Kindleberger on the loss of technological leadership

The following passage by the economic historian Charles P. Kindleberger, from his slim book Foreign Trade and the National Economy, was written in 1960-61 but feels remarkably relevant to the present moment:

Technology today spreads in some degree through illegal imitation, including the pirating of design and industrial espionage, but mainly through licensing, direct investment, a simple reading of technical literature, foreign education, and so on. There is little doubt that the speed of diffusion of technology has increased not only among developed nations but between developed and underdeveloped. There need be no direct communication. That one country can produce a particular article may be sufficient spur to others, as Russian, French, and Israeli work in atomic energy may demonstrate.

Technological leadership is harder than ever to maintain, although historians may think it was never held long. The result is that trade based on technical leadership must keep changing, for any given technical gap is foredoomed to closure.

As a general principle, to me that seems probably right. China is busy trying to close many technological gaps between its own industries and the global leaders, and the forces of technological diffusion suggest that time is on its side. Does that mean that the US, by imposing export controls on Chinese makers of telecom equipment, semiconductors and supercomputers, the US is engaged in a hopeless strategy doomed to failure? Not exactly. Historical inevitability can take a long time to play out, and the difference between technological gaps closing in 5 years, 10 years or 20 years is very much a nontrivial one for companies and nations.

And using this general principle to make predictions about how leadership in specific technologies plays out is not always going to work. Kindleberger’s own observations about the threat to US technological leadership from Europe have held up less well:

It looked for a time as though the technical gap between the United States and other developed countries was an enduring feature of international trade. Isolation from the battlegrounds of two world wars, plus an economic history of great labor scarcity relative to land, and later to capital, gave the United States an interest in innovation which was more widespread among the populace and among economic sectors than in other countries.

This view can no longer be held with assurance. … Europe and Japan are innovating positively. Major developments in the particularly American field of innovation–the automobile–have mainly been of European origin: the disc brake, the two-stroke engine, independent springing, and so on.

Particularly interesting is the new spirit of innovation in France, which has produced in the 1950s the Caravelle and Mystere in airplanes, the Citroen DS 19 and “deux chevaux” (two horsepower) in automobiles, high-voltage long-distance electric transmission, and direct transmission at 25,000 volts to electric locomotives. These and other equally radical departures from simple imitation of leading technical performance suggest a surge of independent innovation in France…

The general principle that technological diffusion is going to happen does suggest that the best way to combat the loss of technological leadership in one area is to open up technological leadership in a new area. The US did this fairly successfully in the decades after Kindleberger’s book was written. It still seems that the best response to today’s technological challenge from China (and others) is not going to be a bunch of delaying actions, but a renewed push forward.

Housing and the Chinese middle class

I have thought for a while that China’s privatization of urban housing is one of the most important and least understood events in its modern economic history. The entry into the World Trade Organization in 2001 has been exhaustively studied and its effects are still being vigorously debated today. The downsizing of state-owned enterprises in the late 1990s has also been repeatedly dissected and analyzed.

Housing privatization, which like SOE reform had its high-water mark around 1998-2003, has received much less attention. Which is strange, because the launch of a private housing market not only created the Chinese business cycle as we know it–basically all of China’s booms and busts over the past two decades have been driven by housing–but created the major source of private household wealth. So it seems obvious to me that housing reform deserves a comprehensive economic and social history, which I have not yet seen.

I dug into Luigi Tomba’s 2014 book The Government Next Door: Neighborhood Politics in Urban China in hopes of getting closer to that. He seemed to immediately grasp the central role of housing in the transformation of urban Chinese from socialist functionaries to a prosperous bourgeoisie. In the introduction he recalls how his initial fieldwork in Beijing in the early 2000s looking for a “middle class,” he found that

Most of the young people I was talking to did not fit the image of the wealthy entrepreneurs that dominate the mainstream portrait of a glamorous Chinese middle class often presented by the international media. Rather, they seemed to be, in large part, professionals and public employees whose housing careers often owed much to their position “within the system” of public employment.

That initial insight led Tomba to start to piece together the complicated story of just who got housing and how. Still, this book is not a complete account of housing reform, nor does it claim to be. Only one chapter of his book is really about housing reform, and most of the rest is too heavy on political-science jargon and too light on detailed history for my taste. But it does contain some important insights on how housing works in China, particularly its political implications:

Housing privatization, which began with a massive transfer of housing stock from public to private hands in the 1980s and 1990s, has provided an opportunity to engineer a middle class systematically, through selective incentives and subsidization. It also built on the converging interests of local governments and developers in selling and developing their land, which remains the main source of income for urban governments to balance their budgets and finance infrastructural projects. These policies have inevitably favored those who had already been privileged by the unequal redistribution of housing in the socialist period because of their employment in the public sector. The resulting boost for a property-holding middle class went therefore mostly toward employees and families actively employed in the public sector, who became the first large cohort of Chinese homeowners during the housing reform of the late 1990s.

The key point here is that housing privatization replicated and amplified, rather than overturning, the pattern of inequality inherited from the planned economy. In that system, there was little inequality in wages or money income, but there was greater inequality in living standards, because housing and consumer goods were preferentially allocated to those with higher political status. The combination of SOE downsizing and housing privatization did remove some socialist foundations, particularly the ironclad guarantee of a job and housing for urban residents. But reform replaced them with something that would prove much more valuable over the longer term: privileged access to assets that were rapidly appreciating in value. So rather than weakening political support for the Chinese government, housing reform bolstered and broadened it:

China’s long-term processes of privatization and reform have, in fact, worked to reinforce, rather than reduce, the legitimacy of the authoritarian rulers, as the state and its policies are perceived by the weakest groups as the last line of defense against the deregulation of the market and by the middle classes as the guarantors of newly acquired “rights.” …

It is increasingly becoming clear that the political apparatus of the socialist hierarchical state is still in place; after more than three decades of marketization, there is little sign of the system that would successfully supplant it. Its role in defining the practices of power is still overwhelming, although perhaps more fragmented and not felt as directly by some of its citizens as in the years of mass campaigns and class struggle.

So China’s housing privatization, in addition to being one of the largest transfers of wealth in history, may also have been one of the most successful political strategies.

What I’ve been listening to lately

It’s been a while since I’ve done one of these, so a lot to catch up on:

  • The Savory Collection 1935-1940 – A huge pile of great jazz from the swing era, most of it unheard since it was first broadcast on the radio. Highlights for me so far are the tracks from John Kirby’s sextet, the jam sessions with Fats Waller, the solo piano tracks by Joe Sullivan (a rare example of extended improvisation from this period), and some sterling performances by Coleman Hawkins and Benny Carter. There’s also a lot of live Count Basie, with his band at its peak.
  • Dr. John – Bluesiana Triangle. I had never heard of this 1990 album until it was mentioned in a few of the obituaries after his passing in June. Of course I grabbed a copy immediately: who could pass up Dr. John playing with David Newman (who was in Ray Charles’ band back in the day) and Art Blakey! People seem to want to call it a jazz album because of the personnel, but it’s not really: as the title indicates, they are playing the blues, and wonderfully well. Rest in peace, Mac.
  • Allen Toussaint – American Tunes. Continuing on the theme of recordings by now-departed giants of New Orleans music, this posthumously released session is something of a follow-up to Toussaint’s jazz album The Bright Mississippi. This one is more deliberately wide-ranging but also brilliant. Would any other piano player — could any other piano player — move so easily from interpreting Bill Evans’ “Waltz for Debby” to Professor Longhair’s “Big Chief”? And his takes on two Ellington tunes, with guest vocals by Rhiannon Giddens, fulfill the promise of the title, magnificently pulling together a century of American musical tradition.
  • Ari Brown – Ultimate Frontier. A stalwart of the Chicago jazz scene who should be better known, and one of very few musicians to play both sax and piano at a high level. I originally encountered his sound in Kahil El’Zabar’s Ritual Trio. This 1995 recording was Brown’s first under his own name, and is a consistently excellent of set of soulful spiritual jazz.
  • Jacob Miller – Who Say Jah No Dread. One of the keystone recordings of dub reggae is Augustus Pablo’s King Tubbys Meets Rockers Uptown. Much of the raw material for that masterpiece came from these less well-known sessions that Pablo produced with vocalist Jacob Miller. The vocal tracks are powerful and compelling–it’s no surprise the dubs turned out so great as well.

What triggered the China backlash?

Richard McGregor’s new short book Xi Jinping: The Backlash is a useful summary of how much of the world’s view of China has changed over the last few years, and not for the better. The catalog of the things that have upset foreigners dealing with China is now quite a long one:

The construction, and then militarisation, of islands in the South China Sea from 2013 galvanised hawks in Washington and allies in the region, not least because of its sheer audacity and scale. Foreign businesses, once advocates of engagement with Beijing to open the Chinese market, became disillusioned when they saw their access truncated. The seemingly ceaseless theft of trade secrets and technology hardened cynicism in governments and companies alike. The detention of up to a million Uighurs in re-education camps in Xinjiang in the name of anti-terror from 2017 highlighted human rights abuses in a way the jailing of individual dissidents never could.

And that is even without going into the somewhat different dynamics of the developing world’s backlash against China’s Belt and Road Initiative. Given all this, it may be a fool’s errand to try to identify any single trigger for the world’s reaction to a more assertive China. It is overdetermined, in the social science jargon, with many causes all pushing in the same direction. Nonetheless I very much agree with McGregor’s assertion that:

If there is a period that crystallised perceptions of Xi, and his world view and ambitions, that moment was in late 2017 and early 2018 when foreigners, and many Chinese as well, finally started to take him at his word. Xi was reconfirmed as leader of the Chinese Communist Party in October 2017 and then abolished term limits on his presidency in March 2018, removing any obstacles to his remaining in power in perpetuity. … In one decision, Xi confirmed his critics’ view that he was an unrepentant autocrat willing to take China backwards in the service of his agenda.

This jibes with my own observation of the dramatic shift in the consensus of the US China-watching community (and here is a similar observation from someone with more foreign-policy expertise than me) . As a few people have pointed out, what has really changed over the last couple of years is not the views of the China hawks–it is the views of the China doves. People who had long felt that China, was moving, albeit imperfectly, in a more positive direction over the long term, began to concede that, in fact no, China was not really moving in the right direction anymore. Xi’s decision to abolish term limits helped convince the waverers and solidified this trend. It was a move that was almost perfectly indefensible. After all, abolishing term limits is something only tinpot dictators of third-world countries do.

China clearly did not anticipate the blanket foreign-media coverage and criticism of the move, but its explanations only highlighted how poorly officials understood the perceptions of their system abroad. Chinese official media justified the removal of term limits as being a minor administrative adjustment to bring the term limit for the presidency in line with the other two offices Xi holds (Party general secretary and Central Military Commission chairman), neither of which have term limits. The official argument is that it’s important for the leader in China’s system to hold all three offices (something Jiang Zemin, the first to do so, had also said). What this argument actually implies is that Xi had already decided to stay for a third term as general secretary, and that the rules had to accommodate this decision by not forcing him to give up the state presidency.

Given the consequences that have since flowed from it, Xi’s decision on term limits must go down as one of the greatest geopolitical own-goals of all time. So I was a little disappointed that McGregor, author of the classic and still-relevant The Party: The Secret World of China’s Communist Rulers, did not dig deeper into the background of this decision. Not that anyone in the Chinese system would have any incentive to talk to him about it. The full story of that fateful moment in early 2018 is likely to emerge only after Xi eventually passes from the scene.

Logistics and the demand for empire

Daniel Immerwahr’s How to Hide an Empire: A History of the Greater United States is one of the more surprising and interesting history books I have read in a while. One part of the book’s agenda is clear from its title: to bring to light the often-forgotten history of the margins of the US, places like the Philippines, Puerto Rico, Hawaii and Alaska, and various Pacific islands. And there is a wealth of fascinating stories here that I (and I suspect most Americans) had never heard.

But the second part of the book’s agenda is even more surprising and ambitious: Immerwahr presents a theory of how technological change has shaped the global political order. The puzzle he sets out to answer is why the US, after acting not so differently from other imperial powers in the 19th century, changed tack after its victory in World War II:

Today, the idea that the United States might have annexed France or claimed Europe’s Asian colonies in 1945 seems like an absurd counterfactual. But it wasn’t unthinkable. That was, in fact, precisely what Germany and Japan had just done. And it wasn’t too different from what the United States had itself done, repeatedly, to formerly Spanish lands throughout the preceding century…

At the war’s end, the United States possessed the world’s fourth-largest empire, accounted for more than half the world’s manufacturing production, and had atom bombs. Why not conquer the globe?

But of course, that’s not what happened. Not even close. Instead, the United States and its allies did something highly unusual: they won a war and gave up territory…

Partly this is because many places were no longer so willing to be colonized: political change reduced the supply of potential colonies. But Immerwahr argues that the US was happy to endorse independence for its colony of the Philippines, and not to seek out new colonies, because it had less demand for colonial territory:

It may help to look at the decline of colonialism from a different angle, focusing not just on supply but on demand as well. The worldwide anti-imperialist revolt drove the cost of colonies up. Yet at the same time, new technologies gave powerful countries ways to enjoy the benefits of empire without claiming populated territories. In doing so, they drove the demand for colonies down.

The “empire-killing technologies” ranged from skywave radio to screw threads, and they worked in different ways. But, collectively, they weaned the United States off colonies. In so doing, they also helped to create the world we know today, where powerful countries project their influence through globalization rather than colonization.

What follows is a fascinating short history of the technical change inspired by wartime pressures. The developed industrial economies had sought colonies for access to raw materials they could not produce at home. Fertilizer was imported from the guano islands of Peru, and rubber from the plantations of Southeast Asia–trade flows that were quickly disrupted by conflict. But developments in chemistry produced substitutes for both of those goods: synthetic ammonia and rubber. Industrial technology could therefore substitute for access to tropical colonies.

Perhaps even more interesting is the discussion of how the unprecedented scale and scope of conflict in World War II led to the development of a whole battery of new techniques and equipment for moving goods around the world:

It’s telling that before the war started, ‘logistics’ had been a specialist’s term, not much heard in general speech. The military academies exalted courage, leadership, and tactical acuity, not procurement and transportation. Yet, fairly soon into the Second World War, commanders grew accustomed to speaking of tonnage, inventory levels, and supply lines with the knowing reverence previously reserved for accounts of battlefield heroics.

What is more, they got good at it. During the war, the military devised a suite of logistical innovations, all designed to move people, things, and information cleanly and quickly around the planet. Planes were the most obvious—the United States came to dominate aviation—but others were no less important. Radio, cryptography, dehydrated food, penicillin, and DDT: these technologies laid the foundations of today’s globalization.

The logistical innovations did more than speed everything up. They also enabled the United States to move through places without carefully preparing the ground first, as it had in Panama. No longer would seizing large areas or zones be necessary to run a long-distance transportation network. Mere dots on the map, sometimes little more than airfields in jungle clearings, would suffice. And so, just like plastic and other synthetics, these new technologies helped to make colonies obsolete.

Empire did not vanish as a result, but its shape changed: Immerwahr calls the US, with its eight hundred military bases strewn around the globe, a “pointillist” empire, focused on occupying strategic points rather than governing large swathes of territory. This does indeed seems to be the contemporary model of empire, as evidenced by China’s effort to build up its own access to strategic points and ports.

Does China have an ideological “red line”?

Not so long ago, the conventional wisdom in the US was that Chinese leaders were essentially hardcore pragmatists, capitalists in all but name, who would do whatever they needed to do to keep the economy growing and unrest contained. Now it seems that the pendulum has swung the other way, and the Chinese government under Xi Jinping is often portrayed as a hyper-politicized system locked in to an ossified Communist ideology. Those who hold this view do not expect much out of the US-China trade negotiations, since they think Chinese officials are so ideologically committed to their current system that they cannot accept any changes.

It would indeed be a mistake to deny the important role of ideology in China’s socialist system. But the ideology that the Communist Party is promoting these days is curiously content-free when compared to the demands of the original early 20th-century socialists. Having recently spent some time reading a few of the latest ideological tracts, I can report that they contain nothing about class struggle. Indeed they contain almost no statements at all about the right and proper way to organize a society or manage an economy–quite strange since such demands were what socialist ideology was originally all about.

The ideology of socialism that the Communist Party promotes today has one key principle: that the Communist Party must be in charge of China. As Xi Jinping himself said, in a phrase that has been endlessly repeated:

The leadership of the Communist Party of China is not only the most essential feature of socialism with Chinese characteristics, but also the greatest advantage of the socialist system with Chinese characteristics.

Why does the Communist Party get to be in charge? Because it always makes the right decisions. Here is how Wu Degang, of the Central Research Institute of Party History and Literature, expressed it in a piece in the People’s Daily in April:

The Communist Party of China thoroughly grasps the laws of a ruling Communist Party, the laws of building socialism and the laws of human social development, so that its leadership always follows objective laws, reflects the wishes of the people and promotes practical development. This is the fundamental reason why the socialist system with Chinese characteristics has great vitality and superiority. …

Practice is the only criterion for testing truth…Whether it is in overcoming disastrous floods, or fighting SARS, or recovering from earthquakes; whether it is dealing with the 1997 Asian financial crisis, the 2008 international financial crisis or the current complicated international situation, the socialist system with Chinese characteristics has, under the leadership of the Communist Party of China, fully demonstrated its superiority. Without the leadership of the Communist Party of China, China would not have withstood so many storms.

What’s interesting about this is that Wu does not tell us what the objective laws of human social development actually are, as a previous generation of socialists would have been only too eager to do. He believes that there are such objective laws, and that the Communist Party knows what they are. But it is not the people’s job to hold the Party to account for whether or not it acts in accordance with those laws, but rather to uphold the Party’s political leadership. Even as he insists that results have validated the Party’s rule, he enters into a kind of circular logic familiar from authoritarian systems: the Party leads because the Party’s decisions are correct, and we know those decisions are correct because the Party made them.

The ideology of the Communist Party is, mostly, that the Communist Party is always right. And indeed it would be hard to come up with a strict ideology that would logically encompass all of the twists and turns that China has gone through since 1949. The Party has both collectivized and decollectivized agriculture, and Party members must believe that both decisions were correct. The Party has both nationalized private firms and privatized state firms, and Party members have to support both decisions.

In fact, it’s a distinctive feature of recent Communist Party slogans that they emphasize the simultaneous pursuit of conflicting objectives: “unswervingly” developing state enterprises while “unswervingly” supporting the private sector, or strengthening the role of both market forces and the role of the government. There is no objective standard that people can bring to bear to know what is the right way to balance those conflicting objectives: they must simply obey political guidance from the top.

So I generally don’t see ideology as a real constraint on what policies China’s leaders can pursue, or on what kind of deal they can negotiate with the US. If Xi Jinping decides that X is good, then Communist Party ideology means that X is good and that Party members need to fall in line. China’s June white paper on the US-China trade declared that there are “red lines” beyond which China cannot go in the negotiations, but it did not say what those are. That’s because it is the Communist Party’s privilege to decide them.

Of course, none of this means that China’s leaders are likely to be willing to overhaul their economic policies just because the US asks them to. They like their system and they don’t see any real reason to change it. If anything, US pressure may just make them feel more strongly attached to it (see this previous post). My point is just that ideology in the contemporary Chinese system lacks a lot of specificity, and so is not really a constraint on the tactics the government can pursue at any given time.

Nor do I think that this tactical flexibility and ideological emptiness mean that China is no longer actually “socialist.” There is a lot of useless debate about the meaning of socialism these days, but I still hold to the classical definition of socialism from Janos Kornai, the great Hungarian scholar of socialist economics: “The primary attribute of the socialist system is that a Marxist-Leninist party exercises undivided power.” Xi Jinping could not have put it better himself.

Gu Mu, China’s champion of export discipline

The concept of “export discipline” is an important one in my understanding of the development of Asian economies, and the functioning of industrial policy more generally. The phrase, which I take from Joe Studwell’s 2013 book How Asia Works, describes a particular type of relationship between the government and business, one in which the government pushes business to make sure that its energy and investment are going into improving national productivity. Exporting does that by forcing companies to compete in global markets and meet global standards. Absent such discipline, businesses can easily turn into lazy monopolists, rent-seekers, or property speculators–activities that generate lots of profits for them but do not do much to raise the nation’s living standards (see my last post on the topic).

Of course, this is easy to say in the abstract, but how is export discipline actually applied in real-life politics and business? Studwell’s book has some good stories about this, for instance the one about how South Korean president Park Chung Hee in 1961 put the nation’s leading businessmen in jail until they agreed to do what he wanted: develop heavy industry and obtain foreign technology.

The official history of China’s economic reforms is rather more sanitized, but the memoirs of Gu Mu (谷牧), who was vice premier in the 1980s and in charge of foreign trade, do help show how export discipline was applied in the Communist bureaucratic system (see this post for some more interesting tidbits from Gu’s memoir).

China initially decided to open up to foreign trade through the famous Special Economic Zones: the coastal cities of Shenzhen, Zhuhai, Shantou, and Xiamen that were given dispensation from many of the stifling rules and procedures of the planned economy. And from the beginning there was some ambiguity about what the function of the SEZs would be, as Gu relates in his account of the March 1980 meeting that decided to create them (these and following quotes are from the official English translation of his memoir):

During the discussions, in light of the practice of starting the special zones, the comrades also considered that we should not only develop industry, but also commerce, tourism, real estate and other sectors. We should not only expand export trade, but also play multiple functions in the economic life of the whole country. So the term “special export zone” could hardly cover all of their functions and roles. Based on these discussions, I came up with the term “special economic zone,” which had a wider connotation and was endorsed by everyone.

In other words, the SEZs were originally general laboratories for economic reform, rather than solely being solely focused on exports (as an aside, it’s interesting that Gu takes credit for coining the term SEZ). And Gu relates how the deregulation in the SEZs allowed them to quickly become centers for smuggling, which attracted lots of criticism from conservative elements in the Party. While he is emphatic that Deng Xiaoping’s strategic justification for the SEZs was mainly to export and attract foreign technology, he also makes it clear that many people in the SEZs were reluctant to sign up to this vision.

From 1979 to the end of 1984, five special documents were issued by the Party Central Committee and the State Council on SEZs or containing content relevant to SEZs. For the orientation of the economy of SEZs, these documents repeatedly pointed out: “Priority should be given to the utilization of foreign capital,” “Priority should be given to conducting industrial productive projects,” “Products should be mainly for export,” “Great efforts should be directed to introducing advanced technology.” The basic intention was clear.

But some comrades who worked in Shenzhen SEZ and several experts and scholars had long held different opinions. They thought that the conditions were bad for Shenzhen to develop industry. Products for export ran against the investment goal of foreign businessmen, which was for their products to enter the Chinese market. Their proposal was to build Shenzhen into a financial, commercial, foreign trade and tourist center, and their cries became louder and louder.

Here is the impulse that export discipline has to counter: local bureaucrats and businesspeople want to make money in ways that are convenient to them, but that don’t build national productivity. Gu worked consistently against these arguments, and tried to stop Shenzhen from focusing so much on property development:

I agreed the SEZs should develop tertiary industry like finance, commerce, foreign trade and tourism. But priority should be given to industry, and related industries should be developed correspondingly to make them comprehensive export-oriented SEZs centered around industry. Without industry on a certain scale and level, their economic foundation was not solid, with no source of goods for export, or vehicles for the introduction and digestion of advanced technology, and other industries would not develop. … So this argument, which went against the policy of the Party Central Committee and the State Council, was inadvisable and unrealistic.

Since I perceived these problems, I wanted to hold a meeting to unify the understanding and action. … I talked about the positive situation of opening up in the country, about the new progress of SEZs, and also pointed out some problems that needed careful attention, including the overextended scale of capital construction, too fast increase of funds for consumption, and the gaining of easy money by taking advantage of the preferential policies. … I emphasized that SEZs should not be content with erecting big buildings; they should not be average industrial cities. They should become export-oriented special economic zones based principally on industry earning foreign exchange through export, so that their products could enter international markets and earn foreign exchange for the state. …

At the meeting I focused on guidance rather than criticism. But this was no easy problem to solve. The meeting was over, but there was no agreement on how to develop an export-oriented economy. Some SEZs still acted according to their own beliefs. In 1985, the scale of construction in Shenzhen was even bigger, with the plan increased by 40 percent over the actual scale of 1984. My opinions were dismissed, and little attention was paid to similar criticisms from others. … I realized that general talk would not solve the problem and we needed systematic work.

The bureaucratic maneuvering that followed is too detailed to quote in full, but basically Gu commissioned some expert reports that would back up his goal of an export-oriented economy, and sent some of his trusted cadres to Guangdong to convince working-level officials of the rightness of his views. The leadership team of the Shenzhen SEZ was also reshuffled, which presumably (though Gu does not say this directly) helped lessen resistance. He then organized a nationwide meeting, running from late December 1985 to early January 1986, of almost all the central and local government officials involved in SEZs, where his speech advocating for export-oriented SEZs achieved the backing of the top leadership. That ensured that the local officials got the message:

This meeting was new starting point for the SEZs to advance in a pioneering spirit. The SEZs unified their understanding and carried it out properly. … they stressed industrial production and a better range and quality of products; they made great efforts to open international markets and increase exports; they cleaned and reorganized companies and overcame disorder in product circulation. These measures were carried out swiftly and resolutely. In that year, Shenzhen cut 51 buildings of more than 18 stories from its capital construction planning. Its scale of capital construction was reduced by 30% from that of the previous year. Hundreds of substandard companies were removed or merged. This was a major shift in focus.

Gu Mu (2nd from right) in Shenzhen in 1980

After reading this account, it hard not to feel that the importance of effective bureaucratic battlers like Gu is probably underrated in recent Chinese history (and probably all history) relative to charismatic leaders like Deng Xiaoping. I also have to wonder who in the current Chinese leadership is serving as the champion of export discipline?