Market Reform Under Socialism

In the past 35 years:
1. China wanted to follow the model of the former Soviet Union for socialism in economy
2. China made a few wrong steps which left many people starving. Then China started learning from other countries, systems and is now ready to embrace the market.
3. shifting startup company.

Comparison:
State Owned Enterprises:
similar to government owned corporations(fannie mae)
question: what elements can you think of about enterprises?
        Previously, government decide what and how much to produce, no less, no more;
government decide the price and raw material;
government decide who to hire and who to lay off;
very low efficiency, very fragmented industry, very low competent

It didn't really work well. (tax, beauarocracy, legacy)

Peasants:
Previously it was all planned: what can do, what can not do, what to plant, how to plant;
All collective: no property; work in teams, share equally(not incentive)
Personalization was prohibited (crime)

Changes: bottom-up(villages of beggers)->top down(governers, central office)
Farmers are FREE - a significant part of labor in the next twenty years

Rural Industrialization :
Didn't really exist before;
Because of 1) freed labor force from collective farming 2)niche market left by SOEs
Inferior, government tried to starve (no bank loans, raw materials and access to the consumer markets)
But they are FREE in the market - making goods in high demand as a result of economic reform but which were ignored or underserved by the state sector.
Their share GDP grew from 6 to 26 percent, let alone the rapid growth of GDP itself.

Individual Economy:
Between 1970 and 1980, sudden influx of "returned youth" from countryside, accounting for 10% of the population for some cities.
SOEs and government can't absorb the labor force.
"youth waiting to be employed" creative rhetoric didn't solve problems.
Young people - protested, blocked railways, encircled government buildings

Special Economy Zones
Shenzhen
A small poor town with 3000 people. Now more than 14 million.
Sea shore cities were once the weakest part in the economy - in fear of enemies.
illegal immigration - some times thousands of people tried to swim across the maritime boarder, drawn and bodies floated back - like what is going on between NK and SK.
What to do?
more soldiers to guard?
"This reflects problems in our policy. Nothing the army can do" - Deng
Hong Kong people earned 100 times more than the people on the other bank.

Open Special Economy Zones
- "appropreate capitalism for the good of socialism
- it doesn't really matter if it fails
- succeeded - open more zones further

Debate - "No Debate" try boldly, strike out boldly.

Like a startup company, now ready to try the lean way.
Now China has a mixed economy
And what else?

China's Market Reform Began

Last time I talked about:
1. China was established like a startup company with a lot of great resource and a good product, but not sure where to go
2. China wanted to follow the model of the former Soviet Union for socialism in economy
3. China made a few wrong steps, including making too aggressive plans, the Great Leap Forward, which left millions of people starving and wasted a huge amount of resources like raw material


After that China experienced a few years' economic recovery and then the turmoil of a ten-year social-political movement - Cultural Revolution. There are thousands of stories stories during this ten year, many of which are still unknown.

Soon it turned to the year 1976, when Chairman Mao Zedong passed away. Like a startup, once a founder leaves the company, it is time to make some change; unlike a startup, other founders cannot simply give up on a country. So it is time for the successor, President Hua, to pick up the mantle and go on the right way. Till then, Mao was still seen by many people as godlike. Chosen by Mao himself, the new president stood firmly by his precedent's side, claiming Mao's rule has to be strictly. However, he demonstrated rare qualities of leadership and tolerance, allowing another voice to raise in the party, which is: "Practice is the best criterion for testing truth". The man who said that, was respected as the next generation of god, especially among young people like me, Deng Xiaoping.

Actually, we don't call him god this time. We call him "the chief architect of China's economic reforms"

However, even in one of the greatest architect's hand, the reformation did not come as easily as many people thought. The government firstly tried to focus on heavy industry and open the market and raise money on global market. Even though this time steel and grain productions were significantly improved compared with the "Great Leap Forward", the trial failed. The reasons were: 1. inexperience on global market(on raw material); 2. imbalance on industrial development. Like a startup: 1. underestimate the difficulties to raise money 2. import/developed cool product but don't know what to do

However, during that period, the leaders realized the importance to open China to modern science, culture and technology. In order to open China, we firstly need to open our eyes. So in the following years, hundreds of officers went to modernized cities and countries to learn from their experience. In fact, the year 1978 was called "Year of Foreign Diplomacy", when central government officials, top provincial officials and state-owned company managers made more than twenty visits to more than fifty countries in a row.

Conversation with LEE KUAN YUE
Question about who is responsible for material distribution

Acknowledge that comunnism is impossible without an extreme expansion in commodity production
Confident that socialist society will do better than capitalism
Ready to embrace the market

Starting Notes

Started reading this book a month ago

Trying to present to ToastMaster folks regularly about what I have learned from the book

Using this to take notes

Chapter 1 & 2: Post Mao Period completed and presented