A Brief History Of Neoliberalism

In Chapter 5, Harvey describes the reformation of the Chinese economy under the leadership of Deng Xiaoping following the death of Communist Party Chairman Mao in 1976. Harvey identifies how China implemented some neoliberal reforms while maintaining some of its historically Communist features. Deng sought to increase economic growth by implementing free market aspects. He implemented market pricing (rather than having the state set prices) and devolved power from a central authority down to local and regional government authorities. China also opened up to foreign trade and foreign direct investment. It also began to invest in foreign currencies. Its transformation was facilitated by the overall neoliberal international market taking shape in the 1980s.

In the section entitled “Internal Transformations,” Harvey describes the domestic policies China undertook to reform its economy. These reforms took place incrementally, in contrast with the “shock therapy” quick market reforms that were implemented elsewhere, such as in Russia after the fall of the Soviet Union. Rather than to create an economic elite class, China chose to make these reforms in order to improve its competitiveness on the world stage. The reliance on foreign direct investment, limits on financial markets, and state ownership of industries also reduces the possibility for capitalists to form a class.