR’s command-administrative economic system to really make sense of the bureaucratic politics at play. The best way I’ve seen to conceptualize the economy was presented by Peter Rutland (1992) in The Politics of Economic Stagnation in the Soviet Union. In brief, the Soviet’s “planned economy” was really three intertwining systems of logic: the planning process mediated mostly by the ministries; the Party apparatus that mediate conflicting priorities at local levels, and generally serve as “fix-it man” when the formal planning system went awry, as it always did132; and an underground “second economy” (estimated at ~10-15% of all activity) that operated on a quasi-market logic and augmented the formal system.133

A Schematic Representation of the Political Economy of the Soviet Union

The Soviet Union was comprised of three key structures: the Party, the legislature, and the executive apparatus. The highest ranking embodiments of each were the Communist Party of the Soviet Union’s (CPSU) Central Committee—most importantly the subset of Politburo leaders—the USSR Supreme Soviet’s Presidium, and the USSR Council of Ministers. In this schema, the Party’s Central Committee was responsible for systematic coordination, the USSR Supreme Soviet—bicameral with a Soviet of the Union and of the Nationalities—was the highest legislative body (its ~1500 representatives directly “elected”), and the USSR Council of Ministers oversaw all state bureaucratic ministries, and through the specialized functional ministries (e.g. the Machine Building Ministry) administered all the enterprises in the Soviet Union. The Soviet system was federal, a Union of, by the 1950s, fifteen Soviet Socialist republics, with approximately three-quarters of its territory, sixty percent of its industrial output,134 and half its population located in the Russian Republic (RSFSR).135

The Party, the Soviets, and the government executive apparatus replicated down the territorial hierarchy: each Republic had its own Communist Party and a Central Committee (except, very importantly, for Russia), each had its own Republican Supreme Soviet, and each had its own Council of Ministers (some important ministries, however, were directly overseen via the USSR Council and did not pass through the Republican Councils). Below that each hierarchy continued to replicate: the state/province level was called the oblast and there were ~130 of them throughout the USSR, mostly in Russia; the next level was city/prefecture called the gorod; followed by the urban district raion or rural kolkoz (state farm). The Party committee at the oblast level was called the obkom, at the city level gorkom, and district level raikom. At the lower levels, there was no Council of Ministers to coordinate the actions of the state bureaucracies, only an executive committee within the local Soviet. This executive committee was far weaker than the local Party gorkom or raikom, and the latter inevitably came to serve crucial local coordination functions.

Party and State Interconnection In Theory

The Soviet Union, similar to China today, was sometimes termed “USSR Inc.” While there is truth to that, the complexity of reality made a mockery of the Leninist image of a streamlined and strict hierarchical command structure.136 By 1987, just prior to Gorbachev’s most substantial reforms, the Soviet economic bureaucracy consisted of 400 sub-bureaucracies: 38 state committees, 28 union-republican ministries, and more than 300 regional ministries and authorities.137 The top Party-state political elite numbered less than one thousand, but the total bureaucratic administrative staff in both the Party and state (above the enterprise / production unit level), numbered roughly 2 million.138

At the bottom of the pyramid, each enterprise (or production unit) was run under the principle of one man rule, with the director as the key decision maker and point of contact. By 1987, there were 1.3 million production units (43,000 state enterprises, 26,000 construction enterprises, 47,000 farming units, 260,000 service establishments, and 1 million retail trade establishments).139 The status of an enterprise and of the director varied wildly depending on the importance of the enterprise. The director was first and foremost responsive to his ministerial superiors—that is, to the state over the party, or the sector over the region. But each enterprise also had a “primary party organization” (PPO) with a party secretary (responsible to the local Party committee) who typically played a notable, though secondary role (but that could change from enterprise to enterprise) in enterprise decision making, normally focused on internal party and ideology work. Depending on the size and importance of the enterprise, the PPO could have thousands of members (a large fraction of enterprise personnel), among whom full-time party positions might be in the dozens.140

Ministerial Administrative Apparatus

The conflict between Party and state, however, is most noteworthy. There was a dual horizontal territorial (party) vs. vertical ministerial (state) responsibility for enterprise performance. Both functional line bureaucracies (e.g. the city Machine Building department of the ministry) and the local Party organ (e.g., city gorkom) would be responsible, but from different perspectives, for the same enterprises—the ministerial department for its fulfilling top-down plan metrics and the party committee for both the top-down plan but also its regional/territorial performance (those familiar with Chinese bureaucractic parlance will know this as tiao/kaui 条/块.) The multitude of bureaucrats and bureaucracies at each territorial level had responsibilities that were unclear, overlapping, and in constant flux.

The struggle between Party and state bureaucracies for control was pervasive. Although the key players were nearly all party members, their occupational and bureaucratic positional differences subjected them to differing incentives. The multiple hierarchical lines of command led to ineluctable coordination problems as bureaucratic silos formed.141 Conflicts could often only be resolved by “kicking problems up” to the highest common superior. Normally, this was the “local Prefect,” the First Party Secretary in the region. If an enterprise director did not agree with a party organ’s intervention, he could try to kick it up the ministerial chain and eventually get an even higher ranked superior to weigh in.142 It was a complex dance, resulting in an organizational matrix structure where the party organ (the committee and its bureau) below the Republic level tended to oversee and coordinate the work of the state ministerial offices (owing, as noted above, to the relatively weak executive committee in the local Soviet, which was not typically empowered or equipped to play this role). '

Party Hierarchy (Mognitogorsk city example)

In practice things were even messier than the figures above suggest: any higher level Party organ could and would give commands to any party or administrative organ below. This created a web of intersecting lines, which the formal org charts above only scratch the surface of (e.g., an oblast/provincial party committee could directly speak with and command an enterprise unit at a raion level, as could the city committee just above the raion).

The role of the party within the Soviet system was intended to be focused on big picture coordination, personnel management, and attending to longer-term fulfillment of top-level economic and social planning. In practice the party became less like the organizational weapon it was originally conceived as and more like an organizational fix-it man. This emergent functionality was perhaps most important in the economic domain, where it played a key role in overcoming planning gaps, applying pressure up and down the chain to obtain necessary resources so enterprises could fulfill their tasks. Local party bureaucrats, as a result, were drowning in minutiae.

Top-Down Planning Overview In Theory

Top-Down Planning, Complicated

References

38

A small sampling: Barry Naughton, “China's Economy: Complacency, Crisis & the Challenge of Reform,” 2014, https://www.jstor.org/stable/43297313?seq=1; Keyu Jin, China’s Reform Stalemate, January 26, 2015, https://www.project-syndicate.org/commentary/china-reform-vested-interests-by-keyu-jin-2015-01; Zhuoran Li, “China’s Gradual Reform Dilemma, The Diplomat, October 2022, https://thediplomat.com/2022/10/chinas-gradual-reform-dilemma/.

A search of CNKI for research on entrenched interests (既得利益 / 利益集团 / 固化利益) indicates coverage of it within China has fallen off notably after peaking between 2011-2015:

Articles published in CNKI referencing 既得利益 (2005-2024)

In this essay, the first of a two part series, we will tell the story of China’s LGFVs: that special type of state-owned enterprise (SOE) behind China’s infrastructure building bonanza. Along the way, we will look at the political and economic processes in China that facilitated their rise, and assess what we know and what we don’t know about them. It is a very long and comprehensive post, and no offense will be taken should the reader choose to treat it as a source for reference material. Efforts were made, however, to make it an enjoyable read. A follow on part two will look to the future of LGFVs and China’s political and economic system.

Data Before Narratives: The Lay of the LGFV Land

Let us begin with data. Today, there are nearly 12,000 LGFVs in China, 3,000 of which publicly disclose financials.1 Collectively, they are gargantuan. As of 2020, according to bottom-up surveys of LGFV financials, aggregated assets and liabilities equal 120% and 75% of China’s GDP, respectively.

LGFV Assets and Liabilities

LGFV’s financial situation is, to put it frankly, very bad. In aggregate, earnings (before interest, taxes, and depreciation, i.e., EBITDA) do not cover even their interest payments. Including government subsidies only occasionally pushes the interest coverage ratio above one. Moreover, the average borrowing cost for LGFVs, 5% or so, far outpaces their 1% return on assets, posing obvious sustainability problems.2

Interest Coverage (LHS) and Borrowing Rates (RHS)

Cash flows paint an equally troubling portrait. Every year 80 to 90 percent of LGFV spending is funded by new debt. On the whole, LGFVs operating inflows do not come close to covering operating expenses. New debt is routinely added simply to make up the gap and sustain current operations.3

LGFVs Cash Flows

As is predictable from the above financials, the stock of interest-bearing LGFV debt has just about unceasingly expanded.4 According to statistics from the IMF, LGFV’s interest-bearing debt has grown from 13% of GDP, or RMB 8.7 trillion, in 2014 to 48% of GDP, or RMB 60.4 trillion, in 2023.5

China’s Interest-Bearing LGFV Debt

LGFV interest-bearing debt is even larger than the IMF data above suggests. An unavoidable limitation of assessing LGFVs via bottom up data, as all of the above sources do, is that it only captures the 2-3,000 LGFVs that have issued bonds and published associated financials. Another 9-10,000 smaller LGFVs have never accessed the bond market and are therefore simply missing from the data.6 A simple way of trying to estimate the rest of the interest-bearing LGFV debt is to assume LGFVs follow a Pareto distribution.7 Doing so suggests IMF estimates probably understate debt by 25%. A more reasonable, if still likely conservative, estimate of interest bearing LGFV debt is probably 60% of GDP, or RMB 75 trillion, in 2023.8

Things Data Can’t Say

While the data tells a story of its own, there is also much it cannot tell us about LGFVs.9 Staring at data and getting proscriptive according to normative neo-classical doctrine risks turning us into IYIs.10 Understanding how we got here and the likely path forward requires other inputs.

What happens if we bring in the complexities of political economy? The incentives of organizational and social systems? The complexities of the past may shed light on the road ahead.

A Single LGFV Can Start a Prairie Fire

The protagonist of our story was born in a little known city in central Anhui province called Wuhu. The city, situated on the bank of the Yangtze, is just three hours south from another little known place with an important legacy: Anhui’s Xiaogang county, the place credited with pioneering China’s household responsibility system in 1978. Twenty years later, Wuhu would join its Anhui brethren in pioneering another defining feature of “socialism with Chinese characteristics”: the LGFV.11

If the household responsibility system unleashed market forces into China’s economy, then the LGFV brought the state surging back in—something Party-state leaders would likely have been keen on following destabilizing bouts of inflation in the late 80s and early 90s.12 But the direct desires of leadership were not the proximate cause for this novel feature of socialism with Chinese characteristics.

The LGFV, as we will see below, rather arose as an indirect result of three conjoined and systemic issues: fiscal centralization and decentralized local developmentalism, the Party-state’s organizational and incentive system, and the weakly institutionalized nature of China’s political system.

A spark only starts a fire in a flammable environment.

The Confederated States of China

In 1781, the United States was governed under the Articles of Confederation. That system had a glaring flaw: an utter lack of centralized fiscal revenue, which neutered central governance capacity. Within eight years a constitutional convention was called to forge a new system, which I would argue turned out better.

When China began allowing markets after Mao, the economic structure shifted beneath Beijing’s feet. SOEs crumbled, the tax base eroded, and tax evasion increased. Total government revenue and the center’s revenue share massively declined.13 Though one imagines the Soviet Union’s recent dissolution was top of mind, one could have also seen parallels between Beijing’s situation in the early 1990s and America under the Articles of Confederation.

The Partial Red-Herring of Beijing’s Fiscal Re-Centralization

In the early 1990s Beijing sought to re-affirm central authority. One of the more reliable ways to do so is to take control of the purse. Of this view were General Secretary Jiang Zemin and his Premier Zhu Rongji, who pushed forward a major fiscal and tax restructuring in 1994. Two big changes were wrought. First, Beijing decisively centralized revenues while keeping expenditures decentralized. Second, Beijing barred local governments from running deficits, and from borrowing.14 China, the most fiscally decentralized country in the world in terms of local expenditure share, overnight developed a stark vertical fiscal imbalance, with unfunded mandates at the local level.15 Nearly an inversion of the original problem. But Beijing was happy and that’s what mattered (to Beijing).

Ultimately, Beijing wanted revenues routed through its own coffers for purposes of control, most importantly over subordinate levels of government, and redistribution. That becomes evident once you realize the central government simply transfers back just about all the money. Indeed, once transfers are accounted for the oft-cited central-local fiscal gap disappears.16 Unfunded mandates did materialize following the 1994 budget reform, but in a more nuanced way.

The problem was (and still is) in the nature of the intergovernmental transfer system. Beijing bureaucrats apportion funds to the provinces, who are in charge of apportioning funds to prefectural cities, who are in charge of apportioning among county level units, who are in charge of apportioning among townships.17 But sometimes the provinces send funds directly to the counties, by passing the cities. Each level also needs their own funds. And each level can take months before passing on the funds it received. By the time funds get from top to bottom, a year or more can pass.18

An Example of Intergovernmental Transfers

It’s fairly easy to understand how funds may also leak, be misappropriated, or miss their mark. The severity of funding problems ends up being highly geographically variable. The resource gap for many local governments is real, if overstated at the macro-level if transfers are not considered.

When we talk about China’s fiscal revenue, what is likely more important to understanding the evolution of China’s political and economic trajectory is the production bias baked into the system: 60% of taxes are on goods and services, just 6.5% on income.19

Share of major taxes in total tax revenue

Local government’s fiscal structure highly incentivized them to figure out how to boost production. So they turned to the task with their highly decentralized expenditure capacity and, more importantly, decentralized powers of off-budget liability-creation.20

The Decentralized Developmental State Gets a New Tool

The expenditure portion of the government income statement is more important than revenue in understanding the rise of LGFVs.21 This owes to the pervasive and multi-faceted role of local governments in economic activity, mobilizing for development.22

Local officials in China have long competed intensively within a hierarchical system that is both decentralized and weakly institutionalized. A combination of top-down and bottom-up incentives attracting them to or diverting them from enacting the center’s ambitions. This developmental modality post-Mao evolved into what is colloquially called the “mayor economy.”23 It is in large part an institutional outgrowth from China’s decentralized Maoist-Leninist system, and arguably traces even further back to imperial-institutional legacies.24 Along with previously noted fiscal incentives, a particularly noteworthy top-down feature has been the Party’s Organization Department and its control and influence over local cadres promotion.25 Mao’s death enabled the re-direction of the Party-state’s high-powered incentive systems to a new goal of production-oriented tournament style competition.26 Arriving at a period of burgeoning hyper-globalization, localities soon began to fight tooth and nail to lure FDI.27 A period of post-Mao capital deepening, urbanization, and transition beyond agriculture occurred at unprecedented speed and scale.

Local officials hunted within this incentive ecosystem for ways to increase their economic role.28 One seemingly win-win way for local governments to deepen their involvement was infrastructure—a role that arguably became their most important.29 To fully step into this infrastructure supplying role, however, local governments needed a new financing tool. Given the enormity of the task, no typical fiscal revenue stream would suffice. That’s where a little ingenuity from financial big whigs at China Development Bank (CBD) came in to play. Chen Yuan, son of famed Chen Yun and then head of CBD, helped local officials in Anhui and Wuhu concoct a simple but brilliant way to expand their economic footprint: create a corporate entity owned by, though at arms length from, local governments that could borrow unconstrained by the 1994 budget and regulatory regime. The entity’s raison d'etre was simple: (1) raise money and (2) build infrastructure. This was the “Wuhu model,” and in 1998 it birthed China’s very first LGFV: Wuhu Construction Investment Company.30

Over the next twenty years the Wuhu spark would engulf the country.

Land, Meet Finance

Leveraging land was Wuhu Constuction Investment Company’s distinguishing characteristic. Indeed, it was land finance that made the rise of LGFVs possible.

Local governments began selling land-usage rights in the 1990s, around the same time as Wuhu’s LGFV popped into existence. Once the land auction system was approved centrally and rolled out in the early 2000s, local government sales of land-use rights exploded.31

Proportion of state-owned land transfer revenue relative to local public budget revenue

For good and for ill local governments, uniquely empowered to requisition and sell land-use rights, used all means at their disposal to get land and ready it for sale, including mass evictions of those currently occupying it.32 The sordid history of local government land theft from China’s rural populace (re-zoning the land and selling it property developers) manifested in many cases as a Georgist’s worst nightmare, with self-immolation a not infrequent form of protest in the countryside.33 CPC led land reform in the early 1950s gave peasants their land, communization in the late 50s took it back. Marketization in the 1980s let the peasants work their land again, local governments began stealing much of it away in the 1990s. Such are the ebbs and flows in China’s countryside.34

By the late 90s, the local government revenue split began to take its contemporary shape, roughly equally divided into three parts: (1) central government transfers, (2) locally generated revenue, and (3) land sales.35

Land sales and locally generated revenue are highly intertwined. In the late 1990s, local governments began selling industrially-zoned land cheaply to attract companies that they could tax harvest. Selling land low seems counterintuitive until you realize locally derived revenue mostly comes from value-added and corporate income tax. Thus local governments became ever more perfect price discriminating monopolists: they sold residentially zoned land (居住用地) high to maximize one off revenue, but sold industrially zoned land (工业用地) low to maximize recurring revenue.

LGFVs took on two very important roles in the burgeoning land finance system. First, the pivotal role of preparing land for sale. Such preparation not only involves evicting rural residents and coordinating with the local governments on compensation (or lack thereof), but also requires multiple land development steps, known as the “seven connections and one level” (七通一平). LGFVs were used to build (1) road connections, (2) water supply connections, (3) electricity connections, (4) drainage connections, (5) heating connections, (6) telecommunications connections , and (7) gas connections. They also leveled the land in preparation for development. The extensive requirements of land development meant that often local governments were losing money on the land use sale (a problem that has only gotten worse in more recent years).36

Second, to finance these land-prepping activities, LGFVs ramped up use of the Wuhu land finance model. Local governments transferred more and more land use rights to these proliferating vehicles, who would in turn go to banks for loans using the land rights as collateral. And thus the land-industrial-complex began. Re-zone land. Transfer land. Develop land. Sell land. Buy land. Collateralize land.37

One need not be a Georgist to understand the unmatched power of land. Tax revenue would never have been capable of resourcing LGFVs the way land-finance did.

LGFVs, Property Developers, and Beijing’s Banking Balloon

No story on the rise of LGFVs could be told without a discussion of property developers and China’s banking system. If LGFVs are Batman, then property developers are Robin, and the banks are Wayne Enterprises (mileage may vary with this analogy).

The Wuhu model LGFV could take land from local governments and develop it for sale, but who would buy? Well, property developers. By the early 2000s, thousands of property developers had been established, eager to participate in China’s epic-scale urbanization process. Both sides of the would-be transaction, however, needed credit—particularly prior to the heyday of pre-sales in the 2010s. The LGFV-Property Developer crime fighting duo therefore needed their Wayne Enterprises.

Banks are the cornerstone of China’s financial system and were really the only game in town capable of facilitating a burgeoning land finance system. Most know about the big banks, but the stories slightly more complicated. To get localities on board with the 1994 fiscal overhaul, Zhu Rongji made a “grand bargain” with localities: in exchange for acquiescing to fiscal centralization, localities would get the right to establish their own locally controlled banks.38 As Adam Liu, whose research focuses on this topic, puts it: what is “rarely discussed is the most vital component of Beijing’s compensation package [for the 1994 budget reform]: local governments were offered the privilege of entering the banking sector.”39 When Beijing closed the front door with its budgetary restriction on lending in 1994, it opened a window.40

One can see the results: city commercial banks and other types of locally controlled banks proliferated. In 1995 the first city commercial bank was set up, and two decades later over 130 were in existence. The loan share of the big six banks collapsed from nearly 100% in the 1980s to roughly 25% today as a result of rising competition from locally controlled banks, e.g., city commercial banks, for deposits (as well as the 12 joint stock banks). The proliferation of state-owned local banks is an overlooked but consequential feature of China’s political economy, and core to the LGFV story.41

In the early 2000s banks were the primary funding source for the land finance system, on both the supply and demand side. Approximately 50-60% of real estate developers’ funding, for example, come from bank loans by 2004.42 That money, in turn, paid for land-use rights that funded local governments and, in part, their LGFVs. Meanwhile, LGFVs used their land-use holdings as collateral for loans (though in China’s weakly institutionalized system sometimes banks would lend without collateral).43 Bank loans made up about 90% of LGFV liabilities in that same period.44 China Development Bank and the big six state owned banks were core lenders, but locally controlled banks were players too, and their role would only grow more prominent.

LGFVs, property developers, and the banking system co-evolved.

Pouring Gasoline On a Fire: The 2008-10 Stimulus

Structural fiscal and developmental incentives likely would have continued to steadily drive LGFVs into ever greater positions of prominence within China’s economy.45 But it was the Great Financial Crisis of 2008 and China’s response to it that sent LGFV growth into steroidal overdrive.

No longer simply acquiescing to their use, Beijing began directing local governments to deploy LGFVs for countercyclical infrastructural stimulus and tasked the banking system with funding them.46 The People’s Bank of China explicitly called on local governments to use LGFVs to borrow, the banking regulator (CBRC) explicitly encouraged LGFV use, as did the Ministry of Finance.47 Buyer of narratives therefore beware, lest you fall victim to the woe is me central government fairy tale. This puts a bit of a lie to the notion that Beijing is effectively a responsible parent figure always trying to constrain misbehaving local officials.

When the center boldly announced its RMB 4 trillion stimulus plan to ward off recession, it did not intend to fund the stimulus directly but instead turned to local governments, now replete with bank licenses and financing vehicle. To this day we don’t know exactly how much China actually spent on its stimulus, though its clear the vast majority came off-budget via LGFVs. Only a trillion yuan shows up on the central government balance sheet.48 Beijing’s calculation of “official debt” accrual to LGFVs in 2009 and 2010 was RMB 3.6 trillion. But this number leaves out a substantial and non-transparent amount of LGFV debt.49 Some estimate LGFVs took on roughly a third of all new bank loans issued in 2009, and continued on in 2010 to account for 40 percent.50

As one example of what funds were used for, LGFVs mobilized to double-down on the build out of industrial parks and development zones. Parks and zones are used by local governments to attract companies, and thus revenue, jobs, and pad cadre evaluation, while from the central government perspective they are suppose to catalyze industrial clustering effects. From 2006 to 2018, officially recognized national and provincial level zones alone increased by 1,180, from 1,363 to 2,543.51 These numbers, large though they are, understate the extent of the build-out: they only include officially recognized zones above the city-level and do not reflect ongoing consolidation, merging, and cancellation of zones.52

One analysis of the post-2008 expansion stated that it “demonstrates that local governments are responsive to central commands.”53 Such a statement must be severely qualified. Local governments could not have been more eager to oblige Beijing in this instance, they tend only to respond with alacrity when doing so also corresponds with their interests. The host of epithets—from foot dragging, to bureaucratism, to formalism—is testament to the legion examples of local government non-compliance. But unleashing the LGFVs was also a boon for local cadres, their promotion metrics, and arguably for local development overall. It also made a fair amount of sense: local governments are closest to the ground and best understand what projects might work. And so China’s counter cyclical stimulus ran through local governments and their LGFVs.

Predictably, Beijing quickly lost what little control it had of the LGFV expansion process. Not only was the credit expansion much greater than Beijing intended, but LGFVs institutional role expanded and embedded deeper into the sinews of China’s economy. The analogy of LGFVs as Sorcerer’s apprentice is imperfect but apt.

Bend it Like Huarong

As they expanded, LGFVs moved out well beyond their initial infrastructural and land development remit. One analogy is that LGFVs have become akin to twelve thousand little Huarongs. Huarong, the country’s largest asset management company, was established just a year after the first LGFV in 1999. Colloquially referred to as a “bad bank” because it was set up to take non-performing loans off the Industrial and Commercial Bank of China’s balance sheet.54 Initially an asset recovery firm, Huarong metastasized into a massive conglomerate with dozens of subsidiaries involved as many different industries. The crazed expansion got so crazed under former Chairman Lai Xiaomin that the CPC decided to execute him.55 LGFVs have similarly spread out well beyond their original mission under increasingly complex corporate structures.

One categorization schema for LGFVs, offered by analyst Glenn Luk, divides LGFVs as follows: (1) The Infrastructure LGFV, (2) The Real Estate Asset Management LGFV, (3) The Structured Asset-Backed Warehousing LGFV, (4) The Financial Intermediary and Investment Holding LGFV, and (5) The Conglomerate “All-of-the-Above” LGFV. If the names don't immediately make senes to you, I invite you to read his post (see footnote).56 Suffice to say that after the 2008 explosion, NAO’s first audit in 2011 discovered that only half of LGFVs were strictly focused on government infrastructure projects, with 18% partly focused on them and a full third entirely focused on market-oriented projects.57 The issue has only exacerbated since.58

A recent Bank for International Settlement paper on the post-stimulus transformation of LGFVs shows just how far they have meandered beyond infrastructure. Between 2004 and 2018, only 20% of the investments made by the 4,432 they analyzed were into public goods sectors. They focus on Guizhou’s Dushan County as a concrete example. This LGFV operates across as many public goods sectors (e.g., electricity, heat production & supply, health, social security) as it does market sectors (e.g., software and IT services, retail, wholesale and real estate). The authors argue there is a U-shaped return to this sort of diversification, with some amount potentially helpful to growth but too much being harmful.59 Others, however, are much less sanguine, and see this expansion as potentially at the core of capital misallocation in China and the country’s overall productivity slowdown.60

LGFVs fed off a mix of moral hazard, unfettered access to credit, and indeterminant state responsibility for liabilities—that is, substantial state involvement under conditions of weak institutionalization. On their expansionary march LGFVs, from a more macro perspective, have cultivated an impressive web of investment linkages:

Red LGFV Over China: The Case of Zunyi Road and Bridge

Zunyi, a small city located in China’s southwestern province of Guizhou, does not often make the news. The city’s claim to fame dates back to the Long March in 1935, when it played host to a meeting that, according to Chinese Communist Party (CPC) lore, decisively established Mao Zedong’s leadership over the Party. Other than that, Zunyi is relatively unremarkable, a city of middling population and economic development, firmly in the 3rd tier of China’s unofficial city ranking system. One recent development, however, has once again brought attention to the city: the increasingly urgent Party-state effort to deal with LGFV debt. Zunyi Road and Bridge Construction (遵义道桥建设) is the star of the show. A snapshot of Zunyi’s corporate structure offers hints at some of the poblems.61

Zunyi Road and Bridge, like most LGFVs, is fully-owned by the local, in this case city-level, State Asset Supervision and Administrative Commission (SASAC).62 Established in 1993 and with registered capital of RMB3.6 billion, it is the second largest of of Zunyi SASAC’s 40+ holdings, many of which also appear to be LGFVs. Zunyi Road and Bridge is itself a holding company with at least 10 companies under its umbrella. Many of these firms are also LGFVs. Its largest holdings include: Zunyi Daoqiao Agricultural Expo Park Co., Ltd., Zunyi Daoqiao Hotel Management Co., Ltd., Zunyi New District Construction Investment Group Co., Ltd., and Zheng'an County Urban and Rural Construction Investment Co., Ltd.

Zunyi Road and Bridge Holdings

Road and Bridge’s subsidiaries also have subsidiaries. Take for example, its largest subsidiary: Zunyi City Baozhou District Urban Construction and Investment (遵义市播州区城市建设投资经营), with registered capital of RMB 1.6 billion. Baozhou Urban Construction itself fully-owns a diverse array of 10+ businesses, ranging from a funeral service company, to a financial leasing company seemingly focused on industrial equipment, to a water services management company, as well as a 49% stake in a property management company and a 5% stake in another diversified LGFV holding company.

Holdings of Road and Bridge Largest Subdiariy, Baozhou Urban Construction

The financing practices to go along with such a web of holdings have been similarly convoluted. One company may acquire loans or go to the bond market only to on-lend to its affiliated entities. There are hundreds, perhaps thousands, of LGFVs like Zunyi Road and Bridge and like the one in Dashan County mentioned earlier. These conglomerate LGFVs undertake what economist David Daokui Li describes as a “nested layering approach” to levergae. Companies at one level borrow funds, use that borrowed capital to secure additional loans at the next subsidiary level, and amplify debt layer by layer.63 All the while moving into more and more lines of business.

Evolving Liabilities: Bonds and Shadow Finance

Beginning almost immediately after their massive GFC-era expansion, Beijing turned from hot to cold on LGFVs. The center unleashed the National Audit Office (NAO) twice upon localities to try and scrape together the extent of the LGFV bonanza, first in 2011 and then again in 2013.64 The then bank regulator, CBRC (which then became the CBIRC and, as of 2023, the NFRA) also began keeping a comprehensive list of all LGFVs around that time, dividing them into “good” and “bad” and ostensibly demanding banks refrain from many types of lending to those on the naughty list.65

Constraints on bank lending, combined with the need to rollover short-term (~4 year) loans post-08, created huge incentives for LGFVs, local officials, and many other actors to devise alternative financing methods for these increasingly systemically important vehicles.66 A cat and mouse game had begun between Beijing regulators and localities.

LGFVs and China’s financial system proceeded to co-evolve.67 As LGFVs moved beyond plain vanilla bank loans, they played a huge part in spurring two other major financing channels: municipal corporate bonds and shadow banking.

Municipal Corporate Bonds

Municipal corporate bonds (MCBs) are bonds specifically issued by LGFVs (they are sometimes called chengtou). One informed analysis of them wryly describes them as the quintessence of socialism with Chinese characteristics: “MCBs are a perfect example of how planning and the market mix in the contemporary Chinese economy: They are implicitly backed by local government (hence “municipal”), but legally speaking they are issued by LGFV entities just like other regular corporations (hence “corporate”).”68

In 2006 only 17 LGFVs had issued a bond. By 2010 it was 1200. By 2013, 1700.69

The rapid growth owes to the central government’s stimulus-era decision to allow and encourage LGFVs to begin issuing bonds (enterprise bonds, a subset of corporate bonds, which at the time were regulated by NDRC, but as of 2023 are now regulated by CSRC).70 Data compiled by Fitch cuts a striking image:

The municipal corporate bond market really exploded in size, though, as 1-to-2 year short-term bank loans to LGFVs needed to be rolled over and re-financed.71 While the stimulus was the spark, the real acceleration came when it was time to rollover short-term debt.72 One study combed through bond prospectus of MCB issuers and disaggregated issuance according to stated purpose (prospectuses require issuers to state the purpose for the funds). The data clearly indicate a rapid rise beginning in 2013, precisely when the average short-term bank loan would have been coming due.73

Municipal corporate bond (MCB) Issuance by Purpose (2004-2016)

Rather than close, most “bond buyers preferred LGFV bonds because they offered higher yields than corporate debt, but were considered government guaranteed, even though they funded projects that typically had no capacity to repay the debt.”74

Most significant to the story, though, is who bought the bonds and how.

Shadow Finance: The Banks Shadow

Shadow banking is financial activity outside regulated channels. But in China, shadow banking takes on a double entendre of literally being the shadow side of banks. China’s shadow banking mirrors the rest of the financial system in being massively bank dominated. LGFV municipal corporate bond issuance was, as it turns out, mostly bought up by banks via shadow banking products.

Wealth Management Products (WMPs), or special funds set up to skirt regulations on deposit rates, are the most important shadow banking product. WMPs invested heavily in municipal corporate bonds. Chen and He et al calculate that 62% of all MCB proceeds came from WMPs. And it was banks that created those WMPs, of course with money that ultimately belongs to household depositors/lenders.75 Shadow banking and WMPs, much like MCBs, may not have precisely arose via LGFV stimulus, but massive pressure to rollover debt and refinance short-term stimulus loans created an extreme accelerant.76

Systemic incentives aligned to shift a substantial share of banking into the shade. Banks already engaged in regulatory arbitrage to get around the deposit rate ceiling and intermediate funds they otherwise wouldn’t have been able to.77 LGFVs got funds they wouldn’t have otherwise had access to. And households got higher returns via WMPs, which they viewed as fail-safe investments (owing to rampant moral hazard).78 Competition among banks to issue WMPs and compete for deposits, specifically between the big four and small and medium sized banks (SMBs), also intensified, going from luring deposits via offers of cooking oil, gold bars and cash to issuing higher-interest WMPs.79 As the figure below shows, WMP issuance as a share of all bank assets takes off in 2011, precisely when LGFV rollover needs are emerging.

Entrusted loans, meanwhile, were the second most prominent category of shadow banking, making up roughly 20 percent of shadow lending relative to WMPs 52 percent.80 Entrusted loans are loans between two non-bank entities that are facilitated by banks, a service for which the bank takes a fee but no exposure. The main characterstics of entrusted loans is firms with privileged access to China’s banking system, such as SOEs and larger LGFVs, channeling capital to those with less access.81 Most such transactions occur between affiliated parties, as between parent and subsidiary, such as in the case of Zunyi. This type of lending increases when credit conditions tighten, precisely as happened when Beijing tried to limit the credit deluge following its GFC-stimulus.82 Entrusted loans, a marginal part of total social financing relative to bank loans, clearly take off with LGFV refinancing.

Post-Stimulus Rise of Entrusted Loans (2002-2020)

Beyond WMPs and entrusted loans, trust companies also came onto the scene. Trust companies are “conduits that connect financial and non-financial institutions with asset classes that their licenses would otherwise prohibit.”83 Many trusts served as yet another mechanism to intermediate bank financing, in large part to LGFVs. The quintessentially convoluted process goes something like this: a bank makes a loan then sells it to a trust, the trust packages multiple such loans into a “trust plan,” then another bank’s WMP invests in that trust plan—investment banks would later serve as an additional layer, intermediating the second bank’s WMP investment into the trust plan.84 Such is the financial cat and mouse game.

Thus, all told, MCBs and shadow banking explode together around 2012 when LGFVs needed post-stimulus refinancing. The stimulus-through-LGFVs and follow-on regulatory tightening had the incidental effect of hastening development of China’s bond and shadow banking markets. LGFVs and the financial system co-evolved.85

Growth of shadow banking in China (2010-2020)

The evolution of LGFV liabilities reflects the tale. Based on a bottom-up estimates, Zhang and Xiong estimate loans fell from 79% of LGFV liabilities to 60% by 2015. That ratio has remained roughly stable up to today. In 2023, for example, global asset manager PIMCO estimated that the composition of LGFV debt was 60% bank loans, 30% bonds, and 10% other financing sources.86 Clearly bank loans still dominate, but given the extent of resources in play, the compositional shift was pivotal.

Evolving LGFVs Liability Composition

Beijing’s effort to conjure then control LGFV borrowing contributed to a sort of diversification of the financial system, including the massive expansion of the bond market. Many called for just this sort of change to Beijing’s bank dominated financial system. It’s a bit like a simulacrum of diversification, though, as banks remained the ultimate buyers, just with additional steps. But, at least when it comes to bonds, much debt was refinanced in substantially more sustainable manner. What’s more most of the ultimate lenders, via WMPs, were rich coastal Chinese folks. A potential avenue for common prosperity, and partial resolution to LGFV debt, could be defaulting on those bonds. That, however, could also risk seismic upheaval in a system laden with moral hazard and wherein not a single LGFV bond has yet to default.

The question of how to resolve the seemingly unstoppable freight train of LGFV borrowing lingered on.

Fiscal Reform Round 2: “Solving” The LGFV Debt Problem

As with property developers, the central government has been aware of problems with LGFVs for a long time and has been moving to resolve what they call LGFV’s “hidden debt.” As mentioned, regulations were first put in place in 2010 to impede bank lending to LGFVs. But the most important effort to try and resolve LGFVs debt and financing problems came with the country’s second big change to its budget framework in 2014, precisely two decades on from the last one. This time, a core purpose of the change was to deal with off balance sheet LGFV debt.

Most pertinent to resolving the LGFV situation, local governments were given a mandate and resources to swap off-balance sheet “hidden” LGFV debt with on-balance sheet bonds. Local governments were now given a clearer path to issuing debt themselves via bonds, and being actively encouraged to do so. The goal was to recognize contingent debt, refinance it with longer duration, lower interest rate bonds, and eliminate LGFVs within three years. Beijing’s “new budget law prohibits local government and their branches from borrowing in any other form, and unless otherwise specified by law, from offering any credit guarantee to any organization or individual.” Then the State Council issued Document Number 43 in September 2014 which aimed “to make these rules explicit” by stating LGFVs did not have “the authorization to borrow on behalf of the local government. If the only business of an [LGFV] is to borrow on behalf of the government, it should be shut down.” The goal, according to economists Chong-En Bai, Chang-Tai Hsieh, and Zheng Michael Song, “was to entirely eliminate [LGFVs] by replacing the debt of the [LGFVs] with local government bonds within three years.”87 If this was indeed the goal, then the reforms clearly failed.

China’s Interest-Bearing LGFV Debt

The failure has several causes. From the start, there remained debt classification issues with regard to what Beijing and local governments considered contingent liabilities. As a result, and the first big cause of the failure, is that a sizable amount of LGFV debt—equivalent to at least 13.4% of GDP, which the IMF’s 2018 Article IV derived from NAO estimates—was likely never transferred.88 Officially recognized local debt did shoot up as part of major bond swap program, and LGFV debt in turn fell from an estimated 32.1% of GDP in 2013 to 13.4% in 2014. But then LGFV debt as percent of GDP shot back to its original levels within three years.

Second, the new bond financing mechanism remained basically the same as the old one. The only difference was that Beijing actively used it. As before, all bond issuance has to be approved by the central government, via the State Council (and approved by National People’s Congress). In turn, provinces are in charge of issuing the debt and distributing the proceeds to all lower level governments. While controlling potential wanton lower-level behavior, it also creates an immense coordination problem lower levels and upper levels. Not only might upper levels not know what lower levels really need, lower levels may have incentive not to fully disclose how much they need. Low-level local governments would thus clearly find it easier to continue relying on channels they control (their banks) rather than official channels like special purpose bonds that are highly onerous, take a long time to get funds, and subject local officials to greater scrutiny.

Third and most important: nothing was changed with regard to local developmental incentives. Local officials were still highly involved in the economy, still controlled local banks and shadow institutions, and still stood to benefit in a variety of ways from credit finding its way to LGFVs. Predictably, new lending did not stop and LGFV debt continued to pile up.

Policies and Counter Policies (上有政策，下有对策）

The center’s hands have been far from clean in the LGFV clean up process. Throughout the winding road of LGFV growth the center has repeatedly stoked the LGFV fire only to then play fireman. The 2009 LGFV stimulus followed by crackdown is one example, but the same dynamic happened just prior to 2014 and again just after. In 2013 the State Council called upon local governments to increase infrastructural investment once more.89 Then, just after the big 2014 Budget Law change, “the State Council issued a new decree in May 2015 (document 40) that reversed its attempts to crack down on [LGFV] borrowing,” urging “financial institutions to continue to lend to [LGFVs].”90 Not only do local governments counter Beijing’s policies, Beijing often counters Beijing’s policies.

In more recent years, however, Beijing has gotten more focused and the drum beat of regulatory restrictions has intensified. Interestingly, though, they have also become more secretive.91 In 2018 the State Council made explicit the PRC government’s ambition to wipe out all local government hidden debt, calculated per 2017 numbers, within 5 to 10 years.92

In the ten years from 2014 to 2023, amid the LGFV diversification process we discussed earlier, local SOEs began to be classified and regulated according to three categories: competitive, functional and public welfare.93 The center is trying to rationalize the operations of LGFVs, limiting state subsidization and backstopping of those oriented toward the market while phasing out the weakest performers. In practice, the policy efficacy is dubious at best. LGFVs have mixed and matched assets not only to create conglomerates that might stand on their own feet in the market, but also as part of a cat and mouse game with regulators with the ultimate goal of keeping credit flowing and their operating capacity in tact. Conglomerates with diversified holdings (from pure public-welfare to pure market) become too big to fail for local governments. LGFV complexity and debt burdens have only grown.

Since 2018 an increasing number of regulatory documents have ceased to be made public. Some speculate there is fear and hesitation within China’s bureaucracy of taking ownership over this massive problem. Amid increasing clamor to better address the LGFV issue, the PRC government issued and circulated two guiding documents within its bureaucracy in 2023. Neither Document 37 or 47, as they are shorthanded, have been made public. But substantial information has leaked within China, and discussion on WeChat is ample.

One organization, an asset management and consulting company that focuses on local governments and their SOEs, has put together a helpful guide on how struggling LGFVs might “transform and develop in the context of today’s debt package.” The firm, Nanjing based Zhuoyuan, suggests:“If an urban investment platform in a region has weak qualifications and declining financing capabilities" it might want to consider “injecting more high-quality assets and integrating weak platform assets.” Alternatively, it might try acquiring high-quality listed companies so as to “broaden investment and financing channels for urban investment companies.”94

A new round of audits is apparently under way to re-assess the scope of the LGFV debt situation. A number of other steps have also been announced, including $1 trillion worth of bonds to bring LGFV debt on-budget and refinance at lower rates, to be handled by provincial governments in the 12 most struggling provinces. More policies and announcements are expected. But what will their efficacy be?

Conclusion: The Most Complex Economic Problem?

Having arrived at the end of our story on the rise of LGFVs, the fall remains untold. The winds of change have been blowing. But a precipice remains elusive. Metaphorical cliffs do exist in China’s weakly institutionalized, moral hazard laden system. And Beijing has shown a willingness to push things off. Need we discuss the rapid fall of China’s property developers?95 With the land market contracting, local officials and LGFVs will be hard-pressed to keep a land-financed based LGFV system intact.

Why though, one wonders, has there been no LGFV policy equivalent of the Three Red Lines? Is it because they are more embedded in “the system”? Consider how much greater the on-balance sheet exposure to LGFVs is than to property developers.

Or maybe it’s because, despite escalating central regulatory action against them, LGFVs remain useful to Beijing in a variety of ways. Beijing, as we have seen, often counters Beijing (上有政策，上也有对策). LGFVs are handy not just as shock absorbers against economic recession, nor just as levers to buttress growth and employment, but also as vehicles for carrying out country-wide goals such as extreme poverty elimination and shanty-town revitalization. But the costs of using LGFVs mounts.96

Whether or not shock therapy comes for LGFVs, the incentive ecosystem is shifting. Beijing has decided its bureaucracy must mobilize not principally to rectify backwards productive forces, but rather to remedy the “contradiction between people’s ever-growing need for a better life and China’s unbalanced and inadequate development.”97 At least one implication is clear: the land-finance system that for the last two decades has been the lynchpin for much of China’s development is being directed toward the dustbin of history. High-powered top-down incentives to boost growth are no longer so high-powered. Property developers have taken their hit, but LGFVs remain at large.

Ambiguous mandates render the future of LGFVs difficult to divine. What constitutes a better life, precisely? Growth is still important, but must be balanced with security and needs to be “high-quality.”98 Local experimentation is still encouraged, even demanded, but must comport with stricter top-down preferences.

Despite the diversification we have seen in the holding schemes, asset structures, and liability composition of LGFVs, there remains a lack of diversification where it matters. Local Party-state officials continue to control LGFVs and the local banks, and possess immense influence over many other facets of their local economy. In a remarkably concise passage from his book 置身事内, Lan Xiaohuan argues that “the root cause of the government’s debt problem,” and by extension of low-quality growth, “is not insufficient revenue, but rather excessive spending, as the government has taken on too many roles in developing the economy. Therefore, the debt problem is not simply a ‘soft budget constraint’ issue or a problem solved by modifying the government’s budget framework. Instead, it is fundamentally a problem of the government’s role."99 LGFVs are the crux of this problem. And it is why property developers, most of which were private companies, have not posed nearly as vexatious a problem for Beijing.

A decade ago Beijing not only set out to constrain LGFVs, but to eliminate them. Fiscal restructuring proved insufficient. Today, localities still have dauntingly expansive roles and mandates, will new sources of financing materialize or will they be forced to abdicate? In this evolving context, will local officials face new incentives to keep their all-purpose handy man, the LGFV, alive and kicking? Will LGFVs whither away, as Lenin once promised the Soviet state would? Who will make them? With a new round of audits sweeping the nation alongside top-down inspection tours and the ongoing anti-corruption campaign, what might become of China’s 12,000 LGFVs?

A common saying in the Party these days holds that it is sometimes necessary to “turn the knife inward and scrape poison off the bone.” A fundamental solution to the LGFV problem, it seems, requires a deeper cut into the system.

References and Endnotes

3

You can also assess the weakness of LGFV financial performance relative to other firms, as the IMF did in its most recent Article IV for China (2023):

4

Multiple organizations exploit the spec of transparency offered by bond-issuances to estimate the LGFV debt problem. Estimates differ seemingly based on how many bond-issuing LGFVs get included in their bottom-up estimates.

At the upper bound of comparables, Rhodium Group, collated and analyzed annual reports from 2,892 LGFVs that have issued bonds.

A 2022 study by the IMF, presumably using very similar methodology as the Article IV consultations, used CapitalIQ’s more limited database to analyze 2200 such LGFVs. PIMCO used Wind Financial and perhaps some proprietary information to come up with its own bottom-up estimate of LGFV and other government debt.

6

The only data sources that include LGFVs beyond those issuing bonds are China’s official audits, conduced in 2011 and 2013, by the National Audit Office (NAO). See: National Audit Office, “2013 Announcement 32: Nation-wide governmental debt audit results,” (2013年第32号公告：全国政府性债务审计结果), 2013. https://web.archive.org/web/20140104011301/http://www.audit.gov.cn/n1992130/n1992150/n1992500/n3432077.files/n3432112.pdf

We have no more recent bottom-up estimates of the entire galaxy of LGFVs. Prior to 2020, the IMF appears to have simply projected forward those estimates.

Those data, however, are limited. As Bai et al (2016) describe: “the data on the Audit Office only covers "official" debt of the LGVs, which the Audit Office defines as "the debt that government has responsibility to repay or the debt to which the government would fulfill the responsibility of guarantee or for bailout when the debtor encounters difficulty in repayment.”” Thus Party-state data may tell us how much LGFV debt was used on infrastructure, but it does not give us the whole picture. As Bai et el (2016) note, the total debt in their smaller sample of bond issuing LGFVs is larger than the total given by the NAO See: Chong-En Bai, Chang-Tai Hsieh, and Zheng Michael Song, “The Long Shadow of a Fiscal Expansion,” Becker Friedman Institute, November 2016, page 11.

Here is an overview of the data accumulated in the NAO audits:

12

Inflation was 18% in 1988 and 1989, and after calming spiked back to 24.1% in 1994:

The high inflation of this period was perceived as a major problem among China’s leadership, considered one of Zhao Ziyang’s failings, and even a root cause of Tiananmen protests. See Julian Gerwirtz, “Never Turn Back,” Harvard University Press, 2022, pages 212, 214, 281.

21

This is also the argument Lan Xiaohuan makes in 置身事内

Also see Tsinghua ACCEPT’s very good paper on China’s post reform and opening development, which has a good explanation of how over-eager officials getting involved in the economy and stimulating excess production, among other maladies, is at the root of the economic problem as much, if not more, than fiscal imbalances. See “Summing Up 40 Years of Economic Reform and Opening,” 改革开放四十年经济总结, 清华大学中国经济思想与实践研究院 Academic Center for Chinese Economic Practice and Thinking, December 2018, page 17, http://www.accept.tsinghua.edu.cn/_upload/article/files/7a/3c/976c22ff48cfb1860f7288f6bd05/612c2ab9-2527-4237-b28e-7ce36ee2b379.pdf;

Local government spending favors production and growth oriented infrastructure rather than service oriented public goods, clearly shown via date from 1999 to 2006: Chengri Ding, Yi Niu, Erik Lichtenberg, “Spending preferences of local officials with off-budget land revenues of Chinese cities,” China Economic Review, 2014, https://www.sciencedirect.com/science/article/abs/pii/S1043951X1400131X

27

The crazed race to lure production resulted in intensive expenditure. Keyu Jin states that between 1998-2007 foreign manufacturing companies were the most subsidized type of firm in China, on average getting multiples more than SOEs. See Keyu Jin, “The New China Playbook,” 2023, page 101.

On strategies used see:

High Capacity

How China uses foreign firms to turbocharge its industry

(This piece builds on part of another piece I wrote on India’s EV strategy.) China uses foreign firms selectively to bring in technology and know-how, to build up its domestic suppliers, and to ultimately sow the seeds for homegrown Chinese companies to compete on the world stage…

Read more

2 years ago · 20 likes · 1 comment · Kyle Chan

31

“As Figure 1.1, taken directly from a CDB presentation, shows, land expropriation and the transfer of land rights are central to making the machine work, used for paying back the loan. “The city had land but no way to turn it into cash, so the government couldn’t get money,” researcher Yu says. “At that time, no one realized what Chen Yuan knew: that once the land price goes up, you have a second source of income.”” Henry Sanderson and Michael Forsythe, “China's Superbank: Debt, Oil and Influence—How China Development Bank Is Rewriting the Rules of Finance,” Wiley, 2012, page 8.

The role of Chen Yun, economic czar for decades, in creating the LGFV model is also noteworthy.

55

Huarong Financial Leasing (2006), Huarong Securities (2007), Huarong Trust (2008), and Huarong Real Estate (2009) were already licensed by the time of Lai’s arrival, but many more segments—particularly investment management related—were to come. Growth in assets in the years from 2014 to 2017 were 47%, 44%, 62%, and 32% respectively before decreasing in 2018, the year Lai Xiaomin was placed under investigation. From RMB315 billion in 2012, by 2017 assets peaked at RMB1.7 trillion, increasing by nearly 6x in only five years.Huarong’s assets based on its corporate filings:

Wang Zhanfeng, Lai’s replacement as Huarong Chairman, stated in the long delayed 2020 annual report: “Due to the aggressive operation and disorderly expansion of former Party Secretary and Chairman Lai Xiaomin, the Company has badly deviated from its main responsibilities and core business.”

56

reading, writing & investing

LGFVs: the Good, the Bad, and the Mierda, Part I

Last week, I started looking closely at the local government financing vehicles (LGFVs) that sit at the heart of many of the current economic concerns in the Chinese economy. Over the week, I continu…

Read more

3 years ago · 4 likes · Glenn Luk

63

The East is Read

Part II: David Daokui Li's meticulous breakdown of "nested" dimensions of local govt & its debt

In a post on Friday, Dec. 22, we shared that Professor David Daokui Li of Tsinghua University recently unveiled a study - together with Zhang He at the Academic Center for Chinese Economic Practice and Thinking (ACCEPT) - that found China’s local government debt in 2020 was around 90 trillion yuan, 50% higher than…

Read more

2 years ago · 30 likes · 2 comments · Yuxuan JIA and Shangjun Yang

72

Provincial-level LGFVs accounted for 38% of total issuance in RMB value, prefectural cities 34%, and county-levels 29% (cities and counties issue far more bonds, but the average value of provincial bond issuances is far higher).

Based on above data, as of 2015, provincials accounted for 38% of total issuance in RMB value, prefectural cities 34%, and county-levels 29%.

Yongheng Deng, Understanding the Risk of China’s Local Government Debts and Its Linkage with Property Markets, IMF & National University of Singapore, 2015, https://www.imf.org/external/np/seminars/eng/2015/housingchina/pdf/Session%203_YDeng.pdf

96

MacroPolo has compiled information on the likely provincial-level debt drag stemming from LGFVs.

At a more disaggregated level, Rhodium looks at the county-level burden.

And there is one historical subject that preoccupies him more than most: the rise and fall of the Communist Party of the Soviet Union (CPSU). 

Consider the now ubiquitous phrase “great changes unseen in a century” (百年未有之大的变局). Xi first used the phrase in late 2017. The timing was likely not coincidental. Precisely a century earlier a global change of great significance occurred, at least from the perspective of a communist party: the 1917 October Revolution that brought the Bolsheviks to power and established the Soviet Union.3

The phrase is routinely used in conjunction with assessments of the changing global distribution of international power, making it a direct allusion to the global rise in power and prominence of a communist nation.4 But, while Xi and the Party appear to draw on the rise of the Soviet Union for aspirational narrative fodder, it is the fall of the CPSU that most commands their attention.

In early 2022 audiences across China were treated to an intentionally unnerving film experience. For 94 minutes, with an opening set to dramatic music and chaotic stock footage, the story of the collapse of the CPSU flickered across projector screens.5 The audiences in attendance for these screenings were not members of the general public, but rather rank and file cadres of the Chinese Communist Party (CPC).

While the ostensible occasion meriting this screening was the 30th anniversary of the CPSU’s fall, the title of the documentary, “Historical Nihilism and the Disintegration of the Soviet Union,” offers a hint at a more contemporaneous reason. Xi Jinping is in the midst of steeling his communist cadres for a systemic competition against hostile foreign forces.

Xi and the Party believe, in particular, that these foreign forces are bent on weaponizing ideas and historical narratives to undermine the Party’s justifications not only to exert global influence, but to rule over China itself.

Ambition and fear thus dually animate Xi’s historical obsession with the CPSU. On the one hand, an aspirational belief holds that the tide of history is surging the CPC and its Leninist system toward the world’s center stage—just as the historical tides of 1917 did for the Bolsheviks. Meanwhile, an existential fear grips Xi that cadres and leaders alike fundamentally lack faith in the Party, its mission, and its ideology, which, at a moment’s notice could enable the collapse of the CPC’s entire edifice, just as happened with the Soviet Union 30 years ago.

What is Historical Nihilism?

A succinct, if cynical, definition of historical nihilism is any interpretation of history aversive to current Party leadership. As Simon Leys once explained, following along with the correct interpretation of history “can be quite bewildering for the lower cadres, whose instructions do not always keep up with the latest shakeup of the ruling clique. As one hapless guide put it to a foreign visitor who was pressing him with tricky questions: "Excuse me, sir, but at this stage it is difficult to answer; the leadership has not yet had the time to decide what history was.”6

Xi Jinping places great importance on molding the ideals and beliefs of his fellow Party members. Xi elucidates that a proper worldview and constellation of thoughts is the basis upon which a willingness to struggle and make great sacrifices for the Party—the epitome of a good cadre—rests.

In a 2018 speech to Central Committee members and leading cadres at provincial and ministerial levels, Xi explains why he places so much emphasis on what people think and believe:

“Marxist political parties are not political parties formed around interests, but political parties organized via common ideals and beliefs. To build a strong Marxist ruling party, we must first start with ideals and beliefs. The belief in Marxism, socialism and communism is the political soul of Communists and the spiritual pillar through which Communists withstand any test. We often say that if the foundation is not strong, the earth and the mountains will shake. And if faith is not strong, the earth and the mountains will shake. Isn't that the logic behind the disintegration of the Soviet Union, the collapse of the Soviet Communist Party and the upheaval in Eastern Europe? The Soviet Communist Party seized power when it had 200,000 party members, defeated Hitler when it had 2 million Party members, and lost power when it had nearly 20 million Party members. As I said, in that turmoil, no one was man enough to come out and fight. What is the reason? It is that ideals and faith had disappeared.”7 [emphasis added]

At the core of Xi and the Party’s ambitions to mold collective belief is the issue of historical memory. Memories condition beliefs and ideals, thus making control over collective historical interpretation and memory fundamental, in Xi’s eyes, to the survival of the CPC’s Leninist political system. Xi himself explains:

“The reason why I emphasize this problem [of historical interpretation] is because it is a major political issue. If it is not handled well, it will have serious political consequences. As one ancient said: “To destroy a people, you must first destroy their history.” Hostile forces at home and abroad often write essays on the history of the Chinese revolution or of New China, doing all in their power to smear and vilify that era. Their fundamental purpose is to confuse the hearts of the people. They aim to incite them into overthrowing both the Communist Party of China’s leadership and the socialist system of our country.”8

Xi goes on in a separate speech to make the consequences even more clear: “history and reality show that a nation that has abandoned or betrayed its own history and culture not only makes development impossible, but also makes it likely for historical tragedies to unfurl.”9

To maintain China’s system of governance, Xi believes cadres must share a set of ideals, beliefs, and ideological faith. In order to protect this shared set of beliefs, though, historical memory must be controlled. For Xi, memory is existential, and amnesia can be enforced by fiat. Historical events, if they are to be remembered at all, should affirm the Party’s role in saving China and ultimately allowing it to develop a novel Chinese system of governance that “offers humanity a new choice.”10 In the third volume of Governance of China, Xi explains that a “well-founded system is the biggest strength a country has, and competition in terms of systems is the most essential rivalry between countries.”11

Historical nihilism is thus a label for the inconvenient facts and historical narratives that could undermine cadres zealous faith in the Party, and thus the Party-state’s resilience during the vital period of “great changes unseen in a century” that will be characterized by a “competition in terms of systems” with the United States and the West.

As the Maoist chengyu declares: “make the past serve the present” (古为今用). 

Author’s note: the full text of the documentaries cited below can be viewed here.

The 2022 Documentary

Like many Leninist leaders before him, Xi Jinping postures as something of a philosopher king.12 Xi Jinping Thought on Socialism with Chinese Characteristics for the New Era is, literally, omnipresent. Xi has Thought on so many things it would be impossible to list them: from green technology, to ecology, to farming the list is long and varies from broad to arcane. Xi’s thoughts and worldview are widely published, disseminated, and (mandatorily) studied by cadres.

In an introduction to the documentary “Historical Nihilism and the Disintegration of the Soviet Union” the Kunlun Policy Research Institute, a Chinese think tank, situates the documentary with reference to Xi Jinping Thought,13 in particular a poignant quote Xi made behind closed doors in January 2013:

“Why did the Soviet Union disintegrate? Why did the Communist Party of the Soviet Union fall to pieces? An important reason is that in the ideological domain, competition is fierce! To completely repudiate the historical experience of the Soviet Union, to repudiate the history of the CPSU, to repudiate Lenin, to repudiate Stalin was to wreck chaos in Soviet ideology and engage in historical nihilism. It caused Party organizations at all levels to have barely any function whatsoever. It robbed the Party of its leadership of the military. In the end the CPSU—as great a Party as it was—scattered like a flock of frightened beasts! The Soviet Union—as great a country as it was—shattered into a dozen pieces. This is a lesson from the past!"14 [emphasis added]

The documentary subsequently fleshes out and substantiates key elements of Xi’s Thought as it has been put into practice.15 On first watch, the most glaring aspect of the 2022 documentary is the amount of time the film devotes to white-washing Stalin. Viewers are informed that accounts of deaths under his reign are greatly exaggerated and, in reference to the Great Terror of 1937-38, that while there were regrettable errors, for the most part he did what he had to do. The film lionizes his ability to prepare the Soviets to defeat Hitler’s war machine. Of course, one will not find any mention of the Molotov-Ribbentrop pact, the years of surreptitious trade Stalin orchestrated with Hitler that enabled the development of the latter’s war machine, or the role of America’s lend-lease and other industrial contributions that enabled the Soviets to continue fighting in the first place.

What one will find in ample quantity, and what constitutes the primary thrust of the documentary, are diatribes against Khrushchev and Gorbachev. Khrushchev is lambasted for denigrating Stalin in his 1956 secret speech on the dangers of the cult of personality, and for creating a cultural moment wherein impressionable youth lost faith in the CPSU.

Gorbachev, who we learn was a product of this rotten Khruschevian cultural period, fields the greatest blame. In no uncertain terms, the documentary declares that Gorbachev abandoned, betrayed, and stuck a knife into communism, Marxism-Leninism, and the Soviet Union. Where Stalin finds redemption, Khrushchev and Gorbachev find condemnation.

The audience is told of several specific ways in which historical nihilism allegedly brought down the Soviet Union. Highlighted for blame are:

·  “all kinds of out-of-control media and numerous seminars and reports;”

·  “falsification of history textbooks;”

·  “the ‘uncovering’ of the so-called "historical archives;”

·  and “the field of literature and art.”

The film then informs us that, in conjunction with these domestic issues, largely attributable to Gorbachev’s political reforms, “The Western camp” pursued the strategy of “peaceful evolution,” launching round after round of offensives in the ideological field. This provided a powerful external impetus for the growth, spread and proliferation of historical nihilism in the Soviet Union.” The documentary contends that these Western “peaceful evolution” strategies to induce “historical nihilism” included:

·  “the United States having invested huge sums of money to establish news media specifically for socialist countries;”

·  “Western countries use of personnel exchanges, cultural exchanges and other means to cultivate and support pro-Western "political intellectual elites" in the Soviet Union;”

·  “full use of novels, films, plays and other literary works to promote the spread of historical nihilism in the Soviet Union;”

·  “Nobel Prizes [as] important tools for the West to promote Western values and smear the history of the CPSU;”

·  “various foundations which become a powerful channel for the West to promote historical nihilism in the Soviet Union;”

·  “the U.S. embassy in the Soviet Union playing the role of a front-line command in terms of ideological infiltration and disrupting the political situation in the Soviet Union;”

·  and “the use of archives or the so-called declassification of archives to promote the proliferation of historical nihilism.”16

The documentary approvingly cites a Russian scholar, saying “the most powerful weapons the West has, aside from nuclear weapons, are all the methods of ideological struggle, such as radio, television, and cultural exchange. These negatively affected people to a considerable extent, and even formed a fifth column within the Soviet Union to support the United States and the entire West.”17

Ultimately, the documentary makes clear, the demise of the CPSU resides in the linking up of internal elements who “betrayed communism” and “abandoned the party” and Western hostile foreign forces who strategically deployed “historical nihilism” in pursuit of “peaceful evolution.”  

Obviously embedded within this analysis is a determination that an open and independent civil society is a threat vector for a Leninist regime. This should not be surprising. Many of the analytic points simply reinforce the aggressive crackdown the CPC, operating under Xi Jinping, has already undertaken on civil society. Such measures include banning foreign books in Chinese primary schools, incorporating more ideologically rigid lessons into history and other textbooks, banning foreign NGOs, shuttering independent media and think tanks, and strictly limiting many scholars’ ability to collaborate outside the country.

What may be more surprising (to some at least) is the degree of continuity the 2022 documentary strikes with the two previous documentaries produced by the CPC and, ultimately, the degree of continuity between Xi Jinping and his predecessors.

Thinking of Danger in Times of Peace

Indeed, the emphasis here, and in media and scholarship more generally, should not obscure the continuity in the CPC’s approach to history and engagement with the West. Deng Xiaoping exclaimed as early as November 1989 that the Western world would stop at nothing to overthrow the CPC: “The Western countries are staging a third world war without gunsmoke. By that I mean they want to bring about the peaceful evolution of socialist countries towards capitalism.”18 It is altogether fitting, then, that Party’s first major documentary on the fall of the CPSU (published in 2006) should be titled “thinking of danger in times of peace” (居安思危).19

In contrast to the 2022 documentary, the 2006 documentary offers a broader analysis that comes across as more exploratory and marginally less proscriptive (it is also about twice as long). “Thinking of danger in times of peace” is broken into eight parts, and the title section names are quite interesting:

1. The Historic Path of the Rise and Fall of the Communist Party of the Soviet Union

2. Basic Theories and Guiding Principles of the Communist Party of the Soviet Union

3. The Ideological Work of the Communist Party of the Soviet Union

4. The Working Style of the Communist Party of the Soviet Union

5. The Privileged Classes of the Communist Party of the Soviet Union

6. The Organizational Course of the Communist Party of the Soviet Union

7. The Leadership Group of the Communist Party of the Soviet Union

8. The Communist Party of the Soviet Union’s Response to the Western World’s Strategy of Westernization and Dissolution

Aside from the greater depth and breadth, perhaps the biggest difference between the two documentaries is the weight the 2006 documentary gives to structural, and thus not solely ideological, reasons for the fall of the CPSU. For example, one finds extensive discussion of corruption and the formation of a “privileged class,” with the documentary explaining that:

“The formation and development of the CPSU’S privileged class went through a long historic process. During this period of time, these visible and invisible hands greedily snatched the national wealth that belonged to the people, while the CPSU seldom restrained the privileged class, or stopped their corruption. It even sheltered them or was complicit in their behavior. It eventually resulted in cancer that grew and spread rapidly in its own body. When the CPSU’s own cancer caused its decay and degeneration, the people had already abandoned it.”20

In the 2022 documentary, one will find no mention of corruption or privileged classes. Yet, of course, the danger of corruption was not a point lost on Xi Jinping, who swooped into power with a major and well-publicized anti-corruption campaign.

What the differential focus of the 2006 and 2022 documentary may reveal, then, is not necessarily a change in views inside Party leadership on what caused the fall of the CPSU, but a change in what the Party deems important to emphasize to its cadres lower down the ranks.

Thus where corruption issues were top of mind during the more freewheeling Hu-Wen era, ideological concerns have come to the fore following a decade of Xi’s anticorruption campaign and aggressive steps to gird the Party-state for systemic competition in the era of “great changes unseen in a century.”

Despite the differential emphases of the two documentaries, though, the fundamental similarities are overwhelming. Making appearances in the 2006 documentary are a defense of Stalin (using similar rhetoric to the 2022 documentary) and denunciations of various things including NGOs, books like “The Gulag Archipelago,” human rights diplomacy, and the newly liberalized media environment.

Both documentaries fundamentally blame Western ideological infiltration and subversion of history as the primary causes of the fall of the CPSU, aided and abetted by those in the Party, such as Gorbachev, who betrayed Marxism-Leninism. The 2006 documentary opens by citing Jiang Zemin and Hu Jintao on this very issue:

“In December 1991, Comrade Jiang Zemin pointed out that the transformation of the former Soviet Union and Eastern European countries is not due to the failure of Scientific Socialism but to the abandonment of the Socialist path. In December 2000, Comrade Hu Jintao also pointed out that there are multiple factors contributing to the disintegration of the Soviet Union, a very important one being Khrushchev’s throwing away Stalin’s knife and Gorbachev’s open betrayal of Marxism-Leninism.”

And, even more consonant with the 2022 documentary, the 2006 documentary concludes:

“The focus of the Western ideological infiltration is to deny the CPSU’s revolutionary history, exaggerate the social problems in the Soviet Union and the Eastern European countries, stir up dissatisfaction among the people, and direct that dissatisfaction toward the communist party and socialism… Facing this propaganda campaign, Gorbachev not only lost his vigilance by providing no patriotic education to the Russian people, but he encouraged people to accept Western ideas instead.”

Clearly the fundamental conclusions of both the 2006 and 2022 documentaries are simpatico. The 2022 documentary, in juxtaposition to 2006, appears merely as an evolution towards precise conclusions and more directly proscriptive implications, while doing away with the complicating structural analysis.

Li Shenming (李慎明)

An analysis of the similarities and differences between the two films would not be complete without meeting the lead author of both films, a loyal apparatchik by the name of Li Shenming (李慎明).

From an early career as secretary to Wang Zhen, one of the elders most decisively in favor of perpetrating the Tiananmen massacre, Li has made a name for himself whitewashing Party history, promoting aspects of Marxist and Maoist ideology, and firmly opposing liberalism. After climbing ranks, Li eventually settled into a prestigious perch as Vice President of the Chinese Academy of Social Sciences (CASS), Deputy Secretary of CASS's Party Leadership Group, and Director of CASS's World Socialism Research Centre. He is now an honorary dean at Zhengzhou University, serving as the founding director of the school's Contemporary Capitalism Research Center, wherein Li describes his own work as a process of "knowing oneself and the enemy" ( 知己知彼) so as to "better uphold and develop socialism with Chinese characteristics." It was at Zhengzhou, while working in conjunction with his old friends at CASS, that he led development of the 2022 documentary, while the 2013 and 2006 documentaries were produced solely under the auspices of CASS.

Li’s vision of the struggle between China and the U.S.-led Western world and the so-called "enemy" of capitalism, while long apparent in his work, appears to have only come into sharper relief for him over the years.

Li, in a retrospective introduction to 居安思危 written as part of a book in 2013,21 hints at the less prescriptive nature of the 2006 film in a rhetorical statement: “What is the actual effect of the film? At first, we were not completely sure.” Later in the introduction to the book, Li informs us of the initial showing of the documentary to relatively senior cadres in Shenzhen, stating that:

“Everyone unanimously reflected that, after watching the film, there were two major gains in understanding: First, after the Third Plenary Session of the 11th CPC Central Committee, our party did not repudiate Mao Zedong. If we lose this glorious banner, we will inevitably follow in the footsteps of the Communist Party of the Soviet Union. Second, Deng Xiaoping is right: if something goes wrong, it comes from within the Communist Party. The film analyzes the historical lessons of the collapse of the Communist Party of the Soviet Union from eight aspects. They all focus on the core issue of the Communist Party and fully achieve the expected results.”22

Li goes on to explain what he views as the key takeaway:

“'The disintegration of the Soviet Union,' that is, the 'peaceful evolution' of the Soviet Union by the western world, is only the external cause of the tragedy of the disintegration of the Soviet Union, while the gradual and final complete deterioration of the Soviet Communist Party is the internal cause of the tragedy. This internal cause played a decisive role in the final formation of the tragedy of the disintegration of the Soviet Union.”23

Finally, Li finishes his introduction by explaining his views on the extent of “win-win” cooperation with the West:

“China is big, and its GDP has now become the second in the world. Whether you engage in socialism or capitalism, the United States will feel that China is a threat to it and will contain China's further development. In terms of specific economic and trade projects, we can win-win with the West; However, in terms of fundamental strategic objectives, it is absolutely impossible to win-win.”24

Conclusion

It may be tempting to compartmentalize the output of Li Shenming. How representative can one man be, after all? Compartmentalization would be easier if Li’s perspective were not so well aligned with that of Party leaders, and as set forth in the introduction of this piece, Xi Jinping’s in particular.

Furthermore, that all three of Li’s documentaries on the fall of the CPSU have been funded and produced under the auspices of CASS, and widely used as intra-Party education videos, indicates these are broadly and officially sanctioned. Thus, it should be fair to say the content of these documentaries offers insights into the minds of Party leadership and its ideologues. Most importantly, perhaps, these documentaries help us understand what CPC leadership want lower-ranked cadres to think. So, what do the documentaries tell us?

1. For the CPC, the Cold War never ended. The Party has long viewed, and continues to view, itself in a “silent contest” (to steal the title of a separate documentary) with the West.25

2. The CPC views this contest as fundamentally one between “systems” of governance. In this systems competition, the Party views the West’s alleged “peaceful evolution” strategy as one of—if not the—most dangerous external element. “Peaceful evolution” is directly implicated across the documentaries as a driving force of the fall of the CPSU.

3. According to the CPC’s analysis, the “peaceful evolution” strategy and the malign attack on history that culminates in “historical nihilism” only succeeded because elements within the CPSU colluded with or capitulated to hostile foreign forces, most poignantly Gorbachev, who engaged in a so-called betrayal of Marxism, the people, and his Party. In Xi Jinping’s words: a real man failed to stand up.

There is no—perhaps can be no—singular answer to why the Soviet Union and its Communist Party fell. Historians across the world continue the debate. Was the collapse primarily due to interest groups stymying reform, a fundamentally broken political economic system, national independence movements, ideological malcontent among Party and populace, liberalizing too quickly, excessive defense spending, Western intrigue, commodity price collapses, some combination of these, or something else? As in so many complex domains, analytic assessments may reveal more about the analyst than the subject in question.

The Party’s conclusions about the fall of the CPSU may thus best be thought of as projections that tell us more about the past and present CPC than about the CPSU. These documentaries shed light on some of the motivations underlying Xi’s ongoing drive to rewrite history, reeducate Party cadres, and revivify the Party as a Leninist organization.

Comparisons are routinely made between Xi and his predecessors. In vogue now is the comparison between him and Mao. But rather than guess who he aims to emulate, it remains more reliable to keep firmly in mind who he does not want to be.

As Li Shenming noted, "There is one central issue … Did the Soviet Union collapse because of historic systemic problems—problems with the Stalinist model—or because of Gorbachev's mistakes?” He concludes firmly: “Our view is the latter. It is consistent with the leadership's.”26

In Xi’s view, where Gorbachev laid down, he is standing up.

About the author: Jonathon P. Sine is a writer and researcher in Washington, D.C. He is a graduate of Johns Hopkins SAIS, a former research intern for Rhodium Group’s China practice, and currently serves on staff at the U.S.-China Economic and Security Review Commission.

The views expressed in this article are the author’s own and, unless cited, do not represent the views of the U.S.-China Economic and Security Review Commission. 

2

Jiang delivered the 16th Party Congress report, while Hu delivered the 17th and 18 reports (although Hu led preparations of the 16th, and Xi led preparations for the 18th). Word counts based author’s calculations:

“In some ways suffering ceases to be suffering at the moment it finds a meaning, such as the meaning of a sacrifice.” ― Viktor Frankl, Man's Search for Meaning

”Happiness comes from struggle.” — Xi Jinping, as quoted in Qiushi

Common prosperity.

It’s a thing a lot of people are worried about. As the PRC’s biggest and newest campaign, common prosperity seems poised to impact many peoples’ lives and livelihoods—mostly within the PRC but of course beyond as well. That common prosperity is important seems obvious, but what common prosperity actually… is? Far less obvious.

For Yuen Yuen Ang common prosperity is about fighting inequality and corruption and rebalancing economic growth by instantiating a PRC-version of America’s Progressive Era. For Tanner Greer it’s about cracking down on specific industries and taming the most toxic versions of what Xi and co. have labeled ‘disorderly expansions of capital’, or what Polish philosopher Andrezj Walicki termed ‘spontaneous order.’ And for others like Andrew Batson and Barry Naughton, the common prosperity campaign is about “sweeping political objectives that cut across economic sectors”—ala Barry Naughton’s ‘grand steerage’.[1]

These three views—inequality/corruption, anti-spontaneous order, and grand steerage—seem to share a fundamental core: the current situation in the PRC is misaligned with the ultimate ambitions of the Party leadership, and there is an increasingly assertive and interventionist, Party-state led push to change that. As Greer writes, for the PRC’s urban citizens:

“Their life does not feel like national rejuvenation. Xi’s attack on the spontaneous order of the market place is an attempt to bring propaganda and reality closer in line. He seeks to rein in the forces that threaten the Dream while there is still time to do so.”

Even though this is argued in the context of his own framing, I think Ang would agree with this—though Batson/Naughton would likely say it misses the more aspirational element engendered in an ‘industrial policy for everything’.

I don’t have the foresight to definitively determine which of these frameworks best captures the moment. But to put my cards on the table, I do favor the Batson/Naughton interpretation—though with a twist!

That said: I along with all other observers and participants—Party leaders included—are just groping at the inchoate elephant of common prosperity, trying to make sense of things. So take what I’m about to say with the requisite grain of salt!

Questions Before Answers

Let me first put an essential question on the table: does Beijing even have a plan for what common prosperity is? A lot of what Beijing is doing seems highly erratic and reactive. As Logan Wright at Rhodium submits in our interview: “there's generally more coherence right now in Beijing about the critique of China's current growth model rather than coherence around what that alternative would really look like.” This seems true to me. I think it’s likely analysts are groping at the same elephant Beijing is and even arriving at conclusions before the Party itself has.

Second, what about the dogs that aren’t barking, or aren’t barking yet? This question is really directed at Ang’s thesis. What I mean is that if Beijing is really trying to reform its gilded age via State-led Progressive Era reform, why hasn’t the Party-state implemented much needed reforms itself? For example: Why do SOE dividends still play such a small role in funding the social safety net? Why are hukou (internal passports that restrict mobility/access to welfare) and rural land reforms (that would give rural citizens the ability to sell their land at market prices rather than to local governments on the cheap) still dead in the water? Why does the center not centralize health care costs and other social welfare expenditures, when it knows it is saddling local governments with expenses they can only meet via land sales and borrowing? Why is the tax structure still so regressive, taking in so little from income taxes and lacking property taxes entirely? Why are elite Communist Party members and their families so rich?

One way of answering these questions is that the Party is starting with the low hanging fruit in the private sector and building up momentum and popular support for tougher reforms in the state-sector. Though as analyst Kevin Tellier argues regarding state-capture: we are eight years into Xi’s consolidation drive! If such state sector reforms were coming, shouldn’t we have seen more progress by now?

Along similar lines: why are the major common prosperity reforms disproportionately addressing the PRC’s urban upper/middle class issues? And why are they done via stiff-arming of the private sector? One way to explain this disproportionate focus on the part of the CPC is via regime stability and legitimacy concerns: urbanites, with their rising expectations, are the scary group of people modernization theory warned would make trouble for the Party. Because this group is concentrated in urban areas, it also has far greater collective action potential than those in the countryside. But how does one differentiate Progressive Era reforms from more mundane, urban-centric stability maintenance operations—particularly when these reforms all seem to be state-led moves against a ‘disorderly’ private sector?

Disorderly Expansions

A disorderly and corrupted capitalist economy is a theme that ties together Ang’s thesis on Progressive Era reforms and Greer’s invocation of Walicki’s ‘spontaneous order’. It is also a view shared, in part, by Li Guangman, who argued that a state-led revolution is underway to rein in much of Xi’s ‘disorderly expansion of capital’. As Li Guangman puts it, there is a profound transformation underway that

“marks a return to the original intent of the Chinese Communist Party, a return to a people-centered approach, and a return to the essence of socialism [and that] will wash away all the dust: capital markets will no longer be paradise for get-rich-quick capitalists, cultural markets will no longer be heaven for sissy-boy stars, and news and public opinion will no longer be in the position of worshipping western culture. It is a return to the revolutionary spirit, a return to heroism, a return to courage and righteousness. We need to bring all forms of cultural chaos under control and build a vibrant, healthy, virile, intrepid, and people-oriented culture.”

Meanwhile, as Greer argues, while Xi and the Party have raised expectations for a grand new style of life,  

“the Chinese are not living it. Urban China is a society of miserable egoists who feel manipulated by forces beyond their own control. Their life does not feel like national rejuvenation. Xi’s attack on the spontaneous order of the market place is an attempt to bring propaganda and reality closer in line. He seeks to rein in the forces that threaten the Dream while there is still time to do so.”

Most poignantly, Greer writes:

“A people whose national anthem begins with the words “Stand up! You who refuse to be slaves!” now finds themselves trapped in a billion-man rat race.”

Struggle and Meaning

Re-reading Fukuyama’s End of History and the Last Man, I was struck by a quote the author mines from de Tocqueville’s Democracy in America (written in the early 1800s..) that speaks precisely to what Greer writes about: the phenomena of atomization and disillusionment under capitalism. De Tocqueville offered this quote as a premonition of the forces that may lead to despotism under democracy, and while it’s quite applicable to contemporary life in the US, it seems equally applicable to the PRC as well:

“The first thing that strikes the observation is an innumerable multitude of men, all equal and alike, incessantly endeavoring to procure the petty and paltry pleasures with which they glut their lives. Each of them, living apart, is as a stranger to the fate of all the rest, — his children and his private friends constitute to him the whole of mankind; as for the rest of his fellow-citizens, he is close to them, but he sees them not; he touches them, but he feels them not; he exists but in himself and for himself alone; and if his kindred still remain to him, he may be said at any rate to have lost his country.”

The US has a motto that embodies the idea that, at base, people are yearning to breathe free. When one stares at the world wrought—intentionally as much as unintentionally—by Liberal democratic capitalism, as de Tocquevillle recognized even in the early 1800s, one sees a world characterized by increasing atomization, loneliness, and vapid consumerism. Yet as Fukuyama argues in his book, humans innately desire more than isothymotic sameness, they desire to strive and struggle for something meaningful—for something more than mere hedonic contentedness. Fukuyama feared that at the End of History, when liberal democratic capitalism had won its final ideological battle, people driven on by this urge would revolt:

“If men cannot struggle on behalf of a just cause because that just cause was victorious in an earlier generation, then they will struggle against the just cause. They will struggle out of a certain boredom: for they cannot imagine living in a world without struggle.”

I think Greer is right in diagnosing in Xi and the Party leadership a dislike of the ‘spontaneous order’ of the market that sucks time, energy, and resources into Red Queen dynamics that seem to serve no greater purpose than ‘to procure the petty and paltry pleasures with which [people] glut their lives.’ But Greer’s analysis does not go far enough.

Under Xi, the Party is not just interested in reining in ‘disorderly capital’ in private industries, he is actively striving to harness and redirect the populace’s innate desire for meaning and worthwhile struggle toward something aspirational. Which is why I find the Batson/Naughton interpretation more compelling when it comes to understanding common prosperity: Xi and his Party-state are helmsmen actively trying to mobilize, unite, and steer their country in a particular direction. In goading the populace into a collective sense of mission, Xi is grappling with that quandary raised in the End of History, which is in fact a defining question of our globalized, consumerist, postmodern era. What makes the suffering innate to human existence bearable? What can valorize the innate human desire to struggle for something greater than oneself? What gives life meaning?

In the PRC, the question becomes more poignant when juxtaposed with the Party’s own revolutionary history. Did the Party overthrow the big comprador bourgeoise and feudal oppression just to establish a country with among the greatest inequality in the world, ruled by a red aristocracy, wherein the average urbanites’ lived experience is of toiling endlessly (九九六/996 becoming 零零七/007) to simply stay in place (i.e. involution 内卷化)? Some people argue that the lying flat movement (躺平运动) isn’t fundamentally political, and from the point of view of the participants that’s probably right. But from the point of view of Party leadership, disillusioned youth ‘checking out’ is a gut check.

Common prosperity is about ‘reining in’ certain parts of the private sector, yes, and it is about addressing the PRC’s gilded age, yes. But it’s also entwined with inspiring people and innervating within them the notion that there still exists a worthwhile, collective, meaning to life. Something that is worth struggling for and remaining faithful to.

Does this sound melodramatic? Perhaps! But consider this 2018 piece from Xinhua titled “Struggle is Happiness.” It reads similarly into Xi Jinping’s vision—tying together themes of struggle, meaning, and economic reform:

“"A great cause is great not only because it is just and grand, but also because it is not plain sailing." in the dictionary of the great rejuvenation of the Chinese nation, there has never been the word "easy". For this reason, general secretary Xi Jinping pointed out that struggle is happiness, and struggle is also arduous, long-term and tortuous. Without hardship, it is not true struggle. The reason why the spirit of struggle is valuable is that the more we face difficulties and contradictions, the more we can stimulate extraordinary strength. Shoulder a new mission and embark on a new journey. Facing many weak links such as insufficient development quality and efficiency, weak innovation ability and shortcomings in the field of people's livelihood, we need to "Maintain the style of hard struggle and guard against arrogance and impatience" and "in the spirit of time being of the essence" strive to better shoulder the mission entrusted by the times, as emphasized in the report of the 19th National Congress.”[2]

There’s even an entire e-reader titled ‘Happiness is Earned Through Struggle’ that builds on this premise, ostensibly to educate Party members on how struggle can help with all sorts of economic reform initiatives.

Tactics & The Importance of Unity

While neither analysts nor the Party likely have a precise definition of common prosperity, it seems to me that this is an emerging tactical campaign in the helmsman’s toolbox to gin up support amongst the populace as he steers the ship of Party-state toward his and his Party’s long desired ends. This is my heuristic for understanding common prosperity. While Logan Wright is quite correct in noting that Beijing is groping for a new way forward, to me it’s principally a question of tactics, not of strategy and certainly not of ends.

Common prosperity is, like so many other tactical campaigns in PRC history, part of a broader *strategy* of figuring out how best to *unite* the people—given the particular circumstances of the era—in achieving the *’common’* ambition of the Party-state. This is why grand steerage works well as an analogy. Lest you are unfamiliar with the longstanding concern of uniting the people, I offer these quotes I assembled from a past essay on atomization—they are very much worth reading:

"Despite four hundred million people gathered in one China, we are, in fact, but a sheet of loose sand [yipan sansha (一盘散沙)]. We are the poorest and weakest state in the world, occupying the lowest position in international affairs; the rest of mankind is the carving knife and the serving dish, while we are the fish and meat…If we do not earnestly promote nationalism and weld together our four hundred millions into a strong nation, we face a tragedy–the loss of our country and the destruction of our race." —  Sun Yat-sen

"Loose grains of sand cannot be tolerated" — Chiang Kai-shek

"It is only through the unity of the Communist Party that the unity of the whole class and the whole nation can be achieved, and it is only through the unity of the whole class and the whole nation that the enemy can be defeated and the national and democratic revolution accomplished." — Mao Zedong

“Government, army, society and education — east and west, south and north, the Party leads all” — A Mao era phrase now quoted by Xi Jinping

Our mission "requires all the Chinese people to be unified with a single will like a strong city wall.” — Xi Jinping's vision, as he told “the broad masses of youth” in his Labor Day speech of May 2015

“We must unite the 1.4 billion Chinese people into a majestic and boundless force driving the great rejuvenation of the Chinese nation.” — Xi Jinping, in 2021 at the Party History Study and Education Mobilization Conference

Most recently, Xi repeated this theme of uniting the people in some variation nearly 20 times in his big centennial speech. Saying things like:

“The patriotic united front is an important means for the Party to unite all the sons and daughters of the Chinese nation, both at home and abroad, behind the goal of national rejuvenation.”

And

“All the struggle, sacrifice, and creation through which the Party has united and led the Chinese people over the past hundred years has been tied together by one ultimate theme-bringing about the great rejuvenation of the Chinese nation.”

And, of course, who could forget the following phrase that he repeated three times, with various endings attached?

“To realize national rejuvenation, the Party united and led the Chinese people in…”

Much like Marxism famously critiqued liberalism for only having a negative view of freedom—i.e. carving out an area wherein people cannot be coerced—I similarly believe Xi has a positive/aspirational view for how the Party is to cultivate and guide its populace, not just rein in the private sector. The routine omission of aspirations in analyses I think, in large part, stems from a similar issue pointed out by Dan Tobin: the tendency among analysts to sell the Party’s aspirations profoundly short, in arguing that their grandest ambition is merely to stay in power. Of course the Party wants to stay in power, but it also wants to build something for which it will be widely lauded and respected.

Shortly after the events of 6/4, Deng infamously said that the biggest mistake he and the Party made were in the realm of education. Patriotic education has been a consistent theme throughout Deng, Jiang, and Hu’s tenures, and it operates with the express goal of molding the worldview of PRC citizens so that they become not merely passive recipients of power, but active participants and supporters of the Party’s developmental ambitions. While making the PRC populace an active participant has been a continuing aim of the Party, it wasn’t successful under Jiang and Hu. Ergo the Tocqueville quote. Greer touches on these lived experiences in his piece. It’s something Xi Jinping is very concerned about in regards to the CPC’s 90 million cadres—at least if his writings are to be taken as indicative of his thoughts. In Governance of China and various other speeches (likely to be included in the 4th volume, which we all eagerly await!) he stresses repeatedly the importance of holding firm to ideals and being willing to struggle. I don’t think it’s a stretch to think he and other leaders would have looked favorably upon the parts of Li Guangman’s essay wherein he argues that ‘tittytainment’ (奶头乐) was a western conspiracy designed to distract the populace from more important things. The difference in this respect between Xi and his predecessors is not in kind, but degree: he wants the PRC citizenry even more actively engaged in ‘rejuvenating the Chinese nation’, ‘achieving the China dream’, and ‘building socialism with Chinese characteristics’.

The ends Xi seeks have been written ad nauseam in Governance of China and various other speeches: uniting the people to achieve the centennial goal and achieving the ‘Chinese Dream’ of rejuvenation! This is not a goal that simply emerged from nothing—it is one that he inherits from and shares in large part with Qing era reformers like Kang Youwei and Liang Qichao, from Sun Yat-sen in the Republican era, from Chiang Kai Shek and the Nationalists, through Mao and the CPC’s revolutionary era, and through Deng and the reform era.

Xi wants Sun Yat-sen’s ‘sheet of loose sand’ to actively participate in the Party’s ambitions, to find in common prosperity common purpose. I think this may also partially explain why the Party is largely willing to forego Western economists recommendations on efficiency and growth. In a very Maoist sense, Xi believes that if the people are properly energized, they can achieve amazing feats. (Mao famously thought revolutionary energy would unleash amazing results during the GLF.)

Xi is no Mao, though. In fact, Xi is far more similar to Deng, who similarly believed that a strong and disciplined Leninist Party was the quintessential ingredient for wealth and power. Xi, like Deng, has no interest in a chaotic mass of energized people ‘bombarding the headquarters.’ What Xi and the Party want is an energized populace ready and willing to follow guidance and actively participate in the building of a new ‘New China.’  That is, Xi wants to sublimate the innate human desire for greater purpose into serving the nation, according to his view of what serving the nation entails. Rather than authoritarian populism, one might call it Leninist populism.

With any luck, Xi and the CPC will have hit on a new tactic for success, combining some Maoist elements of mobilization with Deng era developmentalism and faith in the Party. Common prosperity is about facilitating the rise of a common sense of purpose—ensuring that the people, as de Tocquevillle warned, do not lose their commitment to country. Through energizing, cultivating, and uniting the citizenry with common purpose (especially urbanites), the Party believes it can best steer the PRC ship towards wealth and power. Grand steerage necessitates common purpose.

In the final analysis, then, might we say common prosperity joins the pantheon of slogans such as socialism with Chinese characteristics, the rejuvenation of the Chinese nation, and the Chinese Dream as the things Xi hopes provide reason for sacrifice, justification for struggle, and ultimately meaning in life?

P.s.

This has just been one analyst’s attempt to grope at the elephant of common prosperity.

[1] Per Ang, we (think we) know the Party wants to fight against corruption and decadence. Per Greer, we (think we) know the Party believes certain industries need to be reined because they  are not making people’s lives better. And per Batson & Naughton we (think we) know that the Party has larger political ambitions to increasingly steer society.

[2] Translated from the original Chinese:“伟大的事业之所以伟大，不仅因为这种事业是正义的、宏大的，而且因为这种事业不是一帆风顺的。”在中华民族伟大复兴的词典里，从来没有“容易”一词。正因如此，习近平总书记指出，奋斗是幸福的，奋斗也是艰辛的、长期的、曲折的，没有艰辛就不是真正的奋斗。而奋斗精神之所以可贵，就在于越是面对困难和矛盾，越能激发出非凡的力量。肩负新使命、踏上新征程，我们面对发展质量和效益不够高、创新能力不够强、民生领域存在短板等诸多薄弱环节，需要像十九大报告所强调的那样，“保持艰苦奋斗、戒骄戒躁的作风”，“以时不我待、只争朝夕的精神”更好担负起时代赋予的使命。

“I looked forward to the end of the Cold War, but now I feel disappointed. It seems that one Cold War has come to an end but that two others have already begun: one is being waged against all the countries of the South and the Third World, and the other against socialism. The Western countries are staging a third world war without gunsmoke. By that I mean they want to bring about the peaceful evolution of socialist countries towards capitalism.”

— Deng Xiaoping, 1989

A book was published arguing that the People’s Republic of China has an ambitious and long-established plan to displace America as the world’s sole superpower. This book, The Hundred-Year Marathon by Michael Pillsbury, was roundly criticized for its lack of rigor. Jude Blanchette, Freeman Chair in China Studies at the Center for Strategic and International Studies, offers a critique that can be viewed as representative: “Books that challenge the prevailing view on China are greatly needed… [o]ne can hope that such a book will come along in the near future, as it’s clear that The Hundred-Year Marathon is too replete with errors to inform.”

Six years later, it seems Blanchette’s hopes may have been answered. A new book, The Long Game by Rush Doshi, seeks to provide a more academically rigorous investigation into China’s grand strategy. Doshi, in the introduction, describes Pillsbury’s book as ‘overstated’, relying excessively upon ‘personal authority and anecdote’, and that while it may ‘get much right’, fails to be convincing due to being ‘more intuitive’ rather than ‘rigorously empirical.’ Doshi himself thus seems to be consciously intending his book as an update to Pillsbury’s 2015 effort (pg 8).

Pillsbury and his book Hundred-Year Marathon enjoyed substantial influence on the Trump administration’s views on the PRC—Trump described him as “probably the leading authority on China” and then Defense Secretary Jim Mattis brought the book with him on an official trip to China—though he never held an official position.  Meanwhile, as a star protégé of Kurt Campbell who runs Biden’s important Indo-Pacific team on the National Security Council, Doshi has earned an official position in the Administration as a co-‘China Director’ (along with Julian Gerwitz). The informal and formal ways in which Pillsbury and Doshi respectively advise the Trump and Biden administrations mirrors the nature of their books. Where one is informal and intuitive the other is formal and rigorous. The similarity that remains, however, is their general outlook on the PRC. Their subtitles, ‘China's Secret Strategy to Replace America as the Global Superpower’ (Pillsbury) and ‘China’s Grand Strategy to Displace American Order’ (Doshi) evince the shared nature of endeavor.

Beyond providing an improved version of Hundred-Year Marathon, Doshi’s work to map out the Party’s ultimate ambitions also serves to fill an emerging lacuna that is legitimately dangerous. With an academy increasingly characterized by narrow siloes of expertise, Alice Miller noted in 2018 that the China-watching community suffers “from a contemporary variety of what Chairman Mao might have described as “mountaintopism” (山头主义): analysts have command over their parochial base area of interest but lose track of the overall picture.” More pointedly, Dan Tobin argues in testimony to the US China Economic Security Review Commission, that otherwise excellent work “on Chinese politics explore the challenges of day-to-day governance and of crisis response, the mechanisms of domestic control, and the Party’s political succession processes, but have not provided students and U.S government officials with a sense of the strategic agency of the Party’s leaders.” An unsettling gap in analysis has thus emerged with respect to “an ‘ends-based’ research program on China that studies how Beijing conceives of great power competition.” As with Blanchette, so too with Tobin: Rush Doshi is answering.

Doshi doesn’t mince words when it comes to describing the Leninist nature and character of the Chinese Communist Party. Several times in the book he describes the CPC as a ‘centralized structure’ driven by a ‘vanguard’ elite shot through with ‘ruthless amorality’ (pg 10 & 44). Such declarations by Doshi, though, are not flippant assertions. Citing Franz Schurmann’s classic ‘Ideology and Organization’ he argues the CPC has consistently relied on a highly realpolitik Leninism to guide its practice, i.e. ‘the principles of organization related to gaining and wielding power that have endured even as Marxism has withered.’ (pg 32). A quote from Zhao Ziyang drives this home: ‘Deng regarded a system without restrictions or checks and balances, and with absolute concentration of power, as our overall advantage… he adored the high concentration of power and dictatorship’ (pg 25).

Leninism, for Doshi, remains the key to understanding the ‘how’ of the PRC’s ambitions to displace American Order. However, in Doshi’s view, Marxism does not now–if it ever did–appear to truly inform the Party’s ultimate aims and ambitions. Rather, drawing from Orville Schelle and John Delury’s book Wealth and Power, Doshi argues the Party is and mostly has been an explicitly nationalist party aimed at restoring—‘rejuvenating’, per Party parlance—the grandeur of the Chinese nation. He buttresses his case that great power nationalism is the Party’s ultimate ambition by quoting all Party leaders’, from Deng onward, consistent repetition of the desire for ‘rejuvenation’, which is itself a goal inherited from the Qing-era / early Republic reformers who raged against their states’ impotence in the face of colonial depredations.

In making his case that the PRC does in fact have a grand strategy to displace American order, Doshi relies on two pillars: social science and Pekingology. His first pillar, an explicitly social scientific framework, relies on two rigorously defined core theoretical concepts, international order and strategy, as well as a main interpretative framework. Doshi’s theoretical concepts argue that state’s exist in a hierarchical, not anarchical, international system wherein a leading state enacts and enforces norms and values. Competition over leadership of the international order is thus a zero-sum conflict, as it is over a positional good. Following on from that, Doshi argues that great power states use systematic approaches to achieve security and autonomy related ambitions, i.e. a grand strategy, which for great powers entails striving to gain leadership of the international order.

Doshi’s interpretative framework, meanwhile, is a matrix categorizing the CPC’s grand strategic intent across time based on two things: its perceptions of relative power differential between itself and the US, and the CPC’s threat perception of the US. On the back of this matrix, Doshi argues that ‘shocking’ events have catalyzed three drastic changes in CPC power and threat perceptions, and thus in the Party’s grand strategy, in as many decades.

The first major turning point Doshi identifies comes in the late 80s/early 90s, following Tiananmen, the collapse of the CPSU, and the first Gulf war. While the CPC’s perceptions of a vast power differential between itself and the US remained stable, its perception of threat from  the US altered radically, leading to its first grand strategic shift away from an ‘accommodationist’ disposition to US-led order and toward a ‘blunting’ strategy which sought to quickly limit US capacity to infringe on China’s autonomy. Second, in 2008, while the heightened threat perception remained, the US-centered Great Financial Crisis led the to a decisive change in the CPC’s perception of power differentials, which induced a shift from its ‘blunting’ strategy and toward a regional ‘building’ strategy that saw Beijing begin development of the institutional basis for its own order. The third and final shift, according to Doshi, begins a mere eight years later with Brexit and Trump’s election—intensifying due to the West’s coronavirus mishaps in 2020—which again altered Beijing’s perception of relative power and triggered a shift from ‘building’ to global ‘expansion’.

To back out these key turning points in CPC perceptions of US power and threat, Doshi relies on his second pillar: Pekingology, which Alice Miller describes as ‘Kremlinology with Chinese characteristics’ and Simon Leys memorably characterized as “the art of interpreting nonexistent inscriptions written in invisible Ink on a blank Page.” In normal language, it is the systematic excavation of authoritative Party documents and speeches for insights into the otherwise black-box of Communist Party elite thinking. It requires familiarity with the arcane yet loaded language the Party communicates with internally. Doshi ‘makes use of an original database of  Chinese Communist Party documents’ (pg 3) to undertake a careful reading of authoritative Chinese sources from periods both immediately preceding and following the major world events noted above, conducting what amounts to a ‘Pekingological’ regression discontinuity design.

This clearly articulated methodology is an important contribution Doshi introduces into the debate on China’s grand strategy. In particular, his efforts to move beyond generic ‘hide and bide’ and ‘striving for achievements’—and the overwrought and likely misleading focus on Xi Jinping’s personality—and into specific articulations of when, where, how, and why CPC elites changed their grand strategic orientation, allows for falsifiability and productively furthers our understanding.

More than giving an academic treatment to the subject of China’s grand strategy, though, Doshi truly hopes to persuade. He juxtaposes his own viewpoint against ‘skeptics’ who reject the idea that the PRC has a grand strategy aimed at displacing the US. In particular, he singles out Michael Swaine, who wrote in Foreign Policy in 2018 that “[one] hugely distorted notion is the now all-too-common assumption that China seeks to eject the United States from Asia and subjugate the region. In fact, no conclusive evidence exists of such Chinese goals.” One core purpose of Doshi’s book, then, is to convince the likes of Swaine of the ‘true’ nature and character of China’s grand strategy.

Critiques

Yet, for a book slavishly devoted to dissecting the pronouncements and thinking of Chinese Communist elites, it is somewhat surprising to find missing from The Long Game any substantive discussion of the complex heritage and contemporary influence of Mao Zedong and Karl Marx. Throughout the book, Doshi purposefully glosses over the Mao era and similarly  discounts entirely the relevance of Marxism to the Party’ s ultimate aims. Yet, Xi Jinping’s speeches as well as the Party’s constitution routinely stress the continuing relevance of Marxism and Mao Zedong Thought. Though plausible that Mao and Marx effectively exert little influence on Party leaders thinking despite Xi Jinping’s frequent assertions to the contrary, it is noteworthy that Doshi fails to explain this away. How can we really be sure that such routine topics in Party discourse don’t influence Beijing’s ambitions and strategy? Does not this omission indicate potential blind spots in Doshi’s analysis? Consider, for example, Julia Lovell’s take:

“few of Xi’s headline approaches are particularly new: the CCP has been openly promoting nationalism since the 1990s…'Socialism with Chinese characteristics’ has, again, been in the mainstream of political discussion since the 1990s…Yet Xi does have one stand-out innovation. Emulating Bo Xilai’s invocation of Maoist themes, Xi has, for the first time since the Chairman’s death in 1976, reinserted into the mainstream of Chinese national life some of the symbols and practices of Maoist politics. After some forty years of post-Mao reforms china remains socially, economically, and culturally hybrid, but Xi’s repertoire for political control is resurgently Maoist” (pg 444).

Such notable omissions by Doshi may call into question the more general endeavor of Pekingology itself: the subjectivity of it perhaps necessarily involves weaving a partial and incomplete story.

The most predictable critique of Doshi’s book, though, will likely come from those whom Dan Tobin critiques in his USCC testimony. Many academics continue to advocate, in what is now a rear guard battle, for seeing Beijing as fundamentally more reactive than proactive. This strand of thinking is succinctly captured in well-worn, and oft cited, phrases like ‘fragmented authoritarianism’ and within scholarly work on center-local relations—in books with descriptive titles such as Jae Chang’s ‘centrifugal empire’—which see a centralized Party apparatus beset by problems and routinely incapable of coherently devising or implementing strategic plans. While Doshi goes through pains in the book to argue that foreign affairs is an area wherein the center can lead in a uniquely unitary and strategic manner, his decision to elide discussion on complications wrought by the PRC’s plurality of actors—SOEs, provincial governments, private companies, etc.—and the various domestic drivers of behavior will justifiably come in for scrutiny.

This leads to perhaps the most fundamental critique one might leverage at Doshi’s book. In largely neglecting domestic drivers of behavior, Doshi may misattribute to grand-strategic calculations fueled by relative power and threat perception what are better ascribed to domestic political exigencies. Of particular import is the growing need to keep the Party organization itself unified, disciplined, and fundamentally in control.

As many scholars have noted, Xi Jinping came into power with a mandate to consolidate the increasingly ‘fragmented authoritarian’ system that had evolved over several decades of reform and opening. To do so, however, would require struggle, mobilization, and a re-consolidation of discipline within the Party, things that have indeed proven to be Xi’s primary focus areas. One angle that Doshi might have approached this from is re-centering what has long been a prime directive of the Communist Party of China since Mao. Building on Lenin’s ‘Who, Whom?’ distinction, Mao famously wrote that the prime directive of the revolution must be to always ask and evaluate: “Who are our enemies? Who are our friends?” Indeed, it is this deeply tribalizing type of politics—the invocation to a constant fear of an enemy without and within—that has historically provided the animating force necessary to hold together a centralized, Leninist, single Party. It is not surprising, then, to learn that today’s leaders of China’s Leninist Party—a Party deeply concerned with history, particularly the history of the fall of the Soviet Union—may be reviving that unifying sort of paranoid passion that comes from stoking an ‘us vs them’ dyadic political struggle.

Mao, just after bombing the Jinmen and Mazu islands to create tension and mobilize the Party for the Great Leap Forward, wondered:

“Is it true that tension always harms us? Not exactly, in my opinion. How can tension benefit us instead of harming us? Because tension … may serve to mobilize forces and awaken inactive strata and intermediate sections. The fear of atomic war demands a second thought. Just look at the shelling of Jinmen and Mazu islands … Such a few shots and there was such a drastic storm and the towering smoke of gunpowder. It is because people fear war, they are afraid of disasters the United States might randomly cause … Lenin touched on this when referring to war, saying that war rallies people and intensifies man’s mind. There is no war now, of course, but the tension of military confrontation can also mobilize positive elements, as well as set inactive strata to thinking.”

Viewing developments under Xi as a response to the fragmentation of the Party and its weakening grip on Chinese society helps explain an unaddressed inconsistency in The  Long Game. At the beginning, Doshi suggests that ‘grand strategy is rare’ and ‘changes in grand strategy are rarer.’ He then argues, however, that the PRC’s grand strategy has radically changed three times in as many decades. The contradiction here is never fleshed out. And while the first two shifts in grand strategy, from ‘accommodation’ to ‘blunting’ and from ‘blunting’ to ‘building’, are spaced out, the third shift from ‘building’ to ‘expansion’ is perplexing in its speed, occurring after a mere eight years. Doshi’s intense focus on how Brexit, Trump’s election, and the coronavirus pandemic shifted Beijing’s external perceptions may not provide an entirely convincing account of this rapid shift. A more convincing analysis might also take into account domestic exigencies, such as the CPC’s fear of a fragmenting Leninist Party. In heightening external tensions by shifting into a global ‘expansion’ phase, Xi Jinping and the CPC may be pulling a page from Mao to purposefully heighten tensions and bring about a tribally-induced Leninist unity.

Such a critique is not ultimately incompatible with Doshi’s fundamental argument over Beijing’s intent to displace American order. Indeed, Xi and the Politburo probably view a tension-heightening rush toward the center of global governance as a Party-consolidating expedient that is simultaneously simpatico with his and his Party’s ultimate ambition to once more sit, rejuvenated, atop a China-centered order. But interpreting this seeming rush to the center as a response to domestic exigencies does complicate Doshi’s narrative on Beijing’s grand strategy. It also suggests that even if we fully accept Doshi’s argument regarding Beijing’s grand strategy, we should be skeptical in its ability to carry it out. As analysts such as Ryan Hass have written, the PRC is not ten feet tall. It is truly beset by problems, perhaps the most fundamental, or at  least what Beijing sees as most fundamental, is the need for Party unity. Without a congealed Leninist system, as Doshi himself writes, Beijing’s grand strategy cannot be operationalized.

Conclusion

As Blanchette foreshadowed six years ago, this is the kind of book that many China policymakers have been eagerly awaiting. The Long Game is a rigorous and authoritative treatise on what the PRC wants and how it intends to get it. It is in key ways precisely what The Hundred-Year Marathon was not. China doyens have lined up to review the book favorably, including Susan Shirk, who called it an ‘instant classic’ that persuaded her to re-examine her own view that ‘China’s aims are open and malleable.’ It will be the talk of the town this summer in DC’s foreign policy circles. More consequentially, given Doshi’s position as China director on the Biden Administration’s NSC, it may offer substantive insights into how the US has been and will be handling its affairs with the PRC. Whether you agree or disagree with Doshi’s premise, the book is well-worth reading. And even if you don’t read it, you can be sure the PRC’s America watchers will.

⚠️ Reader discretion advised: this is a long essay on an academic subject ⚠️

Part 1: The Maoist Heritage

Can a Leninist single Party move the People’s Republic of China (PRC) toward an innovation-led economy? It’s a question whose answer the Communist Party of China (CPC) very much hopes is yes. It’s also a question I wrote a long essay about a year or so ago. I didn’t arrive at anything approaching a decisive conclusion, but I did lean to one side. A year on, and I’m tempted to lean in more. 

There’s this idea, perhaps most cleanly formulated by economist William Baumol, that entrepreneurs are always with us seeking out wealth and prestige in its various guises. It’s just a matter of how society's entrepreneurial energies are funneled. Under a Leninist party, the incentives for entrepreneurial rent-seeking via state-patronage are high—and that is likely to complicate a state-led push toward an innovation-led economy.

Yet, intriguingly, while Xi Jinping is gearing up for a big state-led innovation push, he doesn’t seem too concerned about entrepreneurial rent-seeking. As the Atlantic recently reported, Xi “told entrepreneurs to model themselves on Zhang Jian, an early-20th-century businessman who made substantial amounts of money not by innovating, but by sucking up to China’s government.”

We don’t have to merely take Xi at his word. In fact, his policies and actions have been consistent in their intent to increase Party-state influence over and within the private sector. And even more, we can look at research that is finding that entrepreneurs are spending more and more of their time schmoozing with the Party, rather than doing innovative work. Many signs point toward the Baumol-based hypothesis that the Leninist single Party is like a black hole at the center of the universe systematically pulling entrepreneurial incentives away from the market and toward itself.

But what does this have to do with a ‘dialectic of development’? 

Xi Jinping’s much advertised push for an indigenous innovation oriented economy doesn’t merely impact entrepreneurs. As the cornerstone of Xi Jinping’s emerging political economic model and his massive industrial strategy, its efficacy has ramifications for the entirety of the Chinese populace. Whether it is successful or not matters not just for wealthy urbanites, but also for the hundreds of millions of China’s still impoverished rural citizens. This is where the dialectic of development comes in. Xi Jinping’s newest industrial strategy, his eager desire to build up an indigenous innovation based economy, is the newest fusillade in an ongoing saga that pits the PRC’s urban and rural development in dialectic antagonism.

Lenin, Stalin, Mao and Internal Colonization

Leninism is an ideology created in ostensible opposition to imperialism and colonialism. Indeed, its primary ideological extension of Marxism was arguing that exploitative, bourgeois countries can sustain capitalism by extracting ‘super profits’ via their colonial possessions, sending them back to the metropole wherein elites could then buy off the proletariat. Capitalist exploitation under Marxism-Leninism was thus a global phenomenon that saw inherent conflict—a dialectic—between capitalist exploiter countries and pre-industrial exploited countries. In Lenin’s view, he could undermine this system by exporting revolution around the world, which would result in ‘progressive’ uprisings that would end the super profits sustaining capitalism and thus bring capitalism’s entire exploitative edifice crashing down. 

It is more than a bit ironic, then, that Lenin’s Communist Party of the Soviet Union (CPSU) would resort to what can only be described as internal colonization to support its own existence. Alvin Gouldner, a once well-known American sociologist and activist, cogently described this phenomena that began under Lenin but became fully formed under Stalin: 

“At first largely dominated by highly educated revolutionary intellectuals of predominantly urban origins, the party leaders barricaded themselves in the towns and cities against the rising resistance of the vast rural majority. The fundamental structure, then, was not simply one of a "differentiation" between town and country, but of a sharp and growing cleavage between them. What had been brought into being was an urban-centered power elite that had set out to dominate a largely rural society to which they related as an alien colonial power ; it was an internal colonialism mobilizing its state power against colonial tributaries in rural territories. Here, internal colonialism refers to the use of the state power by one section of society (the Control Center) to impose unfavorable rates of exchange on another part of the same society (e.g., the Subordinate Remotes).”

He goes on:

“In effect, [one of the CPSU’s key theorists developed] a deliberate policy of internal colonialism in which "exploitation" of the peasantry was expressly foreseen. While rejecting looting, in principle, [this CPSU theorist] held that "the idea that a socialist economy might be developed without tapping the resources of the petty bourgeois and, above all, of the peasantry can only be described as a reactionary petty bourgeois daydream." Obviously, however, once Soviet agriculture had been collectivized, what was involved was not the exploitation of pre-socialist forms but of a socialist system and it cannot, then, be characterized as "primitive socialist accumulation," in [the theorist’s] sense. It is more accurately described as an internal colonialism.”

Mao’s Industrial Policies Set the Stage

Gouldner’s excellent analysis of the CPSU’s internal colonization, however, is left wanting when it moves into a comparison between Maoist PRC and the Soviet Union. While he rightly acknowledges that the relationship between the Party-state elites and the peasants was quite a bit more amicable in the PRC prior to 1957, he utterly fails to recognize the analogous colonization that would in fact come to characterize the peasant-state relationship during the Great Leap Forward. 

Thomas Bernstein, Professor Emeritus at Columbia and expert on communist systems, writing six years after Gouldner in 1984, aimed to correct Gouldner’s unconvincing comparison. Bernstein first acknowledges key differences between the CPSU and the CPC: 

“The relationship between the Maoist state and the peasantry has long thought to have been very different from the Stalinist case, and with good reason. Relations between the Chinese Communists and the peasants had substantial cooperative and not just adversary components, stemming from a convergence of factors that ran in the opposite direction from those that operated in the Soviet Union. The Chinese revolution was based on the peasantry. In the revolutionary process, the Communists secured significant peasant support and rural organizational capabilities, which were successfully adapted to socialist transformation. Elite attitudes were not anti-peasant and there was an undoubted commitment to the improvement of peasant welfare. Most important, China's economic development problem dictated moderation in the use of agriculture to promote industrialization. Given low per capita output and rapid population growth, the central problem was not simply extraction but development, which in turn required attentiveness to peasant incentives.”

However, Bernstein then goes on to strongly suggest there’s more ‘there there’ than Gouldner believed:

“The Great Leap Forward—an unprecedentedly intense mobilization effort launched in 1958 to achieve a developmental breakthrough—suggests that the prevailing image of Maoist China as differing fundamentally from Stalin's Russia must be reexamined.”

Indeed, despite the much less antagonistic disposition of the Communist Party of China toward the peasants, and as Bernstein foreshadows, a distinct yet recognizable form of internal colonization would emerge in little brother Maoist PRC, just as it had in big brother Soviet Union. Consider this description of life during the rush to ‘socialist collectivization’ in the PRC in the mid 1950s:

“The militia movement and a small corps of trained fighters brought military organization to every commune. All over China farmers were roused from sleep at dawn at the sound of the bugle and filed into the canteen for a quick bowl of watery rice gruel. Whistles were blown to gather the workforce, which moved in military step to the fields, carrying banners and flags to the sound of marching songs. Loudspeakers sometimes blasted exhortations to work harder, or occasionally played revolutionary music. Party activists, local cadres and the militia enforced discipline, sometimes punishing underachievers with beatings. At the end of the day, villagers returned to their living  quarters, assigned according to each person’s work shift. Meetings followed in the evening to evaluate each worker’s performance and review the local tactics.

Labour was appropriated by the communes, men and women being at the command of team leaders, more often than not without adequate compensation. Explained party secretary Zheng Xianli in Macheng: ‘Now that we have communes, with the exception of a  chamber pot, everything is collective, even human beings.’ This was understood by poor farmer Lin Shengqi to mean: ‘You do whatever you are told to do by a cadre.’ Wages, as a consequence, were virtually abolished. Members of a production team, working under the supervision of a squad leader, were credited with points instead, calculated according to a complex system based on the average performance of the team as a whole, the job carried out and the age and gender of each worker. At the end of the year, the net income of each man was distributed among members ‘according to need’, and the surplus was in principle divided according to the work points that each  had accumulated. In practice a surplus hardly ever existed, as the state came in and took the lot. Work points, moreover, devalued rapidly during the Great Leap Forward” (Dikötter, The Tragedy of Liberation, pp. 44).

Such was life for many of China’s hundreds of millions of peasants in Mao’s communist utopia. Mao routinely made paeans to the peasants in speeches and writings. He even, after copying it verbatim during China’s first five year plan (FFYP),  ridiculed the Stalinist model and its tactic of rushing toward industrialization. As Bernstein notes of Mao: 

“The Leap was Mao Zedong's effort to chart an independent developmental and ideological road by breaking with the preceding years of emulation of the Soviet model. "Why can't we innovate?" Mao exclaimed in 1958." But Mao Zedong also became a penetrating critic of the realities of the Leap, and it was he who in early 1959, during a first phase of retrenchment, pointed to similarities with Stalinism on the issue of concern here, that of squeezing the peasants: We should make a comparison between Stalin's policies and our own. Stalin had too much enthusiasm. With the peasants, he drained the pond to catch the fish. Right now, we have the same illness.'”

It’s ironic that Mao would make such a protest just before he would go on to push his country into the most insane rush to industrialization of all time—making the same Stalinist mistakes on an even grander scale. As he song peasant praises, he simultaneously wrung them dry for the sake of rapid industrialization.

A dialectic relationship is perhaps hard to distinguish from schizophrenia, particularly when it characterizes an individual’s personality. The constant negotiation, back and forth, teeter tottering between oppositional ideas. So it was with Mao and the peasants, and his views on industrialization. Mao’s claim to distinctness among the Marxist camp was his unique reliance on and championing of the peasants. Yet he created a system and pushed his lieutenants to exploit the peasants nearly as ruthlessly as the Soviet Union did. He similarly talked a good game about agrarian reform and helping peasants maximize their yields, while entirely failing to do so in practice. Instead, he forced them into mass starvation by goading cadres to force peasants into half-baked industrialization schemes like backyard iron-smelting, and shoddy irrigation and public works projects. Rather than simply encouraging them to feed themselves and produce the agricultural surplus that is necessary for—and indeed would prove crucial for China’s—economic development, their labor was expropriated and ultimately wasted more aggressively than any capitalist system has ever achieved.

Mao was also known to be genuinely more motivated than his guru, Josef Stalin, about egalitarianism. Stalin, perhaps due to Russia’s relative proximity to an already developed Europe and the exigencies of a looming war, unrepentantly prioritized national development over and above egalitarian concerns. As Bianco puts it in his book comparing Stalin and Mao: 

“Mao was more faithful to the October ideals. Faithful and inconsistent, for he wanted everything at once: a great powerful and egalitarian nation...Unlike Stalin, Mao did not subordinate one end (social equality) to another (development), instead he tended to emphasize the former to the detriment of the latter. More often as not, wanting to believe that everything was possible, he gave up nothing and got nowhere” (Bianco, Stalin & Mao, pp 324).

Here again, then, a dialectical relationship juxtaposes the peasants and rural well-being with concerns over industrialization. Sadly, contrary to the Hegelian and Marxian dialectic wherein antithesis and thesis combine to promote a productive synthesis, such a dialectical relationship under Mao’s PRC produced nothing but failure. Not only did the PRC fail to develop—the poorest segments by the time of Mao’s death were actually worse off than they were in 1933—but inequality between rural and urban expanded, although given the overall impoverishment one won’t be surprised to learn the inequality was relatively constrained, with a 3:1 rural-urban income ratio. As Bianco explains again, while post-Mao PRC has evolved into one of the most unequal countries in the world, one might 

“be tempted to blame this on Mao’s successors, so-called Thermidorians who betrayed Maoism and the revolution. In fact between 1978 and 1985, those successors began by reducing the most glaring inequality of all: the chasm between city and country dwellers, but then proceeded to increase it further. Contemporary inequality, in part inherited, is growing within a framework, and thanks to a system, erected by Mao. During his lifetime there had been relative equality within each of the two universes (the privileged urban one and the miserable rural one), which scarcely concealed the poverty in both cases. In all, Mao lost on both counts” (Bianco, Stalin & Mao, pp 36).

What happened under Mao in the PRC is something that only a term like ‘internal colonization’ seems apt to describe. As Bianco explained, and as Dikötter showed in his gripping book on Mao’s Great Leap Forward, the contemporary roots of the PRC’s massive urban-rural inequality stretch back to this era. During his post-civil war land reform, Mao helped deliver the peasants a more equal distribution of land—albeit in a bloody campaign that killed roughly 2 million ‘landlords’ (via arbitrary quotas that often resulted in random murders), operated as a mechanism of social control that was effectively a pact sealed in blood between the peasants and the party.

But then Mao took all the land away and nationalized it during the fastest collectivization ever seen.

Legacies from this era linger on. The PRC’s 600 million+ rural residents do not own the title to their lands, and have no rights to sell it, making it expressly difficult to accrue wealth. As Rhodium Group noted in early 2021:

Land reform never got off the ground. While the 2013 Third Plenum promised to allow rural residents to sell their land through markets, authorities have only piloted this reform in 33 counties, accounting for just 0.1% of China’s total rural nonagricultural land.

Further, during this period, Mao implemented internal passports called hukou, designed to lock-in populations for control and planning purposes and which still exist today as a massive barrier to mobility.

Part 2: A Living (and Growing?) Legacy

When Other’s Finally Stood Up, Rural China Sits Back Down

The rise of the rural laborer in the PRC begins with his reclaiming of family farming. That rise in yield freed him from the depravations of hunger and furnished him with sufficient surplus to begin building what would really ignite the PRC’s early post-Mao growth: township and village enterprises. These crude start up firms were able to eat off the plate of the extremely inefficient state owned firms, and set the stage for the PRC’s growth miracle.

And yet, despite this peasant fueled growth miracle, throughout reform and opening the central government’s policies never changed to secure the peasants’ ability to prosper. Hukou was kept in place, land rights were never established, and education and social policies—one of the strong points under Mao, even if still lagging in rural areas—were severely underinvested and left to languish. Still today, if you live in a city in the PRC today without the proper hukou, you cannot receive social benefits such as healthcare nor can your children attend public schools in the area, which has led to a large phenomena of ‘left-behind’ children in the countryside.

Instead, just as the central government under Mao worsened the rural populace’s plight by forcing local lieutenants into ‘target inflation’ races and incentivizing unrealistic schemes for advancing industrialization, the PRC’s post-Mao central government has actively undermined its rural populace. In addition to the problems described above (lack of land rights and hukou), the center has actively encouraged local governments to quite literally steal rural farmers’ land. As many scholars have argued, the primary culprit for this likely lies in ““the changing fiscal incentives [i.e. the 1994 & 1995 centralizing tax revenue changes that] might have caused local governments to shift their efforts from fostering industrial growth to “urbanizing” China, for instance, by developing the real estate and construction sector.” This also touches on some of the other perverse political economic incentives at play, discussed in this paper and in a previous post.

At bottom, though, is a human tragedy.

It’s a little known fact that the Chinese countryside is a hotbed for self-immolations. Not only are rural inhabitants denied the ability to use their land to accrue wealth—either as collateral for loans or via leasing, but even worse they are actively forced to surrender their only source of cash flow, often brutally by local government hired criminal groups. As a result, rural denizens have been documented to kill themselves via self-immolation by the dozens annually. And that’s just the tip of the iceberg. There are undoubtedly more, and many others who die in less shocking fashion but of whom we simply cannot know. The reason we cannot know is the same, obvious, reason many of the darker sides of the PRC cannot be fully ascertained.

Ultimately, just as the rural populace was beginning to stand up and get rich, they were effectively forced to sit back down. Joe Studwell sums up this whole tragedy eloquently in his book How Asia Works:

“There will likely be a clamp-down on household farm land conversions to commercial agriculture but, unless China’s local government funding problem is resolved, the fiscal pressure to squeeze farmers (and their money-remitting offspring) will remain. The Chinese farmer is a long-suffering beast who, down the ages, has been repeatedly mistreated by his urban masters. In recent times, it was his support which ensured the communist revolution. Left to his own devices he produced a brief output boom, still remembered by older Chinese as a golden era, between the end of the Second World War and the start of collectivisation in 1956. Following various Maoist misadventures, in the 1980s he brought China back from the brink, ramping up agricultural output during an era that also saw the country's most competitive businesses created in rural areas. Huge companies like off road vehicle maker Great Wall Motor...leading car parts maker Wanxiang, top beverage firm Wahaha, and Broad Air Conditioning...sprang out of the countryside in the 1980s. And then, at the stage when landowning farmers in Japan, Taiwan and Korea were getting used to four-wheel drive cars and holidays at the seaside, local government started to take away the Chinese farmers fields to satisfy its fiscal deficit and the greed of village cadres. Central government, which did not finance local government adequately, looked on and said it was all a terrible shame. Now, once again, the Chinese farmer is constrained to fulfill his traditional role and, as the Chinese idiom has it, eat his bitterness.”

Don’t China Model Me

The comparison between the other North-east Asian states is salient. Far from pioneering a ‘Chinese model’, I’d argue the PRC rather switched from a Stalinist developmental model imported almost whole-sale under Mao, to a Meiji Japanese development model imported almost whole-sale under Deng. People can and will quibble about differences, but key facts are plain as day: the most important elements of the Japanese development model—i.e. land redistribution & state-led investments in improving yield, export-oriented manufacturing industrial policy, and a concerted effort to force up savings and funnel those savings through a state-led financial apparatus relying on financial repression to fund both (though the banks in Japan were not fully government owned and controlled). Sadly, unlike Taiwan, South Korea, and Japan, the PRC’s dialectical development would prove, yet again, to militate against a real peasant uprising (this time in material well-being). 

The Rural Urban Divide

Scott Rozelle’s recent book Invisible China packs a life-time of first-hand experience in the Chinese countryside into a plaintive call for action regarding rural-urban inequality in the PRC.

In short, the central government is not making the investments necessary to uplift the rural community who have, in contemporary Chinese history, been soaked again and again for the purposes of industrial development. As a result, education inequality between rural and urban has metastasized, as have issues related to health inequality and income inequality. The dialectical development of industry in the PRC has always seemed to come at the expense of the rural population.

Why? It’s largely about stability, control, and great power status. A dispersed rural populace is easy to control and hide, whereas a centralized urban populace requires much greater care and consideration. This is one of the reasons Mao was fond of sending people back to the countryside in the millions. And it’s one reason why the CPC still has hukou restriction in place stopping rural citizens from moving to cities. Further, institutionalizing the right of rural citizens to the title of their land would give them a degree of autonomy that would fundamentally erode the power of the state, and would forestall local and central government ability to requisition their land on the cheap. Rural wealth and well-being would necessarily come at the expense of the CPC’s voluntarist inclinations. 

And so the rural-urban divide has only grown exponentially more drastic since Mao—when it was a relatively benign 3-fold difference in income inequality, which owed mostly to the lackluster urban economy. The CPC tries to resolve this dialectic via its preferred route: state-led voluntaristic development projects like ‘develop the west’ which sees state-owned companies financed by state-owned banks plow billions into expensive yet questionable physical infrastructure in poor provinces. Such projects have the added benefit of juicing GDP by creating economic activity, though like many such investments in the PRC, generously tack onto the debt load. What these development projects can’t do, however, is actually develop the rural areas and backward provinces. Only a structural reapportionment of wealth that gives rural individuals their land titles, greater resources, and more social security can do that. But, again, such things come at the expense of, or do not align with, the CPC’s voluntarist intentions nor the numerous powerful vested interests in land-development revenue sources. 

In fact, a structural re-distribution of wealth might up-end the CPC’s investment-led and urban-biased developmental schema. This is a debate that is still on-going today. Like Japan before it, the CPC has proved unwilling or simply unable to move beyond the growth strategy that got it to where it is today. The institutional inclinations that enabled its growth miracle—the high savings funneled into investment-led growth—have likely needed to be seriously re-thought for years. As Studwell writes with characteristic succinctness:

“The main problem for China is that its structural rate of growth is beginning to slow as it gets richer and reduced population growth is cutting the supply of new labour to the workforce. This means the government will be less able to rely on growth going forwards to shrink its debts relative to the size of the economy. In turn, with annual growth dropping from 10 percent to perhaps 7 percent in the next few years, and a somewhat more open financial system, financial crisis risk increases. Another way of putting this is to say that China’s investment-led industrial learning process needs to be less wasteful in the future. The country cannot run away from debt as quickly. The best days of industrial policy-led development are therefore already gone.” (Pg 263)

This passage was written in 2013. Interestingly, it echoes precisely what Michal Pettis wrote in his 2013 book  ‘Avoiding the Fall’, which is that the easy and obvious investment projects that the Japanese developmental model is perfectly suited for were likely mostly saturated by 2013. Instead, as both authors argue, institutional reforms are severely needed—and have been for sometime. As Rozelle would likely agree, these reforms need to take place in a way that allows the rural population to catch up and flourish. 

And yet, the sort of institutional reform that would see resources reallocated, are heavily guarded against by vested state interests, including local governments, large property developers (whose relationship with the CPC is incredibly cozy), and key parts of the center itself. Barry Naughton, in a 2017 piece titled ‘Is China Socialist?’ summarizes the situation:

“A number of the policy shortcomings described in the previous section are consistent with an interest group interpretation of the policy process: the failure to redistribute income from urban to rural households; preference for expensive physical capital investments over modest social expenditures; difficulties in shifting from an investment-driven to a consumption-driven economy; sluggishness in addressing issues of environmental deterioration; and others. One possibility is that the very revival in the fortunes of the government described earlier led the Chinese system to evolve a network of entrenched interest groups. Redistributive policies cannot be carried through without fundamental reforms of the fiscal, financial, and decision making systems, which interest groups have so far been able to stall and deflect. In this view, the system ends up reflecting the interests of insiders: for example, of managers of state-owned enterprises. In a broader sense, the interests are those of a larger group of Communist Party officials, politicians and technocrats, and even the urban population—at least those with urban residence permits—as a whole.”

The CPC’s desire for regime stability is predicated on making its urban populations, those most capable of engaging in collective action, happy. That exigency, which rose to particular prominence post-Mao, dove-tails with the CPC’s revitalized commitment to its state-led, urban biased, investment-led model.

An under emphasized but, I think, leading reason why the CPC persists in a developmental scheme that worsens urban-rural inequality is great power status competition. The CPC is more concerned with reaching the pinnacle of technological breakthroughs, which it believes will bring power and prestige, than with redistributing and allocating resources so as to empower and benefit rural citizens. The CPC appears sanguine about pushing 300 million coastal urbanites to the stratosphere while letting rural residents languish.

The New Industrial Policy

The newest reflection of the PRC’s unyielding dialectic of development is to be found in Xi Jinping’s preferred political economic paradigm: innovation-oriented industrial strategy! Rather than engage more seriously with non-urban biased, pro-growth reforms—which might require serious political changes, such as allocating local government & state resources to the rural populous directly—and rather than accept the copious arguments—from veteran economists who don’t all see eye to eye but do on this, such as Michael Pettis, Barry Naughton, Nicholas Lardy, Joe Studwell, Yasheng Huang, Yukon Huang—that more state-led, urban-biased developmentalism is not the answer, the CPC persists. 

Barry Naughton’s primer on the PRC’s industrial policy offers a sympathetic reading toward Beijing’s objectives. From a historical perspective, the PRC had not practiced industrial policy prior to the 2008 great financial crisis (GFC), at least according to Naughton’s definition. For Naughton, industrial policy is specifically about changing the sectoral composition of an economy. The general industrial subsidies that Beijing had in place from the 90s onward, such as cheap credit (thanks to financial repression), free or very cheap electricity, land, and other inputs, and a severely undervalued exchange rate (until 2013 or so) were too sweeping to be considered industrial policy proper. Since the massive credit and investment boom unleashed in response to the GFC, however, and in particular since the late 2010s, the CPC has been engaged in industrial policy proper.

Naughton recently spoke to Jude Blanchette about the ‘New Industrial Policy’ on the latter’s Pekingology podcast. Therein, they tried to project themselves into the minds of CPC leaders to understand their thinking behind this. Why more state-led investment in an already debt saturated political economic ecosystem? What’s more, they also tried to understand how this ‘New Industrial Policy’ might, in fact, actually end up working out.

A useful heuristic for thinking about this that Naughton coined is the term ‘grand steerage.’ It is, in essence, a somewhat natural evolution of the CPC’s statist macroeconomic control mechanisms.

In particular, though, this ‘new industrial policy’ ‘grand steerage’ represents a bet—a very big bet, in fact—that the world is currently riding the crest of a 4th industrial revolution technological wave. The total fundraising scope for the CPC’s Industrial Guidance Funds (IGFs), designed to invest in a broad scope of cutting edge technology, is over $1.6 trillion. These IGFs are far more than Made in China 2025, which in actuality was merely one of the stand alone industrial strategy plans.

As Naughton describes:

Even if we confine our attention to the Industrial Guidance Funds, it is almost certain that China's Innovation-Driven Development Strategy (IDDS) represents the greatest single commitment of government resources to an industrial policy objective in history. Moreover, many other instruments are in play, and it is likely that the resource effort suggested by their implementation has also increased since the inception of the IDDS. This IDDS seems to be a remarkable and unprecedented government effort.

Beijing’s belief—hope—is that if it can position itself properly, it can unleash revolutionary technological advances that will spread across the PRC’s economy and fundamentally shift its development into a new gear, all without having to change the growth model. 

It’s not a crazy idea. Keep the savings rate high, funnel investment into productive sectors disciplined by export-oriented competition, and reap the rewards. The problem is, however, the Japanese investment-led growth model works well when a country is far from the technological frontier—when you simply need to incentivize uptake of known best practices. Whether this model works well at the frontier of technological advancement is a much, much more dubious prospect. The CPC, however, is now betting the house on it.

Xi’s new industrial policy may also be a way of making good on his dictate that ‘houses are for living, not for speculation.’ Xi and the PBSC may be thinking that they can use the power of the state to seed a shift of the economy away from the real estate focus that has come to dominate it in recent years. Again, from the CPC’s perspective, this state-led developmentalist solution would obviate the need for fairly serious political changes—i.e. reallocation of resources. As a recent paper from the People’s Bank of China clearly demonstrates, many thinkers in the CPC are quite comfortable continuing on with the investment-led growth model:

“First of all, we should be highly vigilant and prevent the savings rate from declining too rapidly. We must be clear that our country not only bears the burden of development, but the burden of caring for the elderly. Understand this: without [capital] accumulation, there is no growth. Secondly, we must recognize that consumption is never a source of growth. We must understand that it is easy go from frugality from extravagance, but difficult to go from extravagance to frugality. The high consumption rate of developed economies has historical reasons; once you switch, there’s no going back, so we should not take them as an example to learn from. Thirdly, we should pay attention to investment. We must expand domestic investment in the central and western regions; although China’s marginal return on capital continues to decline, the potential for replacing workers with robots in the these regions is still promising. We must expand outward, and especially invest in Asia, Africa and Latin America, because these regions provide the only remaining large demographic dividend.”

Justin Yifu Lin, a famed economist who last year advised Xi Jinping, has similarly affirmed this view, telling Bloomberg News in an interview that “calls for consumption-led growth ‘are not supported by empirical evidence or economic theory.’ He argues that high investment in new infrastructure and equipment enables workers to be more productive and raises their income, in turn increasing consumption.”

Accumulation vs Innovation

Beyond affirming the analyses presented so far, it is interesting to note the tension between the neo-classical view of growth expressed above—i.e. capital accumulation causes growth—and the innovation oriented growth strategy championed by Xi Jinping. Indeed, Xi Jinping himself expounded a different view in 2014, saying:

“The old path seems to be a dead end. Where is the new road? It lies in scientific and technological innovation, and in the accelerated transition from factor-driven and investment-driven growth to innovation-driven growth.” (June 9, 2014)

As the rising school of innovation economics increasingly challenges what Joe Studwell has called the “intellectual tyranny of neo-classical ‘efficiency’ economics,” it seems like 2014 Xi Jinping might have been onto something.

For the PRC, however, neither state-led developmentalism nor innovation economics is the what the doctor ordered. At its current developmental position, after so many years of distorting factor prices, there is ample room for efficiency led, re-allocative growth. But that requires confronting entrenched interests and making hard political choices. So, instead, Beijing appears intent on trying to somehow synthesize a lumbering state-led investment growth model with an innovation-led growth model, while going in the opposite direction with regard to re-allocative growth. To quote Xi again:

“Whether we can stiffen our back in the international arena and cross the ‘middle-income trap’ depends to a large extent on the improvement of science and technology innovation capability”

Conclusion

The first big problem with Beijing’s investment-innovation synthesis is that it is all predicated on a huge bet: that massive investments in the 4th industrial revolution will unleash miraculous productivity gains.

The second big problem, as outlined at the beginning, is the corruption and rent-seeking that already is and will inevitably continue to accompany massive government-led industrial policy. Further, as William Baumol once argued, entrepreneurial energies will be increasingly directed toward winning state largesse rather than competing in the market. This is an inevitable tension with Beijing’s intention to marry a Party-state-directed, investment-led growth model with an innovation-oriented model. One side is going to give, and, in my view, the consequences for innovation are predictable.

The third problem is this new industrial strategy seems to be actively oriented against a rebalancing of the PRC’s economy away from investment-led growth and toward consumption-led growth. Rather than fundamentally change the growth model, the strategy seems to be to steer the massive amount of savings, largely via the state controlled financial system, into the cutting edge technology industry. But unlike the infrastructure and real estate industries that have thus far absorbed such investment, a tech sector closing in on the knowledge frontier is simply not able to productively and effectively absorb the deluge. With aggregate debt levels already at 300% of GDP, racking up more dubious debts seems unwise.

The fourth problem is this strategy is unlikely to foster rural development or bring up lagging provinces. Despite the PBOC’s hopes, more state-led infrastructure projects aimed at ‘developing the West’ aren’t likely to materially change the situation for rural inhabitants. What would do that? Giving them the resources to improve their own lives and secure wealth for themselves, particularly via establishing land rights. Not to mention ending hukou, what some have even called apartheid, so they can move more freely and receive access to schools and healthcare wherever they live. Such an advance would dovetail with the center deciding to step up and nationalize health care (something you might expect an allegedly socialist country would do) rather than passing the buck to local governments who are already strapped and incentivized to steal land to cover existing outlays. As Brad Setster put it in a recent Foreign Affairs piece, rather than more state-directed investments, the best way to make a difference is to centralize and increase social spending:

“[The CPC] may claim to be communist and to embrace the ideological legacy of Karl Marx, but the government offers relatively little support to many workers. It maintains one of the world’s most regressive tax systems while also offering relatively modest social benefits. Thanks in part to these realities, China now is one of the most unequal societies in the world...China’s limited spending on health care has almost certainly contributed to its exceptionally high savings rate [and] public spending on health is one of the most effective ways of reducing savings rates and raising household consumption...China does need to continue liberalizing its state-dominated economy, and it needs to allow the private market more room to operate in a number of sectors. Yet when it comes to taxing and spending, China needs a bigger, not a smaller, state—one that collects more income taxes and uses the resulting revenues to provide a stronger system of public health and social insurance.”

The fifth and final problem expands upon this fourth problem and brings us back to the PRC’s ‘dialectical development’. Not only will more industrial policy be unlikely to improve rural lives—especially when compared with obvious but politically hard to swallow alternatives—it will actively expand the rural-urban divide. Writing nearly two decades ago, researchers Dennis Yao and Cai Fang singled out industrial policy as uniquely contributing to urban-rural inequality:

“We find that the sharp sectoral divide in the planning episode [i.e. Mao era] was a result of industrial development strategy, but since the reforms the politically powerful urban population has pressured the government for fast income growth using various transfer programs. The central government has continued urban bias in order to preserve regime stability and political legitimacy. Our analysis indicates that, while the urban coalition may pressure the state for favors, political activities are not a necessary condition for the existence of urban bias. The pursuit of industrial development strategy alone can result in a rural-urban divide.”

The PRC has been turning every problem into a nail to be hit with a state-led investment hammer, and some problems simply require solutions that such a hammer is not only unfit to resolve, but actively exacerbates. Rural-urban inequality and the future growth of the PRC are plausibly two such things.

So, is financialization worse in the PRC? The answer isn’t obviously no, which leads me to think it deserves investigation.

The Great Wall of Capital

I began my essay on America’s financialization with reference to FIRE—finance, insurance, and real estate. In the US, finance and insurance alone represent 8.5% of US GDP, as of 2017.

According to Yin Zhongqing, deputy director of the Finance and Economics Committee of the National People’s Congress, in 2015 finance and insurance represented almost 9% of the PRC’s GDP. So, right away, we can conclude: that problem is worse in China.

Yin went on to comment that:

“with the fast expansion of the money supply, vast volumes of funds have cycled back into the financial system,  vast  amounts  of liquidity have never entered the real economy...and ‘casting off the real for the empty’ [脱实向虚] has grown more intense.”1

The deputy director has furnished us with a nice description of financialization, which can be more generally defined as profits accruing disproportionately via financial channels, such as interest payments or asset inflation, rather than through trade and commodity production. In places across the world,

“Retirement savings collected from households by institutional investors (such as pension funds and other SPVs), trade surpluses and sovereign funds), surplus money resulting from recent quantitative easing policies and the rise in accumulated profits of transnational companies in tax havens have all created a wall of money that gradually pushed for the financialization of built environment.”

In the PRC, finance and insurance pales in comparison to the main attraction: real estate. In 2013, former chief economist of the Agricultural Bank of China offered an official window into a general phenomena:

“Almost all big manufacturing companies have, to a certain extent, gotten involved in real estate. For many companies sales are stagnant, business is difficult, and the ability to earn a profit has sharply declined, so more and more manufacturing companies have started to subsidize their losses by getting involved in real estate or with financial investments.”2

Dinny McMahon’s China’s Great Wall of Debt burnishes this quote with several personal anecdotes of entrepreneurs in the PRC who, while ostensibly doing things such as running textile businesses, derive wealth and income primarily from real estate. 

McMahon recounts one representative case:

“When Zhu [Shanqing] mentioned that he also ran a property-development business on the side back in China, I decided to check it out. I assumed it was just a hobby of sorts. I certainly wasn’t expecting the Keer Century Bund… The development included 360 villas—each with its own elevator and a dedicated room for a nanny or butler—and about a dozen apartment towers that lined the south bank of the Qiantang, the river that runs between Hangzhou and Xiaoshan. The sheer scale forced me to reassess Zhu’s business. Property wasn’t some side venture. This was the business.”3

This phenomena, that undergirding every entrepreneur’s ostensible business is actually a real estate empire, is captured well by an editor at Foreign Policy who quipped: the “first rule of Chinese business: Everything Is Actually Real Estate.”

Here is a high-level heuristic for thinking about the intersection of land, real estate, and financialization (the end of the essay specifically addresses the interconnected framework of the PRC’s property fueled financialization, but this graphic provides a quick overview that is worth scanning so you can better conceptualize what we’ll be diving into);

Awash In Savings 

America’s financialization, as I wrote, is undergirded in large part by both a domestic savings glut of the rich and a global savings glut. This, in conjunction with neo-liberal policies that have led to an overall deflationary environment for real goods AND—especially in the last two decades—ultra-easy money policies, have created strong incentives to invest in *inflatable* financial assets. This led to what I snarkily called the Generalized Asset Bubble. I furnished a lot of evidence that this is indeed the case—and explains why inflation has stayed low despite consistently near-zero interest rates.

The PRC, meanwhile, is experiencing a similar issue—but for different reasons. McMahon again:

“ironically, as the economy slows, so should demand for financial services. But in China, they continue to expand, not because the real economy demands credit but because there is so much money that demands somewhere to invest.” 

The PRC, like the US, has a savings glut. Key difference is that the PRC’s is almost entirely domestic (whereas in the US it’s 50% foreign and 50% domestic savings). 

As the figure above from the IMF on the PRC’s national savings indicates, the vast trove of savings stem almost entirely from households and non-financial firms. The PRC’s savings rate, at roughly 50% of GDP, is among the highest in the world—and among G20 economies is by far the highest (for comparison, the US’ national savings rate is 14%, the UK’s is 18%, and Japan’s is 25%). 

Similar to the US, it is also highly likely that the PRC is experiencing a savings glut of the rich. Unlike the rest of the world, however, every decile of the PRC’s income distribution has a very high savings rate—something that is not well accounted for in the literature that I’ve read (though the IMF pins most of it on the PRC’s demographic policies). But, very much like the rest of the world, and as can be seen from the graph below, the savings rate of the rich substantively exceeds that of lower income deciles. 

Inequality & Savings Glut of the Rich

Meanwhile, again mirroring the US, income and wealth inequality in the PRC is quite extreme. Credit Suisse’s 2020 global wealth report estimates that the top 1% in China own roughly 30% of the wealth (vs 35% in the US).

Further, researchers Thomas Piketty, Li Yang, and Gabriel Zucman looked at inequality in the PRC and found similar results. They state that:

“China’s inequality levels used to be close to Nordic countries [but] are now approaching US levels.”

These comparative of graphs of the PRC’s evolving income and wealth distributions tell the tale:

Clearly many have revelled in Deng’s adage that it’s okay for some to get rich first. Although no study mirroring those on America’s ‘indebted demand’ and ‘savings glut of the rich’ have been done in the PRC, I believe the evidence strongly indicates that a similar phenomenon has been happening. One of the more obvious manifestations being the rise of wealth manage products that banks have set up on the low for rich clientele. 

Deluge of Credit

Similarly, there has been an unprecedented expansion in credit. Logan Wright and Daniel Rosen have written extensively on the topic, and in a recent note in 2020 try to frame the stunning numbers in a comprehensible fashion. The PRC’s financial system

“has increased in size by 4.5 times since the global financial crisis, rising from 64.2 trillion yuan ($9.4 trillion) in assets as of the end of 2008 to 292.5 trillion yuan as of last month ($41.8 trillion). To put the current value in context, it represents about half of global GDP. In the same interval, China’s GDP roughly tripled in size, adding around $9 trillion in annual output.”

Here is the phenomena in graphic form: 

The US banking system is $21 trillion. So, in terms of raw financial system size, that problem is worse in China.

Meanwhile, individuals in the PRC have grown increasingly indebted. As of 2017, household debt relative to household income was higher in the PRC than in the USA.

As a recent note from Rhodium Group says, “Over the past five years from 2015 to 2019, China’s households have added $4.6 trillion in borrowing, compared to a $5.1 trillion expansion in US household debt from Q3 2003 to Q3 2008.” As in the US, most household debt comes in the former of mortgage debt, “which the PBOC places at 30.1 trillion yuan ($4.3 trillion) as of the end of 2019, up from 11.5 trillion yuan ($1.6 trillion) at the end of 2014.” 

In the PRC, as in the US, many families are increasingly leveraging up to invest in assets that they hope can only go up. Whether this problem is overall worse in China is not clear—more on that below.

Housing

So, we’ve seen that PRC citizens have high levels of savings at every decile, that inequality has increased and likely produced a savings glut of the rich, that the financial system has expanded massively (4x) over the last decade, and that families are increasingly levered up themselves. The obvious question, then, is where are all the savings and credit going? As McMahon states in China’s Great Wall of Debt:

“Most obviously it’s gone toward inflating asset prices.”4

In contrast with the US and other developed countries, though, the investment profile for the average PRC citizen is far more heavily weighted in real estate. According to most surveys, this asset class makes up roughly 80% of the average family's portfolio. In the US, by comparison, the figure is closer to 35%. 

Thus, whereas in the US we may very well characterize the financialization regime as a Generalized Asset Bubble, in the PRC it’s really just a property bubble. And indeed this is precisely the story that the asset markets bear out: 

As a recent report in the Wall Street Journal spells out—quoting from research done by Goldman Sachs—the PRC’s real estate market has ballooned to $52 trillion. That places it at 10x the size of its equities market, and nearly double the size of the US’s $24 trillion real estate market. Based on Goldman’s 2019 calculations, the three primary asset classes—real estate, bonds, equities— in the PRC have a total market value of roughly $70 trillion. In comparison, the US’s three primary asset classes have a total market value of roughly $100 trillion. 

Further, a recent National Bureau of Economic Research (NBER) paper measured the overall contribution of real estate to overall GDP in a slew of countries and found this:

Real estate in the PRC, inclusive of all the industries and services that support it, make up nearly 30% of GDP. That’s more than twice the percentage in the US. While this isn’t prima facie evidence of financialization, it’s intertwined with the increasing financialization of housing as an asset.

Why Such Allocation?

Rosen and Wright discuss the real estate situation in their 2018 report on the PRC’s credit situation, saying:

“There have been few meaningful corrections in China’s property market that have lasted longer than six to nine months, which has made it a powerful draw for household and corporate investors. China’s interest rates have been relatively low for years, and expectations that property prices will continue to rise have remained strong, increasing the incentive to invest.”

One of the most widely cited phrases on this issue is from Xi Jinping himself, who said

“Houses are for living, not for speculation.”

This is allegedly an indicator that the government is aware and on top of this issue. Xi has championed an innovation-oriented economic growth strategy, and as he and the Politburo undoubtedly know, increasing business and individual attention and investment in real estate—or mere asset appreciation generally—facilitates neither innovation nor factor productivity enhancement. In fact, it can systematically undermine TFP and innovation-oriented growth.

The problem, however, is the same issue that plagues the rest of the financial system in the PRC: rampant moral hazard owing to the—very credible—belief that Beijing will step in to stop downward market pressure. The CPC has routinely intervened to inject liquidity into banks, and has even intervened in the equities markets—halting trading and buying hundreds of millions worth of equity. 

The property market in the PRC is more shot through with moral hazard than other asset classes, as local governments rely on land sales for roughly 50% of their revenue, as well as the value added taxes they receive from developers operations—not to mention, of course, the kickbacks local officials receive, often in the form of housing units. Meanwhile, because individuals in the PRC have 80% of their net worth tied up in real estate investments, a rapid decrease in housing prices would be a very scary prospect from a social stability maintenance perspective. There is thus a feedback loop wherein implicit guarantees and moral hazard induce more investment in real estate, which in turn induces greater moral hazard.

As in the US, there is a deep institutional and societal interweaving with the real estate market. However, the degree to which individual investors, local governments, and the major state-owned banks rely upon housing for revenue, financial assets, and collateral is completely disproportionate to anything in the US. From a real estate perspective, that problem is worse in China.

Relative Conclusions

So, is financialization worse overall in the PRC than the US? I don’t think any reasonable analyst could conclude that financialization on an absolute scale is worse in the PRC. But on a relative scale, I think there’s a strong case to be made that financialization is worse in the PRC. Keep in mind that nearly 50% of Chinese people still live on fewer than $10 a day. I can’t find a similar statistic for the US, but given that the minimum wage is $7.25/hr, it’s safe to assume that very few live on less than $10 a day in the US.

Further, the PRC’s median disposable household income is ~$4,000 (26,500 yuan) versus the US’s ~$36,000.5

The PRC has also received far, far fewer foreign capital inflows than the US—roughly $1 trillion in total foreign holdings compared to the US’s $20 trillion. Those numbers don’t include real estate holdings, for which the US receives additional hundreds of billions a year—much of which comes from the PRC itself and is hard to measure directly—which is multiples of the much smaller but rising rate of real estate inflows into the PRC.

The PRC’s asset bubble—across the three primary asset classes: real estate, equities, and bonds— is nonetheless 70% of the US’s. That the PRC has so much less wealth, and receives so much fewer financial inflows, only makes the market valuation of its financial assets more insane.

These statistics corroborate the narrative that the PRC’s own high level officials—quoted above—are saying. And also jives with what many economists have been saying for years: if state-led investment continues to crowd out private opportunities, and if a fundamental rebalancing of the PRC’s economy away from investment-led and toward consumption-led growth fails to materialize, economic opportunities will whither. We are, probably, already seeing the result: Corporations and individual investors—on the back of a deluge of savings and easy credit—are shoving money into a highly financialized real estate market laden with moral hazard, inflating valuations, rather than investing productively.

On a relative basis, then: financialization is a problem that also seems to be worse in China.

Addendum

I need to re-emphasize the population factor.

Perhaps the massive valuation of the PRC’s real estate market is simply what happens when the world’s largest population, newly enriched and boasting the world’s highest savings rate, directs almost the entirety of its riches into a single asset class. What’s more, the rapid urbanization of the PRC’s population surely further fuels this valuation bonanza. As a recent piece in Yale Politics points out:

“Urbanization—moving families from the countryside to the city—is critically important to understanding China’s housing situation,” Stephen Roach, a professor of economics and East Asian studies at Yale University told The Politic. And yet, that historic trend is barely mentioned in many articles from sources such as Bloomberg and the New York Times that discuss the coming collapse of China’s bubble.

Keep in mind, though, this piece is about financialization, not bubbles & crises. So the important point is merely that a profound amount of savings—from individuals and corporations—are being funneled into boosting property valuations rather than into other more productive types of investment. It’s entirely possible this isn’t a ‘bubble’—or isn’t best characterized as such. But it’s also even more plausible that this is not the best use, from the perspective of the PRC’s economic growth, for all these funds.

"Despite four hundred million people gathered in one China, we are, in fact, but a sheet of loose sand [yipan sansha (一盘散沙)]. We are the poorest and weakest state in the world, occupying the lowest position in international affairs; the rest of mankind is the carving knife and the serving dish, while we are the fish and meat…If we do not earnestly promote nationalism and weld together our four hundred millions into a strong nation, we face a tragedy–the loss of our country and the destruction of our race." —  Sun Yat-sen

"Loose grains of sand cannot be tolerated" — Chiang Kai-shek

"It is only through the unity of the Communist Party that the unity of the whole class and the whole nation can be achieved, and it is only through the unity of the whole class and the whole nation that the enemy can be defeated and the national and democratic revolution accomplished." — Mao Zedong

“Government, army, society and education — east and west, south and north, the Party leads all” — A Mao era phrase now quoted by Xi Jinping

Our mission "requires all the Chinese people to be unified with a single will like a strong city wall.” — Xi Jinping's vision, as he told “the broad masses of youth” in his Labor Day speech of May 2015

“We must unite the 1.4 billion Chinese people into a majestic and boundless force driving the great rejuvenation of the Chinese nation.” — Xi Jinping, in 2021 at the Party History Study and Education Mobilization Conference

Atomization

If you want to understand the most important challenge facing the Chinese Communist Party (CPC) you should read The True Believer by Eric Hoffer. The book is a magisterially concise diagnosis of what fuels, energizes, motivates, and guides mass movements. The most important challenge for the CPC—or rather what top cadres believe is their most pressing challenge—is keeping the Party organization and its 90 million cadres singularly united and faithfully committed in the face of drastic change, internal and external.

Modernization uproots tradition. The material economic conditions of modern free markets— capitalism—create a political economic environment that up-ends traditional social structures, whether families, large clans, or lineage organizations. Children move away to big cities and marry and live outside their close families, wives become increasingly independent, and the incentives created by marketization pull people further and further apart from one another. The result is atomization. 

A key, perhaps the key test, for the Chinese Communist Party lies in its continued response to this enduring phenomena. 

The Chinese Communist Party is striving to maintain its ability to absorb atomized individuals into a coherent organization that gives them a sense of belonging and their life a sense of meaning and purpose. It was, in fact, this historic capacity of the Party to co-opt individuals and direct mass movements that explains its ability to defeat the Nationalists in the Chinese civil war. Schell and Delury highlight this in their book Wealth and Power: "[Chiang's] authoritarianism was closer to that of traditional Chinese secret societies than mass-based political organization. In this and other ways, Chiang proved incapable of truly promoting mass political organization, an art in which his rival and nemesis, Mao Zedong, would prove the master" (Wealth and Power pp 193).

Going forward, the question is how well this core competency of the CPC can continue.

As organizations grow, it is increasingly difficult to maintain an intense sense of mission and belonging. Yet the deep yearning to live for something more than ourselves—to lose ourselves in a tribe dedicated to a greater good—doesn’t fade. This yearning, heightened by atomization—itself wrought by marketization and the breakdown of traditional social structures—can manifest in the desire to join new mass movements and new organizations. For the Party, now going on 40 years of reform and opening, this is a great concern.

Free Radicals

The atomization process was poignantly on display with the Falun Gong. As individuals at state-owned-enterprises, particularly in the Northeast, were thrown out of jobs and lost their sense of community, many turned to a variety of new spiritual organizations. One of these was Falun Gong. The quickly creeping size of this group, and the camaraderie and purpose its members felt, came to be experienced by the CPC as a direct challenge to its hegemonic authority. Falun Gong had to be reigned in.

The challenge of increasingly atomized individuals searching for belonging stretches beyond the Falun Gong. It can be seen in the rising rates of Chinese converting to Christianity, in Buddhist revivalism, and where possible the continuation of familial worship practices. The Party-state has directly responded by attempting to co-opt all such non-Party routes to solidarity and belonging, correctly recognizing such social organizations as potentially grievous threats to its monopoly on social power. On the peripheries, where minorities are even less entwined with the Party-state structure, the draconian crack downs are far more intense. The CPC has sensed the danger to its territorial integrity stemming from the organizational challenge to its monopoly on social power and cracked down ruthlessly.

At the same time, the Party has also become innovative in ways to try to capture these free radicals—the increasingly atomized Chinese citizenry. Most importantly, Jiang Zemin introduced the three represents to expand the realm of inclusion and goad more and more people into the Party structure. Xi Jinping, of course, ran with—though, importantly, did not originate— the discourse of the China Dream and the Great Rejuvenation of the Chinese Nation. He did so, I would submit, to attempt to further induce people into a sense of group mission and belonging within the confines of the Party’s developmental monopoly.

Xi Jinping

Perhaps the most formative early influence on Xi came when he was sent to the caves of Liangjiahe, Shaanxi province, at 15. Isolated from his friends and family, this was when he became a true believer. It is in the depths of isolation and atomization, after all, that people become most susceptible to indoctrination—and most willing to joining mass movements. Xi was no different. He left the caves 7 years later with a conviction that the solidarity offered by the CPC as organization was the key to China’s future. This would become apparent throughout his career. Not only a Party man, he even went to Tsinghua for a PhD in ideology and Party organization. He then went on to head the Central Party School, the lynchpin organization for instilling Party collectivism and discipline.

Chairman Xi is emblematic of an individual who understands the challenge the CPC faces. Indeed, it speaks to the awareness that top level cadres had of this emerging trend of atomization that they fast-tracked him for General Secretary. Xi became imbued with devotion to the cause—devotion to the Party structure—from a young age. He was both weary of the Cultural Revolution’s fanaticism, owing to the detrimental impact it had on his family and himself, but also greatly appreciative of his trials and tribulations. As Viktor Frankel reminds us in Man's Search for Meaning, "suffering ceases to be suffering at the moment it finds a meaning, such as the meaning of a sacrifice.” For young Xi, it would seem, the meaning to be found in his suffering—the thing which he would come to sacrifice the great majority of his life endeavoring to fulfill—was carrying on his father's legacy of building a powerful, united, and mission driven Communist Party.

Xi Jinping is a man who believes that holding the Party together—imbuing its member with a sense of ideological faith, belonging, mission, and purpose—is the single most important thing in the world. More important than development, more important than eradicating poverty, more important than his own well-being. This is because he believes the Party is the key to all those things. 

In a way, Xi Jinping is as any True Believer who understands how to keep his movement alive. Atomization of individuals is the dough with which mass movements are created. If the Chinese Communist Party is unable to mold proliferating free radicals into loyal cadres, the Party itself faces a grievous threat. Thus if the Party is unwilling to abandon the marketization process that creates atomization, it must increase its capacity to productively co-opt free radicals.

The Real Challenge

The much-prophesied fall of the CPC at the hands of growth slowdowns or even financial collapse are thus overblown. The analysis that leads to viewing these as the key factors of regime failure is misplaced. The most important thing that leads to regime failure is the inability to productively co-opt atomized individuals. When individuals cease to identify with the larger whole of the Party, when they cease to believe in the mission, and when they cease to believe in the movement. This is also why it is misplaced to focus emphasis on the specifics of the ideology. Any belief system will do, in fact, so long as the sense of tribalism and belonging is maintained. A coherent ideological belief system is as problematic to this goal as it is beneficial. Too coherent of an ideology risks being disproven. The one that tends to stick is one that is both sweeping yet capacious and able to adopt a multitude of beliefs. This is how Catholicism evolved, and it is how Marxism-Leninism in China has evolved. Marxism-Leninism in China keeps the shell of the belief system—most importantly Lenin’s contributions regarding a vanguard Party—but has cleared out its innards. And while it is true that slow-downs in growth and financial instability increase the discontent of atomized individuals and thus the risk to the Party, so long as the Party can has effectively co-opted most of these individuals and no other coherent movement exists to channel their grievances, the Party will carry on unmolested.

This, however, introduces us to the risk the CPC’s attempts to co-opt these individuals may pose to the rest of the world. We have seen that as lineages evaporate, atomized individuals in China proliferate, growth slows, and financial instability due to marketization grows, the CPC faces ever more pressure to effectively co-opt Free Radicals. This can and does take the form of repressing alternative movements, as well as increasing recruitment into the Party and increasing the sense of belonging and mission for those in the Party structure. While the former may be devastating for those within China’s borders (e.g. Xinjiang), it is the latter that poses a global challenge. How China goes about inculcating a sense of unity and belonging amongst its expanding (90 million+) rank and file has transnational implications.

Consider, analogously, the current ramifications of the debate over the Narrative™ in America. Many people want to hue towards the traditional American Narrative™ of exceptionalism that conspicuously minimized wrong-doing while emphasizing the importance of patriotism—the Trump Narrative™. Meanwhile, others want to forward a Narrative™ that paints America has little else but white supremacy, oppression, and false promises—the extreme woke Narrative™. Neither one is correct, in fact no singular Narrative can ever be correct (though the truth, as they say, is likely somewhere in the middle). The important point, though, is that the Narrative that becomes ascendant will have important implications for domestic political milieu as well as its behavior overseas. A Narrative™ is a critical part of how a nation holds itself together, how the masses are motivated to identify with the nation and push their elites to make policies, and ultimately how elites create and enact domestic and foreign policies. 

As in the US, the Narrative™ that China adopts is critically important for its future trajectory. While a Narrative™ is itself a necessary device for holding the Chinese people together and is more or less interchangeable, the specific content of the Narrative also has specific consequences. A Narrative can be more or less bellicose, for example. The Party can locate its sense of meaning in the Narrative™ by explaining prior conditions as acts of suffering imposed by others—the West, for example—and thus locate itself as a gallant savior and redeemer of the Chinese people. The Party can further nurture a sense of injury and grievance, creating within Free Radicals (atomized individuals) a reflexive disgust and hatred of Western countries and a reflexive belief in the goodness—and feeling of solidarity with—the Chinese Communist Party, who is the one and true represent of the Chinese people and, of course, can never be separated from them. At the same, the Party can create the ‘long hope’ that a community of common destiny, forged principally by the CPC, will work to the benefit of all—especially the Chinese people—and so everyone should join in and support the Party in this great mission that socialism with Chinese characteristics is about to take us on.

It is too early to know how things will play out. But the hyper nationalism of online commentators, the hawkish nationalistic sentiment expressed by youth in major Chinese cities, the various militaristic outbursts in the South China Sea and on the Indian border, and the Wolf Warrior Diplomacy would seem to offer a troubling premonition.  Indeed, on more than one occasion, the Chinese Communist Party has had to specifically reign in anti-foreign protests that were getting out of hand—lest they grow into something beyond the Party’s control. But the tenor of the nationalist outbursts is indicative of a successful patriotic education campaign that inculcates a belief in China as victim and other countries as abusers and bullies. A victim mentality, as Cory Clark at Quillette has well summarized, can induce a sense of righteous aggrievement that justifies one’s own heinousness. As I’ve written recently, the path to hell is paved with righteousness. Perhaps these are overblown cues. Only time will tell for sure.

Ultimately, though, the Party cares less about these unpredictable future consequences than it does about shoring up its power and control in the here and now. From the beginning, the CPC was a mass movement organization and Mao Zedong was an innovative pioneer in engineering successful mass movements. This is what Xi Jinping takes away from Mao. Xi Jinping and the CPC’s other leading cadres all understand that co-opting the proliferating mass of atomized Chinese individuals is the most important task it faces. If it fails other movements will rise, and the CPC will face grave threats. But if Xi and the CPC can update and utilize Mao’s mobilization techniques, and if they can manage to burnish an increasingly market-based and atomized Chinese society with a collective sense of belonging and mission under the stead of identification with the CPC, they will live on.

The Intellectuals

As this narrative overview suggests, the Party has an expansive apparatus for ingratiating itself with the increasingly atomized Chinese populace. In particular, the elite and sub-elite stratum. It is of interest that it was precisely this stratum that formed the Party in the first place. The Party thus has institutional memory of how disruptive an unattached group of sub-elite, atomized individuals can be. As a 1968 study on the early composition of the CPC concluded:

Thus today the Party appreciates how important it is to get this leading edge of the atomized free radicals into the confines of the CPC—where they can be safely co-opted and guided into service of the Party itself. Such is the goal of a fully institutionalized Leninist Party apparatus. To consume that base of society which it knows full well—due to its own experience as an under-dog, under-ground, anti-system organization—can destabilize an organization. Nadege Rolland describes the history in a recent report on co-opting the intelligentsia. Here's the essential part: 

"The development of think tanks in China has largely adhered to an academic tradition of subordination to or dependence on the state. As in Soviet Russia, China’s research centers were from the 1950s onward directly controlled by and attached to the Communist Party or the state bureaucracy, including specific committees, ministries, and security agencies. But neither Mao Zedong nor Deng Xiaoping ever relied on them to inform their decision making. In the 1990s, Beijing allowed a small degree of openness, which led to the formation of a limited amount of civil society organizations and nongovernmental academic centers, mostly dedicated to research on economic issues. In the mid-2000s, CCP leader Hu Jintao, who had been president of the Central Party School, started to encourage input from Chinese intellectuals and experts to support policymaking, and regularly invited them to give lectures at Politburo Study Sessions. Several new and allegedly nongovernmental research centers, such as the Center for China and Globalization and the Charhar Institute, emerged during the 2008–2009 global financial crisis. Rather than offering genuinely independent perspectives on issues ranging from economics to international relations, the entities were established to create a false impression of opinion pluralism under increasingly tight ideological control from the party-state. 

Xi Jinping’s rise to power in 2012–2013 marked in many domains an acceleration and clarification of previously observable trends. Think tanks are no exception. At a December 2012 CCP economic work conference, Xi proposed establishing high-quality think tanks to serve policymaking. A year later, the third plenum of the Eighteenth CCP Congress passed a resolution to create “new types of think tanks with Chinese characteristics.” Rather than inaugurating a flourishing new phase for independent Chinese think tanks, Xi’s policies were intended to further tighten government controls. Beijing passed laws restricting foreign funding for domestic nongovernmental institutions, and required that each think tank be placed under the strict purview of party-state entities. Fu Ying, a distinguished Chinese foreign policy practitioner, explained that Chinese think tanks should “adhere to the Party leadership and serve the country” while at the same time being “independent and objective.” In this case, “independence” does not mean free from government control, but rather free from the influence of Western concepts and ideas that the CCP considers threatening and subversive. More autonomous organizations, including the widely respected Unirule Institute of Economics, have since been forced to close down. The Unirule Institute of Economics—which had actively promoted China’s economic liberalization since its founding in 1993 and had tried to carve out a genuinely autonomous space for itself in an increasingly constricting environment—was locked out of its office in 2017 and eventually forced to close in 2019. 

Xi remains committed to transforming Chinese think tanks into instruments serving the policies of the party-state, and he specifically demands that they help expand the regime’s international influence and contribute to the realization of its main strategic objectives."

Roland concludes: "In China, most think tanks are either built into or closely affiliated with Chinese Communist Party (CCP) organs and government agencies. Their research topics are framed by detailed guidelines and oriented to reflect governmental priorities." 

As a recent report on the CPC's United Front Work Department (an organization tasked explicitly with co-opting individuals and groups outside the traditional confines of the CPC) further argues, the focus on bringing domestic students, overseas students, and intellectuals into the Party's orbit and making them amenable to its influence is strong is a core competency. 

The reason for this focus is simple: free-floating, atomized intellectuals with a bone to a pick are dangerous. They can provide the guidance needed for new and destabilizing mass movements to spring up. They can mobilize the increasingly atomized Chinese populace. The CPC recognizes that the most sustainable way to deal with these intellectuals is to co-opt them. Under Maoism, more were killed than co-opted. Today, it's the other way around (though some who engage in really wrong types of activities are indeed killed—or 'disappeared'). Most importantly, co-opting intellectuals into a positive endeavor—e.g. theorizing about how to make China great again—serves as bulwark against invasive and threatening Western values. An unattached Chinese intellectual is far more susceptible to being 'infected' with the 'virus' of the Western values than one productively employed fortifying the CPC's ideological and intellectual base.  

Furthermore, as Bruce Dickson, Andrew Walder, and others have shown there are substantial economic and network benefits to joining the Party. Not just for the intellectuals, but for the masses in general. For those who avoid the Party, meanwhile, there is effectively a glass ceiling when it comes to governmental appointments, appointments in SOEs, scholarly appointments and funding in think tanks and leading universities, and even in some private sector organizations. The CPC wants to make it desirable, from a status and wealth perspective, to be a member. This creates pervasive, impersonal forces that effectively attract free radicals into its fold, neutralizing their potential to join non-Party social structures that could pose a challenge to its monopoly on social power. (As I’ve written about regarding Entrepreneurship in China, though, co-opting the private sector has a tendency to run up against innovation, as the expansion of the Party and the stability it desires is hard to square with an innovation / creative destruction oriented ecosystem.)

Handling the growing problem of atomization is the CPC's greatest challenge. They are well aware of this. That is why they have created a massive infrastructure for co-opting these free floating radicals. In particular, the most dangerous ones: particularly the intelligentsia but also increasingly the business leaders. To ensure their sole monopoly as a center of social power and influence, the CPC is going all in on its ability to productively co-opt these atomized individuals. A China scholar described the CPC's authoritarian resilience as stemming from its representation within bounds, i.e. attempting to maximize informational  benefits while minimizing reformist elements. Another way of formulating this is 'co-optation' within bounds. Those atomized free radicals who can be productively brought into service of bolstering the CPC will be. Those who cannot, well...

“When hopes and dreams are loose in the streets, it is well for the timid to lock doors, shutter windows and lie low until the wrath has passed. For there is often a monstrous incongruity between the hopes, however noble and tender, and the action which follows them. It is as if ivied maidens and garlanded youths were to herald the four horsemen of the apocalypse.”  Eric Hoffer, The True Believer

When Mao Zedong awoke in the early mornings, what—in his heart of hearts—did he think to himself? What did such a man, this notorious tyrant of history, really think of himself when he reflectively gazed into a mirror and into his own eyes? 

More generally, what motivates such world historical figures to do what they do and how do they self-justify their actions? 

This essay is a reflection on these questions. 

At the ultimate level there are the common motivating factors shared by almost all humans: desire for status (to be known and respected), for purpose and meaning (religious or spiritual justifications for life and sense of group belonging), and the deep urge of reproduction and survival. 

At a proximate level, though, people tend to justify their existence with recourse to a story wherein they are heroic. In other words, world historical figures—like most of us—probably did not think of themselves and their role in life as directly pursuing some combination of status, meaning, survival, and reproduction. Rather, such people—again, like us—view their life through the lens of a meta-narrative that, while implicitly satisfying all of those ultimate desires, nonetheless provides a coherent story wherein they are but humble servants of a noble and grand cause. 

In Mao’s mind, ultimately manifested in propaganda, he was a hero, fighting to enact The Good™. In layman’s terms: he believed his own bullshit. 

The story is as old as humanity. We can find it whenever we encounter world historical figures of consequence, whether Alexander the Great, Muhammad, the Crusading Popes, the European Kings, Mao, Hitler, Lenin, Stalin, Pol Pot, Ceaușescu, or George W Bush.

First of all, such world historical figures are extremely hard working. It is a truism of history that, from a societal mayhem perspective, it is never lazy people that you need to worry about. It is always the hard working, dedicated, conscientious and industrious people who deliver devastation—as well as progress. Though these qualities are often rightly seen as a virtuous, they are also core characteristics shared by the world’s greatest butchers, and are thus necessarily implicated. Such characteristics thus present humanity with convex payoffs: they reap the best and worst outcomes, whereas lazy people list harmlessly in the center neither creating nor destroying. Given the magnificent changes such qualities have delivered over the last two centuries, we can understand why they have become virtues. But we shouldn’t forget that in the wrong hands they are very much a vice. 

Second, for various reasons, all world historical figures view the current world order / system as inadequately constituted and thus necessarily in need of drastic change. This leads into the ultimate explanation: not only does changing the world provide the world historical figure with meaning and purpose, it also offers him a profitable path to status and reproductive success. It does, however, present a grave threat to his chances of survival. If he succeeds in his quest, however, he can be assured of payoffs so spectacular that the cost-benefit ratio seems worth it. However, because the implicit cost-benefit heuristics humans use to guide their life decisions are psychological in nature, I believe it is fair to presume that world historical figures tend to share a common disposition as risk takers with an optimistic view of their chances for success. A risk averse pessimist would be unlikely to stake his life on high stakes, low probability revolution. For what it’s worth, this probably also explains why almost all world historical figures are men. The male variability hypothesis, which is very well substantiated at this point, shows that while males and females have roughly equal average psychological dispositions, men have much higher dispersion on almost all characteristics. Thus, at the tails of the distribution, we should find that men constitute a very, very high percentage of the population that is both extremely risk averse and extremely risk seeking. It is this latter category that is likely to be a world historical figure like Alexander the Great, Lenin, or Mao. I imagine this relationship holds less well today, given that world historical figures face little personal downside risk, such that GWB can topple Iraq with no fear for his own life.

This leads into the third and related feature, which is that the change world historical figures saw themselves as bringing was typically justified with recourse to The Narrative™ and thus The Good™. This is the proximate level, and thus the precise contours justifying the need for change, and the world historical figures role in bringing it about, were socially and culturally contingent. Alexander, for example, lived in a milieu that inculcated within him the belief that it was righteous and glorious to go forth, brutally conquer, and spread Hellenistic culture by the sword. Muhammad, according to the Hadith, clearly believed something similar about Islam. We can see a modern version of it in some of the justifications for the Iraq War, i.e. spreading liberal democracy. 

Alexander thought it was intrinsically very good to conqueror and spread Hellenism. Muhammad thought it was good to conquer in the name of Islam. Crusaders thought it good to conquer in the name of Christianity. Genghis Kahn believed it was righteous and good for the Mongols to conquer and rule the entire world. Lenin, and later Stalin, thought it good to conquer Russia (and areas beyond) in the name of communism. Mao thought it good to conquer China with recourse to a similar Narrative™ and version of The Good™. George W Bush thought it good to conquer Iraq to spread liberal democratic values.

There is also a general pattern wherein as society evolved and expanded in size and scope, world historical figures devised increasing layers of narrative to justify their need to change the world. For example, world historical figures in early eras and/or places wherein civilizational values of settled peoples did not evolve, represented by Alexander the Great and Genghis Khan respectively, often justified conquering as a good thing in and of itself. They had little need for bells and whistles when the populace was still totally on board with openly galvanizing under a leader to get the plunder that was often essential for living well. Conversely, leaders of Qin / Han China and the Roman Empire often justified conquering with the barely more layered explanation that they were righteously spreading ‘higher’ values of empire and civilization—something we saw replicated in a very similar manner under European imperialism (whether it be under the guise of spreading Christianity, the ‘white man’s burden’, or similarly believing in spreading civilization). 

As we approach the modern era, world historical figures increasingly found that trade-offs once readily accepted—little things like human lives, other people’s well-being, etc—were increasingly seen by people as valuable in and of themselves. As human morality evolved and expanded its coverage area from clan, to nation, to an abstract notion of humanity, would-be world historical figures found it increasingly necessary to add new layers onto The Narrative™ and thus construct new, and often more abstract and sweeping notions of The Good™. At the same time, the industrial revolution had turned the world from a largely zero sum to positive sum game. This meant that individual self-interest, that is payoffs in terms of material goods necessary for survival and reproduction, were less and less maximized via accruing resources via conquering. Ideas, as they tend to do, evolved in lock step with the material world. Thus, as a consequence of both real material advances and moral evolution (e.g. killing people just for conquest might not always be okay…) world historical figures increasingly lived in a time wherein explicitly conquering for conquering's sake just couldn't cut it. The masses and the upper middle part of the population that organized and also benefitted from conquest weren’t as easily sold when a would-be world historical figure came around promising the glory and booty of conquest in exchange for their potential sacrifice. In order to succeed, would-be world historical figures would have to re-imagine what The Narrative™ and The Good™ might be. 

The obvious precursor to build off were religious wars of conquest. Rulers thinly wrapped and sold self-interested wars of conquest and plunder in the name of X-Y-Z god for millennia. Humans found this pretty convincing for a long time. In fact, it was a pretty solid sales pitch: the god that you believe in and deeply hope to please also just so happens to want you to go on a conquest mission that will get you some war booty and me, the ruler, world historical figure benefits! Thus the Traditional Religious Narrative™ just so happened to legitimize and serve all the base instincts of the masses, the upper mid-level organizers, and the world historical figures: it provided transcendent meaning and purpose to life (doing gods bidding for your king/noble and with other like-minded dudes, how dope!), offered the victors great status, and increased reproductive potential. 

Meanwhile, your life hanging around at home—i.e. being the same old parish priest, regional official, or peasant—wasn’t that great and wasn’t likely to be getting significantly better any time soon, so why not take a gloriously justified risk? After all you might get lucky and hit the jack pot! If you’re an official, getting appointed to a higher status. If you’re a peasant, by moving up and maybe affording your own manor and acquiring some status and reproductive enhancing resources. And if you’re a world historical figure by achieving the top spot in the new order you’re helping to usher in. The secular variant along these lines in China seems uniquely precocious (probably due to its unique heritage of early state building due to proximity to steppe and uniquely scalable geographic features—a topic for a different essay).  Religious inspired movements also had the extra benefit of convincing people that their downside was in fact substantially mitigated: if you die in service of this great and noble cause you’ll get great things in heaven! 

Thus did religion offer a very thinly veiled, yet highly adaptive, justification for doing the conquer-y thing humans like to do. What was so interesting about it, though, and what signaled ominous signs for the future, was that this added layer of justification actually made conquest so much more viable. It allowed humans to scale up their cooperation levels in joint pursuit of a commonly shared Narrative™ of The Good™. Would-be world historical figures thus became increasingly equipped, thanks to the lessons drawn from religion, of how to play the game at higher and higher levels. He who wields The Narrative™ of The Good™ shakes the world, and in so doing accrues for himself the sense of purpose, status, and reproductive success that world historical figures are largely motivated by. Something, something, something… the dangers of man turning himself into god??

Yet as human society scaled up, as diversity proliferated, and as industrial modernization continued apace, morality itself evolved in lock step with the changing material circumstances. The justifying role that religion played for the would-be world historical figure grew harder to maintain. The discrepancy between other worldly redemption religion offered and the need for change (read: conquest) in the here and now were too blatant, the justification too loose. Where, after all, did God demand conquest much less justify the use of force? (Though here would seem to exist an unfortunate distinction between Christianity and Islam. Much easier to read such a view out of the Q’ran and Hadiths.) Religion, it was increasingly claimed to be about—and thus understood to be about— a far off benevolent dude in the sky (or, even better, some eternal magical spirit energy) who vaguely wants good things for people. Far-off religious justifications for something good in the afterlife, though, just aren't the best way to get people riled up and hot and bothered for sacrifice (Islamic Jihad, however, can still seem to solve this problem uniquely well amongst Traditional Religions™). People need imminently realizable pay offs. As self-interested gain via resources was increasingly lost as a motivating force due to positive sum modernization effects, the justifying veil had to become at once more sophisticated and more immediate. The eschaton had to be immanentized in a new way! 

It’s worthwhile to mention that ‘Immanentizing the Eschaton’ is so adaptive that it is one of the most common tropes that world historical figures rely upon in building a following. An example of convergent socio-cultural evolution. In contrast to its etymological origins, world historical figures often deployed the same basic principle, but rather than the final event being the end of the world it was rather a day of radical discontinuity wherein a new and improved world would unfurl. The word ‘millenarian’, in a similar contrast, originally meant "one who believes in the coming of the (Christian) millennium.” While the term originally sprung up in the 16th century in cahoots and in justification of mounting European imperialism, it would soon come to describe any movement predicated on the belief that a radical re-ordering of society is just around the corner. (The CCP, for instance, bore testament to millenarianism in its early catchphrase: building the ‘New China’.)

The big advance that would-be world historical figures ushered in was to secularize millenarianism. This opened the door for world historical figures to propagate beliefs in a new arena over and above the crowded space of traditional religions. The secularization of millenarian faith broadened the scope of competition for the hearts and minds of the human populace. Any person, whether Christian, Muslim, or atheist, could, in addition to their traditional faiths, also buy into the ostensibly secular faiths! The potential field of recruits for the would-be world historical figure expanded massively. In time, however, it would come to pass that the secular faiths would also explicitly take the place of, and sometimes even outlaw, the older faiths. Secular millenarianism is the groundwork structure upon which new Narratives™ of The Good™ would arise and propagate.

At the same time, the new Narratives™ of The Good™ had to adapt to serve their necessary role as veiling devices, simultaneously covering up and fulfilling the ultimate human motivators of purpose, belonging, status, and reproduction. In this way we can understand the most impactful secular millenarian faith, Marxism, and the historical figures it inspired…Lenin, Stalin, Mao, Cecescu, and so on. By latching onto an all-encompassing meta-narrative they were able to veil—to the world around them and to themselves as well—the deeply human motive forces pushing them to become world historical figures. 

Marxism also demonstrates quite well another maxim that all effective Narratives™ of The Good™ need: a devil. It has been stated before that not all effective movements need to believe in a god, but all do need to believe in a devil. This is true. Nietzsche pointed to the roots of this psychology in his book ‘Beyond Good and Evil.’ He argued that people, particularly those lower on the societal status ladder, have a tendency to create moral narratives by first defining what they hate and calling it Evil™ and then only afterward—and in contradistinction to The Evil™—labeling everything else good (ergo his stated desire to move beyond good evil). The secular millenarianism of Marxism is particularly exemplary on this point, as its progenitors and practitioners were very clear about what they hated but not at all clear about what they were striving for (i.e. what communism would look like). Thus, the would-be world historical figure of contemporary times immanentizes the eschaton and implores his dispossessed followers to fight *against* the existing system and existing order. He hypes up their grievances to the Nth degree. He connects their every little grievance to The Evil™.  The world historical figure and his followers, duly radicalized believing they are fighting Evil™, are thereby hyped up on moral righteousness. So long as the omnipresent, oppressive, monstrous Evil™ exists they can do no wrong, spare no expense in eradicating it. 

That the would-be world historical figure himself—the purported leader—doesn’t have a clue about what comes next is of no consequence to him. He’ll be in power! He can figure it out as he goes. Lenin, for example, often cited Napoleon’s maxim, which captured this type of revolutionary philosophy perfectly: “On s’engage et puis on voit"— i.e. one jumps into the fray, then figures out what to do next. And so did Lenin, Stalin, Mao and other world historical figures grope toward the future, leaving a trail of carnage in the millions. And, in a distinct but very similar manner, so did Hitler rise to power. 

What a clever, if inevitable, historical occurrence! Righteous outrage at The Evil™, midwifed by the would-be historical figure and undergirded by secular millenarianism, came to serve as the new veiling force of violence and conquest. While increasingly recognized as immoral, both were nonetheless justifiable again! The same pattern holds even for allegedly benign liberal democracy. Tyranny, we are told, is the enemy of freedom. Thus liberal democrats are justified in ending tyranny by force! And thus did the GWBush administration ...uhh...justifiably bring…uhh...Freedom to Iraq, by force! (The operation was literally, yet ironically, called Iraqi Freedom.)

It is worthwhile to return again to the question posed at the beginning: what did Mao think of himself when he awoke in the mornings? A lot of people implicitly seem to assume that Mao thought evil thoughts because his actions were so evil. But that is almost certainly wrong. In fact, he more than likely felt precisely the opposite. He probably awoke in the mornings following the anti-rightist campaign, the Great Leap Forward, and the Cultural Revolution truly believing himself to be a heroic champion of The Narrative™ and the Good™. He himself more than likely truly believed, as his Marxist-Leninist philosophy surely did, that in opposing the Evil™ one can hardly do wrong. And, even if he did, it was of a far, far lesser impact than the Evil™ would otherwise be doing. Hurray for Chairman Mao, Chairman Mao thinks to himself. As Alexander Solzhenitsyn beautifully put it in The Gulag Archipelago: “If only there were evil people somewhere insidiously committing evil deeds, and it were necessary only to separate them from the rest of us and destroy them. But the line dividing good and evil cuts through the heart of every human being. And who is willing to destroy a piece of his own heart?"

We know now that it is evolutionarily adaptive to believe your own bullshit. In order to really motivate and convince others, you yourself have to be a true believer. Risk averse, rational skeptics are just extremely unlikely to ever lead a massive, world shaking movement. To do so requires the utmost faith in your convictions and utter dogmatism. Even if some would-be world historical figures start off unsure of their convictions—as I imagine most do—routine exposure and repetition, and/or exposure to a radicalizing event, eventually transitions them into the true, dogmatic believer. If you hold a branding iron against your body long enough it will permanently deform you. If you wear a mask long enough it impresses upon you; ceasing to be a disguise it instead becomes your identity. The social construct becomes reified. Myth becomes reality. 

Half-hearted believers don’t lead revolutions.

So, to sum up: the world historical figure, almost always male and riven with a risk seeking psychology, is intensely motivated by his need for purpose, status, and reproduction. He looks upon the world and sees that it needs to change. Over time and alongside progressive, evolutionary changes in human material circumstances, Narratives™ of The Good™ that justify world historical figures need for change have evolved in lockstep. The justifications remain socially and culturally contingent. 

Most importantly, the modern would-be world historical figure promises change, now! A drastic revolution in the here and now, justified with a righteous indignation against The Evil™ that constitutes the present system. Those who lead and those who buy into such radical visions are of enduring archetypes. The would-be historical figure, is described above. The followers, meanwhile, see in the movement a meaningful explanation (The Narrative™ of The Good™) and thus derive a justified sense purpose, a communal sense of belonging with fellow believers, and (mostly below conscious awareness) recognize that they stand to benefit from the status and resource accrual that manifests as their movement grows and, in particular, should their vision come to fruition. 

Ultimately, The Narrative™ of The Good™ is necessary on two important counts. First, to simultaneously veil and service the deeper undergirding drivers of human behavior that are always bubbling under the surface. And second, to provide justification for the extravagant and often brutal means necessary to achieve the requisite societal re-ordering that appeasing those base human desires inevitably requires. Thus, in contemporary movements and for the would-be world historical figure of modern times, righteous opposition to Evil™ comes to serve as the needed veil of the deeply human impulses that spurred on our conquering forefathers—those impulses that modern sensibilities increasingly recognize cannot themselves justify the exorbitant means inevitably needed to realize the radical societal re-ordering they desire. The emperor has purchased new clothes.

World-historical figures are humans with complex motivations. They grapple with fear and uncertainty. Fear that if they didn’t take the reins someone worse will, fear that they won’t matter to history. They also confront uncertainty about whether they know how to achieve the ends they desire, uncertainty about whether the means and tactics are truly justified. But, as a general rule: the more certain the would-be world historical figure is about the ends he desires, the more willing he will be to justify any means. Ironically, the more righteous they believe themselves to be in pursuing The Good™, the more capable they become of justifying and enacting evil. It is all together too common for world historical figures, being dogmatic true believers in salvation in the here and now, to lead humanity down dark and deadly paths to hell. As Nietzsche warned us: "Anyone who fights monsters should see to it that he does not also become a monster. When you look long into an abyss, the abyss looks also into you." When you believe you are righteously fighting Evil™, stop and think for a moment. And remember this: the path to hell is paved with righteousness.  

Let us develop a maxim: doubt your convictions in proportion to your sense of righteousness about them.

Here, you’ll find thoughts on individual and societal flourishing, through the lens of political economy, evolution, history, finance, and IR.

For more of such writing, check out my website @ https://jonathonsine.com/

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