Problematic Legacies from Mao (and Deng’s Solutions)

Despite the successes I noted in the last post, Mao’s era left a shortage of funds for capital investment, low morale and productivity in the workforce, the beginning of a stagnation period in standards of living, a growing rural/urban divide in living conditions and antique and inefficient (on the verge of obsolescent) industrial plant and technologies. Deng would have to deal with these issues.

His approach was firstly to state his approach and hope it caught on but obviously there was more to it than that. The basic approach was (as usual in the PRC) related by various slogans. It was to recognise that there were ‘objective economic laws’ and scientific methods, that ‘practice is the sole criterion for truth’ and that the CCP and PRC should ‘seek truth from facts’. That was stage one at least and might not appear very radical but it really was something new after Mao’s regularly magical and occasionally probably paranoid thinking.

Deng planned to fix the living standard stagnation and to some extent morale and productivity by allowing some funds normally slated for investment to be the foundation of a new consumer economy. This was near the beginning of the ‘greed is good’ decade in the US and it would be in China, too. Deng felt he could not only satisfy that greed but turn it to the advantage of the economy ala Gekko. The shortage of capital would be addressed in part by permitting unemployment for the first time as necessary economically to free resources for consumption.

How could Deng justify what was an obvious trashing of much Mao Zedong Thought (MZDT), the official policy of the PRC? As MZDT was itself a modification of Marxism/Leninism, Deng saw no reason why he couldn’t further modify MZDT and that was essentially his public message. Within a few years as we know (in 1981) the correction would become quite explicit for all time in black and white in the Mao is 70% good 30% bad pronouncement.

The main error of Mao’s that Deng wanted to correct from a theoretical point of view (or at least this is what Deng wanted his people to believe) what his thinking that Communism was always just around the corner. Deng now said this misread the great Marx and that is certainly a fair claim. Mao was really having regard more to Lenin’s and Trotsky’s ideas when he thought of how China needed to and would be able to behave. Deng’s stated view was that there was an early ‘primary stage of socialism’ to go through that might take anything from fifty to a hundred years. This was what he said objectivity taught (and that was what now mattered, of course).

Economic development was a key focus in this primary stage that could be understood within Marx’s philosophy – a focus that Marx noted was well handled by capitalism (which socialism was to follow, rather than seek to overtake so precipitately). The corollary was that the policies required by Deng looked less like Maoism than capitalism and were arguably perhaps more orthodoxly Marxist (if not especially Leninist). Furthermore, egalitarianism could clearly not be complete at this stage, then, because the greed for extra material incentives was what greased the wheels of the capitalist system. The ideas that “some much get rich[er than others] first” and that in fact “to get rich is glorious” were new tenets for this period of PRC history (that we’re still in today, more than thirty years later, despite the passing of Deng himself into history).

The role of the centre was now to be as a (more remote) chairman of the board rather than a Maoist micro-manager, which was actually more about Mao’s own personal style in many ways. The gradual incremental process of development was described as being like “groping for stones” when attempting to cross a river. Ideas for change would generally be tested with care first on a small scale before gradually going into large scale operation only as they proved their merit. The centre had a role here. There was no question of pretending something had worked at a local level that hadn’t and rushing headlong into a foolhardy national implementation. It could easily be discarded as an idea and moved on from at the local trial level.

All governments manage the economy to some extent at a macro level (by macroeconomic policy) and, as I’ve noted, the new policy was to encourage and permit more consumption. Many also take some charge of microeconomic reforms and the PRC government was well placed to direct resources away from heavy industry investment (still oversubscribed despite Mao’s best efforts) into investment in the lighter consumables industry (and consumable agricultural output was an aim of investment, too). Here Deng was also attempting to address the city/country divide. Salaries were increased and decision making was briskly decentralised to prepare for better development outcomes (local managers were given discretion over the payment of material incentives (the preferred form usually turned out to be payment of bonuses)).

The outcome of this reform was that it became usual for up to 50% of a typical Chinese worker’s pay-packet to be comprised of efficiency bonuses (efficiency would usually be determined by means of some kind of point system). There was also to be a transition to markets determining outcomes in both the cities and in rural areas and so also many price control regulations were removed. And the final reform in the overall economy (that I’ll consider a little further in a later post) was a further opening up of China to trade and foreign investment. China especially wanted to export more and receive foreign investment capital and advanced technology.