China’s New Industrialization Strategy

China’s New Industrialization Strategy

Was Chairman Mao Really Necessary?

Y. Y. Kueh

Deng Xiaoping’s economic strategy is widely regarded as a complete anathema to Mao’s, but this study strongly argues that without the material foundations laid by Mao, it would have been very difficult for Deng to launch his reform and open-door policy. Deng basically shared Mao’s aspirations and approach in pursuit of China’s industrialization, and this had in fact helped to condition him to the successful gradualist methodology. Deng lost patience at times and resorted to the ‘big bang’ strategy, only to fail miserably. Taken together, the book tells a new story about the economics of China’s transition. This is a highly thought-provoking study, blending institutional and convincing statistical analysis.

Chapter 10: Bureaucratization, Property Rights and Economic Reforms

Y. Y. Kueh

Subjects: asian studies, asian economics, economics and finance, asian economics, economic psychology


* BACKGROUND: THE NECESSARY EVIL Central planning as transplanted in China from the Soviet Union must in the first place be seen as a vehicle for implementing the Stalinist strategy for accelerating industrialization. In a nutshell, the strategy focuses on the preferential development of heavy industry. It clearly implies exhaustive resources concentration, centralized allocation, persistent income and consumption squeezes, forced savings, and pervasive official price fixing. These all call for the establishment of a huge, coercive bureaucratic apparatus to facilitate control and arbitration. The entire bureaucratic mechanism also forcefully renders, ipso facto, any system of private property rights inoperative. Thus, nationalization of industry and commerce, as well the banking and financial sectors, followed in tandem the inception of central planning in 1953. Agriculture was then also swiftly collectivized, and compulsory farm delivery quotas imposed, in order to bring the sector (together with the entire Chinese peasantry) into the orbit of centralized allocation and bureaucratic control. If anything, the degree of bureaucratization in China should be much greater than anywhere else in the Soviet bloc, given the sheer size of the country in terms of both population and geographical coverage. Enormous ‘transaction costs’ are clearly involved to help hold the entire fabric together. These include not only direct outlay as salary for the bureaucrats and on necessary physical administrative overheads, but also wastes associated with bureaucratic inertia and abuse, operational inefficiency, disincentives and misallocation in economic terms. Taken together, however, the entire bureaucratic set-up undoubtedly represents a necessary evil. Compared...

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