Peeter Koppel: Planned Economy Did Not Make China Rich

Columnist Peeter Koppel examines a common misconception that China's economic success proves planned economy works. He disputes claims that socialism lifted 800 million Chinese people out of absolute poverty and questions comparisons with US trillionaires.

Peeter Koppel writes that recently he has repeatedly encountered the argument that China is supposedly living proof that planned economy can be done "the right way". This view comes hand in hand with the claim that socialism and central planning lifted nearly 800 million people out of absolute poverty.

What's Wrong?

According to Koppel, this interpretation is fundamentally flawed. China became wealthy not because of planned economy, but precisely because of abandoning it-through market-oriented reforms that began in the late 1970s under Deng Xiaoping's leadership. Before these reforms, when planned economy truly dominated, China was ravaged by poverty and famine.

In other words: it was precisely when China began moving away from planned economy, allowing private ownership, foreign investment, and market competition, that economic growth kicked in, lifting millions of people out of poverty.

The Trillionaires Argument

Another claim that draws Koppel's criticism concerns US trillionaires, specifically the claim that the United States has managed to create only one trillionaire, which supposedly demonstrates the limitations of market economy. Koppel notes that such an argument is misleading: the number of trillionaires is not a measure of market economy's success, but rather living standards, consumption growth, and economic freedom more broadly, are.

The real achievement of planned economy has never been creating wealth, but distributing resources-often inefficiently and at the cost of people's freedom.