Market Economy In China And Mao example essay topic

Overview China in the 20th century has been going through enormous changes. From colonialism and imperialism to republicanism, from communism to capitalism, and from underdevelopment to a country maintaining over 10% economic growth for over ten years. In this research paper, I will focus on the transition of China from a Communist command economy to a type of market economy as well as the economic fluctuations throughout this period. In 1949 Oct 1, the People's Republic of China was established. Before 1949, there was a period of civil war soon after the world war two.

The confrontation was between the Nationalist Kuomintang led by Chiang Kai Shek and peasant-based Communist party led by Mao-Zedong, ended with Chiang's defeat. Mao became the leader of China, and he believed that Marxism was the best way to solve China's social and economic problems. He wanted to stop the landlords from exploiting the farmers. Under the rule of the Communist party, the people owned all the economic areas of China, and these would be controlled by the Communist government.

All of the people would work for the common goal of the country. As a result, Chinese socialism was born. The pre-communist history of modern China has been essentially one of weakness, humiliation and failure. This is the atmosphere in which the Communist Party developed its leadership and early growth. This resulted in strong determination by chairman Mao to eliminate foreign influence within China, to modernize the country and envision a strong economy under Communist control. Therefore, a series of radical reforms were introduced and the social organize was transformed under Communist control.

2 Economic growth during the first ten years of Mao's regime was significant. However, the Great Leap Forward (1958-61) introduced catastrophic changes resulted in a famine in which some 30 million people may have died. The Cultural Revolution from 1966-76 led to further disruptions and the standard of life worsened. (all these will be talk in details later) After the death of Mao Zedong in 1976, Deng Xiaoping came into power in 1978. He was in favor of capitalist-style reforms and he also changed China fundamentally by introducing dramatic changes in economy to cope with the growing influence of global capitalism. 3 The period of Mao Before the People's Republic of China was established, China remained predominantly rural and agricultural, with close to 90 percent of the population living in the countryside and about 65 percent of the national income generated in the agricultural sector. (Liu and Yeh 1965, 66,212) At that time, very few people could read, inflation was so high that prices sometimes rose daily, and the tenants were greatly exploited by landlords (Kristof and Wudunn, 61).

The period of 1949 to 1952 was largely the reconstruction and rehabilitation period. Land reform began promptly after the founding of People's Republic. The Communist halted inflation, restoring confidence in its new paper currency, divided up the land, tried to end up opium addiction and prostitution, banned child marriages, and encouraged the peasants to go to school and breathed new hopes into the people. It was the first time a moderate degree of equality ever existed for most of the Chinese people (62).

Most people were delighted by the communist, reconstruction works were completed by 1952. During this rehabilitation period, output in both industry and agriculture rose rapidly from the sharply depressed 1949 levels, and had been restored to previous peak levels (Lippit 133). The period of recovery and rehabilitation was followed by the First Five Year plan, 1953-1957, during which output continued to rise strongly (110). During this period of time, heavy industry was stressed by the government. It was the first time China began to produce large quantities of trucks, merchants ships, tractors and jet airplanes. By 1957, the gross industrial product increased 2.3 times from that of 1952 level, and industrial output grew at an average rate of 18 percent between 1952 4 to 1957 (111).

The private sector had almost disappeared, and the state directly produced 70% of output. However, the successes in industrialization had a contradiction with the benefit of the rural areas, because growing number of peasants were employed in the industrial sector. Besides, to sustain rapid industrialization and urbanization, the government had to procure large quantities of grains through taxation and required sales at below-market prices. This created intense dissatisfaction in the countryside and made further increases in procurement difficult.

And this in turn, making the industrial sector lacked the capacity to provide chemical fertilizers needed for agricultural modernization. Therefore, the development strategy that the First Five Year Plan embodied could not be maintained. Despite the above problems, the overall growth performance of the Chinese economy in this period was extremely strong. (112,131,132) Politically, Chairman Mao launched another campaign called the 'Hundred Flowers Campaign'; in Feb 1957.

Since he wanted to solidify his power in the party, so he used an ancient Chinese adage, 'let a hundred flowers bloom, and a hundred schools of thought contend'; to 'encourage'; the people to criticize the government (Shui 111). Traditionally, Chinese intellectuals were given the freedom to criticize the governments without fear of persecution. And Mao had read many Chinese histories written by intellectuals who during imperial times criticized the government (145). However, other leaders in the Communist party did not embrace such traditions, and condemned the Hundred Flowers Campaign and launched the Rightist Campaign which condemned critics of the Communist party (147). 5 After 1957, the 'Maoist Era'; continued. Undaunted by the failure of the Hundred Flowers Campaign, Mao in May of 1958 launched another grandiose plan: the Great Leap Forward (1958-60).

This was Mao's economic plan to transform China into an industrial nation in two years time, the plan was to decentralize agriculture and created communes which would promote heavy industry and agricultural production (Potter 70). it was launched in the hopes that it would exceed the output of Britain in only 15 years. Citizens were encouraged to make steel in their spare time by melting iron ore in special 'backyard furnaces'; (Shui 67). If the iron ore was unavailable, people were told to melt down their own iron possessions. Since all the citizen's cooking utensils were used to make steel, meals were provided by the communist government (70). The GLF did not last long because people resisted this kind of regimentation and the Chinese workers complained about long working hours. In fact, the long hours of extra work did not increase productivity, which made the work senseless to the majority (73).

The GLF seemed to symbolize Mao's embrace of technology and industry, in fact, it epitomizes Mao's reliance on traditional Chinese ideals first formulated in his observance of the peasant culture. It relied on a commune system, which operates much like the China of Mao's childhood (86). Small villages would set rice quotas and economic priorities and work as a group, sharing resources for the harvest. Communes can be seen as based on Confucian idea of obligation too. Traditionally, Confucianism obligated a child to respect a parent. Communes, according to Mao would replace that obligation to parents, with an obligation to communism.

Unfortunately, the experiment failed (90). Misapplication of resources coupled with an unforeseen drought was 6 disastrous and 20-30 million starved (77). Initially, Mao wanted to raise the output of the industrial sector by 25 percent Annually; however, the gap between the growth rates of heavy industry and light industry was to be closed not by reducing the effort to develop heavy industry but by accelerating the development of light industry, relying on labor-intensive processes wherever possible. 'The parallel development of modern, technically advanced methods and traditional labor-intensive ones became known as 'walking on two legs'.

' ; (Lippit 114) Besides, life became completely politicized during the GLF, cadres were under tremendous pressure to report sharply improved results. As a consequence, the results of GLF were predictably disastrous. (115) From 1961-1965, China returned to a more conventional, less ideological-mobilization al approach to economic development. Economic rather than political criteria were stressed, and material incentives in both industry and agriculture received renewed emphasis, with income tied more closely to work performance.

The measures taken to restore production during this recovery period were successful. Industrial production increased over eighty percent from 1961-1965, while agricultural production increased about fifty percent during the same period. However, the renewed attention to living standards were short-lived. (116) In the mid-1960's, Mao Zedong became increasingly concerned with some of the social tendencies that were becoming manifest during this period. However, he had lost his dominant position in the party with the failure of the Great Leap Forward, so he had to find some force outside the party to give expression to his concerns.

Therefore, the Great Proletarian Cultural Revolution was launched in 1966 (Liu 39). 7 The central theme of the Cultural Revolution was the need for a transformation of institutions, consciousness, and social values. It was seen by its proponents as a struggle between two roads, one leading to socialism and the other leading to capitalism. The Gang of Four, including Mao's wife largely orchestrated the Cultural Revolution, in which the 'Red Guards'; ~ millions of activist youths were their main supporters (Shui 214).

Universities and schools were shut down, widespread purges of 'rightist elements'; forced many former Communist officials into rural re-education camps (including Deng Xiaoping). Children were urged to denounce their parents and teachers, or even labeled them as enemies (222). The Red Guards stormed the whole country, beating up the party officials, destroying books containing opposite views and spreading their beliefs that the four olds (old ideas, old culture, old customs and old habits) were to be eradicated (223). Economically, The Cultural Revolution had two important consequences. One was the decline in industrial output in 1967 - the first for many years, due to the general dislocation. (Lippit 154,179) The other was that it halted the tentative revival of foreign trade.

Between 1966 and 1970, trade was frozen at existing levels, the outbreak of anti-foreign feeling (such as the burning of British Embassy) created a climate within which new trade possibilities could not be explored (Howe i). 'Although total national income rose during the Cultural Revolution, it was gained by greater investments of capita, manpower and raw material and not by raising economic efficiency and returns'; Both the real wages of people and economic accumulation had fallen about 30 percent between 1966-76 (Rabushka 56). Mao died in September 1976 and his death was immediately follow by a new 8 phase of social and economic policy. The 'Gang of Four'; were arrested and accused not only of attempting to seize power, but of disrupting the economy. In 1978, Deng Xiaoping the new leader of China, criticized Mao's policies and reversed most of his policies. Deng led a drive to loosen the Chinese government's control over the economy of China and welcomed foreign investments under a new 'open door'; policy.

The transition to Capitalism officially began in China. The period of Deng Deng Xiaoping was one of the most important men in the world during the post- Cold War era. His policies- 'political repression and economic liberalization'; - have very great impact on more than one-fifth of the world's population (Kristof &Wudunn 103). After he took over in 1978, the economic growth of China was spectacular. He launched the 'four modernizations'; program in agriculture, science, industry and the army. ' ; Since Deng launched his reform program, the Chinese economy has enjoyed an annual average growth rate of about 9 percent.

This is the triple growth rate of that of the United States in that period, and about 70 percent more than that of India or Indonesia (316). 'As for such growth rates in a huge country like China, there has been nothing like them in the history of the world. ' ; (317) In the post-1978 period, Dent established a series of agricultural, industrial, commercial, fiscal and financial reforms that gave a greater scope to market forces and began to lessen the role of state in China's economy (Rabushka 71). In 1979, the Chinese government made it possible for Hong Kong businessman to invest directly in China, initially in partnership with communes, and later with other levels of government and individuals (Potter 316). Besides, the Chinese government did not collect income tax 9 from the foreign investor for three years, which is something never thought possible since the Cultural Revolution (317).

On Oct 20, 1984, an official report on ' Reform of the Economic Structure'; repeatedly used phases and terms such as ' the individual economy,' ; 'the market,' ; 'competition,' ; emphasizing individual incentives and market forces to stimulate economic efficiency. 2) In a speech published in 1985, Deng went so far as to say, ' I am afraid that some of our old colleagues have this fear: after a generation of socialism and communism, it is unacceptable to spout some capitalism. It cannot harm us. It cannot harm us. ' ; (Rabushka 71) Since 1978, Deng complemented agricultural and industrial reforms with several commercial, investment, and trade reforms. He began to search for foreign capital that included international borrowing and effort to attract direct foreign investment to china.

The 'open door'; policy was a radical departure from the past. In 1980's, the government open up the coastal cities for foreign investment. They gave Guangdong and Fujian Provinces greater autonomy in matters of foreign trade and investment. Besides, four Special Economic Zones were formally designated such as Sheng Zhen which is near Hong Kong.

These Special Economic Zones are totally capitalist-style and attracted foreign investment (85, 86). The increase in prosperity of both urban and countryside between 1979 and 1985 have been remarkable. Under Deng, the majority of Chinese people learned what it meant to own televisions, refrigerators, and washing machines (Kristof &Wudunn 105). According to research conducted in the Chashan district (in southern part of China), in 1979, only 305 of Chashan district's households had television sets; by 101985, 1832 household owned one set. In 1979, there were only 8 refrigerators in that commune, all collectively-owned. By 1985, there were 485.

Similar to the case of washing machine, there was no washing machine in 1979 in the commune; by 1985, 5 percent of households owned washers (Potter 327). Wages of the factory workers continued to rise in the period of 1979 to 1984, the average earnings of the factory workers increased by 290 percent. The average income of peasants in some of the districts even grew by 300 percent. The improvement in the infrastructure lay the ground for further development. Transportation and telecommunications as well as other aspect of social daily life improved significantly (328). Behind the prosperity, contradictions exist, stratification is being created, and concern with social welfare has become secondary.

Economic classes and class antagonisms are re-emerging, casting doubt that China continues to be a 'communist country'; (336). Ironically, it was the communists who finally organized a market economy in China, and Mao had played a part in it (Kristof & Wudunn 326). Why? First of all, the book 'The Rise and Decline of Nations'; by Man cur Olson, it addressed the fundamental question of what turns a nation into an economic dynamo. He asked why Germany and Japan performed economic miracles after being defeated in the World War Two. Answer is that, it was the war which created catastrophic losses and then became a motivation of economic dynamo (322).

That is, when people or a country is confronting with the worst situation, their energy and determination would be inflame. Similar to the case of China, Communist Party itself during Mao is a paralyzing social 11 force, it fulfilled much the same role as war did to Japan. Especially during the Cultural Revolution, people lived in a state of chaos, and it was Mao who created this kind of necessary and inevitable changes (333). The Communist Party unified the country and cleared away the landowners and stagnant class. This created for the first time a moderate degree of equality and built up capital. This is an important ingredient for economic takeoff and the stability of a market economy.

Otherwise, a weak economic foundation in the new market economy of China, might lead to revolution again (326). By 1992 and 1993, China's economy was growing 13 percent annually, faster than that of any other country in the world. Although these are unsustainable figures, China will still keep up of 10% economic growth every year for the foreseeable future. It has been one of the world's fastest growing ever since the late 1970's.

The Asian Economic Crisis of 1998 slowed China's growth slightly but it has responded well and created a new & growing stability. Today, the growing prosperity and diminishing poverty is transforming China in fundamental ways. All around China, many people became xian g qi an kan. This is a play on words, for xian g qi an kan was a common slogan that means 'Look to the future!' ; But the same expression, written with a different character for qi an, loosely translated means 'march towards money'; . And in today's China, you do not need ask which they mean. Everybody including the government is marching towards money.

12 Conclusion China is enjoying an economic Renaissance. A steady supply of foreign currency from the investors helps China modernize its infrastructure, agriculture and industries, thus benefiting China's gargantuan population of 1.2 billion people. If only a quarter of them could be considered middle class, then there exists a potential market of more than 300 million consumers. If China in the coming decades, increased its GNP per capita to $5000 - the level of its new industrialized neighbor, South Korea - it will possess the world's largest economy.

With such economic power, China will become one of the world's leading trade power, it is a goal that Chinese authorities are firmly intent of reaching (Fong 120,121).