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7.DevelopmentStrategy1Ec21282017.pptxIV. China’s Development Strategy
Recap
Even in the best light: China’s pre-1949 economy was poor & underdeveloped
On top of that: economy disrupted during late 1930s through 1940s
When Communists took power in 1949, first tasks were:
Political stability and unity
Economic recovery
Accomplished by early 1951/2
What then?
Needed to have a Development Strategy
Decide on long-term economic objectives
Choose policies to achieve these objectives
Development strategy was, and still is, a major topic of debate among China’s leaders
Views have differed, both then and now
Strategy/policies have shifted markedly over time
In class: We will examine
Main views
Major policy/strategy eras
Outline (matches sections of the reading list)
IV.A D’ment Strategy: The Maoist Era
1) Marx – theoretical background
2) Mao – paramount leader, 1949-1976
3) Chen Yun – influential leader, 1949-1995
IV.B D’ment Strategy: The Reform Era (to mid/late 2000s)
IV.C D’ment Strategy: Policies and Outcomes (to mid/late 2000s)
IV.D D’ment Strategy: Mid/late-2000s and beyond…
→ Readings, class discussion
In class: “Big picture”
Major ideas, policies
Chronology of major shifts in strategy
Readings: Provide details
More info on the range of views/approaches
More specifics about policies and outcomes
Readings and class lectures are complementary
IV.A D’ment Strategy: The Maoist Era
Marx (1818-1883)
Marx did not provide a “blueprint” socialist development strategy
Rather, he described the historical evolution of economies and societies
Economic development would occur through a series of historical stages
Slave society → Feudalism → Capitalism → Socialism → Communism
Socialist revolution would occur only after the economy was industrialized and had reached a high level of development under Capitalism
Marx, cont.
So: Marx did not predict that the socialist revolution would occur before mature capitalism
But: Socialist revolutions DID occur before mature Capitalism in the Soviet Union, China
Question: What is an appropriate d’ment strategy for an economy that has had a socialist revolution, but is underdeveloped?
Lenin, Stalin, Mao, Chen Yun, and many others have tried to answer to this question
Marxist Theory of D’ment
Process involving interactions between:
Productive Forces (PF)
Social Relations of Production (SROP)
Superstructure (SS)
Changes in the PF would cause changes in the SROP, usually achieved through revolution
This would then transform the SS
Transformation of the SS and SROP would release constraints on the PF
So: Change takes place through conflicts between opposing forces, with feedback and interactions.
Productive Forces
Definition: The material means of production, the basic inputs to production.
Include:
land, labor, capital goods, and material inputs
technology in an engineering sense, e.g. embodied in capital goods and material inputs
"HARDWARE” of the economy
Productive Forces, cont.
According to Marx, the PF are constantly developing, expanding
Mankind strives to make a living, to improve the living
Scientific and technological progress
Labor acquires education and skills.
Such activities expand the productive forces, make it possible to satisfy needs and provide yet more goods
As PF expand, feed back on people's perceptions and needs
People perceive new needs, have new aspirations
Thus, people continue to develop their abilities, and improve the technology
PF continue to develop, expand
This feedback between people and the productive forces is what drives economic development
Social Relations of Production
Definition: The social structures and institutions most closely associated with the way goods are produced, exchanged and distributed
The production, exchange and distribution processes are linked to social relations or ‘class structure’
"SOFTWARE” of the economy
The SROP evolve across the stages of development: feudalism, capitalism, socialism, and communism.
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Social Relations of Production
Includes:
Property relations (ownership)
Feudalism: ownership all by the king or ruler
Capitalism: private ownership
Communism/Socialism: state or collective ownership
Institutions through which labor is organized for work
Feudalism: serf system
Capitalism: labor markets
Communism/Socialism: planned, according to abilities
Institutions through which goods are exchanged
Feudalism: tribute system
Capitalism: markets
Communism/Socialism: planning
Social Relations of Production, cont.
Also includes:
Distribution: mechanisms by which the ruling class captures and distributes “value”
All value created by labor
Value is sum of subsistence + “surplus” value
Distribution changes with stage of development
Feudalism: according to social position, whether serf or royalty
Capitalism: according to work performed and ownership of assets
Communism/Socialism: according to need
Requires high level of material development
Superstructure
Definition: Non-economic institutions, practices and ideas that emerge out of the existing economic base.
More "SOFTWARE"
Superstructure
The superstructure encompasses aspects of social, political and intellectual life that are indirectly related to the production process.
State forms are part of the superstructure (e.g. monarchy, aristocracy, democracy).
Institutions that capture the sentiments, morals, and mode of thinking of society: education, religion, ethical and value systems.
Art forms and culture
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Superstructure, cont.
At any point in history, the SS is greatly influenced by the existing PF and SROP.
For example:
Under K-ism, "Protestant" ethic
value placed on hard work, competitive behavior, saving, and material goods
owning property/wealth and working with assets viewed as high status (e.g., investment banking)
Not true in earlier eras, e.g. during Feudal period
banking was not looked upon favourably; usury was sinful
respected professions: royalty, clergy, and farming; NOT business
Superstructure, cont.
Marx believed that Protestant denominations emerged in response to economic changes taking place in late feudal/early K-ist eras, i.e., economic change drove changes in religion and social values. (Weber & Marx.)
Economic changes also caused changes in political systems: political systems reflect the interests of the current ruling class, e.g.,
Under K-ism, the ruling class is the property-owning bourgeoisie
Democracy supports the interests of the K-ist ruling class
In early stages of democracy in Europe, voting rights first went to property owners, then extended to others
Now K-ists use their money to direct “democratic” outcomes
History According to Marx: Basic Plot
PF, SROP and SS are three main actors
D’ment is driven by contradictions between these actors
Basic contradiction: between the low level of material d’ment and perceived wants and needs, aspirations
This contradiction drives ongoing change in the PF
Sooner or later, change in the PF runs up against barriers, contradictions with the existing SROP and SS. The SROP and SS are no longer compatible with the newly developed PF. Expansion of PF slows
Contradictions between PF and SROP/SS lead to revolution, radical change in SROP/SS
Barriers to PF are removed, PF resumes rapid expansion
For Marx, contradictions and revolutions are played out between different social classes, which have different interests.
Ruling class of old PF & SROP doesn’t want change, has vested interest in status quo
lower, exploited classes and beneficiaries of change want change.
Class struggle: the driving force of historical development.
Act I: Feudalism
Land and agriculture based: PF consisted of land, labor, agricultural technology
Labor done by peasant serfs
tied to the land, immobile
Required to work their lord’s lands and to pay taxes and fees on any output from their own plots
Ownership of land, labor belonged to the ruling class (kings and lords)
Distribution:
Surplus value belonged to the ruling class
Serfs maintained subsistence by working on their own plots, and from some support from lords, who were obliged to ensure subsistence
Allocation through customary system of obligations and transfers
Superstructure:
Religious order (Catholicism) valued stability, hierarchical relationships, non-material values. Supported by land-based tithes (share of output).
Political system was complementary, tied to land
Art forms, values, education: glorified, reinforced the system
Between 1000-1800 AD many changes in the PF
crop rotations changed so that less fallow was planted
enclosure movement
new world crops
Such improvements led to rising output and surplus product
Surplus product allowed growth of commerce: exchange and trade
A merchant or commercial capitalist class emerged.
Contradictions arose:
Commerce is all about mobility of people and goods. The dominant class, however, depended on a serf system, in which labor and wealth were tied to the land.
New activities in conflict with feudal social and religious values, which discouraged profit seeking and usury, which were important to the new capitalist class
Feudalism to K-ism
The new capitalist class grew frustrated by controls on labor and profit seeking activity.
Over time with expansion of commerce, the new class’s power increased and its views gained strength.
Contradictions between the new economic order and the old feudal system intensified.
Ultimately led to radical change in the SROP
Revolution, e.g., the French Revolution (began in 1789) or
Confrontational reforms, e.g., in England.
Reform Act of 1832: extended rights of suffrage to middle class, increased representation in Parliament of new industrial cities vs. rural counties, opened the way for K-ist class to exercise political power.
Revolutions/reforms overturned the old SROP & SS
Old constraints on capitalist development swept away, leading to a burst of economic activity and rapid development of the P.F.: the Industrial Revolution.
Act II: K-ism
Industrial and commercial base: PF consists of labor, capital, industrial technology
Labor done by proletarian working class
Ownership of capital belongs to the ruling class (capitalists)
Distribution:
Surplus value belongs to capitalists
Workers paid low, subsistence wages
Allocation through markets
Superstructure:
Religious order (Protestant) values stability, hard work, saving and investment
Political system: democracy
Art forms, values, education: glorify, reinforce the system
Development under K-ism
The basic source of their wealth is still labour. Labour creates all value!
Profits that support K-ists are derived from labour:
K-ists earn these profits by employing labour, and paying labour only a low subsistence wage (less than the value of their product)
Surplus value (value of what is produced minus wage payments) is profit.
As K-ists earn more and more profits, they invest in more and more capital. Reasons:
All other K-ists are investing, so competition drives them also to invest.
Reduces labour costs and labour’s leverage
It's part of the ethic: people want to accumulate asset wealth.
Over time the capitalists rely more and more on capital inputs and less and less on labour inputs. Consequences:
shrinking surplus, which is derived from labour
growing class of unemployed workers
K-ism to Socialism
These effects ultimately bring about the downfall of K-ism.
K-ist firms operate on smaller and smaller profit margins
worker unrest grows
Eventually labour revolts, and the system self-destructs
Revolution overturns the old SROP & SS, constraints on development swept away, leading to a burst of economic development under the next stage: Socialism
Photos from the “Occupy”
Movement.
Act III: Socialism
Highly developed industrial economy: PF consists of labor, capital, industrial technology
Labor done by all members of society
Ownership of capital: by the state or worker collectives
Distribution:
Surplus value shared between workers and the state
Workers paid according to work performed, not asset ownership
State invests to improve PF and benefit society
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Socialism, cont.
Allocation through planning, not markets
Markets direct resources to enemy classes
Superstructure:
Political system: dictatorship of the proletariat
Still have enemy classes, so cannot have full democracy
Government governs on behalf of workers
Art forms, values, education: all change accordingly
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The Finale: Communism
What happens after Socialism?
Under socialism achieve material abundance, which permits distribution according to need
Under socialism, elimination of all class distinctions, so no further contradictions
Material abundance, equality and peaceful development forever after
Graph: Summary of Marx’s Story
Communism
SS, SROP
E Socialism
C D
K-ism
Feudalism
A B PF
Preconditions for Socialism: PF > XX’
SS, X’ Communism
SROP
E Socialism
C D
K-ism
Feudalism
A B X PF
Preconditions for Socialism: SROP/SS > YY’
SS, X’ Communism
SROP
E Socialism
C D
Y K-ism Y’
Feudalism
A B X PF
Relevance for China: Revolution at R
SS, X’ Communism
SROP
E Socialism
C D
Y K-ism Y’
Feudalism
A R B X PF
Dilemma
If revolution occurs at ✱, then the post-revolutionary society has two tasks
to develop the productive forces
to change the SROP
Which to develop first? Which path to follow from R to E?
USSR: Faced this dilemma in the 1920s
Lenin’s view: first develop the PF, and then transform the SROP. The New Economic Policy (NEP) in the 1920s followed this approach
Stalin’s view: first the SROP should be transformed. AG & IND should be nationalized, planning should replace markets. In 1929 began this socialist transformation, by 1931/32 main elements of socialist SROP in place
How to get from R up past E?
SS, SROP
Stalinist
E
Leninist
C D
A R B PF
China’s Dilemma
China: Faced this dilemma in the 1950s
Different views held by Mao and Chen Yun
Some aspects of the dilemma are still relevant:
“China has...experienced far-reaching changes in the productive forces and relations of production, as well as in the economic base and superstructure. However, the basic reality is that China is still in the primary stage of socialism...China’s principal contradiction (is) ...the one between the ever-growing material and cultural needs of the people and the low level of social production. ”
--Hu Jintao
17th Party Congress, 2007
Outline
IV.A D’ment Strategy: The Maoist Era
1) Marx – theoretical background √
2) Mao – paramount leader, 1949-1976
3) Chen Yun – influential leader, 1949-1995
IV.B D’ment Strategy: The Reform Era (to mid/late 2000s)
IV.C D’ment Strategy: Policies and Outcomes (to late 2000s)
IV.D D’ment Strategy: Mid-2000s and beyond…
→ Readings, class discussion
Mao note: Van Ness and Saichur’s strategy B
“Long live the great Marxist-Leninist-Mao Zedong thought”
Mao’s Views: Idealist
Mao believed that “objective conditions,” i.e., the level of d'ment of the PF and SROP, might prove a hindrance, but could be overcome.
Despite being poor, under the proper leadership, China could leap ahead
How?
Immediately make big changes in SROP and SS
this would release constraints on the PF and permit rapid material development
Maoist D’ment Strategy: Simultaneous, rapid transformation of SROP and development of PF
SS, SROP Communism
E Socialism
C D
K-ism
Feudalism
A R B PF
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Key elements of Maoist view
The Communist man and human potential
Party leadership
Self reliance
Communist Man & Human Potential
"The wealth of society is created by the workers, peasants and working intellectuals. If they take their destiny into their own hands, follow a Marxist-Leninist line and take an active attitude in solving problems instead of evading them, there will be no difficulty in the world they cannot overcome."
(Mao’s Quotations, p.112)
Communist Man & Human Potential
"At no time and in no circumstances should a Communist place his personal interests first; he should subordinate them to the interests of the nation and of the masses. Hence, selfishness, slacking, corruption, seeking the limelight, and so on, are most contemptible, while selflessness, working with all one's energy, whole-hearted devotion to public duty, and quiet hard work will command respect."
(Mao’s Quotations, p.153-4)
Communist Man & Human Potential
People play the central role in transforming society—"man is the most precious thing." People--the masses-- are a fount of tremendous energy that can conquer all obstacles.
The people, however, must be properly imbued
Selfless: have a large capacity for self-denial
Committed to the liberation of the working class, to the Chinese nation and people.
Have determination, take initiative, be willing to take risks and experiment
With such qualities, people can overcome any constraints, e.g., due to weather or water supply in AG, due to limited skills and insufficient capital in IND.
Leadership of the Party
"However active the leading group may be, its activity will amount to fruitless effort by a handful of people unless combined with the activity of the masses. On the other hand, if the masses alone are active without a strong leading group to organize their activity properly, such activity cannot be sustained for long, or carried forward in the right direction, or raised to a high level."
(Mao’s Quotations, p. 72)
Leadership of the Party
Although the masses have great potential, their energy must be properly directed.
The Chinese Communist Party (CCP) plays a crucial role in organizing and mobilizing the people.
Self Reliance
"We stand for self-reliance. We hope for foreign aid but cannot be dependent on it; we depend on our own efforts, on the creative power of the whole army and the entire people."
(Mao’s Quotations, p. 110)
Self Reliance
People, and China as a whole, need not depend on others for external assistance.
The means to achieve national, and personal, objectives could be found internally.
China and its people must rely on themselves, on their inner resources, in order to develop.
Maoist D’ment Strategy: The Embodiment of These Ideas
Rapid Transformation of SROP allows immediate, rapid Growth of PF
Rapid growth possible despite lack of skills and materials, because immediate change in the SROP would make it possible to mobilize the people and resources under Party leadership to overcome obstacles to growth
Needed thorough, extensive changes in SROP, to sweep away all vestiges of capitalism and release constraints on PF
Growth a disequilibrium process
Rapid change could not be accomplished through a smooth equilibrium process
Development required attacking and resolving key contradictions, "storming" to overcome problems, mass mobilization of labor and resources to attack key constraints
Emphasis on priority “leading” sectors (heavy industry): sectoral imbalances create “contradictions” that drive growth
Ownership
Move as quickly as possible to “higher” forms of ownership: state ownership wherever possible, elsewhere collective ownership
Minimize private ownership–prohibit any private businesses that employ more than a couple of workers, as they “exploit” labour and are capitalist
Decentralized Planning
Planning, not markets, guide the economy
Planning decentralization to lower level governments, allowing local initiative and creativity
Central Party would centrally give out "main line" (broad directives), lower levels take the initiative in implementing them
Center need not plan carefully for supplies of inputs and resources to lower levels–lower levels could work that out self-reliantly by being creative and through mass mobilization
Different from centralized, top-down approach used in the USSR and advocated by some in China
No Material Incentives
Material incentives not necessary or desirable.
Attitude, commitment are more important
Rely on “normative” incentives
Implications:
consumption could be held at a minimum to allow high rates of investment--rapid growth follows
labour remuneration--wages—egalitarian: distribution on the basis of need, not even work or assets
markets, since they operate on the basis of material incentives, were undesirable
Extensive Party Role in Economy
Politically correct, educated and committed leadership needed to ensure economic decisions reflect interests of the working class and country as a whole
Party leadership would be exercised on the one hand through planning, and on the other hand through active involvement of the Party in microeconomic decisions
So: Have management of factories, communes, and other units (including universities) by CCP members and Party Committees.
Better Red than Expert
Political attitude more important than professional skills and expertise
without a proper attitude, all the skills in the world would not ensure success
Without professional skills, however, correct attitude and determination could achieve success.
Implications
Party members in technical, managerial and economic positions
Education emphasized political education over technical education.
Self-sufficiency, self-reliance
Globally: China would depend on her own resources to achieve economic development. Trade and foreign assistance secondary.
Domestically: localities would rely on their own resources, be self-sufficient and supply surplus to support development
don’t need orders, resources from higher levels
work carried out in a mass movement fashion by mobilizing thousands of people locally
complete economic systems rather than specialization
Taken to its extreme: localities were expected to be self-reliant even in IND goods like iron and steel!
Mao, Summary
Mao's idealist approach was based on his view of human potential, the role of party leadership, and self-reliance
His views were inspirational, gave people a sense of optimism and direction
Yes, China was poor and underdeveloped, but she had within her untapped human capacity
China would leap ahead, catch up with the developed world
Outline
IV.A D’ment Strategy: The Maoist Era
1) Marx – theoretical background √
2) Mao – paramount leader, 1949-1976 √
3) Chen Yun – influential leader, 1949-1995
IV.B D’ment Strategy: The Reform Era (to mid/late 2000s)
IV.C D’ment Strategy: Policies and Outcomes (to late 2000s)
IV.D D’ment Strategy: Mid-2000s and beyond…
→ Readings, class discussion
Chen Yun note: Van Ness and Saichur’s strategy B See Lardy and Lieberthal, ed.s, Chen‘ Yun’s Strategy for China’s Economic Development, 1983.
Pragmatist:
China was poor
Living standards low
PF underdeveloped
Labor was uneducated
Capital stock small
Technology backward
Values, attitudes backward
Chen-ist D’ment Strategy
Moderate rate of growth
Low living standards a constraint on the rate of investment
Backward PF a constraint, as investment alone could not promote rapid growth
"The scale of construction must be suited to the national financial and material capacity. Whether it is suited or not determines whether there is economic stability or instability.
Economic stability is extremely important for a big country, like ours, which has a population of 600 million people. There will be rashness and economic chaos if the scale of capital construction exceeds the national financial and material capacity. If the two suit each other, the economy will be stable.
It is not good either, of course, if we are conservative and thus obstruct the speed of construction that we should have. However, it is easier to correct conservativeness than to correct a rash advance because it is easier to increase construction when there are more goods and materials. It is not easy when financial and material capacity is not sufficient to cut down an enlarged scale of construction. This can cause serious waste.“
--Chen Yun
Balanced growth
Growth stimulated by, depended upon, interactions among sectors and industries
Must plan carefully with this in mind
Different from “leading sector” approach of Mao
Example
If want to increase steel production, must calculate how much iron, coke, energy, skilled labour, and other inputs are required, and plan for production of these needed inputs
Must also calculate carefully whether or not the demand for steel calls for such a supply increase, whether transport facilities had the capacity to carry the steel from the producers to the users, etc.
Chen Yun supported balanced growth among sectors (of heavy IND, light IND, and AG), of S and D, and of government revenues and expenditures (balanced budget)
Step by step, gradual changes in SROP
Constraints
People poor, uneducated, did not yet have a Communist consciousness
Lack of educated, skilled planners and managers
Allocation: Introduce planning, but retain markets
Central planning of key parameters absolutely necessary to ensure balanced growth
Market allocation would fill in the myriad local details, allocate secondary resources
Planned economy is central, markets supplementary (计划经济为主、市场调节为辅)
Gradual change in SROP, cont.
Distribution: Continue to rely on material incentives
People too poor, uneducated
Implications for rate of investment, growth, design of wage systems, role of markets
Ownership: Introduce state and collective ownership gradually
Core sectors, producers, use state and collective ownership
Allow private ownership of small businesses and in less important sectors, and household farming in agriculture, to continue for the time being
Meanwhile, raise living standards, education, skills, technology so as to make possible further evolution in SROP
Economic integration, not self sufficiency
Attention to inter-relations among sectors and regions important
Develop domestic trade and specialization to promote productivity growth
Foreign trade could also be beneficial, BUT
Foreign capitalist influences could be harmful
Strict limits on the role of foreign capitalist countries and businesses within China
Chen’s D’ment Strategy
SS, Communism
SROP
E Socialism
C D
K-ism
Feudalism
R PF
Outline
IV.A D’ment Strategy: The Maoist Era √
1) Marx – theoretical background √
2) Mao – paramount leader, 1949-1976 √
3) Chen Yun – influential leader, 1949-1995 √
IV.B D’ment Strategy: The Reform Era (to mid/late 2000s)
IV.C D’ment Strategy: Policies and Outcomes (to late 2000s)
IV.D D’ment Strategy: Mid-2000s and beyond…
→ Readings, class discussion
Reform Era D’ment Strategy
Two major phases of reform
1978-92
1993 to present
First: Explain basic concepts/theoretical justification that underlie both phases
Second: Explain major thinking and debates in each phase
Reform D’ment Strategy: Theoretical Justification
Primary Stage of Socialism
IMPORTANT
Idea developed in the 1980s, still invoked today
Quote from 3rd Plenum Decision (Nov., 2013): CCP Central Committee Resolution Concerning Some Major Issues in Comprehensively Deepening Reform
“In comprehensive deepening reform, we must base ourselves on the reality that our country will remain in the preliminary stage of Socialism for a long time, persist in the major strategic judgment that development still is the key to resolve all of our country’s problems, put economic construction at the centre, give rein to the pulling function of economic structural reform, promote the adaption of relationships of production with productivity, and of the superstructure with the economic base, promote the sustained and healthy development of the economy and society.”
What is the “Primary Stage”?
Principle contradiction: between material needs of the people and low level of material development
Central task: d’ment of the Productive Forces
This reflects a change from before, under Mao, when the central task was class struggle
Primary Stage of Socialism
What happens during the “Primary Stage”?
Shift from manual, agriculture-based economy to one with a majority of workers in other sectors, and agriculture becomes modernized
Shift from natural and semi-natural economy to a fairly developed market economy
Shift from poor, low income majority to all people moderately well off and income gaps narrowed
Shift from illiteracy, low education and low labor productivity to educated, productive workers and high levels of science and tech
Key tasks of the “Primary Stage”
Economic development is the central task
Class struggle is NO LONGER the central task
Must eliminate poverty and backwardness
Structural change: from agrarian, menial, semi-natural economy to a modern, industrial and service-based, high-tech, commercialized economy
“One central task, two basic points”
Basic line proposed by Zhao Ziyang in 1987
Underlies the “road to Socialism with Chinese Characteristics,” related to the primary stage of socialism idea
Central task: Develop the PF
Two basic points:
Policy of reform and opening up
Four cardinal principles: specify the political boundaries
Four Cardinal Principles
The principle of upholding the socialist party
The principle of upholding the people’s democratic dictatorship
The principle of upholding the leadership of the CCP
The principle of upholding Marxist-Leninist-Mao Zedong thought
Reform Phase I: Socialist Commodity Economy
1978 to 1992
China is a “socialist commodity economy,” (in contrast to a “socialist planned economy”)
Exchange and economic interactions important
Markets can be introduced under socialism
Incremental reform: introduce new elements, while keeping core features of existing system
Socialist Commodity Economy: What it Means
Emphasis on growth through improved productivity, efficiency
Do not grow through ever higher applications of mass labor and ever higher levels of investment
Targeted investments to improve S&T, R&D
Increase labor productivity through training, skills, material incentives
Increase allocative efficiency through better planning and use of markets (dual track system)
2. Economic balance
Pay more attention to balance across sectors and between consumption and investment
Devote more resources to consumption
Less emphasis on producer goods industries
More emphasis on agriculture, consumer goods industries
3. Diverse forms of ownership, but public ownership dominant
Public ownership retained for key sectors and enterprises
Allow expansion of private and cooperative ownership, but mainly for small-scale activities
4. Allocation through Dual-track System
Plan and market co-exist
Retain planning for key sectors and goods
Use prices and incentives in planning, rather than administrative, quantitative orders
Central planning vs. decentralized planning
Increase scope of markets
Markets for most goods
Limited markets for land, labor, capital
Plan is central, markets are supplementary (Chen)
5. Distribution
Material incentives important and necessary in the primary stage
Okay for some people to get rich first
Diverse forms of distribution, according to work is dominant, but also according to assets
6. Professionalism: emphasis on professional and technical expertise, education
7. Opening up
Major shift in views about foreign economic relations
Increased reliance on imports and promotion of exports to pay for imports
Need to obtain technology and knowledge from other countries
Reform Phase I: Debates (source: Harry Harding)
Main features of “primary stage” reform strategy widely accepted
Disagreement over how far and fast to proceed (“moderates” vs. “radicals”)
How much state vs. private ownership?
How much planning vs. markets?
How quickly and far to open up to the world economy?
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Debates led to cycles in policy
Periods of rapid reform, accompanied by rapid growth but also economic imbalances (e.g., inflation, budget deficit, trade imbalances)
1982-85
1987-88
Followed by periods of retrenchment, slowing/reversal of reform, accompanied by slower growth
1986-87
1989-1991/2
Reform Phase II: Socialist Market Economy
January 17-February 21, 1992, Deng went on his “Southern Tour”
Turning point: Swept away influence of “moderate” reformers who had held sway following the 1989 Tiananmen Incident
In October, 1992, at CCP 14th Party Congress, “socialist market economy” replaced “socialist commodity economy”
November, 1993: 3rd Plenum of 14th Party Congress adopted “Decision on Issues Concerning the Establishment of a Socialist Market Economic Structure”
Socialist Market Economy, cont.
“Building a socialist economy with Chinese characteristics means developing a market economy under socialism and constantly emancipating and developing the productive forces. To be more specific, we should uphold and improve the basic economic system in which the socialist public ownership is dominant and different types of ownership develop side by side. We should uphold and improve the socialist market economic structure so that the market will play the basic role in the allocation of resources under state macro-control. We should uphold different modes of distribution with distribution according to work remaining dominant, allowing some people and some areas to become prosperous first so that they can help others to become well off and achieving common prosperity step by step. We should uphold and improve opening up and take an active part in international economic cooperation and competition. We should ensure that the national economy will develop in a sustained, rapid and sound way and that the people will share the fruits of economic prosperity.
--Jiang Zemin, 1997 speech (emphasis added)
Socialist Market Economy: Main Features
1. Growth still central
“sustained, rapid and sound”
Macro policies used to achieve sustained, stable growth
2. Allocation: a new paradigm
Planning is now through macro policy and control, not through micro planning
Market plays the central role in allocation
3. Public ownership remains dominant, side by side with other ownership forms
Sounds the same as before, but:
redefinition of public ownership to include stock and shareholding systems
rethinking of SOE sector’s scope, governance, management
opens the way for dramatic reforms of SOE sector
Much greater tolerance of private and foreign ownership
4. Distribution:
Distribution according to assets as well as labor, and increased scope for private asset ownership
Encourage people to seek profits, get rich
BUT: COMMON prosperity a continued theme
5. Opening up
China should be fully engaged in the world economy
Lower trade barriers, allow foreign investment, join WTO and regional trade organizations
Reform Phase II: Debates
Socialist market economy has continued from 1992 to the present
But…still disagreement
Over time, with changes in the economy and leadership, policies have shifted
Key debates
Jiang/“princelings” vs. Hu/“populists”
New Left vs. Liberal
Phase II: Key Debates
Growth vs. other goals, e.g., social welfare programs, income distribution, environment
Debate about role of state in the economy—how interventionist should the government be? How much separation between state/Party and economy?
Debate about role of private sector and entrepreneurs
Debate about need for political reform to accompany further economic development
Debates: Jiang vs. Hu Factions Source: Based on Cheng Li, “China’s Inner-Party Democracy: Toward a System of One Party, Two Factions?” China Brief 6(24),2006. http :// jamestown.org/images/pdf/cb_006_024.pdf
| Jiang Zemin/Zhu Rongji | Hu Jintao/Wen Jiabao | |
| Socio-political constituency | “Elite”–princelings, educated abroad, engineers, those in finance, trade, real estate, construction | “Populist”–less privileged families, rose through provincial administrations, poor areas, rural, China Communist Youth League |
| Geographical constituency | Shanghai, economically advanced coastal areas | Poorer, central and inland provinces |
| Priorities | Focus on high GDP growth, less concern about regional balance, inequality, environment | Sustainable growth, more regional balance, policy more populist and tilted towards farmers, migrants, unemployed and vulnerable groups |
| Strengths, areas of expertise and experience | Finance, trade, international economic relations | Organization and propaganda, rural administration, poor areas |
Debates: Jiang vs. Hu Factions
Mid-1990s to 2002
Key leadership: Jiang Zemin, Zhu Rongji
D’ment strategy mainly focused on rapid growth
But: by late 1990s/early 2000s, concerns emerged about distribution of growth and income, sustainability
1990s did indeed see rapid GDP growth
Also: increased inequality, wider socio-economic gaps, widening regional gaps
And: environmental problems
Debates: Jiang vs. Hu Factions
After 2002
New leadership: Hu Jintao, Wen Jiabao
D’ment strategy shifted—more emphasis on shared, sustainable, balanced growth
Two groups continued to share power, however, and worked cooperatively, with compromises reflected in development strategy
Hu-Wen Development Strategy
Still used the “socialist market economy” and “primary state of development” framework
Still emphasized centrality of economic growth
However: Greater emphasis on income distribution, balance, and sustainability
Reflected in new concepts introduced by Hu-Wen in 2005
“Scientific Outlook on Development”
“Xiaokang Society”
“Harmonious Society”
Scientific Outlook: Quote from Hu (report to 17th Party Congress, 2007)
“The Scientific Outlook on D’ment 科学发展观takes development as its essence, putting people first as its core, comprehensive, balanced and sustainable development as its basic requirement, and overall consideration as its fundamental approach.
- We must regard development as the top priority... Development is of decisive significance for building a moderately prosperous society in all respects and speeding up socialist modernization.
- We must always put people first... We must always make sure that the aim and outcome of all the work of the Party and the state is to realize, safeguard and expand the fundamental interests of the overwhelming majority of the people... development is for the people, by the people and with the people sharing in its fruits.
Quote from Hu, cont. (report to 17th Party Congress, 2007)
- We must pursue comprehensive, balanced and sustainable development...promote all-round economic, political, cultural and social development...balance the relations of production with the productive forces and the superstructure with the economic base. We must adopt an enlightened approach to development that results in expanded production, a better life and sound ecological and environmental conditions, and build a resource-conserving and environment-friendly society that coordinates growth rate with the economic structure, quality and efficiency, and harmonizes economic growth with the population, resources and the environment...in a sustainable way.
Quote from Hu, cont. (report to 17th Party Congress, 2007)
- We must persist in overall consideration. We need to correctly understand and handle the major relationships...balance urban and rural development, development among regions, economic and social development, relations between man and nature, and domestic development and opening to the outside world. We must take into overall consideration the relationships between the central and local authorities, between personal and collective interests, between interests of the part and those of the whole, and between immediate and long-term interests...take both the domestic and international situations into consideration, develop a global and strategic perspective...”
Xiaokang 小康 Society
A near-term goal of the Scientific Outlook:
Majority of people moderately “well-off“
Most people middle class
Then, economic growth, material development need no longer be the central focus
Can focus on other things, e.g., social equality and environment
Related to idea of “primary stage of d’ment”
In contrast to earlier concepts (spiritual civilization, campaigns against bourgeois liberalization), does not involve heroic self-sacrifice, does not place the material and the spiritual in opposition.
Harmonious 和谐 Society
Longer-term vision, to be achieved through the Scientific Outlook
According Hu (2005:3) a harmonious society is ‘‘democratic and ruled by law, fair and just, trustworthy and fraternal, full of vitality, stable and orderly, and maintains harmony between man and nature.’’
Covers a wide range of institutions and policies
Rural and regional development
Education, health
Environment
Social security system
Party leadership/political system
Culture
“New Left” vs. “Liberals”
Since around 2005: a new debate emerged within the leadership between “New Left” and “Liberals”
Some overlap with “princelings” vs. “populist” factions, but not the same
Locus of the debate shifted, a reflection of qualitative changes and new challenges in China’s economy
New Left: Bo Xilai, Wang Yong, Ma Kai, Zhang Gaoli
Liberals: Wang Yang, Zhou Xiaochuan, Lou Jiwei
Liberals (or “Guangdong Model”)
Concerned that government/Party involvementin the economy leads to corruption, privilege, inequality, inefficiency
Wanted to strengthen,expand roles ofthe market & private sector
Preferred bottom up growth
Enabled decentralized, grassroots policy making
Emphasized building market institutions, e.g., legal, regulatory
Government’s role is to use taxes, transfers, regulation to guide economy, redistribute
Shift towards high value added industries
New Left (or “Chongqing model” or “State capitalism”)
Continued support for state enterprises as key economic actors
Suspicion of private sector, put limits on role of private sector
More top down, direct government/Party involvement in the economy, e.g., picking “winners” and indigenous innovation
Direct, substantial government involvement in provision of social welfare programs, subsidies to households, low‐income housing, etc.
Wang Yang—Liberal
Former Communist Party Secretary, Guangdong
Supported policies promoting growth, market reforms
Also more liberal regarding civil liberties, political reform
Under Xi Jinping: Vice-Premier and Politburo member;
a candidate for promotion to Politburo Standing Committee
In 2017
Bo Xilai—New Left
Princeling, but populist
Former Communist Party Secretary, Chongqing
Supported state sector & social welfare policies
Carried out major anti-corruption campaign,
“red culture” movement
2013 convicted of corruption, life imprisonment
World Financial Crisis (WFC) raised questions about the viability of pure market economies
– lent credence to “New Left” views • Policies shifted in response to WFC
– Large stimulus program during WFC – Increased state activism – Benefited, advantaged state‐owned enterprises
– “The state advances, the private sector retreats”
Debate between “New Left” and “Liberals” has continued
The two sides jockeyed for power and position leading up to the leadership transition in 2012
Current leadership includes people associated with both sides
Recap of Reform D’ment Strategies
Phase I: 1978‐2002
Socialist commodity economy
Debates: radical reformers vs. moderate reformers
Moderates: go slowly, retain more “socialist” economic institutions
Radicals: go faster, farther towards market economy
Strategy fluctuated between the two sides
Recap of Reform D’ment Strategies
Phase II: 2002‐present
Jiang&Zhu(1992‐2002)
Debates: elitists vs. populists
Elitists: emphasize growth, efficiency, coast, trade, technology, enable private sector, build market institutions, etc.
Populists: more emphasis on state role to ensure stability, sustainability, redistribution, etc.
Strategy tended towards elitist
Hu&Wen(2002‐2012)
Debates: initially elitists vs. populists
Strategy tended towards populist, more emphasis on sustainability, distributional outcomes
New debate emerges around 2005: new left vs. liberals
New left: state capitalism
Liberals: expand market & private sector, limit state interference
During financial crisis: Strategy shifts towards new left approach, “state advances, private sector retreats”
Recap of Reform D’ment Strategies
Current d’ment strategy
Still in Phase II: 2002-present
Xi and Li, 2012-2022
Section IV.D of the reading list
Continuities and change relative to Hu-Wen period?
What are the current debates? What directional shifts do we see in development strategy?
In class: Now will look at policies and outcomes from 1950s to reform era (IV.C)
Outline: Where We Are
IV.A D’ment Strategy: The Maoist Era √
1) Marx – theoretical background √
2) Mao – paramount leader, 1949-1976 √
3) Chen Yun – influential leader, 1949-1995 √
IV.B D’ment Strategy: The Reform Era (to mid/late 2000s) √
IV.C D’ment Strategy: Policies and Outcomes (to late 2000s)
IV.D D’ment Strategy: Mid-2000s and beyond…
→ Readings,quiz, class discussion…to come
