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Moving Left Isn’t Right

Written in a time filled with the gasps and death of the Soviet Union, and its satellites’ declarations of their independence, I found Alvin Rabushka’s “The Failure of Socialism in China” capturing my attention. In it, the author mentions the method that Mao Zedong attempted to use to incite the communist Chinese economy to grow – namely central planning. The author also illustrates why the planning did little to anything at all on its own in the way of economy-building or growth.

As many economists critical of socialist governments point out, central planning heavily relies on a number of measures, so that it can claim to function better than alternative forms of economies. Among the measures are: constant inflows of information to allow tweaking of quotas, difficulties in procuring that data, lack of a labor market, little or no incentives to produce, little or no entrepreneurship, wasted resources, and political interference in the economy. These measures were to blame for the anemia and failures of so many socialist countries in the late 20th century.

While at times, the failed states may have appeared healthy, much of the time it was due to support from other socialist patron states, like the Soviet Union and China. Although the patrons may have propped up the subordinate states, the goods provided were sub-standard quality and in lesser quantity than those produced in the west. Once the patron states collapsed (like the Soviet Union), countries like Cuba found themselves in dire situations.

China was a bit of an anomaly, however. Despite the numerous five-year plans, and massive instruction directed by Mao, the Chinese economy did not really begin to grow until 1979 – after Mao’s death. What finally jump started the Chinese economy, and led to growth never seen before in the period from 1957 until then, were economic reforms, led by Deng Xiaoping.

So, what were these reforms that led to so much growth? Deng modified regulations after he witnessed what occurred in his home province with modified rules. Allowing Chinese peasants more input and freedom in carrying out measures and surpassing their quotas, produced increases in production, foreign investment, and per capita income. How was that possible? What were these “magic” modifications?

Simply, the communist party, and Deng in particular, saw that providing incentives for work led to: harder working peasants, peasants who were more engaged in their work, and peasants who cared more about meeting the quotas and exceeding them. Simply put, the Chinese system changed from the stick as a simple cudgel, to a stick with a carrot on the end of it.

Those who ignore history…

Now, the part that the American government, and Obama and his administration in particular, should pay close attention to, are the measures that Deng found worked to create an energetic and engaged citizenry. Allow the people to strive to meet their potentials. Do not be so unwise to think that a leader, who believes he sits above his people to delegate the actions of those people.

Deng lowered taxes (in some cases on livestock to nothing), set quotas for the citizens (but refused to dictate how they should be met), and retreated from the heavy hand of government, allowing goods/crops produced above the quota to be sold for the peasants’ own income. The land leased to peasants was also made inheritable, building trust in the peasants, that the central planners would not arbitrarily confiscate lands. Even the urban citizens saw benefits – real urban per capita incomes grew by 40%! Overall, the new policies of the central planners in China led to more growth between 1979 and 1985, than the country had seen between 1957 and 1979!

One small group of planners can in no way successfully guide millions of citizens to reach a satisfactory conclusion. The more the leaders attempt to guide the masses, the more the masses will resist, and the heavier the weight of the planners’ guidance will feel to them. It is unfortunate that the current American administration seems to be moving retrograde to successful outcomes. They continue to plan, and guide, and swear that they know how to fix this economy. Despite their protestations, the proof is in the pudding, and the pudding, so far, has been rotten.

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