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Frost: Entrepreneurial Transformation of Socialist China—Noted

Summary:
Adam Frost: Entrepreneurial Transformation of Socialist China https://ysi.ineteconomics.org/project/5f316897689c756fb5c52785/event/5f6b2b94a21037043d0c1458: ‘China’s socialist era (1957–1980) is often described as having been void of entrepreneurial activity. Generations of scholars argued that beginning with the Communist’s victory over the Nationalists in 1949 and culminating until the establishment of collective economic institutions in 1957, private entrepreneurship was effectively purged from the Chinese economy. It was only with the introduction of market-oriented reforms in the early 1980s, that Chinese entrepreneurs began to reemerge.... [But] capitalist entrepreneurship was an enduring feature of the modern Chinese economy.... 2,600 cases of “speculation and

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Adam Frost: Entrepreneurial Transformation of Socialist China https://ysi.ineteconomics.org/project/5f316897689c756fb5c52785/event/5f6b2b94a21037043d0c1458: ‘China’s socialist era (1957–1980) is often described as having been void of entrepreneurial activity. Generations of scholars argued that beginning with the Communist’s victory over the Nationalists in 1949 and culminating until the establishment of collective economic institutions in 1957, private entrepreneurship was effectively purged from the Chinese economy. It was only with the introduction of market-oriented reforms in the early 1980s, that Chinese entrepreneurs began to reemerge....

[But] capitalist entrepreneurship was an enduring feature of the modern Chinese economy.... 2,600 cases of “speculation and profiteering” that were prosecuted by local government agencies in the 1960s and 1970s.... Private entrepreneurial activity... was far greater in scale and scope than previous scholarship leads us to believe. Of the millions of entrepreneurs who were prosecuted by the socialist state, the mean individual was engaged in the production and exchange of goods whose value represented years’ of income for the median worker....

The socialist state was not unified in its suppression of private entrepreneurial activity. A statistical analysis of the punishments in “speculation and profiteering” case demonstrates that local government officials did not faithfully execute central directives. Rather, they adopted overtly protectionist strategies, sheltering entrepreneurs who were engaged in large-scale pursuits or activities that they viewed as more productive in the local economy. Collectively, these findings overturn longstanding ideas about the evolution of the modern Chinese economy and the historical antecedents of China’s market-oriented reforms…

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John Maynard Keynes (1925): Soviet Russia I https://newrepublic.com/article/77318/soviet-russiai: ‘This system does not mean a complete leveling down of incomes—at least at the present stage. A clever and successful person in Soviet Russia has a bigger income and a better time than other people. The Commissar with $25 a week (plus sundry free services, a motor-car, a flat, a box at the ballet, etc., etc.) lives well enough, but not in the least like a rich man in London. The successful Professor or Civil Servant with $30 or $35 a week (minus sundry impositions) has, perhaps, a real income three times that of the proletarian worker, and six times those of the poorer peasants.

Some peasants are three or four times as rich as others. A man who is out of work receives half pay, not full pay. But no one can afford on these incomes, with high Russian prices and stiff progressive taxes, to save anything worth saving; it is hard enough to live day by day. The progressive taxation and the mode of assessing rents and other charges are such that it is actually disadvantageous to have an acknowledged income exceeding $40 to $50 a week. Nor is there any possibility of large gains except by taking the same sort of risks as attach to bribery and embezzlement elsewhere—not that bribery and embezzlement have disappeared in Russia or are even rare, but anyone whose extravagance or whose instincts drive him to such courses runs serious risk of detection and penalties which include death.

Nor, at the present stage, does the system involve the actual prohibition of buying and selling at a profit. The policy is not to forbid these professions, but to render them precarious and disgraceful. The private trader is a sort of permitted outlaw, without privileges or protection, like the Jew in the Middle Ages—an outlet for those who have overwhelming instincts in this direction, but not a natural or agreeable job for the normal man.

The  effect of the social changes has been, I think, to make a real change in the predominant attitude towards money, and will probably make a far greater change when a new generation has grown up which has known nothing else. A small, characteristic example of the way in which the true Communist endeavors to influence public opinion towards money is given by the campaign which is going on about the waiters in communal restaurants accepting tips. There is a strong propaganda to the effect that to give or to receive tips is disgusting: tip in a public way, and a not unknown thing for a tip to be refused!

Now all this may prove Utopian, or destructive of true welfare, though, perhaps, not so Utopian, pursued in an intense religious spirit, as it would be if it were pursued in a matter-of-fact way. But is it appropriate to assume, as almost the whole of the English and American press do assume, and the public also, that it is insincere or that it is abominably wicked?

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DeLong’s Questions:

John Maynard Keynes in 1925 wrote of the post-War Communism Soviet Union of the NEPmen: “The private trader is a sort of permitted outlaw, without privileges or protection, like the Jew in the Middle Ages—an outlet for those who have overwhelming instincts in this direction, but not a natural or agreeable job for the normal man…”

How different was Maoist China’s attitude in those districts were the government was relatively tolerant?

As I understand how the centrally-planned economies worked, they controlled a few hundred key commodities and their flows through material balances under imposed semi-military discipline. But that was only a small part of the economy. The rest of it? The center made that factory managers’ an commune directors problem. Hence they had to beg, borrow, buy, barter, blatt, and steal all resources other than those that were tracked by material balances and that they could command by fiat and pointing to the plan.

Highly inefficient, highly corrupt…

But exchange, beggary, barter, blat, and plan—understood as a desire to accomplish the organization’s primary goals—in a mixture is not that different from the internal workings of a capitalist corporation in a market economy. How different is what the NEPmen in the USSR in the 1920s and the profiteers in the 1970s in China were doing different from what people were doing who were simply trying to fulfill their places in the plan?

.#china #noted #really-existing-socialism #2020-11-10
Bradford DeLong
J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

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