There were pressing economic issues that preoccupied Deng in the spring and summer of 1979. First was the urgent need to reform China’s dysfunctional agricultural sector, and second was the need to introduce concrete productivity-enhancing incentives and quality control standards in industry, science, and technology. China, thus, witnessed the introduction of a series of experimental reforms.
18 Brave Villagers
Stimulated by the Third Plenum’s decision to allow the country’s farmers to engage in family-based, incentive-driven production and marketing, rural areas began to experiment with the idea of contracting production to individual households; the very same concept that Deng Xiaoping had first tried to introduce in 1962.
There’s an interesting story about the revival of household farming in post-Mao China. At least a full year before the Third Plenum gave the green light to initiating this revival, a daring and potentially quite risky experiment was begun in secret by a group of desperately poor peasants in Xiaogang village, in Anhui Province.
In the spring of 1978, 18 villagers met one night to sign a secret pact, which they sealed with their own blood. In it, they committed themselves to divide up the commune’s land for farming by individual households. Although the parceling out of land to families went entirely against the established agricultural policy of collective farming, the experiment proved highly successful in raising food output in this perennially impoverished part of China.
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Old Ideas Come to Life
When the story of Xiaogang’s success came to the attention of the party secretary of Anhui Province a year later, in 1979, he endorsed the Xiaogang experience and vigorously defended the villagers’ actions against the defenders of Maoist orthodoxy.
Soon Deng Xiaoping also heard the story of Xiaogang, and he, too, endorsed what the villagers there had done. Indeed, why wouldn’t he? Sixteen years earlier, at the height of the famine induced by the Great Leap Forward, Deng and Liu Shaoqi had proposed a very similar family-centered solution to the problem of dismally low communal farm production.
However, Deng and Liu had fallen afoul of Mao on that occasion, leading to their downfall as “capitalist roaders” during the Cultural Revolution. After that, the very idea of “contracting production to individual households” had been anathema in China, a forbidden zone where none dared venture.
But now Mao was dead, the Cultural Revolution was discredited, and the whole country was clamoring for change. Assisted by his oldest friend and economic adviser, Chen Yun (whose seniority in the Communist Party was second only to Deng), Deng set out to test the mouse-catching abilities of privatized “white cats” against those of Mao’s collectivized “black cats.”
This is a transcript from the video series The Fall and Rise of China. Watch it now, on Wondrium.
China’s Agricultural Reforms
By mid-1979, decollectivization was gathering steam in the countryside. Farmers were signing multi-year contracts with village cadres to farm particular pieces of land. Each family undertook to deliver a specified grain quota to the state at a low fixed price as annual rent.
Once the compulsory grain deliveries were fulfilled, families could grow whatever they wanted, consume what they needed, and trade or sell the rest on the open market. They were also permitted to supplement their family income by engaging in non-agricultural sideline commerce.
In another measure designed to strengthen production incentives in rural China, the central government granted farmers an across-the-board increase of 20 percent in the purchase price paid for compulsory grain deliveries to the state. And to encourage farmers to sell even more than the mandatory minimum to state purchasing agents, the price paid for above-quota grain sales was raised higher still, by a whopping 50 percent.
Within one year, the combination of household contract farming, the re-opening of rural free markets, and rise in prices paid for state grain purchases generated substantial increases in total food production and average rural family incomes. Additional income and output increases were achieved annually over the next half-decade.
New measures were also introduced in late 1978 and 1979 to boost productivity and performance in state industries. In factories, across-the-board pay raises were granted to the bottom half of the industrial labor force—the first raise in well over a decade.
At the same time, piece-rate wage systems were introduced to motivate workers to accelerate the pace of their labor. And finally, cash bonuses were paid out to those workshops, shifts, and groups that over-fulfilled their production quotas.
At first, these bonuses were allocated collectively to the entire workgroup, regardless of individual contribution. But quite soon, the free-rider problem reared its ugly head, and the bonuses were subsequently apportioned individually.
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Managers Given More Responsibility
Industrial managers were now given enhanced responsibility for enterprise operations. No longer were they required to undergo regular and repetitive political study or spend half of each week working on the front lines of production, as the Maoists had previously mandated.
Now, their bonus pay and their opportunities for upward career mobility were tied to the improved performance of their enterprises. To give managers leverage over the workforce, they were granted the authority to promote high-achieving employees and discipline slackers. The iron rice bowl was being bent just a little bit.
Common Questions about China’s Agricultural and Industrial Reforms in the Late 1970s
In the spring of 1978, 18 villagers made a pact and divided the commune’s land for farming by individual households. The experiment proved highly successful in raising the food output. The villagers’ actions were defended by the party secretary of Anhui Province and later endorsed by Deng Xiaoping himself.
Deng’s ideas for China’s agricultural reform were considered taboo. He had fallen afoul of Mao the first time he presented his ideas, leading to his downfall as “capitalist roader” during the Cultural Revolution.
New measures were introduced in China in late 1978 and 1979 to boost productivity and performance in state industries. In factories, across-the-board pay raises were granted to the bottom half of the industrial labor force; piece-rate wage systems were introduced to motivate workers to accelerate the pace of their labor; and cash bonuses were paid out to those workshops, shifts, and groups that over-fulfilled their production quotas.