State-building in China, 1644-1994

Kent G. DengLSE

Academia Sinica, September 2010

A. Outline

• 1. The Issue and Importance of state-building in Chinese recent history.

• 2. Periodoisation of China’s state-building.

• 3. The differences made by state-building and state-builders.

• 4. ‘Unnecessary changes’, 1644 to 1994.

1. The Issue and Importance of state-building in Chinese recent history

• Three key questions: • a. Who made changes (social stratum)? • b. Why were changes made (ideology)? • c. How were changes made (means and

resources)?• d. Were changes all that necessary and rational

(growth and development, especially living standards)?

2. Periodisation of state-building

Five periods can be identified to capture conditions and changes in China’s state-building:

(1) 1644 to 1711 (before Kangxi’s decree to fix the total tax revenue) when a Confucian state was rebuilt,

(2) 1712 to 1849 when the Confucian state matured and then withered,

(3) 1850 to 1920 when Social Darwinian states emerged,

(4) 1921 to 1977 when the Social Darwinian state developed into a party-state, and

(5) Post-1977 when a market-friendly party-state emerged.

Notion of the ‘Qing Confucian state’

• a. Voluntary power-sharing with the Chinese

• b. Confucian Social mobility

• c. Confucian land-holding rights

• d. Confucian proto-welfare state

• e. Confucian ‘small and cheap’ state that withered voluntarily

• Contrary to Marx’s speculation about ‘the Asiatic Mode of Production’ and Wittfogel’s hypothesis of ‘Oriental Despotism’not only did the Qing economy expand but also China’s ‘human development index’ (HDI) was respectable: there were life expectancies comparable to those of Western Europe, adult literacy rates that were the envy of the rest of Asia, and standards of living respectable by the world standards.

• Remarkably, all these were achieved with an unprecedented population growth and limited progress in technological change.

Who actually controlled the Qing state?Who actually controlled the Qing state?

• It has become very clear that after 1700 the degree-holding Confucian literati controlled the Qing state, not the Manchu warrior. The vast majority of the literati were Han Chinese.

• All Manchu emperors were strictly educated by Han Chinese scholars.

• So, all the claims made by the Taipings in the mid-19th century and Sun Yat-sen’s Nationalist Movement in the early 20th century were groundless.

Distribution of appointments of Governors, 1644–1911

Total 335

Han Chinese 234

Manchu 96

Mongols 5

Han % share 69.9

Manchu % share 28.7

Mongols % share 1.4

How big was the Qing bureaucracy?How big was the Qing bureaucracy?

• Any efficient organisation needs minimum size. The absolute limit is a one-man team.

• Without modern technology, the smaller the size the less efficient an organisation.

• So, small can mean inefficient and weak.

Ratios (c. 1800)

Gentry/officials ratio 60:1Sub-official functionaries/officials ratio 33:1Gentry/ sub-official functionaries 2:1Population-officials/sub-officials ratio 400:1Soldiers-officers ratio 300:1Population-armed forces ratio 510:1

These ratios indicate a small and weak state.

How efficient was the Qing state?How efficient was the Qing state?

• Despite all the claims about the Qing commercialisation and commercial success, a large proportion of the soldiers living allowance and official salaries were paid in kind in the form of stipend rice.

• The rice was collected annually from 8 provinces as a special tax.• Due to the constant lack of resources, the collection of this tax was usually

done by tax-farming with the help of the local gentry.• In the process, more than 10 times of the targeted 4 million shi was

collected by various agents as economic rents. The true cost of the stipend rice was much higher than the market price for rice in Beijing.

• Beijing was fully aware of what was going on in those provinces but was powerless to stop the stipend rice–related corruption. It did nothing until the 1880s.

• Again, tax-farming indicates an inefficient state.

Costs of tax-farming with rice (in silver)

Total cost in silver: 63.3–64.7 million tael

Actual cost for the target: 7.2 million tael

Extra rice collected: 12.9–14.3 million tael

Extra cash collected: 43.2 million tael

Total extras: 56.1–57.5 million tael

Amount received by Beijing: 11% of the total

How free was the Qing population?How free was the Qing population?

a) State dependence on the peasantry

b) Rural autonomy (freedom)

c) Family landholding rights (freedom)

d) Production freedom

e) Market freedom

f) Educational freedom

What did freedom do to China’s economy?What did freedom do to China’s economy?

• By definition, Chinese freedom under the Qing was “producers’ freedom at the grassroots.”

• China’s grassroots freedom led to micro-level diversification in an ‘industrious revolution’ of self-exploitation (seen from family farming, weaving, marketing and so forth).

• Diversification has its limit: it may maximise output and income but is powerless in changing a given production possibility frontier. Rather, it constantly tries to strike a better trade off between different products. So, such diversification was opposite to a high level of specialisation and division of labour at macro level.

• Moreover, the range of choices for micro-level diversification was extremely limited: it was confined with materials available on which some value was added by hand.

• Furthermore, there was no sense of profit-making. Diversified families had limited incentives to produce for a greater market let alone to ‘over-supply’ that market. This is because the very concept of diversification avoids such over-supply. It is about to supply thinly to many niches. In contrast, modern capitalism is all about the economies of scale and scope to reduce cost per unit. The Qing micro-level diversification lacked the economies of scale and scope. It did not reduce cost per unit, at least not quickly enough.

Simultaneous and Ubiquitous Social Unrest, the 1850s–60s

Notion of a Social Darwinian state

• a. The demonstration effect of the 1840 Opium War and the following aggressions: ‘ the state power comes from the barrel of the gun’.

• b. The rise of autonomous ‘governor-lords’ after 1850, Zeng Guofan, Li Hongzhang, Zuo Zongtang, Zhang Zhidong and many others.

• c. The rise of independent warlords after 1916 (after Yuan Shikai).

Zeng Guofan

Zuo Zongtang

Yuan Shikai

Northern New Army

Feng Guozhang

Chiang Kai-shek

Zeng Guoquan

Anhui Army

Li Hongzhang

Hunan Army

New HunanOld Hunan

Duan Qirui Zhang Zuolin

Anhui SectZhili Sect Fengtian Sect

Huangpu Military Academy

Notion of a Party-state

• a. It was an anti-democracy minority rule. It operated on a personal cult, self-declared teleology, a loyal army and a lot of foreign aid.

• b. This new type of state was exported from the Soviet Union with Soviet support with money, weapons and advisers.

• c. It began with Sun Yat-sen and ended with Mao Zedong.

Notion of a market-friendly party-state

• In exchange for legitimizing the party’s rule and ending exploitation:

• a. To re-build law and order and social harmony. • b. To resume supply of the well-educated

bureaucrats. • c. To resume economic rights, incentives and

freedom for ordinary people via the market. • d. To promote foreign trade and FDI. • e. To build ‘a comfortable material life for all’

(xiaokang).

3. The differences made by state-building and state-builders.

• GDP growth

• Population growth

GDP benchmark

• There are two credible GDP growth rates: 0.9 % a year from 1750 to 1830, and 1.2 % a year from 1887 to 1936, averaging 1.05 % a year.

• This 1.05 % growth rate can be used as China’s long-term expectant benchmark rate.

The ratio between the GDP index and the expectant benchmark (I/II) measures China’s growth performance over time.

• GDP index (I) Benchmark (II) I/II

1830 100 100 1.00

1887 93 181 0.51

1914 121 240 0.50

1936 167 303 0.55

1946 76 336 0.23

1952 167 358 0.47

1962 282 397 0.71

1972 310 441 0.70

1977 394 463 0.85

1982 1,304 489 2.67

1992 6,555 543 12.07

2000 21,690 590 36.76

Population benchmark

• China’s population growth rate in the early period from 1766 to 1812 was 1.2 % a year. It slowed down to 0.5 % a year from 1812 to 1833.

• If the average rate of 0.85 % a year is used as the benchmark.

• China’s GDP grew faster than population by 0.2 % a year (1.05 – 0.85).

• Census records Index (α) Benchmark (β) α/β

1833 398.8 million 100 100 1.00

1887 377.6 95 158 0.60

1911 368.1 92 194 0.47

1928 451.8 113 223 0.51

1936 479.1 120 239 0.50

1946 455.6 114 260 0.44

1949 540.0 135 267 0.51

1952 574.8 144 274 0.53

1962 673.0 169 298 0.57

1972 867.3 217 324 0.67

1977 947.7 238 338 0.70

1982 1,016.5 255 353 0.72

1992 1,171.7 294 384 0.77

2000 1,267.4 319 411 0.78

The ratio between the GDP index and the expectant benchmark (α/β) measures China’s growth performance over time.

By 1978,

China’s GDP was 15–50 percent lower than the benchmark.

China’s population was 30–50 percent short of the benchmark.

And, China’s per capita GDP growth was at least 30 percent below the benchmark.

Mao’s legacy

• Mao’s legacy is not life expectancies, or living standards, or industrialisation.

• His legacy is 700 million very low paid and landless peasants who have no strong incentive to stay in farming or invest in agriculture.

• This made the dynamics of Arthur Lewis dualism deadly easy during Deng’s reforms.

Deng as ‘Mao in reversal’• Mao DengCashing in China’s comparative advantage No YesConsumer revolution No YesEconomic freedom No YesEfficient resource allocation No YesFast technological change No YesFast urbanisation No YesFirms and workers’ incentives No YesFreeing from budget constraints No YesFreeing from excessive and wide poverty No YesFreeing from low level equilibrium No YesFreeing from man-made famine No YesFreeing from negative GDP growth No YesHigher income for ordinary people No YesModern economic structure No YesPrivate property rights (de facto) No Yes

4. ‘Unnecessary changes’, 1644 to 1994.

• Unnecessary changes refer to those whose outcomes damaged producers and investors’ incentives to produce more and better and invest more and wider. They also harmed ordinary people’s material life.

• So, the most unnecessary changes were the Taiping and Maoist ‘experiments’.

• The Qing Confucian welfare state was still the longest-standing. It was far from perfect but worked nonetheless.

Extra Information

Maoist alteration of Chinese factors of production

• State ownership replaced private ownership.• State economic planning replaced market signals. There was no

realistic costs and returns to guide production and investment decisions.

• There was a looming issue of principle-agency problem and coordination problem in the bureaucracy.

• The entire working population (including workers and farmers) became proletariats.

• Material rewards were minimal for producers which in turn removed incentives to produce.

• The Maoist state resorted to coercion to incentivise the economy. But coercion did not work in the long run.

• Then, Mao launched his full-scale attack on human nature. He was doomed to fail.

Mao’s fake industrialisation

• There is a common misconception: Mao pushed China towards industrialisation.

• Evidence: Unclear weapons and heavy investment in heavy industry.

• But, China’s industrial workforce was frozen under Mao’s rule.

Maoism: heavy industrial bias (growth rates)

Heavy industry (A) Light industry (B) A:B

1953–7 36% 7% 5.1

1958–62 54% 7% 7.7

1963–5 46% 4% 11.5

1966–70 51% 4% 12.8

1971–5 50% 6% 8.3

Average 47% 6% 7.8

Untrustworthy official data

• With 47% per year growth, the heavy industrial sector would triple its size every three years.

• Maoism ruled China for 29 years, the heavy industrial sector would increased 71,150-fold. If so, by 1978, China would have been a super-power.

Low growth in industrial workforceLow growth in industrial workforce Workers (mln) (I) Total population (II) I/II

1959 45.5 672.1 6.8%

1964 36.4 705.0 5.2

1969 40.9 806.7 5.1

1974 59.1 908.6 6.5

Annual (%) 1.76 2.03

In 1975, at least 77% of China’s workforce working in the agricultural sector, not too different from 1880.

This workforce was allegedly produced about half of China’s GDP. In comparison, currently, China’s industrial workforce (50% of all employment) only produce about 65% total GDP)

Mao’s fake development

• There is a common misconception: Mao saved China from economic uncertainty and crises and made everyone equal.

• Also, allegedly, Mao had Chinese life expectancies doubled.

• Evidence: State ownership and economic planning

Life expectancies, the red herring

• As far as we know, in 1965, China’s infant mortality rate was 165 per 1,000. The same level of infant mortality applied in 2004 only to the poorest countries on earth with low life expectancies of around 40. They include Afghanistan, Angola, Liberia, Niger, Sierra Leone and Somalia

• Clearly, these is a base line problem. Mao’s spin doctors must have picked up 20 as the base line.

• According to the statistics of the World Health Organization, To reach life expectancies of 70 years, a country’s infant mortality rate must be lower than 25 per 1,000 with an average of 40.6 hospital beds for per 10,000 people.

• In 1980, China had 5 hospital beds every 10,000 population, the same level as current-day Afghanistan (4 hospital beds for per 10,000 population, in 2001), Cambodia (6 beds for per 10,000, in 2004), Guatemala (5 beds for per 10,000, in 2003), Myanmar (6 beds for per 10,000, in 2000), Somalia (4 beds for per 10,000, in 1997), and Yemen (6 beds for per 10,000, in 2003).

• Mao’s China needed a miracle to reach life expectancies at 70.

• Now, the United Nations has re-figured a 55% increase in China’s life expectancies under Mao from 1950 to 1975. It means that Mao’s life expectancies were not 70 but 54.

• It is known that The East Asian post-war average increase in life expectancies was 24 percent (capitalist Hong Kong, South Korea, Singapore and communist Outer Mongolia, North Korea, and Vietnam). Mao’s life expectancies were likely to be 43.4 years.

• This level (43.4 years) fits well with the benchmark of the World Health Organization: infant mortality of 165 per 1,000 for life expectancies at 40 years).

Agriculture declinedAgriculture declined

• Total Output, 1952–77 

 

Current price Index 1952 price Index

Gross annual growth 2.7% –1.4%

Net annual growth 0.7% –3.4%

Growth rate declining under Mao

Food availability seen from food Food availability seen from food exports (in 10,000 tons)exports (in 10,000 tons)

• South China North China China’s total

Pre-collectivisation• 1953–5 688.5 204.3 892.8

Post-collectivisation• 1956–60 1,950.5 –472.0* 1,478.5• 1961–5 669.5 –2,013.5 –1,344.0• 1966–70 942.0 –796.5

145.5• 1971–5 952.5 –1,159.0 –206.5• 1976–8 –22.8 –1,106.4 –1,129.2

Low living standards

• Poor provision of public goods

• Perpetual rationing at the subsistence level

• Decline in wage purchasing power

• People were worse off than before

Poor provision of public goodsPoor provision of public goods• The case of The 1959–62 Great Leap The 1959–62 Great Leap

Famine when Famine when 30-40 million Chinese died:

• (1) No rural social welfare or disaster relief.

• (2) Mao’s government exported amount of food enough to sustain at least 38 million people for a year (see the next slide).

• Note: There was not severe China-wide natural disaster for the famine period.

Rural food rationing (Rural South Rural food rationing (Rural South China, raw grain)China, raw grain)

Age Per year After processing

2–5 60 Kg 40 Kg

6–10 90 60

11–15 190 127

15+ 210–40 140–60

Urban food rationing (kg cereals Urban food rationing (kg cereals per month per person)per month per person)

Shanghai Beijing

1955 1979 1955 1979

0–3 years 3.5 3.5 4.0 4.3

10+ 12.5 12.5 13.8 15.0

University students 16.0 16.0 17.5 17.0

Office clerks 14.0 14.0 15.1 15.0

Heavy physical workers 20.0 20.0 22.0 22.5

• In 1978, China-wide urban benchmark daily calorie intake was 2,009 of which 1,750 came from cereals (83 % of all calories).

• The rest 27 % calories were mainly made of vegetables.

• The following non-grain items and quantities were rationed for each calendar month (which helped little in daily terms):

Eggs Pork Sugar Bean-curd Bean noodles4 250g 100g 300g 50g

Rationing of consumer durablesRationing of consumer durables

Retail prices =Starting wage

“Phoenix” bicycle 156 yuan 5.0 months

“Shanghai” wrist watch 120 4.0

“Butterfly” sewing machine 187 6.0

Total 463 15.0

Savings after food bills 37.5

Urban low wagesUrban low wages

Nominal wage Index Real wage Index

1957 637 100 637 100

1961 537 84 493 77

1965 652 102 539 85

1970 609 96 429 67

1976 605 95 327 51

1978 644 101 310 49

Decline in wage purchasing powerDecline in wage purchasing power

• Average family (persons) Dependents (persons)

Pre-1949 6.9 (100) 4.0 (100)

1957 4.5 (65) 3.3 (83)

1964 5.8 (84) 3.4 (85)

1970 – 2.5 (63)

1977 4.5 (65) 2.1 (53)

The Chinese consumed more in The Chinese consumed more in the 1930sthe 1930s

Daily calories % of 2,009 calories

China-wide average 2,537 126

Beijing wage-workers 2,670 133

Shanghai wage-workers 3,008 150

Wuhan wage-workers 3,500 174

Consumption per capita, 1937 Consumption per capita, 1937 versus 1952–2000versus 1952–2000

• Grain Oil Meat Fish Housing (U) Housing (R)

(Kg) (Kg) (Kg) (Kg) (M2) (M2)

1937 307.0 – 13.6 0.5 – –

1957 203.1 2.4 1.6 4.3 4.5 11.3

1966 190.5 1.8 7.1 – – –

1978 195.5 1.6 1.2 3.4 3.6 8.1

2000 366.0 23.4 38.3 33.9 20.3 24.8