Chinese economic reforms transformed the direction of the country’s economy after Mao Zedong’s death, moving it away from socialist policies and institutions toward market incentives, first in agriculture and then in industry. In the book’s account, their decisive significance lies in the political process that made this shift possible: reform followed a struggle over power within the Communist Party, rather than a sudden discovery by its leaders that earlier policies were economically damaging. The resulting growth was substantial, but it did not amount to a transition to fully inclusive political institutions.

The Political and Economic Background

The reforms are presented against the record of severe economic and political damage under Mao. In the 1950s, the Great Leap Forward pursued drastic industrialization and led to mass starvation and famine. In the 1960s, the Cultural Revolution brought the persecution of intellectuals and educated people whose party loyalty might be questioned, wasting talent and resources. The book therefore rejects the claim that Chinese poverty before the reforms arose from Chinese culture: it locates the causes in the way Mao organized the economy and conducted politics.

This history also frames the reforms as a break in policy direction, rather than a cultural transformation. The book argues that neither the earlier poverty nor the later growth can be explained by a change in Chinese values. Instead, it ties the difference to changes in economic organization and political leadership. That distinction matters to its broader account of global inequality: the same society could experience very different economic outcomes as its institutions and incentives changed.

A Political Turn, Not an Enlightenment

After Mao’s death, Deng Xiaoping and his allies gradually abandoned socialist economic policies and institutions. They began in agriculture and subsequently extended reforms to industry, introducing market incentives into sectors previously organized under socialist arrangements. The sequence was gradual, but the book describes the change in direction as radical in its consequences for China’s economic organization.

The account explicitly distinguishes this shift from an intellectual conversion by the ruling party. Deng and his allies did not prevail because the Communist Party finally recognized that collective ownership of agricultural land and industry created poor incentives. They defeated powerful opponents within the party and changed its leadership and direction through what the book calls a political revolution of sorts. Their economic reforms followed from that political victory. In this interpretation, politics determined the move toward market incentives; improved advice or a better understanding of economic principles did not.

That explanation is also contrasted with the idea that poverty can be overcome simply by informing leaders about sound policy. The book argues that political and economic institutions shape the incentives and constraints rulers face, and that these structures can prevent the adoption of policies likely to improve general welfare. China’s shift, accordingly, did not demonstrate that leaders had become less self-interested. Deng and his allies were no less self-interested than their rivals; their interests and political objectives differed, and they gained enough power to change policy.

Growth Under Continuing State Control

The reforms produced rapid economic growth, but the book distinguishes this outcome from the creation of inclusive political institutions. Early growth was spearheaded by radical market reforms in agriculture; changes in industry were more muted. The state and the Communist Party continued to play a central role in determining which sectors and companies would receive additional capital and expand, decisions that could make or break fortunes.

The comparison with the Soviet Union clarifies what this continued control means in the book’s analysis. Like the Soviet Union during its period of rapid growth, China could direct resources toward productive areas and grow quickly while economic institutions remained extractive and under state control. The comparison is not a claim that the countries followed identical paths: the Chinese reforms had already introduced market incentives, especially in agriculture. Rather, the shared point is that rapid growth can occur without a corresponding opening of political power.

The South Korean experience offers a different possible trajectory. There, increasingly inclusive economic institutions reduced the economic elite’s reason to favor its own or the military’s political dominance, while relative income equality left the elite less fearful of pluralism and democracy. The account does not present that transition as inevitable for China. It suggests that China’s economic institutions, still far from fully inclusive, make a South Korean-style political transition less likely, though not impossible.

Significance in the Book’s Argument

Chinese economic reforms serve as a central case in the book’s rejection of explanations that treat poverty as the product of ignorance, culture, or fixed national traits. The contrast between famine and persecution under Mao and growth after the shift in policy is explained through changes in institutions, leadership, and political incentives. China’s experience illustrates how changes in political power can redirect economic policy even when the people making those decisions remain self-interested.

The case also sets a limit on what growth alone proves. The reforms unleashed market incentives and rapid expansion, but the state and the Communist Party retained decisive influence over investment and business fortunes. Economic transformation, in the account, is therefore not synonymous with political pluralism or inclusive institutions. China’s trajectory demonstrates both the force of institutional change and the possibility that growth can continue under concentrated political control.