What transformed China’s Economy

Source: Planet Money

1978 Communist China

- Millions of people in China didn’t even have electricity
- Transformation: happened Zhao Gang -- Yuen Jin Zhao: he runs a
small restaurant, 30 years ago he was a farmer
- In 1978 everyone works at a collective farm -- height of
communism
- Basic idea: “everyone works for the common good, nobody owns
anything, they all belonged to the group”
- Farmers were dictated everything that they need to do by the
communist party
- It didn’t matter how much/how hard you work because everyone
gets the same -- the government will harvest all of the
goods and allot them equally
- Nobody wants to work -- the allotment wouldn’t be enough and
they would be very hungry
- They had to walk to other villages and beg for food
- Yuen Hen Chang: a farmer who proposed for a change out of
desperation -- the idea was dangerous so it had to be discussed
in secret
- Idea: rather than farm as a collective, each family will get
to farm their own set of land -- if the family grows a lot
of food you get to keep some of it
- However, owning in China in 1978 was treason
- They decided to create a contract so that they would be
binded by it: “We will divide up the farmland between each
family, the head of each family will sign the stamps for
approval, each family will give a share to the government at
the end of the year, before put to prison or executed, we
will not complain, the farmers in the group will raise our
children until 18 years old”
- They were the first capitalists of modern China

Meritocracy and Competition

- Farmers were incentivized to work hard because whatever they
produced were theirs; if you didn’t work hard, it’s your loss
 - All secretly competed: everyone wanted to produce better than the
other person -- that got people working hard
- Same farmland, same tools, but just by changing the economic
system and telling them, “you keep what you grow”, everything
changes
- Enormous harvest: both exciting and terrifying because people
could sense that something different was going on

Economic Experimentation
- When they were caught, Yuen Hen Chang who proposed the idea were
called by the officials and was reprimanded and cursed on
- Luckily for him, during this time, there has been an ongoing
debate in China about economic policies
- Powerful people were suggesting reform and the regional party
chief in YHC’s area was for it
- When YHC was called in the regional party chief vouched for him,
calling the situation, “an experiment he approved of”

Deng Zhao Ping’s Ambition to Reform

- He has been aiming to change what is happening to China -- still
in communist China so it received a lot of criticism and backlash
- “It doesn’t matter if the cat is black or white, as long as
it catches mice, it’s a good cat”
- However, he decides to go about with this plan silently by
hiring writers to tell this story to the people in China --
soon enough, everyone was farming like YHC’s community
- Government tries to experiment with other economic structures and
begin to let other foreign companies in
- Then China’s economy grows like crazy
- Since YHC’s farming policy spread in China more than 500M
people from China had risen out to poverty
- From huts to houses with electricity

Different Narrative of The Zhao Gang Reform

- YHC and the communist party officials tell different stories
- CPO/official version says that everything in town was great,
new factories were springing up
 - YHC says that once he begins business and they become
profitable the government takes it away from him
- The government has let go of some parts of the economy but it’s
still taking a hold of some other parts