Category Archives: economics

China’s Agricultural Revolutionaries

From Strange Rebels: 1979 and the Birth of the 21st Century, by Christian Caryl (Basic Books, 2014), Kindle Loc. 5314-5338:

The transformation of agriculture in 1978 and 1979 proceeded with little instigation from the top. The peasants sensed the opportunities provided by the loosening of the party’s political control and pushed ahead. It was a process marked by wide regional variation; there seem to have been as many different names for agricultural reform experiments during this period as there are counties in China. It was also very much a matter of trial and error. When the politicians learned what the peasants were up to, they usually waited for evidence of success before they committed themselves unambiguously. Wan Li and Zhao Ziyang could claim credit for letting the farmers do what came naturally. When the experiments of the peasants bore fruit, Deng publicized their success, recognizing a good thing when he saw it. But he certainly could not take credit for giving farmers the idea.

The irony, as American anthropologist Stephen Mosher realized, was that Western scholars at the time regarded the Chinese as incorrigible collectivists. “Group thinking” was considered an indelible part of traditional culture that predisposed the Chinese to Communist ways. As a result, Mosher had come to the countryside expecting to discover evidence that the peasants were fundamentally satisfied with the stability and predictability furnished by the regime. According to scholarly reasoning, the Communist Party had taken power in 1949 largely due to the support of the country dwellers. It had promised to improve the lot of the peasantry, and in this it had surely succeeded. After all, hadn’t the Communists brought schools and basic health care to even some of the most remote villages? Hadn’t they eliminated the corruption and tyranny of the old landlords? Upon his arrival, Mosher carefully noted all the characteristics of a traditional society that skewed visibly to collective ways of doing things.

The rampant cynicism and apathy that he encountered in China’s real-existing countryside thus came as something of a shock, and his account provides a fascinating chronicle of how a preconceived view can disintegrate upon contact with reality. But amid the ruins of Mao’s utopian edifice, Mosher also discovered intriguing evidence of a powerful source of transformative energy: individual initiative. Though they were far from the places where the most important experiments were under way, the people in Mosher’s remote Guangdong village had already picked up on the spread of the household-responsibility system, and he succeeded in capturing a nice snapshot of the spirit that, once unleashed, would soon lift hundreds of millions of people out of poverty. The old entrepreneurial mind-set of the Chinese “flared anew once opportunity presented itself,” Mosher noted. When one woman heard that the party might soon allow a return to household farming, she immediately began making plans to start cultivating her own mulberry patch, planting the bushes between the rows of trees on the farm. “You can’t do that now because people are careless when they work,” she explained to the American. “They would step on them when they are spreading mud [as fertilizer] or picking mulberry leaves. But I’ll be careful because they’ll be mine.”

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Wordcatcher Tales: getihu, baochan daohu

I learned a few new Chinese terms from reading Strange Rebels: 1979 and the Birth of the 21st Century, by Christian Caryl (Basic Books, 2014).

个体户 (traditional 個體戶) getihu (‘individual-body-enterprise’) – Even during the heyday of collectivization, Communist China allowed very limited small-scale entrepreneurship. The term for such businesses translates literally as ‘individual’ (个 ge, used as a counter for individual items) + ‘body’ (体 ti, also ‘form, style; system’) + ‘door’ (户 hu, also ‘household, family; [bank] account; type of professional’).

包产到户 (traditional 包産到戸) baochan daohu (‘assure-production reach-household’) – The method used to abolish China’s disastrously underperforming collective farms was to reassign production quotas down to the level of individual households. The term for production quota is baochan, composed of 包 ‘wrap; envelope; include; take full responsibility for; assure, guarantee’ + 产 ‘give birth to; produce’ (or ‘product[ion]’). The reassignment of responsibility to households was conveyed by adding the modifier 到户 daohu, from 到 dao ‘arrive, reach’ + 户 hu ‘door; household, family’.

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Thatcher’s Unorthodox Campaign, 1979

From Strange Rebels: 1979 and the Birth of the 21st Century, by Christian Caryl (Basic Books, 2014), Kindle Loc. 3391-3428:

The election of 1979 marked a watershed moment in British politics. This is not to say that everything about the vote was black-and-white. It is, for example, indeed true—as many contemporary historians are wont to point out—that Thatcher was careful to avoid making her proposals sound too radical and that the Conservative manifesto (the party program) included little in the way of detailed policies for change. It is true that she might have faced a much different political landscape if Callaghan had called for a general election back in the early fall of 1978 (as some of his advisers had counseled), before the Winter of Discontent had left British voters conclusively disgusted with the direction of the country. And it is even true that her personal popularity rating remained well below Callaghan’s right up to the end. Yet despite these qualifiers, there can be no mistaking the fact that Thatcher used the election of 1979 to offer a fundamental break with the way the country had been governed. Voters saw that she was offering a dramatically new approach to dealing with the unions, and it was also clear to them that she was proposing a new set of policies on management of the economy. She pledged change to an electorate that was deeply disillusioned with the status quo—and she did this less through election documents than through her own speeches and campaign appearances. Along the way she also departed decisively from the received wisdom on British electioneering. The message here was, at least in part, the medium—Margaret Thatcher herself.

Conservative leaders before her had focused their campaigns on the classic Tory electorate—those members of the middle and upper classes living in the more affluent parts of the country. Thatcher and her advisers, however, set out to target voter categories long neglected by Conservative campaigners. She made a point, for example, of specifically wooing skilled laborers of the type that Tebbit was courting in his home district. Known in the mysterious argot of British pollsters as “C2s,” these workers had long been considered automatic Labour voters. Thatcher disagreed. She believed that many union members resented the undemocratic ways and the cynical tactics of their leaders, and she surmised that many working-class voters would be correspondingly receptive to her calls for greater constraints on union power. She also felt that upwardly mobile workers would welcome her proposals to allow the tenants of public housing to buy their homes. She reasoned that many C2s were also tired of inflation and runaway spending. This was why she staged her first big election rally in the traditional Labour stronghold of Cardiff in Wales. “Labour, the self proclaimed party of compassion, has betrayed those for whom it promised to care,” she told her audience. “So in this campaign we’ll not only extend and consolidate Conservative support, we’ll carry the fight right into what were once the castles and strongholds of Labour, and in many places we’ll win.”

Her campaign tactics were equally novel. She shunned the traditional Conservative support network in the broadsheet newspapers and favored instead the tabloids and daytime TV—an approach that allowed her to tap into a new electorate in the embattled middle classes who felt threatened by the growing power of the state and the unions and also allowed her to avoid probing questions about policy specifics. She made aggressive use of television, whereupon she was accused (comical as it might seem to a modern audience) of the egregious sin of importing “American-style campaigning” to Britain. She proved very effective at exploiting the medium—especially once her adviser Gordon Reece prevailed upon her to lower her voice, an adjustment that lent her gravitas and authority.

This might seem trivial, but it was especially important in light of Callaghan’s magisterial efforts to use her gender against her. It was not so much what he said as how he said it; he was a master at sardonically implying that whatever the leader of the opposition said was made even sillier by the fact that it was being said by a woman. She countered this by doing what she had always done to beat so many male competitors before: she worked harder, sleeping just a few hours a night as she relentlessly studied her briefing papers and learned her lines. At the same time, she turned her gender to her own advantage by slipping, when she chose to, into the role of a commonsensical housewife, hoisting sample grocery bags to drive home the corrosive effects of runaway prices on the ordinary household budget. Nor was she afraid to give interviews to women’s magazines in which she shared recipes and stressed her fussy mastery of good housekeeping. Not only did this help to draw in female voters, but it also underlined her point that the economic remedies she was proposing were less a matter of abstract theories than of the everyday ethos of thrift and moderation on which many British households prided themselves.

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Afghanistan’s Communist Revolutionaries, 1978

From Strange Rebels: 1979 and the Birth of the 21st Century, by Christian Caryl (Basic Books, 2014), Kindle Loc. 2221-2259:

Taraki and Amin both belonged to the PDPA’s other faction, known as Khalq (“the People” or “the Masses”). Khalq’s ethnic basis was narrower than Parcham’s: Khalqis were overwhelmingly Pashtuns, and more often than not they hailed from a particular subset of the Pashtuns. Taraki and Amin were both members of a particular Pashtun tribal confederation, the Ghilzais, that had long chafed under the domination of more powerful Pashtun groups—and especially the Durranis, the dynasty that had dominated Afghanistan for centuries, right up until the Communist coup. (Both Daoud and Zahir Shah were Durranis.) The Khalqis tended to be far less vested in the existing system of ruling elites, and this helps to explain the radicalism that dominated their thinking.

Khalqis were, above all, dutiful Leninists. Like so many other would-be Third World modernizers, they detested their country’s backwardness, and they believed that the only reasonable cure was to frog-march it into the twentieth century by brute force, if need be. To be sure, Afghanistan didn’t really have a proletariat, and though many aspects of its agricultural system appeared backward and traditional, most peasants actually owned their own land. But no matter. There was one institution that could still serve as a revolutionary vanguard, and that was the army. For years the military had been one of the few structures in the country—along with the monarchy and a steadily expanding state educational system—that managed to coalesce the notoriously unruly Afghans around a sense of shared national destiny. The military was one Afghan institution that offered opportunities for advancement even to those who weren’t part of the traditional elites. And the upper ranks were filled with officers who had studied in the Soviet Union, which offered them a clear example of a primitive rural society that the Communists had mobilized into a modern industrial power.

The ideological differences between Parcham and Khalq were just part of the problem. There were also intense personal feuds at work. Karmal, the Persian-speaking patrician, despised Taraki and Amin as upstarts, and they were happy to return the favor. In the old, prerevolutionary parliament, Amin had been famous for his easy joshing with his opponents among the religious conservatives, who gave their atheist colleague the joking nickname of “Satan.” Karmal, a formidable orator once imprisoned for five years by the king, had emerged to become a political heavyweight courted even by Daoud himself, and he cultivated a self-regard that alienated just about everyone. As the new Communist regime got under way, Amin couldn’t help reminding the Parchamis that they had spent the “revolution” cringing in prison while the Khalqis got on with the job. The Parchamis, in turn, regarded the Khalqis as bumbling zealots who needed a bit of adult supervision.

The Afghan public at large knew little of this, of course. What they saw instead were slogans, revolutionary parades, and a burgeoning personality cult centered on Taraki. There is little doubt that the vast majority of Afghans—most of whom had no access to television or newspapers—regarded all this with bemusement, apprehension, or apathy. But the state almost immediately denied them the luxury of disengagement. Within weeks of seizing power, the new revolutionary government announced a series of far-reaching edicts that would tip Afghan society into a maelstrom from which it is still struggling to recover.

Decree Number One proclaimed land reform. The proclaimed intent was to uproot the supposedly feudal underpinnings of Afghan society, stripping power from traditional landlords and canceling unfair lending arrangements that had kept millions of people indentured to local power brokers. The political aim was to give the majority of Afghans—who overwhelmingly lived in the countryside—a reason to love the new government. A flurry of other new reform measures followed. A literacy campaign taught the benighted how to read and write. Women received full civic rights. It was a program that bore a striking resemblance to the shah’s White Revolution [in Iran].

It all sounded wonderful, on paper. The problem was that this blizzard of reforms, and especially the realities of their implementation, bore little or no relation to the society they were intended to change. Of course, everyone believed in the goal of literacy, but the catch was that the government had little in the way of resources to accomplish the task of educating the rural poor. So it relied, as Communist regimes so often had in the past, on a mixture of mobilization and brute force to fill the gap. Zealous young schoolteachers dispatched to the villages, invariably without proper textbooks or teaching materials, often ended up haranguing the locals on their backwardness. What particularly inflamed the locals was the newcomers’ insistence that women should take part in the courses, in classrooms that mingled both sexes. Mobs drove the arrogant outsiders away. In some cases the do-gooders then returned with escorts of government troops, and literacy classes then proceeded at bayonet point.

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Afghanistan in the 1970s

From Strange Rebels: 1979 and the Birth of the 21st Century, by Christian Caryl (Basic Books, 2014), Kindle Loc. 997-1035:

Afghanistan in the 1970s thus offered a textbook example of what the economists like to call a “rentier state”—one that lives by exploiting the advantages of good fortune (natural resources or favorable strategic position) rather than capitalizing on the talents and skills of its people. There were deep-seated historical reasons for this. Afghan rulers had long governed according to a somewhat minimalist philosophy, dictated, to some extent, by the country’s bewildering ethnic diversity and its fantastically rugged terrain. Roads were few and far between. The high mountains and deep valleys fragmented the population, exacerbating differences of language and custom. When the Soviets finally completed the Salang Tunnel in 1964, the world’s highest traffic tunnel at the time, they supplied the missing link to a road that connected the northern and southern halves of the country for the first time in its history. The Americans, meanwhile, had already built the first east-west highway, from Kabul to Kandahar. This new infrastructure transformed Afghanistan’s economy and dramatically simplified the government’s ability to communicate with the interior.

Even so, the average Afghan’s dealings with Kabul remained shallow and infrequent. The primary function of the local administration was less to provide people with public services, few of which were available in the countryside to begin with, than to prevent them from organizing opposition. Most people correspondingly regarded officials as a remote and somewhat unnecessary presence, better avoided than engaged. American anthropologist Thomas Barfield, who conducted field research in Afghanistan in the mid-1970s, noted that, for most Afghans in the countryside, “government” meant not a concept but a place, namely, the local government compound. “On passing out its front gate, and particularly after leaving the road that led to it, ‘government’ ended,” he wrote. (And this, in turn, helps to explain why literacy rates in the country were so shockingly low. In the 1970s, only 10 percent of the population could read or write—and only 2 percent of women.)

The real power in most communities came from traditional leaders, usually tribal notables or landowners. The local khan might provide jobs, adjudicate disputes, or allocate resources (especially water, that scarce but vital commodity for this overwhelmingly rural population), and his authority rippled through the intricate networks of kinship that structured most of society. The leader’s followers judged his legitimacy in part according to his success at distributing wealth. In the old days, that might have meant the booty from battle, but in the 1960s and 1970s, this often translated into access to a cushy government job or a place in the university in Kabul. Afghanistan is often described rather loosely as a “tribal society,” but the reality is more complex, given the fantastic ethnic and social diversity of the place. The word Afghans use for the defining characteristic of their society is qawm, which can refer not only to networks of blood relationships but also to linguistic, religious, and geographical traits that shape the group to which an individual belongs. A Turkic-speaking Uzbek might define himself above all by the dialect that he speaks, a Persian-speaking Tajik by the district that he hails from, a Pashtun by his tribal affiliation.

If anything could be said to unite them all, it is religion. Virtually all Afghans are Muslims, most of them Sunnis. (The most prominent exception are the Hazaras, an ethnic group, descended from the Mongols, who happen to be Shiites.) Even in the 1960s and ’70s, observers often remarked upon the simple piety of the people in Afghanistan. All activity stopped whenever the call to prayer sounded from the local mosque. References to God and the Prophet punctuated everyday speech. Public figures were expected to invoke the supremacy of the Almighty at every turn.

Yet this did not mean that religion and politics seamlessly overlapped. Throughout their history, Afghans had known rule by kings, not religious leaders. Village mullahs, who performed a variety of religious services in exchange for fees, were often regarded as corrupt or buffoonish, the butt of jokes rather than figures of respect. There were, of course, some religious figures who enjoyed privileged status—Islamic scholars, perhaps, or pirs, Sufi spiritual leaders. But none of these individuals had any clearly defined institutional power over the others. The diffuse quality of Afghan Islam was also a product of practices that many other Sunni Muslims would have regarded as heterodox—such as the veneration of saints, whose graves, beflagged and decorated, were treated as holy places. In Iran, the Shiite religious elite presided over a clearly defined hierarchy, which greatly increased the power of the clerics. In Afghanistan, there were no central religious institutions to speak of. Islam was flat, localized, and fragmented.

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Britain on the Eve of Thatcher, 1970s

From Strange Rebels: 1979 and the Birth of the 21st Century, by Christian Caryl (Basic Books, 2014), Kindle Loc. 360-398:

The postwar consensus endured because it worked—at least for the first few decades. The British economy grew steadily through the 1950s and 1960s, widely spreading the benefits of expanding national wealth. But by the 1970s, the bloom was off. Rising global competition had revealed the structural rigidities of Britain’s social-democratic system. The oil shock hit at a moment when traditional British manufacturing industries were already affected by painful decline. Once-proud working-class cities had turned into landscapes of blight, factory ruins defaced with graffiti. In the 1970s, the British economy tottered from one crisis to another. In 1974, in the wake of the Arab oil embargo, Conservative prime minister Edward Heath was forced to introduce electricity rationing and a three-day workweek. Unemployment surged and productivity sagged. British business seemed to have lost its way. Entrepreneurs fled punishing tax rates for more hospitable climes. Strikes punctuated the national news with benumbing regularity; the trade unions repeatedly demonstrated their enormous political power, contributing mightily to the fall of Heath’s government in 1974.

These were the problems that confronted James Callaghan as he assumed the office of prime minister two years later. His Labour Party had won the 1974 election under the leadership of Harold Wilson, who returned to Number Ten Downing Street after an earlier stint as prime minister. But Labour’s margin of victory in the election was narrow, and the best that Wilson could do was to form a minority government with his party in the lead. His administration soon foundered as it struggled to deal with the aftereffects of the energy crisis and the intensifying demands from the unions, his party’s most powerful constituency. By the time Callaghan stepped in to take the beleaguered Wilson’s place, inflation had reached a staggering 25 percent. Outside investors lost confidence that the British government would ever regain control over its finances, and the pound became so anemic that London found itself facing a full-blown balance-of-payments crisis. Put simply, the British state had run out of the foreign exchange it needed to pay for imports. Bills were coming due that the United Kingdom was not in a position to pay.

To his credit, Callaghan did not soft-pedal the causes. He inherited stewardship of the economy at a moment when the old sureties were crumbling. His chancellor of the Exchequer, Denis Healey, declared that Britain couldn’t go on spending its way out of crises. Callaghan’s son-in-law, an influential journalist by the name of Peter Jay, had even become a convert to the economic school known as “monetarism,” which deemed strict control of the money supply to be the only remedy for inflation. This flew in the face of the Keynesian principles of Britain’s postwar consensus, which placed a premium on combating unemployment through government spending. The speech that Callaghan gave at the 1976 Labour Party conference, authored by Jay, turned into something of a elegy for Britain’s postwar economic system:

For too long this country—all of us, yes this conference too—has been ready to settle for borrowing money abroad to maintain our standards of life, instead of grappling with the fundamental problems of British industry. . . . [T]he cozy world we were told would go on forever, where full employment would be guaranteed . . . that cozy world is now gone. . . . We used to think we could spend our way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candor that that option no longer exists, and that insofar as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy followed by a higher level of unemployment as the next step.

Finally, in November 1976, the United Kingdom was forced to ask the International Monetary Fund (IMF) for a $3.9 billion loan to tide it over through the crisis. The conditions included brutal spending cuts and across-the-board austerity measures. Back in 1945, the United Kingdom had been America’s partner in creating the international economic system that had brought the IMF to life. Now London was calling on the fund for help in an existential crisis. It was the first time that one of the world’s developed countries had ever asked for IMF support. (Nothing comparable would happen again until 2008, when Iceland was forced to follow suit during the global financial crisis.)

This was a humiliation of epochal proportions. A country that had been at the heart of the Western economic and political system found itself reduced to the status of a banana republic. Callaghan diagnosed the problems but was unable to come up with a remedy. Something always seemed to get in the way: the resistance of the unions, the global economic climate, the accustomed way of doing things. The old ideas no longer worked—that much was clear. But where were the new ones? Britain was waiting for something to give.

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Hua Guofeng and the Two Whatevers, 1977

From Strange Rebels: 1979 and the Birth of the 21st Century, by Christian Caryl (Basic Books, 2014), Kindle Loc. 2594-2619:

In the wake of Mao’s death, the colorless Hua surprised everyone with a sudden show of initiative. Allying himself with two established party elders, Army Marshal Ye Jianying and veteran functionary Li Xiannian, Hua engineered the arrest of the Gang of Four. It was a startling gambit even by the Byzantine standards of twentieth-century Communist conspiracies. Hua had started by splitting off one of the Gang’s key allies, a man by the name of Wang Dongxing, who had risen with the Gang’s help to become the head of the party’s Praetorian Guard, the 8341 Special Regiment, which provided for the security of top officials. Hua and Wang arranged for two of the Gang’s leaders to be called to a special session of the Politburo. They were arrested at gunpoint as they stepped into the room. Jiang Qing, Mao’s widow and the Gang’s leader, was taken into custody in her bedroom; one of her personal servants is said to have spat on her as she was led away. Under orders from Hua, the People’s Liberation Army quickly moved to disarm the heavily armed militias and the powerful media machine that Jiang’s faction had built up over the years. The Cultural Revolution was finally coming to an end.

Yet what was Hua offering in its place? This was not immediately clear. Hua certainly understood that the country could no longer afford permanent revolution. Adopting a strategy originally envisioned by Zhou Enlai, he declared that China should push ahead with “the Four Modernizations” (science and technology, industry, national defense, and agriculture). He moved to restore the economy’s animal spirits by ordering a huge surge of investment in industry and agriculture. Like Gierek in Poland, Hua seemed to believe that part of the solution involved taking big foreign loans for flagship projects; also like Gierek, he seemed to have few concrete ideas about how these loans would be paid back.

Hua’s program did result in tangible growth. But it also led to big budget deficits and scandalous waste, since it failed to tackle many of the serious problems of management and organization bequeathed by Maoist excess. Hua had the right idea, but he was still, in essence, relying on mobilization and slogans rather than substantive economic policy. Some of his critics belittled the program as another Great Leap Forward, a utopian exercise with little practical foundation. Hua, for example, urged a rapid increase in the output of steel, which duly materialized. But to what end? What, precisely, was the underlying economic strategy?

Hua had eliminated the Gang of Four. He tried to revive the economy. But he seemed hesitant to put an end to the broader legacy of the Cultural Revolution. In February 1977, a few months after Mao’s death, Hua’s supporters published a statement containing a conspicuous quote: “We will resolutely uphold whatever policy and decisions Chairman Mao made, and unswervingly follow whatever instructions Chairman Mao gave.” This credo came to be known as the “the two whatevers,” and its adherents, “the Whateverists.” Like many factional nicknames, this one contained a large grain of truth. Hua’s legitimacy stemmed from the fact that he was Mao’s chosen successor. That counted for a lot. But it also limited his freedom of maneuver. He could not chip away at the memory of the Great Helmsman without undermining himself.

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