The Economics of the “Second Land Reform” in China

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Abstract
For peasants who have been collectivized for nearly three decades, the national campaign initiated by the Party Central Committee's Document No. 1, 1984 to promote the reparcellization of collective farmland, by extending the peasants' leasehold right to over 15 years (para. 3–1), is certainly not less spectacular than the land reform of 1949–52, when land was confiscated from the rich for redistribution among poor peasant families. This “second land reform” has now firmly consolidated the long-fought policy of Deng Xiaoping for a decentralized approach towards rural management. All the cats – “black or white” – seem to have now been totally unleashed to run after their best catch. This stands in sharp contrast to the uneasy equilibrium of the “two-line struggle,” which existed throughout the entire 20-year period following the abortive communization drive of 1958/1959. Nevertheless, while probably no Chinese leader today can afford to play the role of Mao's Liu cum Deng, one wonders whether, for economic reasons, the present rural institutional solution as envisaged in Document No. 1 will mark the end of the perennial Chinese search for an “optimum” level of decentralization. In a way, the agricultural reform of recent years has begun with the drastic increases, decreed in 1979, in state farm procurement prices, averaging 25 per cent. For a regime very much obsessed with the value imperative of modernization, the farm price increases should clearly be construed as income incentives for promoting agricultural production to ease the economic constraints on industrialization. This is nothing new but is exactly the policy developed by the prominent Chinese economist, Ma Yinchu, some 25 years ago in his then much condemned “balanced growth model” for China. Thus the strategy fits in well with a western analytical model formulated by Chiang and Fei in 1966, for a “maximum-speed development through austerity.” The model postulates that under socialism, a consumption policy which imposes an “optimum” rather than maximum degree of austerity, may induce greater labour effort and thus an output growth more than proportionate to the required marginal consumption expenditure. It follows that not only will the rate of capital accumulation not be depressed by increased consumption, but it may even accelerate and thus help to sustain a higher overall income growth rate.

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