Thursday, April 18, 2019

The Village Experiment that Transformed China

Every Thanksgiving, I share the story of how the Pilgrims nearly starved to death because of their experiment with collectivized agriculture.

Once the settlers shifted to a system based on private ownership, however, their problems disappeared.

The obvious moral of the story is that incentives matter. Socialist systems encourage slackers (see this cartoon strip) and market systems encourage productivity.

A column by X in the Wall Street Journal tells a similar story about China.

It’s actually the story of an important anniversary.
The People’s Republic of China turns 70 in October and will celebrate with flag-waving and fireworks. …2019 also marks the anniversary of the result of a smaller, quieter but just as defiant protest—one that will receive little attention in or out of China, even though it launched the economic reforms that kick-started the country’s rise.
Here’s the background.
After taking power in 1949, China’s Communist Party had effectively abolished private land ownership, grouping farms into “people’s communes” subservient to the state. By 1978 villages were crippled by quotas that seized most of what they grew for redistribution. …there was no food. Xiaogang’s farmers dug up roots, boiled poplar leaves with salt, and ground roasted tree bark into flour. Families left their thatched-roof homes and took to the road to beg.
By the way, the Chinese system of collective farms was an example of hardcore socialism – i.e., government ownership and control.

So it’s hardly a surprise that it produced awful results. Including mass starvation.  But desperate times were the motivation for desperate measures.
…a farmer named Yan Hongchang summoned the heads of the village’s desperate families to a clandestine meeting. On paper torn from a child’s school workbook, the farmers wrote a 79-word pledge to divide the commune’s land into family plots, submit the required quota of corn to the state, and keep the rest for themselves.
And what happened?

Incentives and property rights worked. Spectacularly.
…farmers…reported a grain yield of 66 metric tons. This single harvest equaled the village’s total output between 1955 and 1970—but for once the figure was not exaggerated. In fact, villagers underreported their actual yield by a third, fearing officials would not believe their record haul.
And the really good news is that the successful experiment in Xiaogang led to market-based reform for the entire nation.
The grass-roots experiment did spread. In Beijing, three years after Mao Zedong’s death, Deng Xiaoping urged the Chinese to ignore political dogma and instead “seek truth from facts.” Now came news that dissenting farmers were actually growing food. This year marks the 40th anniversary of Deng’s decision to scrap collective farming. In its place came one of the country’s most popular reforms, the Household Contract Responsibility System, or chengbao, which allows families to farm their own allocation of land and sell most of the harvest at unregulated prices.
Indeed, China now celebrates Xiaogang’s rebellious shift to markets.
Xiaogang village is a “red tourism” attraction, albeit the only one whose “patriotic education base” (museum) celebrates local defiance of government policy. Its exhibition hall displays a copy of the farmers’ pledge—the original was lost years ago—and floor-to-ceiling photographs of its signatories. The men are lauded as heroes, and Xiaogang celebrated with a slogan: “The origin of our nation’s economic rise!”
Maybe future historians will look upon the events in Xiaogang the same way some people look at 1356 in Europe?

In any event, what began forty years ago already has yielded great results for the people of China.


Grinding poverty has virtually disappeared.

To be sure, China still needs a lot of reform. It’s only ranked #107 according the latest edition of Economic Freedom of the World.

But if some good reform yielded some good results, just imagine how much prosperity China could enjoy with a lot of good reform?

P.S. Just as the village of X helped to rescue China from hardcore socialism, there’s a grocery store in Texas that played a role in rescuing Russia’s economy.
 

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