Fat Years - Chan Koonchung [107]
“Most encouraging,” said He Dongsheng, “were President Franklin Roosevelt’s Second World War economic policies, including price controls, that not only supported an enormous military expenditure but also allowed the United States to free itself from the Great Depression that had bedeviled the nation for twelve years.”
The economist John Kenneth Galbraith served at the time as deputy head of the Office of Price Administration with a staff of some sixteen thousand employees. Before becoming president of the American Economic Association in 1972, Galbraith wrote a book on price-control policies, and in the 1970s during a period of economic stagflation, he again advocated them. All Western economists are not, then, opposed to price-control policies. It is just that in the last forty years, the ideas of the Chicago School of market fundamentalists had so much influence that no one remembered that price control is a good strategy for regulating a market economy. In France right up to the 1980s, 40 percent of economic activity was still regulated by price controls.
This was the breakthrough He Dongsheng had made in his understanding of economics. After that, he combined his new knowledge with China’s actual circumstances and tried to sell his ideas to his other comrades. Fortunately, many Chinese officials had just emerged from the socialist command economy, and were willing, on the surface at least, to accept a market economy. In their heart of hearts, however, they were elated to hear about price-control policies. In a period of economic transition, price controls were actually a necessity; they would assist the market, and save this newly emerged market from self-destruction, but would not usurp the functions of a mature market economy.
None of the officials in He Dongsheng’s Price Control Group were dyed-in-the-wool ideologues. The core members of the group were technocrats in their fifties who had accumulated the price-control experience of thirty years of Reform and Openness. They had recruited a large number of the best students of statistics and econometrics from China’s premier universities to set up a database and develop software for a nationwide network of a kind not available in an earlier age of planned economy. This made it possible for producers and consumers throughout the world to go online and locate the most up-to-date price-control information.
Price controls make real prices transparent. They are intended to allow businesspeople to make money and encourage them to produce, but prevent them from entertaining ideas of speculation, hoarding, and profiteering.
What should be regulated, what should not be regulated, and what is the influence on supply and demand? These are the things that have to be handled just right in order to inhibit major fluctuations in prices. Even more necessary is relinquishing control at just the right time to allow the market’s own regulatory mechanism to take over.
This sort of large-scale regulatory feedback system implemented in China was a startling revelation to the initially skeptical foreign media. To put it bluntly, even a more authoritarian dictatorial government would be able to implement this “command economy for a new age” by employing twenty-first-century automated information and calculation systems. Price controls provided a kind of armed escort to smooth the path of China’s latest large-scale economic reform.
“In the world today,” said He Dongsheng, his voice beginning to break, “China is truly the only country that could accomplish all five of these policy changes at the same