ABSTRACT
This chapter analyzes the contested events of the summer of 1988, when shock therapy was once again attempted. One narrative suggests that the 1988 attempt was driven by Zhao Ziyang, who would have listened to his young advisors reporting from a journey in Latin America that inflation was not to be feared. Chapter 8 argues instead that in 1988, reform had reached an impasse. The golden age of the first years, when all parts of the population seemed to be benefitting from reform, came to a close. This situation unleashed resistance from within the state and the population. Deng Xiaoping, hoping to rescue his marketization agenda, decided to forge ahead with the plan for shock therapy, which had been propagated by economists for almost a decade (see Chapters 5–7). Deng’s plans could not be stopped by economists’ warnings and were only reversed when propaganda for wholesale liberalization triggered runaway inflation. Deng was prepared to push ahead with full-scale marketization, but not at the cost of undermining the ability of the state to maintain control. Thus, in 1988, China escaped shock therapy a second time but at tremendous political and economic costs. Analysis of the events of 1988 is crucial for an understanding of the Tiananmen movement of 1989.
