Economies of Asia: Mao-Period - Assignment Example

Mao-period Part The move by Mao to develop communist relations of production after the Great Leap Forward (GLF), as opposed to factoring in the forces of production has been indicated to be the major cause of the slow development in China at the time (Riskin 163-164). As seen in the research conducted by Riskin, the GLF policies were aimed at making China outdo other countries in the world by becoming communist through the self-reliance policy (117-133). The policies touched on the agricultural plus industrial sector that would pave way for an expansion of the iron, steel, coal and the machinery industry as well as increase farm produce respectively. However, it is clear that the policies were not well thought since by 1959 the communes could not succeed in meeting the demands of the policies (Riskin 117-133).The commune leaders on the other hand could not push its subjects towards achieving the set goals, and some would even be charged for the same. It is evident that the factors of production were not factored in by Mao since the machines produced were not of good quality. Riskin explains how the farm machinery produced were completely destroyed while being used in the farms (117-133). This means that the food produced could not be harvested even with China presenting a perfect environment for agricultural practices. The policies can, therefore, be said to have put more focus on quantity as opposed to quality productions. Riskin explains how the policies could not deal with drought issues on some parts of the country and floods on the other (117-133). Even with high produce from the farms, Riskin explains how starvation occurred in different places in the country, to the extent that the government had to measure food for its citizens (42, 77, 136). In the industrial sector the same issue of not focusing on factors of production was imminent. As seen in the work of Riskin, the backyard furnaces were seen to consume huge amounts of coal (125-126). Since China’s railway system was heavy reliant on coal at the time, the coal driven train suffered a great deal since they did not have enough energy that would be useful for transport form place to place (Riskin 127, 195). Also, it is key to know that the in as much the production of steel was high prior to 1958, the products were of very low quality (Riskin 125-126). A good example is that of the home made utensils such as pots and pans that were made of the lowest quality steel and could not even be recognizable (Riskin 273, 279). It is true that the steel was produced but was used in many impractical ways. The environment paid a great due to the high levels of deforestation resulting from the Great Leap Forward energy production approaches. As a result, the commune members got to appoint where they would gain nothing since it was almost impossible to meet targets for the communes. Riskin explains how there was need for the peasants to use other methods of grain production that would see to more production of food (50, 67). However, the same would not happen since the grain production go worse and unsustainable with natural disasters such as drought and floods destroying the harvest that was left behind, that resulted to the “bitter years” (Riskin 116). This explains why there high famine that causing starving and ultimately high levels of death rates. It is the inability of the government to reform the policies of the Great Leap Forward that led to the death rates and famine (Hart-Landsberg & Burkett, 35-46). One would argue that there were neglegence on the part of the government in as much the weathery conditions contributed to famine. A good example is that of diversion of the agricultural workers being forced to produce steel as opposed to growing crops. The export of the grains also contributed to the failure of the GLF policy adopted by Mao (Riskin 323-6). It is clear that the wrong policies adopted by Mao are the major consequences of the adverse effects that faced the country at the time. If Mao choosen for evaluating factors of production, then his communist policies would have been appropriate for China. Part 2 Studies indicate that the leadership of China has led to a major imbalance, unsustainable and an uncoordinated economic system (Lardy 1-6). This explains why China’s economy has presented major challenges in the quest to balance the economy even with policy enactments. The economic imbalances have been well described by Lardy. As seen in his research, Lardy argues that the imbalances of the Chinese economy were because from distortion of the prices in the economy especially concepts that touched on the prices in the economy, the exchange and the interest rates as well as the energy prices (Lardy 43-85). The interest rates represents one of the major imbalance in the Chinese economy. As seen in the research conducted by Lardy, China’s interest rate shows how the cost of capital in the country (43-85). The worst part is that China’s interest rates have remained low for a long period of time. The domestic interest rates are also not liberalized, this means that the central bank strains a great deal to maintain the undervalued exchange rate (Lardy 78-96). The domestic money supply has also decreased since the central bank has no proper mechanisms of intervening in the foreign exchange market to increasment its domestic money supply (Lardy 78, 96). One would argue that the domestic price inflation is still a serious problem in as much the central bank intervened to a considerable extent by increasing consumer deposit funds and an enforcement of the purchase of central bank bills. Lardy indicates that liberalization of the interest rates in China has been awfully low and uneven. The deposit rates have also been regulated by the People’s Bank; thus, higher lending rates (Lardy 78-99). A close analysis of this fact explains that these high lending rates could negatively impact China’s corporate sector since the debts will continue to increase notwithstanding the fact that China’s debt already stands at 100% of GDP (Lardy 71-102). With the banks grudging to giving loans to the private firms, it forces them to borrow from other informal channels; thus, a minus as far as development is concerned. Some private companies that have the potential to develop would also be said to be pushed out of industry since the banks offers high interest loans on them. The prices of energy is yet another factor that has contributed to imbalances in China’s economic system. According to Lardy, the price distortion on the energy sector needs to be corrected if China’s industrial sector has to be correctful (106-138). In the event that China controls gasoline, electricity and other liquid fuels, China’s industrial sector will be subsidized to a great extent since these forms of energy consume about two thirds of the entire energy production (Lardy 109). A lot of emphasis was putting on the service sector over to the capital-intensive investment. An analysis of this fact explains the decreasment of the GDP wage share and the slow development of the labor sector. Lardy explains how the prices of oil in China are high; thus, making the oil companies in China work on losses (107-109). It is such prices that have seen issues in the electricity sector. The increase in the cost of electricity generation has led to high prices of electricity generation and usage, making the final consumer suffer a great deal in the course of electricity consumption (Lardy 106-109). Power production companies have also recorded many increasement losses in the course of energy production, making them operate on minimal assets even after the government’s intervention to provide subsidies to these companies. An analysis of this fact explains how China’s service sector is operating at lower levels and percentages as opposed to other markets. It is this inequality that creates imbalances in the Chinese economy. China’s exchange rates is yet another factor that creates economic imbalances in China. According to Lardy, China’s current account surpluses have declined; thus, a huge deprecation of the exchange rates (55-122). This is a good explanation of economic imbalances will take place since the imports will become more expensive and the exportings extremely cheap. Lardy also explains that there will be need for more intervention in the foreign markets since the interest rates are not liberalizing (96-98). In the event that the exchange rates are not regulated, lardy writes that the China may experience prolonged periods of slow growth (92-135). Works Cited Hart-Landsberg, Martin & Burkett, Paul. China and Socialism: Market Reforms and Class Struggle. New York: Monthly Review Press, 2005. Print.  Lardy, Nicholas, A. Sustaining Chinas Economic Growth after the Global Financial Crisis. Washington, DC: Peterson Institute for International Economics, 2012a. Print. Riskin, Carl. Chinas Political Economy: The Quest for Development Since 1949. New York: Oxford University Press, 1987. Print. Read More