John McMillan

Reinventing the Bazaar

The communes had relied on appeals to work for the common good more than on individual incentives. Attempts had been made to create some personal incentives, but they were mostly ineffectual. Farmers worked in production teams. Each team member was assigned work points, which purported to measure how effectively he or she had worked, and pay depended on the number of work points accumulated. The link between individual effort and reward was weak, however, because it was impossible to track how hard each person worked and because there was an ideology of spreading the commune's earnings equally. In addition, since people belonged to a commune for life, the ultimate incentive—work or be fired—was absent. Adding to the lack of personal responsibility inherent in the collective was the commune officials' habit of taking grain for themselves in unpredictable quantities. Not only was commune members' pay unrelated to their own performance but, to make matters worse, it was cruelly inadequate. The state deliberately set the price of rice artificially low. The old Eastern European lament applied also in China: 'We pretend to work, they pretend
to pay us.'

The upshot was that the farmers in the communes had little incentive to exert effort. It made little difference whether a farmer worked himself to exhaustion or dozed all day under a tree. Either way, the amount he took home to feed his family was much the same. 'The enthusiasm of the farmers was. frustrated,' said Yan Junchang, a Xiaogang village leader. 'No matter how hard I rang the bell or blew the whistle, I couldn't get anyone to go into the fields.' The missing incentives translated into low output. Agricultural productivity was actually lower in 1978 than it had been in 1949, when the communists took over.

Some in the West used to see the communes in a romantic light. At a White House dinner party held in honor of Deng Xiaoping during his visit to the United States in 1979, just after the reforms had begun, he was seated next to Shirley MacLaine. The movie star took the opportunity to describe her trip to China in 1973, during the Cultural Revolution, that time of national paranoia when many who were out of favor with Mao Zedung's government were forcibly removed from the cities and compelled to work in communes. 'Learn from the peasants,' these displaced urbanites were ordered. Visiting a remote village, MacLaine met a white-bearded scholar, who told her that he felt much happier and more fulfilled on the commune, toiling in the fields from dawn to dusk growing tomatoes, than he used to feel working in a university. The scholars affirmation had deeply moved her, MacLaine earnestly recounted. Deng, who had himself been forced to work for a time on a commune, patiently let her finish her tale. Then he dryly responded, 'He lied.'

In the reformed system, each farmer has a long-term lease of a plot of land. The farmer must deliver an annual quota of produce to the state (which can be thought of as a rental payment for the use of the land) and may sell any above-quota output in markets. As a result, the farmer faces full market incentives, in the sense that any increased effort translates directly into increased income. Whereas in the commune system decisions were made by the collective leadership, in the new system farmers were free to decide what crops to grow and what animals to keep. Farmers experimented with new seed varieties and began to plant a diverse range of fruits and vegetables. As one farmer said, now "everyone uses his brain.'

In addition, as the communes were being broken up, the government raised the price of rice. Between 1978 and 1980, the prices the farmers received rose about 30 percent. Food production grew by over 60 percent between 1978 and 1984. Farmers' incomes grew by 20 percent each year over this period. This growth was the direct result of the introduction of market incentives.

As agricultural output boomed, rural marketplaces developed rapidly. Farmers living near highways set up stalls to sell their fruit and vegetables. In the towns and cities produce markets were created. In his novel Waiting, Ha Jin depicts a rural town in the early i98os: It was market day, so the sidewalks of Central Street were occupied by vendors. They were selling poultry, vegetables, fruits, eggs, live fish, piglets, clothes. Everywhere were wicker baskets, chick cages, oil jars, fish basins and pails. A bald man was blowing a brass whistle, a sample of his wares, and the noise split the air and hurt people's ears.

The abundance of food on offer was in marked contrast to its absence just a few years earlier. The countryside was revitalized. The agricultural reforms led to a transformation of the rest of China's economy. The increase in productivity freed labor and capital to be moved into industrial production. Rural factories were set up at a rapid clip, creating employment for people who otherwise would have been underemployed as farmers. By 1989, a decade after individual farming started, almost one-fourth of the rural workforce was working in industry. The rural factories, along with the increases in food production, fueled China's sensational economic growth. National income per head of population grew at a rate of over 8 percent for more than twenty years, meaning that the average person's income quadrupled.

Most of China's fanners were crushingly poor at the start of the reforms. The number of rural poor, according to World Bank data, fell by 170 million in the brief period of the six years from 1978 to 1984. (This calculation defines the poverty line to be U.S.$o,70 per day in 1985 dollars, the income required for minimal nutrition of 2,100 calories per day.) Rural poverty was not eliminated. In 1995 about 180 million people, mostly in remote regions with barren soil and unreliable weather, were still earning less than a dollar a day. But lifting hundreds of millions out of poverty is a stunning achievement.

It is a sad irony that it took markets to correct the shortcomings of collective agriculture. Chairman Mao Zedung's admirers in the West during the 1960s and 1970s liked to point to China's communes as a new and better way of organizing life. The communes were, supposedly, humane workplaces in which concern for one's neighbor replaced the rapacity of the market. Visitors to China would return home proclaiming the communes a triumph. Joan Robinson, a famous Cambridge University economist, asserted that as a result of 'the appeal to the people to combat egoism and eschew privilege.' China was economically successful. 'Peasants are taught to feel that they are working for the nation, for the Revolution and for all the oppressed people of the world, but they are clearly and obviously doing good for themselves at the same time.' Robinson wrote her fulsome assessment of the communes in 1976, just two years before the Xiaogang peasants, who really did know what it was like to live on a commune, risked arrest to disagree.

A system based on exhortations to work for the common good may seem more admirable than one based on self-interest, but the romanticization of the communes trips up on the facts. The boom in food production following the reforms showed how badly the communes had been underperforming. In the communes, millions of peasants were on the verge of starvation. Under markets, prosaic as they may seem, the Chinese people have enough to eat.