Category Archives: economics

by | 10 October 2009 · 11:00 am

Salonica’s Polyglot Boot-blacks

From Salonica, City of Ghosts: Christians, Muslims and Jews, 1430-1950, by Mark Mazower (Vintage, 2006), pp. 12-13:

IN THE 1930s, the spirit of the Sufi holy man Mousa Baba was occasionally seen wandering near his tomb in the upper town. Even today house-owners sometimes dream that beneath their cellars lie Turkish janissaries and Byzantine necropoles. One reads stories of hidden Roman catacombs, doomed love-affairs and the unquiet souls who haunt the decaying villas near the sea. One hears rumours of buried Jewish treasure guarded by spirits which have outwitted the exorcists and proved themselves too strong for Mossad agents, former Nazis and anyone else who has tried to locate the hidden jewels and gold they protect.

But Salonica’s ghosts emerge in other ways too, through documents and archives, the letters of Byzantine archbishops, the court records of Ottoman magistrates and the hagiographies of the lives and extraordinary deaths of Christian martyrs. The silencing of the city’s multifarious past has not been for lack of sources. Sixteenth-century rabbis adjudicate on long-forgotten marital rows, business wrangles and the tribulations of a noisy, malodorous crowded town. The diary of a Ukrainian political exile depicts unruly Jewish servants drunk in the mud, gluttonous clerics, a whirl of social engagements, riots and plague. Travellers—drawn in ever-increasing numbers by the city’s antiquities, by the partridge and rabbits in the plains outside, by business, art or sheer love of adventure—penned their impressions of a magical landscape of minarets, cypresses and whitewashed walls climbing high above the Aegean. From the late nineteenth century—though no earlier—there are newspapers, more and more of them, in half a dozen languages, and even that rarity in the Ottoman lands—maps. As for the archives, they are endless—Ottoman, Venetian, Greek, Austrian, French, English, American—compiled conscientiously by generations of long-departed foreign consuls. Drawing on such materials, I begin with the city’s conquest by Sultan Murad II in 1430, delineate its daily life under his successors, and trace its passage from the multiconfessional, extraordinarily polyglot Ottoman world—as late as the First World War, Salonican boot-blacks commanded a working knowledge of six or seven languages—to its role as an ethnically and linguistically homogenised bastion of the twentieth-century nation-state in which by 1950, more than ninety-five per cent of the inhabitants were, by any definition, Greek.

The old empires collapsed and nations fought their way into being, identities changed and people were labelled in new ways: Muslims turned into Turks, Christians into Greeks. Although in Salonica it was the Greeks who eventually got their state, and Bulgarians, Muslims and Jews who in different ways lost out, it is worth remembering that elsewhere Greeks too lost out—in Istanbul, for example, or Trabzon, Alexandria and Izmir, where thousands died during the expulsions of 1922. Cities, after all, are places of both eviction and sanctuary, and many of the Greek refugees who made a new home for themselves in Salonica had been forced from their old ones elsewhere.

Similar transformations occurred in cities across a wide swathe of the globe—in Lviv, for instance, Wroslaw, Vilna and Tiflis, Jerusalem, Jaffa and Lahore. Each of these endured its own moments of trauma caused by the intense violence that has accompanied the emergence of nation-states. Was the function of the Israeli Custodian of Absentee Property after 1948, for example, handing out Arab properties to new Jewish owners, very different from that of the Greek Service for the Disposal of Jewish Property founded in Salonica five years earlier? Both systematized the violence of dispossession and sought to give it a more lasting bureaucratic form. Thanks to their activities, the remnants of former cities may also be traced through the trajectories of the refugees who left them. A retiree clipping her roses in a Sussex country garden an elderly merchant in an Istanbul suburb and an Auschwitz survivor in Indianapolis are among those who helped me by reviving their memories of a city that is long gone.

By 1950, when this book concludes, Salonica’s Muslims had been resettled in Turkey, and the Jews had been deported by the Germans and most of them killed. The Greek civil war had just ended in the triumph of the anti-communist Right, and the city was set for the rapid and entirely unexpected pell-mell postwar expansion which saw its population double and treble within thirty or forty years. A forest of densely packed apartment blocks and giant advertising billboards sprouted where in living memory there had been cypresses and minarets, stables, owls and storks. Its transformation continues, and today Russian computer whiz-kids, Ghanaian doctors, Albanian stonemasons, Georgian labourers, Ukrainian nannies and Chinese street pedlars are entering Salonica’s bloodstream. Many of them quickly learn to speak fluent Greek, for the city’s position within the modem nation-state is unquestioned: the story of its passage from Ottoman to Greek hands has become ancient history.

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Filed under Balkans, economics, Greece, labor, language, migration, religion, Turkey

by | 9 October 2009 · 6:48 am

Changing Demographics in Pacific Seafaring

From Sailors and Traders: A Maritime History of the Pacific Peoples, by Alastair Couper (U. Hawai‘i Press, 2009), pp. 178-180, 188:

As well as improvements in maritime education and training under IMO regulations, there has also been a veritable social revolution in Fiji. The young generation of Pacific sailors no longer seriously ascribes to the old tradition that females bring “bad luck” to a ship. Pacific women have shown considerable strength of character, as well as new professionalism, in taking charge of crews and in coping with family….

The other change in human relations in Fiji has been an amelioration within the maritime sector of the sensitive issue of race relations. The exclusion of all but indigenous Fijians from the Waterside Workers and Seamen’s Union, which was registered in 1946 with a specific racial limitation clause, continued until a rival unsegregated seamen’s union emerged in 1992. The reasons for the initial segregation are deeply embedded in colonial history. However, with the increase of Fijians as wage earners in ports and shipping, trade union exclusiveness seemed as much a matter of class as race. Ports and shipping had Fijian laborers and ratings, while Europeans and part-Europeans were officials and officers. Capital in turn came from the United Kingdom and Australasia and locally from Indo-Fijian commercial sources. The more class-conscious union organizers saw the Fijians as “workers” and the others as “bosses” who were not eligible for union membership.

The mobility of a few Fijian ratings with sufficient education to junior officer levels and the increase of indigenous Fijians serving as cadets and officers on local vessels have reduced the basis for class resentment. There are still racial problems, but younger Fijian sailors recognize the merits of Indo-Fijians as mariners. For example, the Khan family on the island of Nairai have long been regarded as good sailors, running their own cutters with Fijian officers and crew….

The global hierarchical structure is broadly 40 percent officers from countries in the OECD (Organisation for Economic Co-operation and Development), plus Russia, Poland, and some of the eastern European states, and most of the ratings from eastern Europe and developing countries, including some Pacific islands.

Increasingly, young men and a few women from the Pacific are moving to officer ranks on foreign-flag ships, as there is a dire shortage of officers in the developed ship-owning states. The shortage is due to both declining interest in careers at sea and the losses of trained personnel arising from demands ashore in business, technology, and administration for well-qualified mariners. One of the several advantages to Germany, for example, of recruiting lower-cost sailors in Kiribati and training some of them to officer levels is the lack of well-paid employment in islands for their skills, which would attract officers ashore. Thus there is a minimizing of wastage from manpower training investments. There are twelve maritime training institutions in the Pacific Islands. Only Fiji and Papua New Guinea provide the full range of education and training from pre-sea, rating, and officer courses to Class 1 foreign-going masters and chief engineers. Several other places offer training of ratings and/or junior officers. There is mobility in training, with concentrations for special courses under the coordination of the SPC Regional Maritime Programme….

Kiribati in 1959 (as part of the Gilbert and Ellice Islands crown colony, GEIC) was already supplying seafarers to the China Navigation Company of Britain. There were also crews and a few I-Kiribati nationals serving as officers, usually with European captains, on colony ships sailing on long-distance interisland routes. In terms of distance, Kiribati shipping was virtually foreign-going…. Kiribati is now the principal country in the Pacific island region for supplying seafarers.

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Filed under economics, education, Fiji, labor, Micronesia, Pacific, Papua New Guinea

by | 1 October 2009 · 5:31 pm

American Independence & Chinese Silver Imports

The June 2009 issue of Journal of World History has an enlightening bit of historical revisionism by Alejandra Irigoin entitled The End of a Silver Era: The Consequences of the Breakdown of the Spanish Peso Standard in China and the United States, 1780s–1850s (Project MUSE subscription required). Here are her conclusions (pp. 238-239).

This article argues for revision of traditional views of the global silver trade with China in the late eighteenth and early nineteenth centuries. Section I shows that the existing historiography tends to ignore that silver imports into China continued for longer than normally acknowledged and at increased levels up to the 1820s. New evidence shows that the structure of the silver trade changed substantially when US merchants became central intermediaries between Spanish American silver “producers” and Chinese “consumers,” when Chinese imports of silver consisted increasingly of Spanish American coins, the so-called pillar and bust dollars.

Section II explores the role of Americans as intermediaries who increased trade with Spanish America in order to obtain silver coins needed to trade with China. The timing of the flow of silver out of China to pay for opium purchases is challenged, as is opium as a cause for the desilverization of China. This article also questions received wisdom that reduction in the supply of silver owing to Spanish American independence was the root cause of silver scarcity in China in the early nineteenth century. This received wisdom ignores a fundamental fact: Spanish America itself was a significant reservoir of silver coins in the world. Thus, (relatively minor) interruptions in the production of silver—at different points in time and in distinct places—in South America during Independence were unlikely to account for supply shortages in China, and continued exports of silver into the United States confirm this view. Hence, the fall in Chinese silver imports must be a function of demand-side forces in addition to supply-side problems.

Spanish American independence presented a different problem to the global economy. The Spanish Empire broke up into a multitude of distinct states in the wake of independence, each fiscally and monetarily autonomous. In other words, the largest monetary union of the premodern world had collapsed. The resulting fragmentation of coinage and seigniorage across postindependent Spanish America terminated a silver standard that had organized international trade throughout the early modern world, East and West and in between. New republican governments, especially in regions with silver endowments, took over mint houses in the service of local and regional interests. Coins minted in various mint houses began to diverge in quality and fineness, whereupon the universal standard of the Spanish silver peso was definitively lost.

Section IV advances the central argument of this paper, namely that Chinese demand for silver, at least since the late eighteenth century, involved demand for a certified and reliable means of payment, as opposed to silver in some generic sense. “Good” colonial Spanish American coins traded at a premium over the sycee [ingot] equivalent, clearly confirming this point. Fragmentation of the Spanish monetary standard after independence had a devastating influence on Chinese demand. The impact of Spanish American independence on China’s economy operated through deterioration of coin quality, not through quantities of silver per se. By contrast, the United States used Spanish dollars as legal tender under the control of central monetary authorities, thereby succeeding in keeping new peso coins in circulation for a decade or more.

The end of the silver standard following independence in Spanish America during the 1810s and the 1820s had major consequences for development of the global economy before the gold standard. On one hand, termination of the silver era contributed to the poor economic performance of the Chinese economy. A lack of high-quality, reliable Spanish pesos between the 1820s and the 1850s, rather than insufficient silver mining, largely explains the fall in Chinese silver imports. Hence, I argue that the Chinese silver trade in these decades was demand-side rather than supply-side (mining) driven. Consequences for the internal market in China were manifold, including increased transaction costs, fragmentation of markets, and credit shortages. On the other hand, the United States reacted differently—and with a different timing—to termination of the silver standard. Immediate detrimental effects were weathered by workings of a well-integrated banking system, a quasi–monetary authority, and assay by the mint. Ultimately, this article poses an important comparative question for economic historians: in light of the US response, why did the Chinese empire never monopolize seigniorage, and why did it fail to provide reliable control of its currency system in the face of high costs for the domestic Chinese economy? Answers fall well beyond the scope of this article, of course, but the question should at least be framed in a global context.

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Filed under China, economics, Latin America, opium, Spain, U.S.

by | 30 September 2009 · 6:11 am

Wind vs. Coal Power in Pacific Shipping

From Sailors and Traders: A Maritime History of the Pacific Peoples, by Alastair Couper (U. Hawai‘i Press, 2009), pp. 141-142:

The companies secure within colonial territories made more capital investments in land, stores, and shipping. A major item was the shift from wind power to coal in propulsion and from wood to iron in ship construction. In many ways sail was still more suited to Pacific conditions. Distances were great—some 6,500 miles from San Francisco to Sydney. By then more information was available on favorable winds and currents for passage planning under sail, where calms had always been of more concern than storms. The early steamships, carrying around 1,500 tons of cargo, were disadvantaged, as they burned about thirty-five tons of coal per day to give a speed of seven knots. This meant coaling stations were required across the Pacific, including Honolulu (2,100 miles from San Francisco), Suva (2,800 miles from Honolulu), and to reach Sydney, another 1,700 miles away. Coal was expensive whereas wind was free. Bunkers took up cargo space and added weight, as did the engines, which required spares, skilled engineers, and technical maintenance. Coal in turn had to be brought to bunkering ports by other ships and stockpiled. By the 1870s there were bigger steamships with more efficient engines, requiring a coal consumption of fourteen tons per day at nine knots. Sail then focused internationally on low-value bulk but continued on some Pacific routes.

In the island trades the strategies adopted by several companies were to continue using sail for the long-haul supply ships from main ports, ultimately with auxiliary engines, and steam vessels for trading permanently around the islands, for a time with auxiliary sail. The advantages of steam and diesel propulsion in the islands included improved schedules, greater maneuverability in reef areas, ability to work clear from a lee shore, and the facility to leave lagoons regardless of wind direction. On Chong [Trading Company] employed the barque Loongana for the 2,500-mile passage from Sydney to the north Gilberts, and steam vessels such as the St. George for trading around the islands. It was such a successful division that when the Loongana was lost, she was replaced by the sailing ship Alexa, until she too was lost in 1924.

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Filed under economics, energy, Pacific, travel

by | 27 September 2009 · 7:18 am

Tok Pisin with Isuzu Lu: Hey, Poro!

Isuzu Lu: Hey, Poro

Isuzu Lu: Hey, Poro

Lu: “Hey, Poro … Mobeta yu baim wanpela Isuzu Utility … Ol i strongpela moa … inap long karim ol kain kain kago long baksait … Yu traim, laka!?!”

Lou: “Hey, Friend … You’d do better to buy an Isuzu Utility … They’re very strong … enough to carry all kinds of cargo in back … Try it, okay!?!”

This is a scan from a faded old photocopy of a cartoon ad by Bob Browne for New Guinea Motors in the Papua New Guinea Post-Courier, 1976. I’ve got a lot more, but I’ll have to limit my scanning to just a sample because I see that the author/illustrator has published a collection of these cartoons. I just bought the last copy of Isuzu Lu Book 5 available on Amazon.com.

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Filed under economics, language, Papua New Guinea

by | 26 September 2009 · 4:53 pm

Preference for Pacific Island Seafarers

From Sailors and Traders: A Maritime History of the Pacific Peoples, by Alastair Couper (U. Hawai‘i Press, 2009), pp. 102-103, 106:

As a result of continued shortages of crew, British and American ships frequently sailed shorthanded for the Pacific. The trips involved passages that were four to five months long, via the Cape of Good Hope or Cape Horn. American ships sometimes picked up a few sailors in the Atlantic Islands but generally shipowners were not unhappy with depleted crews, which reduced labor costs during these unproductive legs of voyages. Not so for the disgruntled seafarers whose lives were endangered from shortages of experienced shipmates in bad weather and when beating around Cape Horn against strong headwinds.

Arrival in the trading and whaling areas of the Pacific entailed supplementing the crew, all the more necessary because ships would lose many of the original crew during the three to four years the men were employed in the Pacific. Most losses were due to desertion….

The cautionary note on the recruitment of Samoans as sailors reflected the persistent bad reputation of those islands, arising from the massacre of the boat’s crew of La Perouse in 1787. [I believe La Pérouse was the name of the commander, not the name of his vessel.—J.] Whalers by the 1820s were likewise returning with stories of treachery and savagery experienced in parts of Melanesia and Micronesia. Such tales led to more misgivings regarding taking crew from several of these islands. The situation was different in Tahiti and Hawai‘i, where local seamen were encouraged by chiefs to serve and showed reliability even in difficult Arctic voyaging. Several Hawaiians are recorded to have been on that coast in 1788 under Captain John Meares. The New Hazard increased her crew from twenty-four to thirty-three in 1811 for voyages to the northwest coast, additions that were simply designated as “kanakas” in logbooks and journals. The ill-fated Tonquin had a Hawaiian crew of twenty-four when it was destroyed possibly by the captain after Indians boarded on the coast, and the fur trading ship Beaver took on ten “kanakas” in 1812, together with an experienced island sailor, bosun Tom. American whalers subsequently obtained most of their crews in Hawai‘i and Tahiti and also periodically at the Marquesas, the Carolines, and New Zealand….

Captains clearly preferred Pacific seafarers, who were used to compliance toward chiefs and thus unlikely to give captains trouble by demanding seafaring customary rights on board. The islanders were useful too as interpreters and understood the Pacific ways of trade. As sailors they were skillful at handling loaded boats through heavy surf when ships had to stand off and on. On whalers they acquired reputations as good harpooners and for boldness in closing on a whale. The keen eyesight of island sailors earned them the tobacco bonuses for spotting whales, and this, along with reading the signs of the sea for sudden squalls and reefs, made them invaluable as masthead lookouts.

Swimming and diving proved other important assets. Turnbull was impressed when, on approaching Hawai‘i, he encountered people a mile offshore supported only by “a thin feather-edge slice of wood.” He refers also to Hawaiians diving from topgallant yards and swimming under the ship. This skill of deep diving was employed on pearling and bêche-de-mer ships, as well as for making underwater hull repairs and clearing fouled cables. The extent to which island men and women were at home in the sea is further alluded to in dramatic rescues. Copping describes how, when the Harriet of Sydney was totally lost near Te Puna in April 1840, “the crew would have been lost also if it had not been for the Maori women on board the ship swimming them ashore.” He relates also that when his own whaleboat broached to, and he was knocked overboard and trapped under the boat, a shark “lay hold” of his shoulder, but “my harpooner a Maori jumped overboard after me.” Similarly when James Bagley fell from the topgallant crosstrees, a Hawaiian seaman, John Mowhee, dived after him and told Bagley to hold on to his shoulder until they were rescued.

For the shipowners a more compelling reason for employing Pacific seafarers was their lower costs in wages and victualing. The whaleship owner F. Parbury, who gave evidence at the British House of Lords Select Committee on the Navigation Laws, readily attested to this and expressed preferences for New Zealand (Maori) crews.

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Filed under Britain, economics, Hawai'i, labor, Pacific, Polynesia, travel, U.S.

by | 24 September 2009 · 6:02 pm

Failed Hawaiian Colony on Erromango

From Sailors and Traders: A Maritime History of the Pacific Peoples, by Alastair Couper (U. Hawai‘i Press, 2009), pp. 88-89:

Kamehameha died in 1819 at the age of about sixty-six. His fleet of foreign-going ships probably never made adequate profits, even though most of the capital and operating costs had been derived from the extraction of natural resources, with free Hawaiian labor ashore. Most of the voyages to China by his ships were ruinous, at least partly due to the unscrupulous agents and merchants in Canton, lack of care, recurring repairs and delays, and related payments of high port dues. His son Liholiho (Kamehameha II) faced increasing debts, as resources from land and sea, used for financing these ventures, had appreciably decreased.

Despite mounting debts the new king went on to purchase more ships. His first acquisition, at enormous cost, was the luxury yacht Cleopatra’s Barge (191 tons), bought from the American millionaire shipowner George Crowninshield Jr. Renamed Haaheo O Hawaii (Pride of Hawai‘i), the ship cruised around the Hawaiian group with the royal family and leading chiefs until 1825, when it was wrecked. It was reported that the ship at this time was “manned by a drunken, dissipated, irresponsible crew from the captain down to the cabin boy.” About the same time, the ship Prince Regent, which Vancouver had promised as a gift, was also wrecked after less than one year in service. To add to the problems of the royal family, news was received in 1825 that the king and queen had died of measles on a visit to England during 1824. They were there to elicit British political support and in the process incurred considerable expenditure.

The family, now with a boy king (Kamehameha III), faced numerous creditors, and with sandalwood and pearls exhausted, a bold maritime venture was conceived to solve these financial problems. Governor Boki of Oahu and Chief Manui‘a of Hawai‘i were to sail for Erromango in Vanuatu and acquire the still plentiful sandalwood of that region for carrying to China on Hawaiian ships. Chief Boki was in effect to occupy Erromango as ruler in a Hawaiian attempt at colonization. They sailed on 2 December 1829. Boki was in charge of the royal warship Kamehameha with a complement of 300 people, including 10 foreigners, Hawaiian sailors, soldiers, servants, women, and some other Polynesians. His navigators were Blakesly (a watchmaker) and Cox (a silversmith), possibly neither being qualified in navigation or experienced in seamanship. Manui‘a was in charge of the Becket, with 179 people. His navigator was more sensibly a former mate of a whaler.

Other merchants were also seeking Erromango sandalwood in 1829–1830 with Pacific Island labor. The Sofia carried more that 100 Tongans to the island in 1829. On a second voyage in January 1830 the Sofia recruited 200 Rotumans for Erromango. The Snapper in turn delivered another 113 Tongans for sandalwood extraction. The Kamehameha never arrived in Erromango, and no trace was ever found of the ship The Becket stayed there for six weeks, but Erromangoans were alarmed at the arrival of four European-type ships with 600 or so Polynesians, and there was much hostility, malaria, and many deaths. The Becket returned to Honolulu on 30 August 1830 with only a few Hawaiians and foreigners left alive….

The last foreign-going vessel independently owned by the Hawaiian royal family was the schooner Kamehameha III (116 tons), which sailed to California in 1848. However, the French Navy commandeered the ship in response to a complaint by its consul in Honolulu regarding unfair treatment of French business interests by the Hawaiian authorities.

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Filed under economics, Hawai'i, labor, migration, Pacific, Polynesia

by | 14 September 2009 · 8:18 pm

Zhao Ziyang on Deficit Financing

From Prisoner of the State: The Secret Journal of Premier Zhao Ziyang, trans. by Bao Pu and Renee Chiang (Simon & Shuster, 2009), Kindle Loc. 2059-88:

After the Third Plenum of the 11th Central Committee, our country’s financial revenue gradually declined in proportion to the gross national product, while expenditures steadily increased, thus resulting in a deficit. This was the price we had to pay; it was normal and solvable. In 1984, I began proposing a gradual raising of the revenue-to-GNP ratio. To reduce the deficit, we temporarily scaled back infrastructure construction and reduced the pace of economic development. There was no other choice.

If we had ignored the situation and launched an “all-out fast-paced campaign,” we would have faced seriously high inflation and put greater strains on farmers and workers. The readjustments in 1979 and 1980 and again in 1981 had been necessary. As a result of the 1981 readjustments, the agricultural sector continued to enjoy big harvests, the market continued to prosper, and the nation’s economy showed no negative growth. On the contrary, the economy grew by an annual rate of 4 percent. And as the readjustment deepened in 1981, growth increased. The growth rate in the first quarter was relatively low, the second quarter was better, the third quarter was higher, and the fourth quarter was significantly higher. This proves the readjustment was good and the economy had recovered.

Here’s how we kept the economy growing: by scaling back infrastructure projects and reducing heavy industry, iron and steel production, and machinery production; by expanding light industries such as consumer products and textiles while allowing and encouraging private businesses; by developing service industries. The cities continued to prosper and living standards continued to rise. Employment rates rose. In the end we achieved a balanced budget and the people were generally more satisfied. That said, the policy had its shortcomings. We still hadn’t entirely corrected the traditional way in which the Planning Commission cut back on infrastructure projects, which was to “cut straight across the board.” With the old system still in place, it was hard not to do so, and so we set quotas for each region.

In order to save projects that really should not be cut, however, I asked the Planning Commission to be flexible with a part of the budget so that we could revive some of these projects. After the general spending reduction, we reviewed which cuts would incur too great a loss, or which projects were so beneficial they should continue. Of course, there could not be a large number of exceptions, but we were able to reduce the negative impact of “cutting straight across the board.”

Still, in retrospect, the readjustment was too severe. We should have made exceptions for all projects where equipment had already been received or was urgently needed and could be installed and put into production quickly. This would have been more cost effective, particularly if you consider the cost of storage. Even though some of these projects resumed a year later, time and money was wasted. Some of the projects took years to recover.

The reason we didn’t take more flexible measures was mainly because we lacked sufficient domestic funds to pay for these projects; the deficit needed to be reduced so that a financial balance could be achieved. It was all too mechanical.

For example, if the deficit had not been eliminated immediately and some of the budget had been spent on worthwhile projects, the investment could have been returned in a year or so. And under the open-door policy, we could have resolved the problem by taking out more foreign loans.

But Chen Yun was concerned and firmly insistent. He was afraid of excessive and overly large projects and insisted on the reductions. At the time, there were things we didn’t clearly understand, since we did not have enough experience.

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Filed under China, economics

by | 14 September 2009 · 7:54 pm

Zhao Ziyang on China’s Agricultural Revolution

From Prisoner of the State: The Secret Journal of Premier Zhao Ziyang, trans. by Bao Pu and Renee Chiang (Simon & Shuster, 2009), Kindle Loc. 2040-59:

After the Third Plenum of the 11th Central Committee, there were good harvests several years in a row: 1979, 1980, 1981, 1982, 1983, and 1984. The rural areas experienced a new prosperity, in large part because we resolved the issue of “those who farm will have land” by implementing a “rural land contract” policy. The old situation, where farmers were employees of a production team, had changed; farmers began to plant for themselves.

The rural energy that was unleashed in those years was magical, beyond what anyone could have imagined. A problem thought to be unsolvable had worked itself out in just a few years’ time. The food situation that was once so grave had turned into a situation where, by 1984, farmers actually had more grain than they could sell. The state grain storehouses were stacked full from the annual procurement program.

Two other factors contributed to the change. One was the elevated price of agricultural products. Farmers could make a profit from farming. The other was the reduction in the quotas for mandatory state procurement, which meant taking less food out of the mouths of farmers.

For more than two decades, farmers had not had enough to eat after handing over the grains they had produced to the state after every harvest. Of course, the reason that we were able to introduce this new policy was because the Third Plenum of the 11th Central Committee had decided that China could import grains. Comrade Chen Yun said the imports were allowed so that industrial crops could be preserved, but in fact, the imports fulfilled urban consumption demands, thereby reducing the rural mandatory procurement quota [purchased in part for urban markets]. The quantity of grain imports was huge in those years, between 10 million and 20 million tons. Major grain-producing regions could sell their surplus at a higher price and make a profit. Together, all of this gave rural areas instant prosperity.

These policy implementations came at a cost. While the prices of agricultural products had gone up, urban food prices could not be immediately raised, since urban workers had limited purchasing power. Therefore we had to finance additional subsidies for agricultural and other rural products. At the same time, foreign currency was needed to import grains, which affected the import of machinery. Plus, urban housing needed to be expanded. And since factories now had more autonomy, the wages and bonuses of the workers were raised. All of this involved additional expenditure. But these things all were part of the recovery process, which paved the way for the good situation of later years.

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Filed under China, economics, food

by | 14 September 2009 · 6:08 am

Zhao Ziyang on the “Birdcage Economic Model”

From Prisoner of the State: The Secret Journal of Premier Zhao Ziyang, trans. by Bao Pu and Renee Chiang (Simon & Shuster, 2009), Kindle Loc. 2442-56:

Comrade Hu Yaobang was similarly unenthusiastic about the planned economy. According to my observations, he believed it was the highly concentrated top-down planning model that had limited people’s motivation and creativity and restricted self-initiative at the enterprise and local levels. He believed that building a socialist society entailed allowing people, enterprises, and local governments to act independently, while the state continued to direct and mobilize them with social campaigns.

Chen Yun and Li Xiannian, however, emphasized the importance of a planned economy, especially Chen Yun, whose views had not changed since the 1950s. He included the phrase “planned economy as primary, market adjustments as auxiliary” in every speech he gave. The tone of his speeches didn’t change even after reforms were well under way. His view was that dealing with the economy was like raising birds: you cannot hold the birds too tightly, or else they will suffocate, but nor can you let them free, since they will fly away, so the best way is to raise them in a cage. This is the basic idea behind his well-known “Birdcage Economic Model.” He not only believed that China’s first Five-Year Plan was a success, but also, until the end of the 1980s, he believed that a planned economy had transformed the Soviet Union in a few decades from an underdeveloped nation into a powerful one, second only to the United States. He saw this as proof that economic planning could be successful. He believed that the reason China had not done well under a planned economy was mainly the disruption caused by Mao’s policies, compounded by the destructive Cultural Revolution. If things had proceeded as they had in the first Five-Year Plan, the results would have been very positive. In terms of foreign affairs, Chen Yun retained a deep-rooted admiration for the Soviet Union and a distrust of the United States. His outlook was very different from that of Deng Xiaoping, and there was friction between the two.

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Filed under China, economics, U.S., USSR