Submission by Dennis Pan
As the global tension of the New Cold War emerged and conflict arose between the Chinese economy and US economy, people began to compare China’s progress to the movement of the Progressive Era in the United States. The Progressive Era was a key development that helped the US develop its economy to a more fair market. While the “New Era” in China occurred late in comparison to similar eras in other countries and had different intentions than those of the progressives in the West, it is noteworthy for turning the Chinese economy into a strong economic empire in the Asian market. While both movements seem alike, the two movements included many aspects that are different from each other.
The Gilded Age and The Progressive Era
In America, after the Civil War, the shift from agriculture to industry produced an economic boom, a time referred to as the Gilded Age.
As the nation advanced its economy, the US became a divided nation of the privileged wealthy upper middle classes and the lower labor classes. The rise of the big corporations that controlled markets via monopoly was the main cause of the wide expansion of wealth. The most common monopoly tactics were horizontal and vertical integration, which took advantage of the market by taking control of materials and out-competing business rivals by increasing production. This made US entrepreneurship hard in the 19th century, as many businessmen ended up broke, joining the working classes who would face oppression by the large corporations.
By the late 19th century, the United States faced a backlash against the corruption of large corporations who exploited monopolies and trusts. In the term of Theodore Rooselvelt, the voices of the lower classes were formally acknowledged by the government. In an effort to reduce the economic gap between wealth and poor, and to reduce corruption in the government, the government created laws that sought to advance morality by protecting the underprivileged. This legislation was seen by US citizens as “progress,” and so historians named this period the Progressive Era.
China's Reform and Open-Door Era
Starting in 1979 and ending in 1981, China began a period of economic readjustment by increasing exports, opening markets to foreign investment, and increasing technology and industrialization. Its ultimate goal was to make China’s market better sustainable for industry, possibly reducing some controls of the market by the government but also keeping the country under a Communist government.
After the success of the period of readjustment, China adapted its reform of the Economic system under the leadership of Deng XiaoPing to create a new economic system in China and a return to foreign trade.
Deng’s era created more opportunities for the impoverished, who previously could only advance economically by accepting government-issued labor. Deng established civilian-run enterprises and sought to learn from the West in establishing effective economic systems. Over time, the Chinese GDP rose significantly from that of a low-developed country to roughly 15% of the world market, creating closer relationships with the western nations and to the people of China, who had created the slogan “Mao made China stand up; Deng made China rich”. Despite the later controversial political tensions under his term, Deng created a successful Chinese economic model for its people. As the era developed, the economic system in China leaned more toward a free market. The rapid adjustments to its market were recognized by the international market and spurred the Chinese Economy. In 2001, China joined the WTO, marking a major success of the Chinese Economy and retaining its goal of improving its economy while maintaining a socialist society.
Nonetheless, corruption in the government has long been an issue since Deng’s term. As money scandals increased among government officials and the upper classes, lower-class income increasingly fell. Worse, monopolies developed as entrepreneurship increased nationwide, contributing to the dissatisfaction of those kept out of such opportunities.
China’s New Era
In 2015, the Chinese government began to make great changes to its policies. The government sought to eliminate corruption and the monopolies that remained as a result of Deng’s, Jiang’s, and Hu’s terms. Afterwards, China’s market system began a drastic turn towards government control, marking the so-called New Era..
In the New Era, the Chinese government pushed back against capitalist activities in China. More specifically, this era consisted of three main movements: the anti -corruption movement, which sought to remove high-level officials and local servants accused of bribery and abuse of power; the anti-monopoly movement, which sought to regulate high-income corporations and assert more governmental control of the economy; and the movement to eliminate poverty.
The rapid changes in recent years have largely impacted entrepreneurs who emerged after Deng’s reform to lead rising “superstar” companies such as Tencent and Alibaba. These have been targeted by the government in attempts to take control of the companies. The government created new political models that had strict regulations on entrepreneurs they deemed to have threatened the distribution of wealth by trading with foreign countries, which the Chinese government deemed corrupted with capitalist ideals. The New Era has thus created many new policies that have stopped the progress made in Deng’s era.
Contrasts and Uncommon Paths
Both the Progressive Era and the “New Era” had many similarities. First of all, the apparent goal was the same for both periods: both nations sought to lower the economic gap, reduce the corruption in the government, and regulate monopolies. Another similarity is that the period of progress for the two nations both started after a period of technological advancement in their country, which gave it more wealth and international prestige, enabling the government to fix its political problems. Also, both movements had a large number of supporters.
That said, the current progressive movement in China’s New Era has an important difference to the Progressive Era: the approach to business regulation. The US government was not allowed to directly determine the fate of large corporations, so it passed a number of landmark laws, such as the Sherman Antitrust Act and the Clayton Act, which aimed to curb the power of monopolies and trusts. It was easy for business leaders to bypass these laws, and the battle for a fair distribution of wealth had to continue, but it established a fair system for entrepreneurs. In contrast, China's reforms focused on strengthening state-owned enterprises, which gave the government a greater degree of control over the economy.
Another difference: China had no clear rule on when a private business deal was deemed a monopoly, with those targeted by government crackdowns labeled as corrupt without any evidence given to the public. This approach created the current climate of fear in the market, in which entrepreneurs are scared of punishment by the government and thus produce less wealth for the country.
Another key difference was the two countries’ approach to social welfare. The US Progressive Era saw the passage of a number of laws aimed at improving the lives of working-class Americans, such as child labor laws and minimum wage laws. In contrast, China's reforms were less focused on social welfare, and the country has continued to struggle with poverty and income inequality.
It is also noteworthy that the United States had a more capitalist and democratic government, which allowed more voices in their politics. Meanwhile China’s government is a one-party system, so it refuses to tolerate dissent. This lack of freedom to speak explains why it is so hard to determine whether the government of the New Era is making changes that actually address problems with corruption and monopolies as the US progressives did.
Economic Reforms in China: At a Crossroads - Progress or Reversion?
In 2015, on the threshold of the New Era, the old economic model was viewed as outdated by some who believed China needed changes to eliminate corruption and create more equal opportunity for citizens. In the recent years of the New Era, more regulatory crackdowns on private entrepreneurs have become the new norm. These reforms gradually shifted China towards a more planned and state-controlled economy, with an emphasis on strengthening state-owned enterprises.
While this move may seem contrary to the direction taken by the United States during its Progressive Era, it was driven by the goal of sustaining a Communist government structure. In recent years, China has abandoned a pro-business market overhaul in favor of a more state-controlled economy, in which business interests are secondary to the goals of the Chinese Communist Party. China’s handling of the pandemic, and the growing ideological influence on its economic policies, have caused many business people to question whether the country remains a reliable place to operate. Companies like Apple have been looking with greater urgency to diversify outside China.
According to a Stanford report, the share of China’s national income earned by the top 10% of the population has increased from 27% in 1978 to 41% in 2015, nearing the US’s 45% and surpassing France's 32%. Similarly, the wealth share of the top 10% of the population has reached 67%, close to the US’s 72% and higher than France’s 50%. Meanwhile, the income for China’s bottom 50% (539 million adults) has increased fivefold since 1978, during which time period the same group in the US saw a 1% decrease. According to the Diplomat, the Chinese anti-poverty movement has indeed reduced poverty by building more roads and schools in places that needed access to them, but problems remain. The report also showed that 63% of rural students dropped out of education before high school. China has a long road to travel on its path to reduce the wealth gap.
This Chinese New Era has many similarities with the US Progressive Era, as both were periods of significant social and economic change. The US Progressive Era laid the foundation for the modern American welfare state, while China's reforms transformed the country into one of the world's leading economic powers. However, it is important to note that China's reforms have also come at a cost, as the government has consolidated its power and control over the economy and society. Unfortunately, despite improving on China’s past development, the New Era policies borrowed from the American progressives have failed to create a stable market like that of the US today.
Written by Dennis Pan
Senior Student at Mountain View High School, Mountain View, CA