EVANSTON, ILLINOIS—(BUSINESS WIRE)— President Xi Jinping declared at the CCP’s centennial celebration, “Over the past hundred years, the [Chinese Communist Party] has united and led the Chinese people in writing the most magnificent chapter in the millennia-long history of the Chinese nation,” in a speech that emphasized the Party’s role in driving China’s success, including its economic rise. However, the CCP’s economic record is mixed, and even those who recognize this frequently forget the fact that its achievements and failures are rooted in the same economic principles.
Xi is correct that China has made the “historic jump” from one of the world’s poorest countries with “very backward productive forces” to a middle-income country with the world’s second-largest economy under the CCP’s leadership.
What he failed to mention is that this record is tainted by key missteps, such as the Great Leap Forward (1958-1962), which resulted in the world’s biggest famine, and decades of stringent family-planning policies, which contributed to a rising demographic problem.
READ: Xi Jinping’s effort to return the Chinese Communist Party to its revolutionary beginnings could backfire
DEVELOPMENT DRIVEN
The CCP’s capacity to successfully mobilize resources has allowed it to deliver large-scale public goods that have aided development. Beginning in the early 1950s, the Party made significant investments in public health and education. As a result, China’s life expectancy at birth increased at one of the quickest rates ever, from 35 to 40 years in 1949 to 77.3 years now. School enrollment rates surged as well, rising from 20% to nearly universal at the primary level and from 6% to nearly 80% at the secondary level. Literacy has increased from 20% in 1949 to 97 percent presently. The state also invested in transportation and renewable energy after the reforms of 1978. The entire length of Chinese expressways increased sixfold between 1988 and 2019, surpassing the length of interstate highways in the United States.
During the Labour Day vacations, many people visit Beijing’s Forbidden City. (AFP/Noel Celis photo)
Furthermore, China has constructed 50 third-generation nuclear power facilities and approves six to eight additional reactors each year. It also just announced the development of an ultra-high-voltage electrical grid. The ambitious goal of having wind, hydro, and solar electricity account for 25% of China’s primary energy consumption by 2030 will steer these efforts. READ: Commentary: The successes of China in COVID-19 are credible at home, but not so much overseas. One of the CCP’s biggest assets is its capacity to mobilize money to invest in public goods on such a broad scale. It possesses the political clout to enact policies that promote general growth in regions where private investment would be insufficient.
A CHANGE IN ATTITUDE
Healthcare, education, renewable energy, and infrastructure all contribute significantly to economic growth and social value. However, those who benefit are not usually the same individuals who pay. While educated and healthy people are more productive economically, the parents who made the necessary investments may not receive the benefits. Future generations will profit from renewable energy, but local economies that rely on coal today will suffer. Farmers lose their livelihoods as their land is requisitioned for the new road. New highways benefit newly connected people, but farmers lose their livelihoods as their land is requisitioned for the new road. What are the chances for international climate cooperation? The following is an excerpt from the Climate Conversations podcast: These are textbook instances of how a disparity in private and social valuation can lead to poor investment decisions. There is insufficient investment without government assistance. In some countries, private interests may be able to make their case, but in China, the CCP has the capacity to impose its policy decisions. While strong political leadership has aided growth in the past, the magnitude and scope of Chinese policy execution means that when officials make mistakes, the repercussions can be disastrous. EXTREMELY DIFFICULT PROBLEMS This occurred during the Great Leap Forward, when peasants were obliged to produce crops without cash remuneration or private property rights due to the collectivisation of agriculture. Because of the skewed incentives, it was difficult to maintain production as well as track regional output and capacity.
Chinese President and party leader Xi Jinping gives a speech during an event marking the centenary of the ruling Communist Party in Beijing, China, on Thursday, July 1, 2021, according to a photo released by China’s Xinhua News Agency. (AP Photo/Li Xueren/Xinhua)
The ensuing Chinese Great Famine killed 22 million to 45 million people in just two years, and the economy stalled for the next two decades, with China seeing zero or negative yearly growth.
China’s fertility program is threatening to exacerbate an already significant issue. The People’s Republic had a population of 540 million people when it was created in 1949. The CCP then introduced pro-natal policies, such as restricting contraceptive access, and the country’s population surged to 841 million people by 1971. However, after China’s recent famine, the CCP attempted to restrict fertility, enacting an extreme one-child policy that lasted from 1979 to 2016. During that time, the population continued to rise, and it now stands at 1.4 billion people. However, the one-child policy significantly raised the old-age dependence ratio and contributed to a sex ratio that was heavily biased toward men. READ: Why is it so difficult for the West to have a coherent China policy? INTERVENTIONS THAT ARE EXPENSIVE The Great Leap Forward and the CCP’s family-planning initiatives — like as investments in health, education, renewable energy, and physical infrastructure – were dependent on the Party’s capacity to mobilize grassroots support and compel dissenters. However, there is a significant difference in economic fundamentals. Individuals paying for agricultural production and fertility absorb the majority of the advantages; societal and private values are fairly similar. There is no need for government action when individual interests are aligned with social needs. When you factor in the difficulties of implementation, such as determining how much food a farmer should produce or how many children a family should have, initiatives in these areas are not only ineffective, but also exceedingly costly. READ: Commentary: The one-child policy in China has left a million Chinese children orphaned. Xi’s centennial address focused heavily on the Party’s future plans and its objective of “developing China into a great modern socialist country in all areas” by 2049, the People’s Republic’s 100th anniversary. The CCP will need to use its political clout to enact economic measures if it is to succeed. However, one hopes that it will use its power wisely, focusing on public goods with a considerably higher social worth than private value and leaving the rest to the Chinese people. Nancy Qian is the Founding Director of China Econ Lab and Northwestern’s China Lab. She is a professor at Northwestern University’s Kellogg School of Management./n
