“Classes struggle, some classes triumph, others are eliminated. Such is history; such is the history of civilization for thousands of years. To interpret history from
this viewpoint is historical materialism; standing in opposition to this viewpoint is historical idealism.” (Mao Zedong, 1949)
After last time that we talked about the brief history of China, today we are talking about the Economic history of China during the beginning of period that Mao Zedong was in the power and the first failure from his idea. (Yes, there was a second time)
After the wars with foreigners and the civil war ended in 1949, China was unified and at peace for the first time in decades. Mao Zedong was seen as a national savior
who had heroically resisted Japanese and passionate leader who wanted to help poor farmers in the rural China. Mao led the communist party by following the Marxist way to build a socialist society. He intended to build an equal society by getting rid of classes. At that time, nationalism in China had risen to the point that Chinese people committed and organized to have a revolution, and defeated the World capitalist system after the Second World War. China was among the poorest country in the world in 1949. The agricultural sector was a backbone sector of the economy.
Mao characterized his Chinese people as a blank paper that he wish to write “the newest and most beautiful words”. The strategy that Mao adopt was from the Stalinist strategy of the Soviet Union. The country was divided into six regions under military administrative control. Mao started by writing the First Five-Year-Plan focusing at stimulating the industrialization by increasing physical capital while creating the centralized state and the national market. In the pure command economy which Mao wanted China to become, the society does not rely on price and market mechanism. The planners will determine how much to produce, how much to consume, how much land, labor, capital and raw materials were required. In order to do so, the government has to control all production decisions. Mao hence started to transform the private enterprises into semi-state owned and finally state owned enterprises.
The result at the beginning of the First Five-Year-Plan was good; rapid economic growth and rapid pace of industrialization. Urban areas were expanded. City lives were
Everything seemed fine, what was the problem then?
Chinese people in the cities were enjoying from their higher income, buying more manufacturing products, and also consuming more food. Imagine that you have moved a
lot of people from the farms to the city to work in the factories. A lot rural areas were abandoned. The source of food was abandoned. China started to experience food and raw materials shortage in 1956. Mao realized that something had to be done with the agriculture.
Mao launched “the Great Leap Forward” policy which was officially defined as “simultaneous development of agriculture and industry”(Eckstein, 1977, p.56). One of the main purpose of this campaign was to move the surplus of labor in the countryside to the higher labor-intensive projects designed for the greater gain in agricultural output. Another side of the campaign aimed to stimulate the small scale industries in the rural areas. In other words, Mao wanted to compromise between industrial and agricultural sectors by increasing productivity in agriculture and alleviating the concentration of industrial manufacturing in the cities. The main aim was to catch up with the Western industrialist countries.
Unfortunately, the Great Leap led to the Great Crisis.
Mao would like to make China catch up with Britain in the production of iron and steel as well as other industrial products within fifteen years (Riskin, 1987, p.125). Small-scale industry especially the backyard iron and steel factories were a hallmark of the Great Leap. The households were expected to have their own backyard iron-casting furnaces to supply the heavy industrial sectors. When farmers were spending more time for small iron-casting factory, they had less time in the farms. A lot of the activities to supply the material for industrial sector occurred at the peak of the harvest season. The autumn crop was not entirely brought in (Walker, 1968, p.443-4). In addition, the output from these backyard production did not meet the industrial standards (especially for the heavy industry).
The Great Leap Forward campaign did not make Chinese people’s life better like expected. It also exaggerated the shortage of food supply and slowed down the industrial productivity. Mao himself realized the problem and attacked the overcentralizing tendencies of the Leap, and warned that there was serious unrest in the countryside. He referred to the mass smelting of steel as a “great catastrophe” but it was too late.
By 1959, most backyard furnaces were being closed down. Towards the end of 1959, the commune underwent its first major decentralization while the agricultural crisis still existed and was growing (Riskin, 1987, p.127).
The deepest crisis was in 1961, when the per capita grain supply and daily availability of food energy was lowest (Riskin, 1987). It was not only because of the poor harvest but also the worse quality of the output. The nutritional diseases increased and reached a peak in 1961. The confidence and the heroism of Mao at that time got severely attacked for the first time.
How did Mao solve the crisis? What did the strategy that Mao use after the Great Leap crisis? Why did the pure command economy’s idea change to market socialist economy? Please come back next week!
Eckstein, A. (1977), China’s Economic Revolution, New York, Cambridge University Press.
Riskin, C.(1987), China’s Political Economy: The Quest for Development Since 1949, New York, Oxford University Press.
Walker, Kenneth R. (1968), ‘Organization of Agricultural Production’, in Ekstein, Galenson, and Liu (1968), Economic Trnds in Communst China, Chicago, Aldine.