Essayist Gerald Early said that the history of the United States will one day be reduced to the Constitution, jazz, and baseball. If someone had made the same summary of Chinese history 30 years ago, the trio would likely have been the Great Wall, Maoism, and famine. Over the past 2,000 years, China has suffered almost one famine per year. Severe drought killed as many as 13 million Chinese in the two-year famine beginning in 1876. The 1927 famine killed as many as 6 million. There were significant famines in 1929, 1939, and 1942. The Great Famine, which began in 1958 and lasted three years, was probably the deadliest famine in human history, killing between 30 and 45 million people. The causes of Chinese famines have varied, ranging from drought to hoarding to Mao Zedong’s horrifically misguided food procurement policy, which took food from the mouths of the people who grew it, concentrating deaths in traditional farming areas.
For most of China’s history, famine was just an extreme version of the normal state of affairs. As recently as the late 1970s, 30 percent of China’s population was undernourished. Grains supplied the overwhelming majority of their calories. One in 3 children under the age of 5 had stunted growth.
It’s almost hard to believe how different today’s China has become. By 2005, fewer than 1 in 10 Chinese people were undernourished. Consumption of meat nearly doubled and fruit consumption more than tripled in the past three decades. Birth weights have risen, and the average 6-year-old child is two inches taller today than in the 1970s. (Pause on that incredible fact for a moment.) China feeds 20 percent of the world’s people using less than 10 percent of arable land, with plenty of food left over to export. Food has fueled the Chinese miracle.
How did China go from barely surviving to a nation with a food surplus? There’s a short version and a long version, and the difference really matters—even for Americans.
The short version reads something like a fairy tale written by free-market philosopher Ludwig von Mises. Chinese farmers under Mao were organized into collectives that worked common land. The manager of the collective made planting decisions and assigned duties, paying no heed to market signals or the particular skills of individuals. At harvest time, the collective sold a portion of its crop to the state at fixed prices, then divided up the remainder among the farmers based on the number of hours worked. Hard work changed an individual farmer’s fortunes very little, so no one worked very hard and the farms weren’t very productive.
Everything changed in 1978. A collective in the village of Xiaogang secretly agreed to go capitalist. The group’s output surged so dramatically that it caught the attention of the evil communist authorities. The Xiaogang dissidents feared they would be executed. Rather than punish the heroic Xiaogang collective, however, Beijing recognized their genius and adopted reforms. Farming families across China took quasi-ownership of plots of land and were granted more freedom to sell their yields on the open market. That single change created incentives to work hard and make investments for future productivity. And everyone lived prosperously ever after.
You hear this version of the story quite often in the media. NPR portrayed this secret agreement in Xiaogang as the catalyst that lifted 500 million Chinese out of poverty. Jikun Huang of the Chinese Academy of Sciences and Stanford economist Scott Rozelle wrote in a report for the World Food Programme that the impact of the reforms “could not have been more dramatic” and the “rise in the vibrancy of the rural economy was one of the triggers of the rest of the economic reforms in China.”
The capitalist fairy tale version of the Chinese miracle has a rather simple lesson for the rest of the world: Create the right incentives, and hard work and human ingenuity will solve all the other problems. “We all secretly competed,” a Xiaogang farmer told NPR. “Everyone wanted to produce more than the next person.” When people talk about this version of the Chinese miracle, the implication is that capitalism itself is miraculous.
There’s a lot of truth to this tale. Agricultural productivity rose at a meager 2.7 percent per year from 1970 to 1978. In the five years following the reforms, the growth rate surged to 7.1 percent. Overall GDP also spiked. The reforms encouraged individual members of farm families to take up non-agricultural employment, diversifying and lifting household incomes in rural areas.
The full story is far more complicated than a simple capitalist fairy tale, though. It involves prudent planning, heavy investment in infrastructure, and state subsidies. It doesn’t give you that warm, self-satisfied feeling of Western philosophical triumph. But you ought to hear it anyway.
In fact, Chinese authorities recognized the poor productivity of their farming collectives long before 1978 and set in motion a series of changes that would take years to pay off. Beginning in the 1950s, the central government worked to bring Chinese farming practices into the 20th century. Just 18 percent of Chinese farmland was under irrigation at the beginning of the technological overhaul. Heavy investment in water infrastructure began more than a decade before de-collectivization. Today, more than one-half of Chinese farmers work irrigated fields, making the country one of the most intensively watered farming economies on the planet. At the same time as the investments in irrigation began, China accelerated research on new varieties of grains, fruits, and vegetables that could, when paired with improved irrigation, produce more food on less land. Many of these varieties didn’t become available until just before the capitalist reforms of the late 1970s.
Chinese central planners can also take credit for some of the investments made by Chinese farmers themselves. Around the time of the reform, the Chinese government increased the amount it paid farmers for their crops by around 25 percent. In a single year, Chinese farm income surged massively due almost exclusively to government policy. Many of the farmers put some of their capital windfall toward the purchase of chemical fertilizers, which flooded the Chinese market around the same time, further enhancing productivity.
Sheer luck played a major part in the incredible Chinese agricultural surge as well. Beginning in 1982, China saw some of the best years of farming weather in recorded history. Unless you think that was God’s way of endorsing the capitalist reforms, that change artificially inflated early 1980s productivity and magnified the positive effects of both the infrastructure investments and the capitalist reforms. Productivity decelerated a few years later, when the weather took a turn for the worse.
Scholars continue to argue over how much of China’s agricultural turnaround was due to the capitalist incentive structure, how much resulted from earlier investments, and how much was a trick of the weather. Some say the end of collective farming accounted for nearly three-quarters of the improvements in productivity, while others say it was responsible for no more than one-third.
It’s fine to treat China’s food revolution as a fairy tale. The changes were so dramatic that it’s hard not to. But let’s make sure we get the moral of this story correct. Changing the incentives isn’t a magic trick that can turn any lagging economy into a global juggernaut. Investment in infrastructure, research and development, and putting money into the pockets of workers work wonders as well. And a little sunshine doesn’t hurt, either.
