Great Leap vs. Gradualism: China's Economic Development Since 1949

Introduction: Framing China's Economic Trajectory

In recent decades China has been able to maintain an almost steady double-digit rate of economic growth, and this spectacular performance has attracted the interest of Chinese and non-Chinese economists, policymakers, media commentators, and general observers alike. Many leaders and economic thinkers in developing countries look to China as a model, as do Americans concerned about job losses, while multinational corporations admire China's vast and productive labor force. In light of these realities, it is valuable to examine the patterns of economic development in the Maoist and post-Maoist eras and to identify the factors that allowed China to prosper in recent years.

There are many factors that can account for China's successful economic performance. For example, the nation's enormous human capital and its traditional cultural emphasis on hard work are certainly among them (Chow, 2010). But the pattern of development that most decisively helped China in recent decades is its gradual transition from a planned economy to a market economy.

China's gradualism is usually contrasted with the "big bang" or "shock therapy" rapid economic changes that took place in the former Soviet Union and Eastern Europe (Qian and Xu, 1993). While such comparisons are useful, they cannot fully explain the reasons for success or failure in any of these economies, since each country has domestic and unique features — history, potential, and limitations — that distinguish it from the others. A better understanding of China's gradualist transition can be gained by historicizing the development. One useful approach is to examine periods when China adopted rapid economic changes and contrast them with eras when China embraced gradualism.

It is the contention of this paper that rapid changes — particularly those adopted under Mao — did not serve China well. In contrast, gradualism, whether adopted temporarily during the Maoist period or pursued as a continuous policy in the post-Maoist era, has worked. It is important, therefore, that for future development China should avoid rapid changes — such as the wholesale and uncritical adoption of Western models that ignores traditional Chinese patterns of development, including the legacy of Maoism — and instead take a cautious approach, gradually embracing the benefits of market economy in a way that befits China's national and unique needs and interests.

Measuring Development Beyond GDP

Before discussing any aspect of Chinese economic history, it is important to note that economic development cannot be measured solely on the basis of GNP or GDP growth. It is one of the biases of the Western neoliberal approach to assess economic development purely in terms of gross economic output. A country's productivity potential in producing goods and services and engaging in foreign trade is certainly a meaningful measure, but it is not a sufficient one. Economic historians such as Amartya Sen and Chris Bramall have argued that the measure of development should include, alongside statistical data on gross output, the freedom of the population, civil liberties, citizen access to basic necessities such as education and healthcare, and other factors that account for people's satisfaction with their standard of living. This approach ties the measure of development to citizens' "perceived level of happiness" (Bramall, 2009, p. 3), and it also better explains the complexity of Chinese economic development across both the Maoist and post-Maoist eras.

Maoist Rapid Change and Its Consequences

In his comprehensive study of modern Chinese economic history, Naughton (2007) notes the shortcomings and failures of the planned economy pursued during the Maoist era. Among these, he lists the "single-minded pursuit of industrial development" at the expense of consumption. For instance, while gross capital formation grew thirteen times between 1952 and 1978, household consumption only tripled. Another problem was the neglect of service-sector growth: available services declined from 29 percent of the economy in 1952 to 24 percent in 1978. Furthermore, Chinese policymakers failed to increase employment creation and confined industrial investment to capital-intensive but technologically demanding sectors. For the same period, however, Naughton notes that the "flow of resources into basic health and education was fairly substantial throughout the socialist period, and Chinese people were healthier and better educated at the end of the Socialist era" (pp. 80–82). So, while China performed poorly in terms of overall economic strategy under Mao, the country also invested heavily in human capital, which undoubtedly supported development in the post-Maoist era.

The complexity of both Maoist and post-Maoist economic development is better understood by examining the gradualist and rapid-change phases the state initiated at different times. In the 1950s, China adopted Soviet strategies of "big push" and mass collectivization wholesale. The state initiated rapid changes that forced the Chinese population — especially those in rural areas — to adapt to a new environment with different patterns of agricultural and industrial development. For example, during the "High Tide of Socialism" in 1955–56, private ownership was abruptly destroyed. Mao initiated a mass campaign forcing farmers into cooperatives: from 1954 to 1956, the proportion of farmers enrolled in cooperatives rose from 2 percent to 14 percent. Private factories and shops in cities were also largely forced to convert into cooperatives or join "joint public-private" enterprises more tightly controlled by the state. As Naughton (2007) explains: "Private ownership, having survived and grown for six years since the establishment of the PRC, was virtually extinguished during six months in late 1955 and early 1956" (p. 67).

The implementation of the Soviet model, which entailed rapid economic and social changes, placed enormous stress on Chinese economists trying to manage the transition and on ordinary people suffering from the resulting economic problems. The rapid changes also caused a stagnation of agricultural output. Faced with these difficulties, Chinese leaders responded by relaxing the pace of change, and the Eighth Congress of the Communist Party called for economic moderation. Many proponents of economic liberalism at the time — who would later inspire Chinese economic reformers in the post-Maoist era — argued that gradualism was the appropriate path. Proponents of the movement labeled the "Hundred Flowers" campaign called for economic liberalism and a slow, gradual detachment from the Soviet model. The movement and the ideas it generated were genuinely promising, and there is good reason to think that such a path could have better served Chinese economic development, as it would later in the post-Maoist era. However, the movement proved short-lived.

Post-Maoist Gradualism and Market Transition

After Mao's death and Deng Xiaoping's ascension to power, China moved toward an era of market socialism. China's adoption of market economics was quite different from the path taken by the former Soviet Union and Eastern Europe. But China's new direction was also a break from the past — particularly from Mao's strategy of envisioning rapid change and quick development, oblivious to the havoc such changes could, and did, wreak on society. The hallmark of the new transition in the post-Maoist era was "gradualism" (Bramall, 2009, p. 325). Whereas the former Soviet republics abruptly broke from their past and adopted Western capitalist models wholesale, China adopted a policy of slow change, initially introducing small cooperatives and private businesses and limited Western investment — confined to specific economic zones — that would bring Western technology without abruptly destabilizing the local economic structure. Notably, China began its market transition before Russia, yet by the mid-1990s Russia was already largely capitalist, while China still maintained a "market socialist system" (Bramall, 2009, p. 325).

As Naughton (2007) explains, there were several features of the transition. The first was the introduction of the dual-track system, which allowed the co-existence of both the planned and market economies. Chinese leaders recognized that the plan was initially necessary to avert destabilization, but private enterprise was encouraged, and even state-owned firms were permitted to produce in excess of their plan quotas — that is, for the market. Another feature of the transition was "growing out of the plan," a strategy that allowed China to outgrow its planned economy as the development of the market gradually made planning "proportionally less and less important" (p. 92). The Chinese government also weakened state monopolies on industries, allowing small private firms to enter and compete with state-owned enterprises. This competition improved the quality of goods and services and simultaneously facilitated the transition to a market system.

Conclusion: Lessons from Maoist and Post-Maoist Development

This brief overview of Chinese economic development in the Maoist and post-Maoist eras shows that rapid economic changes and the wholesale adoption of a foreign model do not serve economies well. The wholesale adoption of capitalism by former Soviet republics led to chaos, while China's gradual transition to a market system was largely successful and accounts for the country's stunning economic performance over the past three decades. While one cannot draw fully conclusive comparisons between China and Russia because these two countries have distinctive features — in terms of history, potential, and limitations — the success of gradualism can be meaningfully explained by examining recent Chinese history from within.

The rapid "big bang" or "big push" policies largely implemented by Mao Zedong did not serve China well, while gradualism in both the Maoist and post-Maoist eras helped stabilize and develop the Chinese economy. It is therefore in the best interests of Chinese policymakers to remember this recent history and to avoid the wholesale adoption of foreign models, which risks generating serious internal problems — including the decimation of healthcare and the mistreatment of the rural population more broadly. Traditional Chinese patterns of economic development, including aspects of Maoism that emphasized investment in human capital and welfare programs, should be preserved and incorporated into the evolving Chinese capitalist model.

References

Bramall, C. (2009). Chinese Economic Development. Routledge.

Chow, G. C. (2010). Important lessons from studying the Chinese economy. Singapore Economic Review, 55(3), 419–434.

Naughton, B. (2007). The Chinese Economy: Transitions and Growth. Cambridge: Massachusetts Institute of Technology Press.

Patnaik, U. (2004). The republic of hunger. Retrieved April 10, 2011, from

Qian, Y., & Xu, C. (1993). Why China's economic reforms differ: The M-form hierarchy and entry/expansion of the non-state sector. Economics of Transition, 1(2), 135–170.