China and Industrial Policy
Brad DeLong’s post on China and industrial policy combines a deep knowledge of history, politics and economics. It’s a superb post, one of Brad’s best ever so do read the whole thing then come back here for some minor quibbles.
Brad goes over the top for Deng Xiaoping ("quite possibly the greatest human hero of the twentieth century.") Without denying Deng’s importance, I would say that China’s great leap forward came with the death of Mao Zedong. Once Mao – quite possibly the greatest human killer of the twentieth century – was dead, China could almost not help but improve.
Second, the Chinese people, especially the peasant farmers, deserve a huge amount of credit. Here’s a couple of paragraphs I wrote recently:
The Great Leap Forward was a great leap backward – agricultural land was less productive in 1978 than it had been in 1949 when the communists took over. In 1978, however, farmers in the village of Xiaogang held a secret meeting. The farmers agreed to divide the communal land and assign it to individuals – each farmer had to produce a quota for the government but anything he or she produced in excess of the quota they would keep. The agreement violated government policy and as a result the farmers also pledged that if any of them were to be jailed the others would raise their children.
The change from collective property rights to something closer to private property rights had an immediate effect, investment, work effort and productivity increased. “You can’t be lazy when you work for your family and yourself,” said one of the farmers.
Word of the secret agreement leaked out and local bureaucrats cut off Xiaogang from fertilizer, seeds and pesticides. But amazingly, before Xiaogang could be stopped, farmers in other villages also began to abandon collective property.
Deng and others in the central leadership are to be credited with recognizing a good thing when they saw it but it was the farmers in villages like Xiaogang that began China’s second revolution.
Addendum: For the story of Xiaogang I draw on John McMillan’s very good book, Reinventing the Bazaar.