April 12 (Bloomberg) -- In September 1982, U.K. Prime Minister Margaret Thatcher traveled to Beijing to discuss the future of Hong Kong with Chinese leader Deng Xiaoping.
It wasn’t an easy encounter. Premier Zhao Ziyang had previously announced China’s determination to reclaim sovereignty over Hong Kong, which had been a British colony for 140 years. Thatcher later told the press that her talks with Deng were friendly. In reality, Deng hadn’t concealed his anger.
Two years later, the two nations reached a rapprochement. The U.K. promised to relinquish its claim on Hong Kong in 1997, and China vowed to maintain a free-market economy in the territory for 50 years after the handover.
For Thatcher, this was an important concession by the Chinese. To the Western press, it was further evidence of the Chinese leader’s pragmatism. Deng, the New York Times said, had “put aside ideology” to close the deal.
In this respect, Deng appeared to be the complete antithesis of Thatcher, who was frequently condemned as an ideologue and a radical. She didn’t take this as criticism. She admired Friedrich Hayek’s “crisp, clear analytic arguments” in defense of liberty and free markets. And she reveled in her battles with the “wets” inside her own Conservative Party; the “collectivists” in the opposition Labour Party; and the “apparatchiks” who controlled the U.K.’s trade unions.
It is that steadfastness for which Thatcher, who died April 8, is now remembered. As the “Iron Lady,” she privatized government-run industries, reduced regulation and limited the welfare state. And her influence wasn’t limited to the U.K. After her death, the Economist magazine said she “had changed the world.” Der Spiegel called her “one of the most important reformers of the postwar era.”
Future historians may take a different view. Indeed, the most important global transformation of the Thatcher era may have been the rise of China, and its distinct model of authoritarian capitalism. And the leader who deserves credit for this transformation is Deng, not Thatcher.
When Deng and Thatcher came to power in 1978-79, the U.K.’s gross domestic product was greater than that of China. More than 30 years later, China’s GDP is about triple the U.K.’s. In 1982, none of the five busiest ports in the world was in China, and one (Hong Kong) was under British control. By 2006, three of the busiest five ports were Chinese. (One of these -- Shenzhen -- was only a cluster of small towns when Thatcher took office in 1979.) By the early 2000s, the number of people migrating each year from China’s rural regions to its industrial centers substantially exceeded the total population of the U.K.
Although Thatcher later commended China’s “embrace of capitalism,” she did little to bring it about. Thatcher had scarcely begun her parliamentary career when Deng articulated his famous defense of market-oriented policies -- “It does not matter if the cat is black or white, what matters is whether it gets the mouse” -- in 1961.
Deng was being persecuted for rightist tendencies while Thatcher was a backbench member of Parliament. He came to power and launched China’s “course of four modernizations” while she was still the leader of the opposition. Deng’s promise to maintain the free-market model in Hong Kong, mistaken as a concession to the West, was consistent with a policy that the Chinese leader had been pursuing for years.
So far as the writing of history is concerned, Deng suffered from certain disadvantages, at least in the short term. He wasn’t the leader of an English-speaking nation. He worked within an opaque regime. And he had learned, through brutal experience, not to be perceived as a radical. He presented economic modernization as a technical, rather than an ideological, problem. And the final authority of the Communist Party was never questioned. Reform was about economic, rather than political, freedom.
The Thatcher years were undoubtedly a period of profound global transformation. But the most important legacy of that era isn’t Thatcher’s bold vision of political and market liberalism. It is Deng’s model of authoritarian capitalism. Thatcher the ideologue captured our attention. But Deng the pragmatist changed our world more profoundly.
(Alasdair Roberts is the Jerome L. Rappaport professor of law and public policy at Suffolk University Law School. His books include “The Logic of Discipline: Global Capitalism and the Architecture of Government.” The opinions expressed are his own.)
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