[MUSIC]
Let's look at China's political economy on the eve of reform,
which really is sort of the end of the Mao era.
So, first, if we look at rural China and the status of agriculture,
what we find is within China's countryside,
there was really limited support for collective farming.
There were some and we'll talk about it when we talk about de-collectivization.
But particularly in areas where the famine had been very strong,
Anhui, Sichuan, Hunan, those kinds of areas, the support for
collectivization and for the collective farming was really quite weak.
In the 50s, all private firms in the countryside,
including hotels that had been set up, restaurants, food companies,
feed companies, grain stores, all of them had been collectively owned after 1956,
and so on the eve of reform, they were still collectively owned.
What we also found is that very sharp constraints on off-farm labor.
That means villagers could not go into the cities.
They couldn't do various kinds of orchards,
different kinds of things that did not involve planting.
And there was a heavy emphasis on grain production and
grain self-sufficiency, so there were really quite limited forms of crops.
And this really meant that the income for farmers and
any opportunity for income and growth outside of farming was extremely limited.
And we actually know now that in 1976, on the eve of the reform,
the possibility of famine had begun to re-emerge in Sichuan and Anhui Province,
which were two of the provinces that had been hit so badly during the great famine.
We also saw an urban bias,
which is actually quite interesting because many people would
have thought that Mao's policies would have favored the countryside.
But growth in the countryside was really agricultural growth, was really on average
only about 2%, for much of this period, it wasn't so terrible.
But it certainly wasn't enough to drive the economy.
A second component of this bias was what's known as China's Hu Kou system.
Hu Kou meaning a household registration system.
And some scholars have referred to it as China's own kind of apartheid system
where the peasants were relegated to the rural areas and
their income had to come from the rural area.
They were not allowed to go into the cities, they were not allowed to work in
the cities, and this really favored urban workers over rural workers.
And the bias was really quite extensive.
It included subsidized grain for people in the cities.
Food was cheaper.
Housing prices, the rents were very, very cheap.
When they retired, the state-owned workers all got benefits.
Peasants didn't get that kind of thing.
The schools were better in the cities than they were in the countryside.
So the urban youth could get promoted and get better educations.
Public healthcare, there was a good coverage in the city.
There was some coverage in the countryside.
But really, public healthcare was better in the cities.
The doctors, the hospitals were all better in the cities.
And the large state on enterprises worked as a kind of welfare unit
where they subsidized, supported, ran all kinds of programs for
people who worked in those enterprises.
Now, in terms of industry on the eve of reform,
there was really an over-investment in heavy industry, and
this had really gone back to the 1950s when China copied the Soviet model.
