Agricultural Reform: Summary/Review

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Xinhua 'Full Text' of Communique of Fifth Plenum
of 17th CPC Central Committee

• The plenum agreed that the Central Military
  Commission (CMC) of the Communist Party of China
  (CPC) be augmented to include Xi Jinping as a
  vice-chairman.

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Small Group DiscussionTransition Mao Era to
Reform Era

• Define legitimacy
• What were the bases of regime legitimacy?
• 1950s?
• 1960s?
• After Maos death?

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Impetus for Reform (critical juncture)

• Crisis of political legitimacy
• Communist utopia? ?Economic stagnation
• Per capita household expenditures
• increased only 2.2 1952-75
• 1975 per capita consumption of
• Grain, cooking oil, meat ? lower than in 1950s
• Poverty increasing
• Nationalism (wealthy/strong China)?
  ?Demonstration effect/challenge of East Asian
  tigers
• South Korea, Taiwan, Hong Kong, Singapore

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Impetus for Reform

• Inefficiencies of planned economy
• extensive development strategy ? exhausted
• (using more and more inputs to produce
  output growth)
• 1950s
• each 2.5? in additional inputs generated a 1?
  increase in output
• 1970s
• each 5.5? in additional inputs generated a 1?
  increase in output
• Sought efficiencies of market economy
• therefore, turned to intensive development
  strategy
• (using a given amounts of inputs more
  efficiently to produce output growth)

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Experimentation as Policy Approach

• No blue print for reform groping for stepping
  stones while crossing the river
• ??????
• Tolerance for experimentation

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Agricultural Reform

• What specific problems had emerged in the
  agricultural sector as of 1978?

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Agricultural Reform

• Initial policy opening
• 3rd Plenum of 11th Central Committee (Dec 78)
• marked the beginning of the reform era

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Agricultural Reform

• 3rd Plenum of 11th Central Committee
• Primary source document
• Decision on Accelerating Ag Development
• Re-introduce price incentives
• Increase price paid by state for compulsory grain
  procurements from peasants by 20
• Increase price paid by state for above-quota
  grain procurements by 50

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Agricultural Reform

• Initial policy opening
• Did NOT envision de-collectivization
• Addressed local crises
• Local crisis in Anhui (Wan Li, provincial party
  secretary)
• ? Household responsibility system in farming
  (i.e., de-collectivization)
• Evaluated experiment with household
  responsibility
• ? Successful became official policy
• Fully implemented by 1983
• Wan Li became head of State Agriculture Commission

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Agricultural Reform

• Note nature of policy process
• No blueprint
• Local experimentation allowed
• If considered to be successful,
• Then implemented on a wider scale
• Seek Truth from Facts

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Agricultural Reform

• Tremendous early success
• Improve quality of life (rural and urban)
• Increase rural incomes
• Decrease poverty

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Positive implications of ag reform

• legitimacy--improved living standards, rural
  incomes
• 1979-83
• rural per cap income incred 70 (almost doubled
  in 4 yrs)
• of rural pop w/ food intake of lt2200 cals/day
  decred from 31 to 13 (cut in half)

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Implications for transition from ag to
industry(stay tuned for next class)

• Ag reform
• Revealed surplus labor
• For alternative employment in industry
• Increased household savings
• For alternative investments in industry
• Develop rural industry? 2nd major success

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Short DiscussionChinese peasants/farmers

• Think back to Perrys analysis of Chinese
  peasants
• Rational peasants?
• What does it mean to make rational choices?
• Are they rational maximizers?
• If so, what are they maximizing?
• Are the peasants of the late 19th C
  analytically the same as the peasants of the
  late 20th C?

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Problems emerge after 1984

• Budget burden
• High grain prices paid to farmers are a burden on
  the state budget, because state still subsidizes
  grain price paid by urban residents
• Policy reaction slow down price increases
• Weak incentives for farmers
• Farmers shift OUT of grain production

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Other incentive problems for farmers

• Insecure land tenure
• Initial responsibility contracts only 1 year
• Later extended (according to official policy)
• Extended to 3 years (early 1980s)
• Extended to 15 years in some places (1984)
• Extended to 30 years (1995) allow transfer of
  land-use rts
• May be extended to 70 years (2008) allow land to
  be used as collateral for bank loans
• Extensions NOT implemented in places
• Why?
• Cadres reallocate to reflect changes in household
  size (land as social safety net for farm
  families)
• Cadres allocate land to meet grain/tax quota
  burden

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Results of insecure land tenure

• disincentive for farmers to invest in
• infrastructureirrigation
• long-acting fertilizer
• Declining yields in agricultural output

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Other problems in agriculture sector

• Tax/fee burden on peasant households
• To pay for local schools, roads, etc.
• (rural sector largely self financing)
• Led to significant rural unrest
• Rural/urban inequality
• Per capita urban incomes now 3x rural incomes
• Among most unequal in the world

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Addressing problems in agriculture sector

• Hu Jintao/Wen Jiabao regime puts new attention on
  rural development
• Abolish rural fees (2001), ag taxes (2005)
• Increase fertilizer subsidies
• Increase intergovernmental fiscal transfers to
  rural areas
• to finance basic infrastructure (significant
  increase by 2004)
• to finance rural teachers salaries
• still not enough to finance rural development
• takings of farmers land w/out adequate
  compensation
• a new source of revenue for local officials
• a new cause for protests by rural residents
• New socialist countryside top priority of 11th
  FYP (2006-2010)

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Ag and WTO Crisis or Opportunity?

• Ag tariffs fell to avg 17 by 2004
• Liberalize imports of major ag commodities
• Grant foreigners rts to import/distribute ag
  products

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WTO

• China NOT competitive in grain
• Grain land intensive China land scarce
• Import grain
• China competitive in other ag products
• Labor intensive comparative advantage
• Animal husbandrypork, chicken
• Horticultureflowers, fruits, vegetables
• Aquaculturefish farming
• Processing of ag productsprocessed foods

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Positive implications of ag reform

• legitimacy--improved living standards, rural
  incomes
• 1979-83
• rural per cap income incred 70 (almost doubled
  in 4 yrs)
• of rural pop w/ food intake of lt2200 cals/day
  decred from 31 to 13 (cut in half)

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Implications for transition from ag to industry

• Ag reform
• Revealed surplus labor
• For alternative employment in industry
• Increased household savings
• For alternative investments in industry
• Develop rural industry? 2nd major success