Magazine article Teaching Business & Economics

From Command to the Market the Chinese Experience

Magazine article Teaching Business & Economics

From Command to the Market the Chinese Experience

Article excerpt


The process of economic reform in China has been ongoing for over twenty years now. It began at the 3rd Plenary session of the llth Central Committee of the Chinese Communist Party in December 1978 as a result of the advocacy of Deng Xiaoping, China's 'paramount leader' who had by then finally wrested control of China after the death of Mao Zedong and the arrest of the 'Gang of Four' in 1976(1). In that latter year, China was still a command economy, one where markets an arena wherein buyers and sellers voluntarily interact played almost no part at all in the process of resource allocation. In urban areas, the Chinese industrial base was wholly publicly owned in the form of often giant State Owned Enterprizes (SOEs) while in the countryside, peasants lived and worked in almost exclusively agricultural collectives where most forms of side-line enterprize, even such innocuous activities as the making for sale of straw hats or cakes from traditional recipes were outlawed as `capitalist tails' as was the hiring for work of any Chinese by others.

In the years of Mao Zedong's leadership (1949-1976), the public domain held absolute sway over the private, the collective over the individual, political command over the vagaries of the market. Key political-economic decisions were almost exclusively topdown, emanating from the Party hierarchy in Beijing and enforced through the allembracing tentacles of the Chinese Communist Party successively down to the lowest possible levels. This was feasible because all Chinese lived (as most still do today) in work-units (danwei) which provided them not only with work and remuneration but also with living accommodation, education, medical and other services, pensions, entertainment and a general sense of social being. To the extent that each danwei maintained a Party branch and that most Party committees, and in particular the Party Secretary (shuji) ruled them (even if popularly) with a rod of iron meant that the will of the central hierarchy could be translated into practice in the fields, on the shop floor, even on the streets, with almost effortless ease.

Mao wanted rapid economic growth. Yet by 1976, after nearly thirty years of Communist rule, and despite huge sacrifices made by large numbers of Chinese in the years since 'liberation' in 1949(2) to achieve it, China remained materially poor. On some parameters, there had been significant advances: in comparison to most other 'Third World' countries: health care was impressive, even in rural areas (Mao's bare-foot doctors had done a good job), life expectancy was high (almost to European levels), there was a high degree of income equality (the Gini coefficient, at 0.29 in 1979(3), was one of the lowest in the world) and there was a significant array of infrastructure, in the form of canals, irrigation systems, dams, dykes and the like, built up by gangs of collective labour, which provided a material basis for future advance. But China was still demonstrably a 'Third World' country. While the lot of urban Chinese was marginally better most rural Chinese (four-fifths of the population) still lived in mudand-straw huts, cooked and slept on the traditional long, low stove (kang) had no indoor sanitation or electricity, had few if any consumer durables and ate little other than rice. As Howard put it:

Peasants succinctly expressed their predicament with a common complaint that they were being "roped together to live a poor life." It was time to cut the rope.4


Despite their shared experiences as fellow Long Marchers, early Communist revolutionaries and comrades-in-arms in the antiJapanese and Civil wars in the 1930s and 40s, Mao and Deng held very different perspectives as to the correct manner of translating socialist theory into political practice. While Mao continued throughout to practice the political economy of command, based on selfsufficiency and isolation from the outside world, charismatic leadership, continuous "socialist" revolution and the supremacy of politics over economics, Deng took a very much more pragmatic position, best illustrated by his catch phrase "it doesn't matter if the cat is black or white so long as it catches the mouse", a position for which he was periodically criticized and labelled a "capitalist roader". …

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