EASC 160gm 1st Edition Lecture 12 Outline of Last Lecture I. Cultural RevolutionII. Deng’s ReformsIII. Dual Track SystemOutline of Current Lecture I. Chinese EconomyII. UrbanizationIII. Household Registration SystemIV. CitizenshipV. Rural ConditionsVI. Township Village EnterprisesVII. Migrant Living ConditionsCurrent LectureCommon patterns of economic development: Urbanizationo Rural to urban migrationo Shift tin dominant sectors of productiono Demographic changes (China’s advantageous moment due to One Child Policy)o services have taken ofo genie coefficient: distance between rich and poor, measure of economic inequalityo China’s genie coefficient show that there is a HUGE gap, and it is getting worseProblem: unplanned rural to urban migration- examples: Brazil, Manila, Mumbai- hypothetical: move people out of agriculture into industry- Mao Era: didn’t do this, most people were still in the countryside by the end of the Mao Era- didn’t allow people to move a lot- Why? in poor developing countries, if you allow them to move freely, they will rush to the cities, and you get slums, favelas, unplanned urban growth, hard to regulate- Came up with Household Registration System to prevent this from happening- 1959-1976 Migration Lockdowno also simplified many other planning problemsHousehold Registration Card: keep people where they need to bestill important today, but really important up until 2000, getting less importantGrain Coupons: only work in the designated cityRural China- 3-4 million of villages by one count- 632,000 administrative villages today- conditions can be extremely diferent2 Different and unequal kinds of citizenship: Rural and Urban Mao eraUrbanites were members of a danwei (work unit)- job security- low price access to commodities- health care- pension and benefits on retiring- primary and middle school education for children- low cost housing- good jobs for children (depending on number of kids, education prospects, etc…)- social and cultural activities (free movie tickets, dances, etc…)- political activities were also organized by danwei- no private property claims to any of these things- everything controlled by stateRural fold were members of collectives/villages- none of the above subsidized benefits- kept housing (after redistribution under land reform of course)- access to land- access to some benefits when the collective/village prosperous enough- in the 1990s there was a huge shift, more on this later, people were able to purchase homes for very cheap pricesRural ConditionsUNDER MAO AND THE COLLECTIVES- paid through work point system- excessive time put into labor- grain production excessively stressed: grows 2.2% annually (just faster than population)- contradiction between high government demand and low price- government demanded it but people didn’t profit from it- people didn’t work very hard, no motivation- oil and fiber cannot keep pace with population growth- excessive time put into agricultural labor- little diversification or optimization in crops- this doesn’t match standard development modelAFTER 1978 IN THE HOUSEHOLD RESPONSIBILITY SYSTEM- family’s responsibility for land plots, get to make own decisions, keep profits- grain production shoots up to 4.1% annually- excessive grain- less time per crop- more diversification and optimization- occasional land redistribution but essentially land is a guaranteed right of rural residents- plots are generally small- agriculture is more productive and efficient- this is around the 1980s- land is not privately owned, occasional land distribution but not common and uneven- land is still owned by village- no clear policy about land redistribution- don’t really own it, but they can’t take it awayRESULT- in terms of productivity - China has higher wheat productivity than the US per acre, but uses 150 people for every 1 person in the US to do it- crazy labor intensive even though efficient- rural residents have housing and land- have subsistence food- families usually have more laboring members than needed for farming- rural residents have very little cash- what does this mean?- kids don’t need to work on the farm- extra labor, they have house, land, don’t have to worry about feeding everybody- EXTRA LABOR → lots of people power- demographics at the current moment (One Child Policy) creates even more extra labor- lots of adults who are laboring, productive- One Child Policy: lots of old people and lots of old people to take care of- right now they have a maximal number of people in the work force → real productive jump- not a lot of huge money drains, lots of savings, more investment, financing infrastructureand driving economic growth- this will all change about 20251978-1980s- how reforms started to open up possibilities for mobility- farmers’ markets and other small markets return- small shops, stands, and businesses open up to sell food and small goods, cheap goods- Township Village Enterprises begin to thrive- motor for developmentTownship Village Enterprise: late 1970s-1990s- where extra labor went- did not require big migration- going to nearby township factory- publicly owned by collective- privatized in 1996- golden age was between 1979-1996- from 28 million to 135 million employees- accounts for 26% of GDP in 1996- why so successful?- TVE’s reflected China’s true factor endowments- labor is dirt cheap for TVEs- state owned enterprises include really expensive laborers, a lot of subsidies for laborers- financed and owned by local governments: capital was cheap and available, taxes were light- filled niches and undercut state owned enterprises prices- planned economy can’t fill all niches- TVEs takes care of this- TVEs can undersell government made products- fills market niche and makes lot of money- once privatized, even more money is made- TVEs decline in existence- new labor pool looking for laborRemember that before 20th century rural China was highly commercialized- highly developed rural handicraft industries- produced luxury goods in the countryside that there was a great demand for - used their own supplies to create more specialized goods- grows really fast- examples: cotton, not just grown, New Years PaintingEconomic Growth/DevelopmentEconomic Security