ECON 455 Lecture 10 Rural reforms

ECON 455 Lecture 10 Rural reforms - Econ 455 Chinese...

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1 1 Econ 455: Chinese Economics Lecture 10: February 12 Rural reforms Sandra Poncet Lorch Hall, room 207 Email: [email protected] Office Hours: Mondays 16:30-18 & Wednesdays 10:30-12 2 Introduction Experimental reforms were launched in nearly every sector of the economy. However, it was in the countryside that reforms succeeded first, and it was the dramatic success of rural reforms that cleared the way for continuing and progressively more profound change; Having agricultural reform precede industrial reform proved to be a great boon to the Chinese reform drive / -tremendous momentum for industrial reform -changed the terms of political debate in China Success of reforms in agriculture is only half the story: -Freedom of labor allocation induced a sharp increase of labor input into nongrain crops and nonagricultural businesses. -Rapid rise and then fall of Rural Collective Enterprises
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2 3 4 Source: Park (2005)
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3 5 Lecture Outline Introduction I-Rural Reforms A. 1978 Agricultural Reforms B. The household responsibility system: features and consequences C. Transition to a market economy in rural China II-What Can Explain the Rise & Fall of China’s Township and Village Enterprises A. Features of TVEs B. Explanations for TVE Success C. Explanations for TVE Decline Conclusion 6 1. Diversification – rural economy (end of “grain first”) 2. Product Specialization / Crop Selection based on comparative advantage 3. Expansion – free markets 4. Rise in procurement prices 3 rd Plenary Session of 11 th Central Committee of Communist Party of China 12/78 “Decisions of the Central Committee of the Communist Party of China on Some Questions Concerning the Acceleration of Agricultural Development (Draft).” Promulgated following September at 4 th Plenary Session I-Rural Reforms A. 1978 Agricultural Reforms
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4 7 Recall: Contributions of Agriculture to Industrial Development High farm incomes create demand for simple consumer goods Expanding farm production creates demand for production inputs (e.g., fertilizer, tractors, etc.) Rural savings finances industrial investment Cheap food reduces real wages Fourth Plenum actually prohibited agricultural decollectivization to the household level. Yet at that time decollectivization was already happening on a large scale in Anhui Province. 8 1978 Anhui Experiment with the Household Responsibility System County Percent Increase in Grain Production County as a Whole Teams using HRS Chuxian 12.5 35.7 Quanjiao 12.4 35.7 Laian 0.7 37.1 Jiashan 0.3 31.0
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5 9 I-Rural Reforms B. Household responsibility system: features and consequences HRS transferred decision-making power from collective production units (communes, brigades, and teams) to the family.
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