The True Titan of E-Commerce
Below you’ll find an excerpt from the February issue of The George Gilder Report. The monthly issue features a portfolio recommendation that you simply won’t want to miss.
Keep scrolling to find out more…
People were still starving in the Anhui province in 1977 when Wan Li brought amazing news from Beijing.
Under Mao’s devastating rule, tens of millions of Chinese had starved to death and hundreds of millions descended into brutal poverty.
In Anhui, the suffering had been especially terrible. Now, China’s new leaders, moved by Anhui’s extreme poverty, had chosen the province for an experiment. The rigidly ruled farming communes would be allowed somewhat more autonomy.
Some villagers noticed that the new rules — though vague — could be interpreted to allow villagers to rent surplus land from the commune, farm it on their own time, and keep the profits.
Of course, in a Communist country neither the words “rent” nor “profit” were used.
Anhui’s villagers were skeptical. For almost 20 years, holding back food or money from the local commune had been a capital crime. Selling food was still illegal under China’s harsh rationing system. And the vague new policy contained no provisions for the villagers actually grouping together in profit-making enterprises.
Despite the risk, 18 men and women from the village of Xiaogang Cun met in secret and decided to bring capitalism to rural China.
As told by Juan Du in her brilliant new book, The Shenzhen Experiment, the 18 villagers secretly “drew up a group agreement to contract a plot of unused land from the village commune and farm it collaboratively,” sharing “surplus produce and profit” among themselves.
So taboo did this seem that “all 18 swore a blood oath to secrecy, agreeing to collectively raise the young son of the group leader,” should the leader be arrested, imprisoned, or worse.
Fortunately, when local officials uncovered the conspiracy, they were so happy about the extra food they simply thanked the conspirators.
In all but name, the villagers had formed a for-profit partnership — the first in China since the Communist takeover.
Word spread. Soon villagers all over Anhui, then throughout China, were launching for-profit farms and cottage industries (always given some communist-sounding name). It was not until 10 years later that privately-owned enterprises were legally recognized in China.
By then, millions were already thriving. In microcosm, the story of Xiaogang Cun is how capitalism came to China. It was not because of any elaborate government plan. Rather, the reformers, led by Deng Xiaoping, periodically issued vague statements that didn’t seem to quite reject Communist doctrine, but also could be interpreted to give Chinese citizens just a bit of room to maneuver.
And the people ran to daylight.
Every practice, process, institution, or initiative that was crucial to a market economy was established in China by ordinary people, originally without government sanction and often while still explicitly illegal.
Even after reformers had been in power for years, it remained illegal for Chinese to move from one town to another without permission, change jobs without permission, build houses without permission.
Rent out extra space to a tenant? Absolutely illegal. Form a corporation, issue shares, pay out profits? Hey buddy, this a Communist country, capice?
In every single case, some ordinary Chinese citizens broke the law — and then thousands, and millions followed in their footsteps.
And in every case, only years later did the government grudgingly create some sort of legal accommodation.
The only alternative would have been to return whole regions, and hundreds of millions of people to abject poverty. All the Chinese government’s newfound wealth, all its military might, all of the Belt and Road initiatives around the world are funded by markets that the government did not create, foresee, or even permit until it was too late to reverse them.
Surprised? We shouldn’t be. Governments have never created markets. They can’t.
In the February issue, I go further into detail with my research and then reveal this month’s newest recommendation.
Editor, Gilder’s Daily Prophecy