How did one of the world’s poorest countries—China—become one of the world’s richest in just 30 years? The answer is capitalism. The bizarre about-face is difficult to fathom in this day and age, but here’s how it happened.

In 1949, the Chinese Communist Party (CCP) defeated the Nationalist Party in a brutal civil war. The leader of the CCP, Mao Zedong, promised the Chinese people that he would create a new China. To transform China into this heaven-on-earth, Mao launched radical socialist reforms: industries were nationalized, private businesses were eliminated and land was confiscated. But rather than turning China into a heaven on earth, these policies turned China into a hell-on-earth.

Mao’s successor, Deng Xiaoping, didn’t have any answers, but in 1978, a small group of 18 of farmers from the village of Xiaogang did. They made a secret deal with their village leader.  After fulfilling the government quotas, they would be allowed to keep any surplus for themselves and sell what they didn’t need.

The result was magical. The “Xiaogang model” began to spread to other villages. When Deng heard of it, rather than punishing the farmers, he had the good sense to recognize that these simple peasants had shown him how to revive China’s economy. The freer the Chinese economy became, the wealthier the Chinese people became. In the space of three decades, 800 million Chinese people emerged out of poverty. Here’s more from journalist-author Helen Raleigh on PragerU.