The Economic Reforms of Deng Xiao Ping - Essay Example

The Economic Reforms of Deng Xiao Ping In 1949 Mao Zedong took charge in China with the aim of turning a mainly agricultural country into a heavily industrialised one, with strong central control. Small family run were united into huge collectives and much of the countries resources were used to promote heavy industry . Under Mao’s dictatorship and repressive regime the economy suffered badly, producing supply bottle necks and shortages, according to Goodman ( 1994, page 11). There was widespread famine in China from 1959 –1963, and it was estimated that some 30 million people starved to death. Difficulties continued into the early 1970s but Mao maintained his policy of absolute control. After Mao his immediate successors in China were the infamous Gang of Four. But, due to opposition led by Deng Xiao Ping, by then already in his 70s, these four were ousted and in December 1978 many reforms were ushered in. Agriculture, China’s military, science and technology and industry were all reformed as a direct reaction to the ’Cultural Revolution’ of Chairman Mao’s time. Rather than uphold the earlier slogan of "Better to be poor under socialism than rich under capitalism," the ever pragmatic Deng promoted instead the more positive idea that "Poverty is not socialism." ( As quoted by Visions of China 2001). This essay is particularly concerned with economic reforms. This began with agricultural reforms, getting rid of the remaining huge collective farms, some having been broken up earlier into more manageable units ( Goodman , 1994, page 65) and reverting to an age old pattern of traditional family style farms. Under the previous collective regime farmers were required to give any excess to the state, so had no inducement to encourage them increase yields, but under Deng’s reforms there were incentives to produce at a higher level. At the same time there was an opening up of China to the possibility of foreign investment opportunities. The economy of China was stagnant and this much needed foreign investment brought with it necessary infrastructures, transport, factories and other smaller production centres as well as skills and knowledge. As well as this outside input the Chinese people themselves were also able to set up as businessmen, as entrepreneurs. There was vast privatisation from the late 1980’s onwards, although some things such as the petroleum industry and banking remained as government monopolies. Despite Deng’s death in 1997, this continued until 2005 , when , under the leadership of Hu-wen, some of the earlier reforming measures were reversed. Deng Xiao Ping had inherited a Chinese economy that was stationary and so he was forced into launching what he described as ’A Second Revolution’. He insisted that this would not bring in a capitalist system, but would rather be ‘Socialism with Chinese Characteristics’, as quoted by Hays, 2008. Deng was quickly able to revitalise the economy to a staggeringly successful extent. For the twenty years from 1978, according to Chow ( 1999) the GDP was as high as 9.5 % per year. Part of this was due to foreign trade and investment, thanks to Deng’s policy of Gaige Kaifang (lit. Reforms and Openness). In its earliest stages Deng’s reforms became known as the household responsibility system according to Hays (2008). This was the absolute opposite of the earlier totally state controlled system, with market forces taking its place. It also involved a move towards more consumer orientated markets rather than a heavy concentration upon heavy industry. Such wide reaching reforms was difficult for Deng to carry out without careful negotiation with his colleagues, but he always was able to give the impression that matters could be reversed quickly if deemed necessary. Deng’s Career Born in 1904, at the age of only 16 Deng had travelled to 1920s France for study, as described by CWB (1996). During the years he spent in Europe he became a Marxist. His aim in going to France however had been to learn industrial skills which would help China. On his return he served his country well, and in 1956 he was elected onto the Standing Committee of the Political Bureau and became General Secretary of the Central Committee, advising Chairman Mao, and others involved in leadership, about everyday matters. However there were difficulties and on more than one occasion Deng was removed from office. In 1962 he was decried as a capitalist and his son was severely physically attacked, so much so that from then on he had to use a wheelchair. From 1969 to 1973 Deng and his family were exiled to a distant rural province for ‘re-education’. In 1976 Mao, Zhou Enlai and Zhu De all died. The ten year long counter revolution was brought to an end and Deng was re-instated to a high position. Principles Followed In 1979 Deng set out four cardinal points :- Firstly the principle of following a communist path. Secondly the principle of maintaining the people’s democratic dictatorship. The third principle was concerned with the leadership of China’s Communist party, and finally came the principle of upholding the Marxist – Leninist – Mao thinking. This may seem quite repressive from a non-Chinese point of view, but it fact although these 4 principles could not be questioned , it was possible for other ideas to become matters for debates. Deng’s split between wanting to maintain Communism and its ideals, and yet at the same time move China onwards to economic growth out of the chaos of the immediate post- Mao period, is described by Bao ( 1998) as the two faces of Deng, almost a split personality. The Chinese leaders knew that Mao’s plans had not really worked for the country’s benefit , but had no other pattern to follow. According to Chow ( 1999) they began to experiment , trying out a number of ideas and then following up on those which seemed to bring positive results. For instance in the1980’s even state run industrial enterprises began to be given the opportunity to make their own local decisions with regard to matters such as production, distribution and about investment. Chow (1999) points out what Deng viewed as a number of faults with the pre-reform industry , in particular poor training and lack of incentives. Deng authorised the payment of increased prices being paid by the state to farmers. In other fields bonuses became available to good workers. By the middle years of the decade the degree of price control was decreased. A two tier price system came in whereby, within limits, state controlled enterprises could make purchases at a lower price than was generally available. However the reforms brought about inequalities and obvious differences between living standards. Also by the 1980’s the economy wasn’t doing quite as well as it had done in the previous decade and unemployment increased. At the same time there was a call for a more democratic system of government. Leaders of such rebellious factions were imprisoned and their publications suppressed, but it was obvious that new steps were required. ( Encyclopedia of World Biography , 2011) Finance In the 1980s China had four specialist banks. These were the Bank of China, the Agricultural Bank, the Industrial and Commercial Bank and the People’s Construction Bank. These were all state owned and did not operate as commercial banks. One advantage to this system was that, because of a lack of alternatives, many Chinese people have savings accounts with these banks, making the assumption that the government will protect their money according to Chow (1999). Deng allowed Special Economic Zones. He realised that this would enable some to overcome their poverty, and believed that eventually these riches would reach the majority. He seems to have been following a theory of ‘the ends justifies the means ‘ even if this apparently went against his favoured political standpoint to some extent. He is often quoted as having said :- Whether a cat is black or white makes no difference. As long as it catches mice, it is a good cat.( Visions of China, 2001) In these special areas foreign investment in China was positively encouraged. This brought in lots of new jobs as well as technical knowledge. The investors received quite significant tax advantages when starting up new businesses, the idea being that they would be successful and so would bring in more taxes in the future. Deng’s open door to foreign trade was a great success. Chow (1999) cites the volume of foreign trade being 10% of GDP in 1978, but having risen to a massive 35% by 1996. In 1989 Deng hand picked his successor Jiang Zemin, trying to ensure that political grip on the county’s finances would not be lost, despite the massive economic changes that had and were continuing to take place. Deng finally retired in 1990, already at the age of 86, but with a job well done as far as benefiting China and her people. Mufson ( 1997) quotes American China scholar Michael Oksenberg as having said :- Deng's death starts a protracted period when China has the opportunity to refurbish its international image, to put behind it the last image indelibly printed, at least in the American mind, of the lone hero defying the column of tanks. Deng’s Legacy Deng enabled the Chinese people to look at their country and its economy from a new perspective. His biography undated ) states that he did this by repudiating two ‘Whatevers’. These were the policies of WHATEVER policies Mao had introduced must be maintained and WHATEVER instructions had been given by Mao must be obeyed. This was a huge turn around and was a brave and massive undertaking. It is believed that Deng’s economic reforms assisted some 170 million poor people out of their extreme poverty. By 1984, despite the massive numbers involved, the country was at last self-sufficient in food. By 1993 (Goodman 1994, page 90), China was the world’s largest aggregate economy. Also the state now was only producing less than 50 % of the overall profits, whereas back in 1978 they had been controlling more than 80%. 50% is of course a lot, but this is still a more realistic picture if what is wanted is a lively economy in which workers could be involved making their own decisions and having incentives to improve performances. Yet in no way did Deng abrogate the control that the Communist party had over the 1.2 billion citizens of China, so he did not actually go back on the principles set out in 1949 and the first founding of the People’s Republic of China. According to Visions of China ( 2001) , even in the last few years of his life, Deng continued to maintain control by removing dissidents into exile. Writing in 1997 Shawki quotes Business Week of 1994 :- The death throes of communism clearly gave birth to the new era, leaving most nations with only one choice–to join…the market economy…Almost 150 years following the publication of the Communist Manifesto…the bourgeoisie has won. After decades of repression China’s new market-oriented industries became excellent models of a socialism that was also egalitarian and geared to market forces. Deng left behind a China that was both stable and prosperous, but at the same time it continued under its Communist one party, no opposition system. References Bao Tong, ‘Two Faces’ of Deng Xiaoping, Radio Free Asia, 1998, accessed 19ht September 2011http://www.rfa.org/english/news/china/baotong-12292008165015.html Chow, G., China’s Economy: Reform and Perspectives, 1999, accessed 19th September 2011 http://www.princeton.edu/~gchow/China.html CWB, The Life of Deng Xiaoping , 1996, accessed 19th September 2011 http://www.cbw.com/asm/xpdeng/life.html Deng Xiaoping Deng Xiaoping , accessed 20th September 2011 http://english.peopledaily.com.cn/data/people/dengxiaoping.shtml Encyclopedia of World Biography, Deng Xioaping Biography , 2011, accessed 20th September 2011 http://www.notablebiographies.com/De-Du/Deng-Xiaoping.html Goodman, D., Deng Xioaping and the Chinese Revolution, ( New York, Routledge, 1994) Hays, J., Deng Xiaoping’s Economic Reforms , 2008, accessed 19th September 2011 http://factsanddetails.com/china.php?itemid=79&catid=2, Mufson, S, Deng’s Successor to lead Memorial Rites Tuesday , Washington Post , 21st February 1997, accessed 19th September 2011http://www.washingtonpost.com/wp-srv/inatl/asia/feb/20/deng.htm Shawki, A., Deng’s Legacy, International Socialist Review, Issue 2, Fall 1997, accessed 19th September 2011 http://www.isreview.org/issues/02/China_Part2.shtml Visions of China, Reformer with an Iron Fist, Deng Xioaping, 1904- 1997, 2001, accessed 20th September 2011 http://www.cnn.com/SPECIALS/1999/china.50/inside.china/profiles/deng.xiaoping/ Read More