Unirule Institute of Economics MAO Yushi
China has made remarkable achievements in its economic development in the past thirty years of reform. No one would deny this, whether he is friendly or hostile towards China. We Chinese people who had experienced this process by ourselves definitely have much deeper understandings. Except for those who are much younger, people aged over thirty or forty have all witnessed this great change with their own eyes. I suppose more than ninety-five percent of Chinese people have benefited from the economic reform. Surely, there are still quite a few who feel unsatisfied. However, they are unsatisfied not because their living standard is lower than that of thirty years ago, but because they feel oppressed in some other aspects.
However, there is a lot of controversy as how to summarize China’s economic development during the thirty years before the reform from 1949 to 1978. For one thing, young people have no personal experiences. For another, theoretical issues of economics are also involved here. Therefore, it’s not easy to make it clear.
It should be said that China’s economic development during the seven years from 1949 to1955 was actually very successful. Japan’s invasion of our country and our eight years of War of Resistance against Japan, plus three years of Chinese Civil War, brought China numerous sufferings as well as serious economic difficulties. Peace finally came in 1949. Our dream of having an opportunity to rebuild our country finally came true and the whole country was overwhelmed in a sea of cheers. At that time, we Chinese people pulled together with one mind and threw our heart and soul into rebuilding the country, and the situation was rather favorable. After a rehabilitation of three years, we ushered in the first Five-Year Plan (1953-1957). We also signed the Sino-Soviet Treaty of Friendship, Alliance and Mutual Assistance, and were granted with disinterested assistance by the Soviet Union. Quantities of Soviet experts came to China to help our construction. The planned construction of 156 industry projects was carried out smoothly, and people’s live standards were rapidly improved. Their pay went up almost every year by 5-10%, and modest price inflation was experienced. A picture of prosperity was seen all around the country. Though Korea War (1950-1952) turned out to be a tremendous burden to our country, China’s economic development did not encounter many obstacles.
However, the erroneous idea of planned economy started to crop up at this moment. In 1952, the policy of unified purchase and sale of grain was implemented, exerting negative influence on rural economy. Afterwards, this policy was extended from grain to cotton, oil-bearing crops, and then to all kinds of not only farm produce but also day-to-day necessities. Overall planned supply was carried out after three years of famine. Almost all commodities were supplied by ticket or voucher, such as, cloth, cotton, tea, soap, watch, and bicycle. In 1954, agricultural cooperativization movement was started, and peasants were forced to join in cooperatives, which greatly discouraged their enthusiasm for production. Even before elementary cooperatives were soundly consolidated, advanced cooperatives were forced to organize. All means of production were turned over to cooperatives, and this aroused strong resistance from peasants. Mao Zedong criticized Deng Zihui, (Minister of the Ministry of Rural Work of the Party Central Committee at that time) who was against to advanced cooperatives, as “a woman with bound feet.” Mao organized the compilation of The High Tide of Socialism in the Chinese Countryside, and then organized people to study this book so as to eliminate public opinions against adventurist advance. In the end, the more radical Movement of People's Communes in 1959 resulted in great retrogression of the whole rural areas. In fact, by 1955, agricultural products were already in short supply. Pork could hardly be found in small cities, and was sporadic even in big cities. By 1956 the situation went worse, and common people began to complain, which was also a reason for opposing governmental policies during the Anti-Rightist Campaign in 1957. [Page]
The Anti-Rightist Campaign in 1957 was a great political retrogression. From then no, no different voices could ever be heard in society any more. The Campaign against Right Deviations in 1959 wiped out the different voice within the Party represented by Marshal Peng Dehuai. Two anti-Rightist struggles firmly set up the line of “left” deviation in the following twenty years, and we never turned back since then. Marshal Peng Dehuai believed that the Great Leap Forward was merely “fanaticism of the petty bourgeoisie”, and actually he was correct. If Mao Zedong had listened to Peng Dehuai’s advice, those thirty-five million people would not have died of starvation. The Lushan Conference in 1959 which overthrew Peng Dehuai was originally intended to correct adventurist advance. However, as Peng Dehuai criticized Mao Zedong’s line, Mao felt his authority being challenged, and then shifted the direction of the conference to sticking to great expansion of steel production and people’s communes, and the impractical line of Surpassing Great Britain and Catching up with the United States, which brought the mistake of the Great Leap Forward even further. As a result, over thirty-five million people, amounting about 5% of the whole population at that time, died of starvation during the three years of famine from 1959 to 1961 (The large scale death of starvation actually took place during 1959 and 1960, and incidents of death of starvation were greatly reduced in 1961). This is the largest scale of death incident in human history which happened in time of peace (Twenty-nine millions of Chinese soldiers and civilians in total died during the eight years of War of Resistance against Japan). Meanwhile, the economy walked into a dead end. Mao Zedong had to adopt Chen Yun (a top leader of the Party)’s adjustment policy of using market means and selling high-price meat and desserts, so as to retrieve the dangerous situation. However, the common people’s savings were mostly spent on food, on comforting their hungry stomach. Also, graded non-staple food preferential supply were carried out in order to quiet the enormous dissatisfaction in and outside the Party. State leaders enjoyed privileged supply and were able to buy such things as non-staple food, cigarettes and alcohol from stores. High-ranking cadres enjoyed fixed supply of meat and eggs (Hereinto two ranks were included). Ordinary middle-class cadres enjoyed supply of 1.5 to 2.5 kilos of sugar and soybeans each month. Workers and common cadres enjoyed no preferences. Sometimes, they could buy some man-made meat or several kilos of vegetables. Supply of cigarettes was also classified into different ranks. High-ranking cadres were supplied with Peony cigarette and Chung Hwa cigarette; sugar and soybean cadres (those who enjoyed such privileged supply of sugar and soybeans) were supplied with Qianmen cigarette and Hengda cigarette; the others behind rankings had access merely to those inferior brands. [Page]
During the thirty years from 1949 to 1979, besides those thirty-five million people died of starvation, there were also others who died unnatural deaths due to various regime-related behaviors. For example, some were killed in suppression of landlords and counterrevolutionary; some were condemned to death in Movement of Cleansing the Class Ranks; some died in wars; some were beaten to death or buried alive by red guards; some were framed up to death or committed suicide in various movements; some died of sickness while being engaged in Concentration Reform Camp through political reasons; some died in violent fights defending Chairman Mao’s revolution line. Around 50 million people in total died unnatural deaths, amounting one fifth of the total 230 million deaths during the thirty years. That is to say, one out of five died an unnatural death because of regime-related behaviors, rather than their own reasons. Now some people are praising the first thirty years, saying that certain achievements were made in economic development. However, when compared with enormous unnatural deaths, these achievements actually deserve no praise at all. Not to mention that economic development at that time was also a crashing defeat. The primary mission of a regime is to protect human rights of common people, and rights of living in particular, which is also emphasized repeatedly by our current government. I agree with the saying that the government has no reason to put common people to unnatural deaths. Those who died unnatural deaths at that time either made no mistakes at all, or made certain mistakes which were too little for death sentence, some of whom were even young people with hot blood of revolution. The situation has undergone fundamental changes since the reform. The Yunnan hide-and-seek incident, in which a man was taken into police custody and mysteriously died a few days later, was considered a big event, attracting the attention of the whole country. Large scale of unnatural deaths is unlikely to happen by now, and the situation of human rights in China has been greatly improved. Now most of the young people consider staying alive a rather natural thing while death is rather far away. It’s not like this at all during the thirty years before the reform. A man was suddenly killed while nobody knew or wanted to know the reason, and death was a rather common thing. In terms of population mortality rate, the average of the thirty years before the reform is 1.1%, while that of the thirty years after the reform is 0.66%, reduced by almost a half. One of the reasons is that the number of people died of political reasons is significantly reduced.
The Five-Year Plan stopped by three years of famine was then changed to three years of adjustment from 1963 to 1965. The slogan at that time was “adjust, consolidate, enrich and improve.” Due to implementation of market means, national economy had already recovered and stood again at the starting line when the adjustment ended in 1965. Mao Zedong saw that national economy had accumulated certain foundation and then started the Great Cultural Revolution, the ten years of internal friction during which people framed up one another and national economy suffered disastrous large-scale retrogression. [Page]
The salary of government officials was never raised again since 1955, and the salary of new employees was all rather low. The workers’ monthly salary during probation period was RMB 36. After a uniform level setting as Workman II, their monthly salary would be raised to RMB 42.5. The salary of university graduates was RMB 56. The moderate salary was hardly enough for maintaining one’s life, to say nothing of supporting the family. Workers were especially in financial difficulty. The average salary of the whole country was declining year by year, as the salary of new employees was very low while the salary of old staffs was not raised at all. Though prices did not go up, commodities were in serious short supply, which is actually one of the characteristics of planned economy. Planned economy is capable of maintaining balance in macro-economy as investment is arranged in accordance with savings. Also, savings and investment are both under the control of the state. That’s how the balance between aggregate supply and aggregate demand is achieved and price level is stabilized. However, in terms of micro-economy, fixed prices can not reflect real supply and demand, thus large amount of overstocking of products and serious short supply both exist. Due to unbalanced micro-economy, we have to use tickets to realize balance. During the Great Cultural Revolution, almost all commodities of everyday use were supplied by voucher. Though the price was low, the quantity was seriously lacking and the quality was extremely inferior. Take supply of grain for example. Market proportion of roughage was increasing while rice and refined white flour was only in supply during festivals and holiday season. People’s ordinary staple was corn, sorghum, and potatoes.
The biggest damage to productivity after liberation is the damage to agriculture. During the one hundred years before liberation, agriculture had been a very efficient industry of China. Industry and commerce at that time were rather weak, and nine in ten of the population made their livings by farming. National income relied heavily on agriculture. China’s agriculture not only supported 400 million people at that time, but also provided considerable grain surplus for export. Manchurian Qing government suffered a series of disastrous defeats in wars against imperialist powers and was forced to cede territory and pay huge indemnities, amounting to more than one billion taels of silver in total. Most of these burdens ultimately fell on peasants’ shoulders. The government lost battles while the peasants paid the bill. The overthrow of Manchurian Qing government was then followed by fighting among warlords, which lasted nearly two decades. Different provinces were in constant battles. Though most of these battles were not sizable enough with merely several hundred of deaths in each battle, and lasted no more than several months, agricultural production was considerably disturbed. These conflicts also became burdens of the peasants. [Page]
During the eight years of War of Resistance against Japan, Chinese peasants made enormous contributions by providing soldier's pay and provisions as well as serving as sources of troops. Though with heavy war burdens, no large scale of people ever died of starvation in general, and food supply was basically guaranteed around the whole country. During the war, transportation was paralyzed, business ties were destroyed. In addition, the Japanese extorted solders’ pay and provisions. Therefore, with extremely heavy financial burdens, peasants at that time lived a very hard life. However, no serious food shortage ever occurred in the country. The victory of War of Resistance against Japan was then followed by three years of Chinese Civil War, in which both sides motivated far huger scale of forces than in the War of Resistance against Japan. The Kuomintang pressed-gang able-bodied men, while the Communist Party motivated common people to join in the army. In addition, solders’ pay and provisions was also collected from peasants. All these were burdens of peasants, yet no serious food shortage ever happened. Judging from these facts, it can be seen that agriculture of our country was considerably efficient. High productivity level depends on stability of relations of production and that all parties have certain enthusiasm for production. In general, the situation of countryside at that time was basically healthy.
However, significant changes happened to relations of production in countryside after the liberation. At first, landlords were suppressed and their land and movable property were redistributed. Then, peasants were motivated to participate in elementary cooperatives. Even before elementary cooperatives were soundly consolidated, advanced cooperatives were required to be established. After the Great Leap Forward, we aimed at surpassing Great Britain and catching up with the United States. The people were required to go all out soon in agriculture, and people’s commutes were quickly set up. Redistribution of landlords’ land originally aimed at annihilating exploitation. Though this seemed rather reasonable, it actually infringed upon the right of ownership of property. That’s also why such improper things as forcing peasants to join in cooperatives and conduct land pooling had taken place afterwards. The bad influence of infringement upon the right of ownership of property is still working by far. Forcing peasants to join in cooperatives was also well intended in the very beginning. Cooperation is definitely higher in efficiency than farming on one’s own, but peasants were not willing to do so as rewards did not correspond with their hard work and everybody will take a free ride and ate at the same big pot. These measures made serious damage to China’s agricultural productivity. As a result, supply of agricultural products dropped day by day. First all kinds of meat were unobtainable, then grains were rationed and not allowed to be freely traded, and finally happened the tragic three years of famine in which over thirty five million people starved to death. From 1949 until 1978, agricultural development became harder and harder and almost fell into hopeless straits. The government tried almost every mean they could ever come up with, such as “Take grain as the Key Link,” “Emulating Da-Zhai on Agriculture,” “Go to the Mountainous Areas and the Countryside,” “Everybody Engages in Grain Production,” etc. Unfortunately, none of them ever worked. After the reform and opening-up, farmers of 18 households from Xiaogang, a village in Fengyang County, Anhui Province, signed a secret life-and-death agreement, and fixing farm output quotas on a household basis was carried out. That’s what had reversed the retrogression of China’s agriculture. [Page]
Housing is a big item of household consumption. In a balanced market, this part of spending accounts for one fourth to one third of total household expenditure. During the thirty years after liberation, housing conditions went backward. Hardly any new dwelling houses were built due to implementation of the policy of “First production, then living”. The population kept expanding by over 80%, from 530 million in 1950 to 960 million in 1978, while housing increased by merely one fifth. As a result, the average per-capita living space kept shrinking, and it was not uncommon to see two or three generations pigging it in one room. Illegal construction was another solution. Many shacks were put up in corridors and small yards. People also slept in office. In the daytime beddings were rolled up, while at night offices were fixed up into dormitory. No matter in terms of food, clothing, housing and other daily necessities, people’s living standard was far lower than that of the end of rehabilitation in 1952. This was what happened to city dwellers. As for the countryside, at last one third of peasants were never properly-fed since the three years of famine until 1982 when fixing farm output quotas on a household basis was carried out. In general, living standards of peasants declined further that of city dwellers. Per-capita GDP at the end of the Great Culture Revolution was about a half of that in 1952. In terms of employment, many a few city people were out of job and students were motivated to go to the mountainous areas and the countryside so as to decrease urban population. In fact, this is to cope with economic recession by reducing people’s living standards.
Some people measure GDP with output of steel and cement. This is incorrect. GDP is the sum value of all final products and services. As steel and cement are both intermediate products, they should not be included in GDP. Only food, clothing, housing and other daily necessities should be included. It is the same case with factories built and mines explored by the government. If no final products are produced, then none could be counted as contributions to GDP. In particular, the Third-front Construction during the Great Cultural Revolution moved many factories from the east region to inland mountains where transportation was very inconvenient and operational costs were extremely high, making an unparalleled waste instead of any contribution to GDP. These factories were either closed or moved back after the reform. GDP data could not be used in statistics of national economy at that time, either. This is because the price then was seriously distorted, and we can not work out GDP without correct prices. It is the same case with the Soviet Union period during which the common people had much savings, yet most were lost after price liberalization and the consequent sharp inflation rise. This is because the real value of bank-note issued by planned economy and document currencies is far less than currencies for free purchase, and when bank-note and document currencies were converted into currencies for free purchase, prices would definitely go up. Therefore, in a planned economy in which bank-note and document are used in purchasing, there’s no way to work out GDP correctly. It is a common defect of countries implementing planned economy that no precise GDP data could be possibly attained. Certainly, though it’s impossible to count GDP, it’s possible to estimate GDP in terms of food, clothes and other daily necessities as well resources consumed by each person. Since this is only estimation, we could never expect it to be precise. In this sense, since RMB now is not convertible currency yet, it will appreciate further once it becomes internationally convertible currency. National Defense Construction as final products should be included in GDP besides food, clothing, housing and other daily necessities. However, there is no reliable data as to how much this part should constitute. Fortunately, it does not have too much to do with people’s living. [Page]
In theory, besides food, clothes and other daily necessities, investment is also part of GDP. In this sense, investment was pathetically meager during the thirty years before the reform. For example, there were merely two bridges crossing the Yangtze River, one in Wuhan and the other in Nanjing. After the reform, nearly fifty bridges were built across the river. Bridges were built not only across the Yangtze River but also in many cities along the river, where there were few bridges before the reform, such as, Changsha, Nanning, Hangzhou, Chaozhou. However, in terms of the long period of thirty years, investment did not increase output, and people’s living stands were not improved. Just as in the case of Third-front Construction mentioned-above, enormous money was invested in a wrong project, thus the investment was of zero or even negative efficiency. Much strenuous yet fruitless effort was made during this period. For example, in Great Expansion of Steel Production, all the people were engaged in steelmaking with enormous enthusiasm, yet this project was wrong all the way from objective to method. In order to fulfill the mission of 10.7 million tons of steel (China’s steel production in 2008 is 560 million tons, almost sixty times that of this period), iron pots were even cracked for steelmaking. Moreover, even peasants were motivated to produce steel. Since steelmaking is something that requires equipments, techniques, and experience, how could we expect common peasants to know how to produce steel? It then became a political mission to call for all the people to engage in steelmaking. During the year of Great Expansion of Steel Production, many trees were cut down. In the end, though the set objective mission was fulfilled, the country became poorer than before. Great Expansion of Steel Production is not a proper objective, as no one has a final say on how much a society needs iron and steel. There are economic objective laws as to what to produce and how much to produce. Even the objective of “industrialization” raised by the first Five-Year-Plan is not correct. To realize this aim, agriculture and service industry were both sacrificed. Also, as a result, country became poorer. During these thirty years, the people did not fear hardship and fatigue, struggled against nature, responded to the government's call and put in a lot of hard work. However, the output was often negative. The people saw no increase of wealth but poorer living standards. In fact, in the very beginning, Ma Yinchu, President of Peking University at that time, had seen the problems with the objective of industrialization, and insisted that balanced development should be realized, and that both agriculture and commerce were needed as they both helped to develop industry. But the leaders who were not familiar with economics all taunted his theory as wanting to achieve all. They believed it would be easier to make success if one single aim was emphasized. After the reform, we did not set up similar aims but focused on one single aim of “marketization”, which was then transformed into an ultimate aim of making money in the implementation. It’s correct that we want to make money. We improved our living standards without paying much price or struggle against nature, because wealth was increased in society by people’s money-making. However, there are also problems with the aim of making money. We trade things which are not commodities. For example, official posts, awards, diploma, and even football games are being sold for money. [Page]
However, we can not say that economic development during the thirty years before the reform is altogether bad. I think its most important accomplishments are in education and health. China’s literacy rate and average life span data both exceeded countries with same per-capita GDP. The average life span at that time was as high as over sixty years old, equaling to that of countries with a per-capita GDP of four or five thousand dollars. The illiteracy rate was also far below the average international level. Mao Zedong criticized that Ministry of Health at that time was that for urban lords which took care of urban dwellers only. His criticism is very proper, and is not out of date up until now. Though health care in rural areas was rather backward at that time, there were barefoot doctors and basic health care security, and the problem of peasants’ getting medical service was easier to solve. In conclusion, during the thirty years before the reform, equality was overemphasized while efficiency was neglected, resulting in equality among the poor; now it is right the contrary, efficiency is being overemphasized while equality is seriously overlooked.
Economic development during the thirty years before the reform is basically a failure. However, there are always two sides to everything, and the positive aspect about it is that it paved the way for following reforms. After the Movement of People's Commune, peasants’ living status was even worse than that of slaves, as they were not allowed to move freely, had no freedom of choosing careers, and were always poorly fed. After the reform, peasants are allowed to go into and work in cities. Though their income in cities is still rather low, they feel their living standards are greatly improved, so they rarely complain. This is an extremely important reason for China’s reform being able to go smoothly. In thirty years of reform, we constructed so many high buildings, roads, bridges, airports, seaports; we also mined over 20 billion tons of coal and earned over 2000 billion dollars of foreign reservation. All these accomplishments should be attributed to migrant workers, who enjoyed no labor security and always work overtime. For them, industrial injury death is a common thing, and they only protest when their wages are in arrears. In many cases, they have to resort to suicide so as to arouse public attention to their difficulties since rare support and assistance is ever provided. Such diligent and meek labor power is hard to be found anywhere else in the world. This characteristic of peasants is closely related to the extremely low starting point created in Cultural Revolution. However, the situation has already changed by now. Migrant workers who come into and work in cities are no longer peasants who do not have enough to eat, but a group of people with higher requirements and awareness of rights.
In retrospect, though the overall living standards have improved as we are wealthier than before, many people’s interests were harmed in the reform due to unsuitable distribution. Their living standards are improved, yet still fall far behind that of the others. Unstable factors are increasing in current society, and a rather dark future is waiting for us. [Page] |
