The Economy of Communist China

[Music] this is China in 1949 he was a nation ravaged by years and years of war and Exploited by its allies at the time namely America and the Soviet Union this nation was once the wealthiest in the world and now it was struggling to feed itself it was these kinds of conditions that gave rise to the political system that would go on to define China in the later half of the 20th century this is the second part of a three-part series on the economy of China if you have not already seen the first part I would encourage you to watch that either before or after you watch this video and I'm not saying that exclusively for a shameless plug but also because it is important to understand where China had come from up until the start of the 20th century China was the largest economic power in the world the nation boasted this wealth for a majority of the last millennia only ever trading places with India another nation that flies under the radar in recorded history it even achieved and maintained a level of wealth beyond the typical colonial powers like England France and the Netherlands that we typically associate with world domination in this period and it did this through a good old-fashioned grunt China wasn't the wealthiest nation in the world because it had embraced modern technology or ruled over a portfolio of foreign colonies it was home to the world's biggest economy because it had a lot of manpower good arable land and a hard-working and productive populace this all started to slip in the early 20th century when nations like the United States and then later Europe and Japan caught up and acceded China as the world's modern economic superpowers the time had come where raw manpower alone couldn't keep up with modern industry steam power had been replaced with electrical grids in gasoline and the textile mills had been replaced with production lines and all of this meant that raw manpower alone was not enough to keep up this was not ignored in China and a lot of the leadership at the time had seen the power of an industrial nation to improve the wealth of its citizens what is more is that industry now meant military power in the age of mechanized warfare having the ability to produce tanks and planes and ships was hugely influential this became extremely evident in the Second World War when Japan a nation with a smaller population less resources and less desirable geographic position invaded and subsequently decimated mainland China the invasion of Nanjing was one of the most horrendous atrocities in the Second World War and this was a war marred by horrendous atrocities but what it meant for the economy was a huge desire to industrialize to stop something like this ever happening again in 1949 this man Mao Zedong established a one-party nation as the People's Republic of China and got straight to work establishing China as the economic powerhouse it was destined to be it had fallen behind in previous years but it was time again for it to become a modern powerful socialist nation the first task was cleaning up the nation and it was in bad shape years of war meant that a lot of the infrastructure had been destroyed this was made worse by Soviet troops dismantling what was left of a lot of industrial machinery and shipping it back to the Soviet Union when they were finished deployment not cool comrades on top of this food production had suffered because a lot of farmers were forced to flee their farms during the war so even food production the one thing that China had been really really good at up until this point had started to suffer now a lot of nations that were impacted by the war during this period started receiving foreign aid particularly from the United States we have already explored how the Marshall Plan and the reconstruction of the Pacific got Japan and Germany off the ground to go on and become the modern economic powerhouses they are today but America was a whole lot less keen to extend that charity to China because of the whole communism thing so they were kind of on their own now this whole cleanup thing took about three years and from then they set out on the first of their five-year economic plans this called for a centralized Soviet style economic model where all inputs and outputs and allocations of resources were handled by a central administration in particular China was very keen to focus on building heavy industry to drive their economic development remember how the Soviet soldiers kind of dogged their comrade China by stealing all their machinery at the end of the war well by this point the Soviet Union realized that they needed all the friends that they could get so they repaid this debt by sending Soviet scientists engineers and developers over to set up factories and capital intensive infrastructure to make industrial development possible this central planning model also called for the nationalization of existing industries China at this point still had private enterprises but the Communist Party wanted to take control of this the government offered to buy private enterprises in exchange for prestigious government positions and this was kind of a carrot and stick deal take this generous offer or you know get branded a class enemy and we'll just take your factory anyway needless to say by 1956 no privately owned firms remained in China now this period was actually really prosperous the nation embraced heavy industry for the first time and they did reap the rewards of their new productive capacity that being said though it wasn't like they were starting at a great level to improve from furthermore farming the once foundational industry started to lag behind the nation had not yet properly embraced modern farming techniques and instead relied on farming collectives of workers who were more or less growing food the same way that they had always done but now with more of an emphasis on this food being redistributed toward the industrial workers in the cities before they even got to the end of their first five-year plan the growing imbalance between industrial and agricultural growth dissatisfaction with efficiency and lack of flexibility in the decision-making process convinced the nation's leaders particularly Mao Zedong that the Soviet way of doing things may not be super appropriate for China they weren't abandoning communism or even central planning altogether but they decided that China was best run through its industrial provinces this way provinces with a high density of Industry could focus on industry management and provinces made up of farms could focus on agriculture they decided to scrap the five-year plans in favor of a rebranded economic stimulus called the Great Leap Forward this was an economic plan that called for all industries agriculture manufacturing and even the military to take a will up great leap forward and achieve ambitious goals set by the central government the plan to achieve this you know opening up new trade agreements embracing new technologies modern farming methods no no just work harder now this sounds dumb it would barely be acceptable for the acting manager of a KFC but the command to just work harder was just really awful economic direction from the central government of what used to be the most powerful economy in the world just 60 years prior but it wasn't necessarily without reason Chairman Mao and a lot of the leadership had become obsessed with the idea of slack labor particularly in the industrial sector the idea was that workers were not performing to their maximum potential because they were lazy and there was no individual incentive to work harder than the absolute bare minimum on top of this Communist China was very uncool to people that were working harder than their peers workers were terrified of being branded as class enemies which basically meant people who were trying to be better than everyone else which in communist China carried harsh punishments this did not bode well when they are now trying to turn around and ask these workers to work as hard as they can to meet these new economic goals there was actually a lot of disagreement between communist party leadership about this equality at all cost business the lack of incentives to work harder and on top of these punishment for people that work too hard did stifle economic growth and by extension living conditions major party figures like Deng Xiaoping now eventual successor advocated for some kind of recognition for high achieving workers to incentivize stronger output figures now eventually shut this idea down for a few reasons one it went against the fundamental message of the nation that all men are equal and we are working collectively but the second reason may have been more important Chairman Mao was a ruthless dictator that ruled over an authoritarian state labeling someone as a class enemy was a really really effective way to ice any political opponents so he was probably keen to keep that whole system in place the kerfuffle that was the Great Leap Forward was kind of typifies in the nightmare that was the backyard furnace experiment Chairman Mao decided that farm machinery was a good solution to increasing the struggling crop here which was actually a great idea when producing anything you have to consider the factors of production land labor and capital in that sense producing potatoes is no different than producing cars now China had plenty of Labor and plenty of land but it did not yet embrace capital or machinery intensive farming techniques Mao decided that farmers should set up backyard furnaces to produce steel and that could be used to make this machinery these furnaces were small they took a lot of manpower away from the farms to maintain and operate and required a lot of fuel to produce steel this fuel came from doors and furnitures and any tree that could be found around these farms which caused issues trees are super important to the irrigation of farmland and lopping down every last one of them to throw into your furnace is going to cause irrigation problems and failed crops to make things worse the metal used to produce this steel came from pig iron ore from knives and forks and plates and pots and pans and really any metal that the population could get their hands on and it should probably go without saying that the metal that this produced was absolute garbage like totally useless for anything clumps of nothing so yeah there you go the backyard furnace experiment left a large population of overworked peasant farmers without doors or furniture pots or pans sitting in mud with no food because it had all been washed away which when you think about it was probably a metaphor for China as a whole during this period China under the rule of Mao Zedong was perhaps a period of best intentions executed terribly the conflict of ideologies and good economic policy conflicted to the point that the population suffered greatly the nation was mired by poorly planned economic strategies that continued to backfire and started to impact the nation's ability to feed itself the nation had once been so powerful simply because of its ability to feed and maintain a large population but even that was failing heavy industry is not a golden ticket to success productive industry that facilitates the efforts of motivated workers is what made nations like the United States as wealthy as they are today and China certainly missed this distinction remember this guy Deng Xiaoping who basically said that we should cool it with the killing off above-average workers well he eventually took over the reins of the nation after Mao's death and started enacting policies that were slightly more liberating to individual workers this was the beginning of the turning point that would lead to the economy we see today the Chinese miracle is truly a fascinating economic case study and so in the next video we will explore how China went from being a failing state with poor crop yields and stagnating growth to the second most powerful nation on earth until then I hope you enjoyed this video I want to give a big shout out to our new patrons over on patreon thank you for your support guys you continue to make these videos possible otherwise if you did enjoy please consider liking and subscribing I will be answering questions for an hour after this video goes live on our discord server or our YouTube live stream over on the second channel feel free to jump on there if you want to ask any questions or interact with the audience otherwise thanks for watching guys bye

Channel: Economics Explained

Views: 466,840

Keywords: chinese communist party, economics of communist china, economy of communist china, the economics of communist china explained, the economy of communist china explained, communist china economics explained, ccp economics explained, economics explained ccp, economics explained china, economics explained communist china, communist china economy, communist china economics, china communist party economics explained, chinese communist party economics explained, economics explained

Id: YtzFn73sYmU

Length: 13min 2sec (782 seconds)

Published: Thu Jan 09 2020