Transcript The Socialist Era: Structures, Processes, Outcomes

The Socialist Era:
Structures, Processes, Outcomes
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Industry: firms & markets & planning
Agriculture: collectives & decentralization
Separation of Urban and Rural
Political Movements and Reform
Public Goods and Poverty
Comparisons and Connections
Structures
Russian industrial structures
• Lenin sees state control over the economy as one
big super enterprise—decisions on inputs and
outputs are management decisions and
management is a science of its own.
• Russian context of agriculture without much
commercialization
• Limited crafts and trade
• Thus formation of large enterprises is substitute
for market development and many enterprises.
Firms, Markets, & Planning
• Contemporary economics sees a basic division
between firms and markets. Economics deals
best conceptually with 2 extremes—competitive
markets made up of many producers or
monopolies which have only one producer..
• Under neo-classical assumptions of perfect (&
costless) information, calculation of marginal
costs and marginal prices can be done by a
single firm as easily as many firms so either the
state as a single super-firm or a multitude of
individual firms getting information from market
signals could make the same decisions.
• But this is just an ideal of course in both cases.
Assumptions for a planned economy
and the problem of public goods
• Perfect information
• Common interest
• Public goods are not divisible. States
supply social goods (health, education)
• Real world economies have mix of private
and public goods
Sizes of firm and market
• Naughton’s critique of late imperial economy—
very efficient with markets, but small scale firms
• When size of markets and of firms are both small,
how do you promote development?
• Make markets work to allow firms to be
developed OR
• Focus on fewer larger firms directly without
developing markets (more administration)
• How does one combine firm-market structures
that vary by product or sector?
Reform in the Eastern Bloc
• Wlodzimerz Brus divides economic decision
making in 3 tiers—macro/enterprise/household.
Economies differ according to degree of
centralization/decentralization for each set of
actors.
• Decentralized model allows market mechanism
for enterprise decisions on product markets but
state ownership and capital/investment control.
• Soviet efforts to refine planning system
technically but continuous decline in both growth
rate and efficiency.
Eastern Bloc Reforms
• Janos Kornai: key is not big bang vs.
gradualism, but of whether bottom up
development or priority to privatization of state
assets.
• Under bottom up strategy you sell state assets,
new firms have few owners with hard budget
constraints.
• Priority on privatization of state assets often
voucher scheme, not sale, preferring dispersed
ownership and without hard budget constraint.
Chinese Industry
• Context: 3 decades after Russian Revolution,
begin from a more developed industrial base.
• Goal: heavy industry, hence needs lots of
capital. Easy to envision industrialization as
subject to state control because of need for
capital
• Purpose of industrialization: wealth and power
• Soviet model for rapid industrialization
• Korean War fears shortly after WW II ends fuel
state control
Chinese Agriculture
• Small scale plots, labor intensive, little
mechanization;
• Efforts to introduce fertilizer and coordinated
labor based in part on cooperative practices of
past
• State organizes production. Seen as radical
change from a peasant society of small holders
but this perspective fails to see the
distinctiveness of the Chinese structures and
their basis in past historical practices.
Extending the Past into the Present
• Penetrate rural society to a degree never
achieved before and not attempted elsewhere
in the world. It is a Chinese pattern of change.
• Possible because extends earlier practices
• State always had a variable presence in
countryside
• Purpose of organizing production is first to
create social order and then to create greater
economic security for agricultural households
New Results
• One major change is control over production
decisions, an aspiration earlier officials had—some
worried about what they considered excessive cash
cropping and wish they could order people to plant
more grain in the context of a subsistence-first
priority.
• Second major change that is less remarked upon
also very important—market networks are
dismantled and countryside loses its craft industries
as well as its markets that connect agrarian
households to the commercial world they used to
have.
Urban/Rural=Industrial/Agricultural
• Institutional separation AND bureaucratic connections
• Industrial and agricultural administration separate
bureaucracies—major social effects: no migration to
cities, separate organization of social order in urban
and rural areas
• State extracts resources from agriculture to pay for
industrialization—basic macro-economic relationship
defined by state; savings from agriculture used for
investment in industry
Basic social structures
• Urban danwei: manages housing, health, low
cost grains and education. Social benefits
higher than those of countryside.
• Changing society to be simpler not more
complex
– Less inequality in countryside
– Little social differentiation in cities
– Main differences are urban rural rather than
differences within each
Modern break of urban-rural
connections of early modern era
• In past there was more continuum between
urban and rural. Elites who lived in towns or
cities owned land in countryside. Much craft
production in countryside.
• Treaty ports separate from countryside.,
• Republican era: agrarian crisis as countryside
increasingly distant from cities which are
connected to larger international networks
Communist consolidation of break
between urban and rural
• One kind of logical conclusion to 20th c. changes
• Goals: Bureaucratic separation of countryside and
city to create control over two very different social
environments
• Reasons
– Mao’s experiences in countryside (rural vision)
– Chinese learning Soviet practices (industrial vision)
• Results: Creation of the “traditional” rural sector
based on agriculture without industry.
Processes: State Simplifications
• Rural—gradual collectivization, reduce bases of
economic differentiation among households
• Reduce local inequalities, inequalities persist
among regions according to resource
endowments.
• Create greater isolation with no markets except
what is supplied by government in terms of
information, services and goods.
• Take crafts out of the countryside, make it more
agricultural
Processes: State Simplifications
• Urban—slowly get rid of professional and
middle classes; keep differentiation among
workers limited.
• Elites: political party elite, not economic or
cultural elites. Party the only path of mobility--social, political and economic fused..
• Workers face various constraints and
shortages, but they continue to do better than
peasants.
Center-local Relations
• Remove markets and horizontal connections,
• Choice of top-down organization of economy or lowerlevel autonomy/autarky
• Administrative assignment of resources and outputs—
issue of what spatial scale is control exercised on
• Levels of community autonomy—creation of
communes is both decentralization AND creation of
larger artificial communities from top down.
• Administrative decentralization makes the levels of
communication, information and coordination lower
and less demanding
Authority relations vary according to
strategic concerns of central
government and how they are to be met
• Early 1950s—centralized to build heavy industry
& military, fear American invasion from Korea War.
• Early 1970s—Mao calls for 10 autonomous
industrial regions for military, fear American
invasion from Vietnam War
• In contrast, mid-150s decision to reduce military
priorities, gives more priority to light industry and
agriculture (more balance among sectors) Also
seeks to take advantage of coastal resource
endowments.
Economic Aspects of the
Ten Great Relationships
• Heavy vs light & agriculture—more resources to light
industry & agriculture
• Coastal vs interior for industry—allow coastal to flourish
more
• Defense vs civilian industry investment: put more into
civilian
• State-enterprise-workers: interests of each to be
stressed.
• Center vs locale: give local more autonomy
• China and foreign countries—learn good from all
nations (not just rely on Soviet Union)
Administrative Decentralization
• Sharing administrative power and profits among
different levels of bureaucracy, NOT with enterprise
directly; contrast with Yugoslavian model ; Mao prefers
ideological over material incentives.
• Power to make plans goes to local administrations who
coordinate within regions on materials and equipment
allocations
• Capital construction and credit devolved to locales
(appears to be no hard budget constraints)
• 1958: 88% of enterprises transferred from ministries to
lower levels. Central govt controls directly 39.7% of
production in 1957, 13.8 % in 1958.
Problems of Administrative
Decentralization: a market contrast
• Call to increase production led to massive resources
investment, low efficiency and false reporting
• Wu Jinglian pp54-57: discusses distinction between
administrative and economic decentralization
• Administrative: give lower levels of govt incentives;
still allocating resources bureaucratically
• Economic: market allocation of resources and
production
• In reality administrative decentralization creates gaps
and spaces for markets.
Mass mobilization &
political movements
• Exhortation—individual sacrifice to build nation,
new socialist individual, belief in CCP.
• Direct Economic effects most in countryside
– Labor mobilization—slack season employment
– Infrastructure in countryside, public goods
• Indirect economic effects especially in urban
industrial economy
– Red vs expert: to stress ideological belief over expert
knowledge
– Critique of technical knowledge & bureaucracy.
Outcomes: positive
• Heavy industrialization achieved. Strong state;
industrialization does not mean
commercialization— less commercialized than
before.
• Agriculture stabilized in general. Persistence
of regional differences. Agriculture produces
capital for heavy industrialization. Also
agricultural investment through labor
mobilization.
Outcomes: positive
• Chinese pattern before 1978 allows
development of a particular kind of urban
society that is based on planned
industrialization and the survival of a kind of
rural society built in part on past practices.
• Public goods provision high relative to
income—mortality rates good, public health
and medical care good; primary education
widespread.
Bad Outcomes: Great Leap Forward
• Goals & strategy: expand output thru labor
mobilization
• Problems
– Administrative decentralization—less ability to respond to
disasters
– Incentives for mis-reporting
• Outcomes: recentralize administratively &
bureaucracy strengthened over movements
• Continued tension of bureaucratic & nonbureaucratic
Oscillating political equilibrium
• Administrative decentralization & movement
outside bureaucracy
• Administrative recentralization
• Explaining dynamic:
– Political bureaucracy: information and control;
– Economics: principal-agent problem within a firm
– What is missing—the market as mechanism for
sending information via prices. Limits on
efficiency, productivity.
Contrast with industrialization and
urbanization elsewhere
• Model of industrialization and urbanization together
creating a ‘modern’ society
• Processes of rural society being remade into urban
society—migration, new jobs, skills, lifestyles.
• In world where economies do not industrialize,
have large rural populations, sometimes have a few
big cities and a large countryside. Cities can be
overcrowded due to efforts to escape land.
• Urban and rural relationship favors urban
everywhere, but with greater urban problems
Comparisons with past,
challenges for future in 1978
• Comparisons with past
– Less connected internationally than before
– Affirm the split between urban and rural that began in
modern era
– Persistence of gaps between regions
• Challenges for future
– How to close gaps between countryside and city and
across country the late imperial legacy makes these
criteria for successful state.
– How to integrate economy into global economy
to develop more efficiently and effectively