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?