1979: The Great Backlash

China was a country that had, among other catastrophes, witnessed repeated waves of state-orchestrated famine over the years. So when the first peasants forged ahead with the private use of land in 1978, they did their best to keep it a secret, fearing retribution. But in 1979, to their surprise, Deng not only sanctioned their experiment—he approved it on a national scale. He also embraced the idea of establishing Chinese "special economic zones," where foreign investors could set up factories staffed by low-wage mainland workers, and approved the idea of gaining technology and know-how from the West—another dramatic reversal of Maoist dogma. So there was a certain logic to it when the United States, reeling from stagflation and defeat in Vietnam, decided to build on President Richard Nixon's earlier overtures to Beijing as a way of reining in Soviet expansionism. The two countries took up diplomatic relations at the start of 1979.

Deng's genius, it turned out, was to start small and quiet—so much so that the true scale of his counteroffensive against Maoism was largely overlooked in the West. When Deng came to the United States, the Washington Post's correspondent could only shake his head at "the enthusiasm of American businesses eyeing the China market, an enthusiasm even leading promoters of China trade here think has gone too far." No one would have dared to predict that Chinese gdp would grow tenfold in less than a generation.

The countries of the West had certainly followed a more moderate path than China's since World War ii. Yet they, too, had embraced a steadily expanding role for government. Welfare, regulation, and rationality were the watchwords. Europe's social democratic consensus was embodied by the all-encompassing "nanny state" ushered in by the Labour Party in Britain in 1945, with its nation-al health insurance and generous state pension schemes, close cooperation between unions and government, and state ownership of key industries. Markets were some-thing to be tamed and controlled, not unleashed.

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