APPENDIX B THE PRODUCTION-POSSIBILITY CURVE The production-possibility curve is a graphical device used to describe the alternative ways in which an economy can use its resources of land, labor, and capital. The curve illustrates the basic economic principle of scarcity; that is, the principle that an economy normally can increase its production of "guns" (heavy industrial goods) only at the cost of giving up some of its production of "butter" (consumer goods). In the diagram below, the annual production of guns is measured on the vertical axis and the annual production of butter on the horizontal axis. Each point on the curve represents an alternative combination of guns and butter that the economy has the capacity to produce with its particular package of resources. Guns B 4 Butter Figure 7. Prototype Production-Possibility Curve The lettered points in the diagram represent three distinct situations: (1) At point A, the resources of the economy are fully employed in producing a certain combination of guns and butter. A movement from point A to point B represents a movement along the production-possibility curve, that is, the production of additional units of guns at the cost of giving up some units of butter. (2) At point C, the economy is operating inside its production-possibility curve. A portion of its resources lie idle. By moving northeastward from point C to point D on the curve, the economy can obtain both more guns and more butter. (3) A movement beyond the production-possibility curve, from point E to point F, also permits the production of both more guns and more butter. This movement would be possible if the whole curve shifted out because of additions to the economy's resources, such as The reclamation of barren land; An increase in the average skill of the labor force; A rise in the level of technology; or Improvements in economic planning and management. ADDITIONAL CONSIDERATIONS This brief discussion of the nature of the production-possibility curve should be supplemented by four comments which are relevant to the main body of the paper. First, the very process of economic development may be viewed as a continued shifting outward of the production-possibility curve. Second, the curve may be presented on either an aggregate or per capita basis, an important distinction in Malthusian countries like China where population increases eat into the margin for economic growth. Third, since the definition of the productionpossibility curve assumes a normal work pace and a regular schedule for maintaining and repairing capital equipment, an economy may temporarily operate at a point beyond the curve through working its labor force overtime and deferring the maintenance and repair of equipment; this was the case in China during the Great Leap Forward. Fourth, the simple production-possibility curve of this paper divides output into two classes only-guns and butter-whereas the division of guns (heavy industrial goods) between military output and industrial investment is also of fundamental importance to the PRC's economic strategy; in this regard, as argued in the body of the paper, Peking has succeeded in expanding and upgrading the quality of both its military establishment and its industrial production facilities; in similar fashion, one could further subdivide the allocation problem, for example, the division of investment resources between the expansion of basic steel capacity and steel-finishing capacity, or the division of land resources between grain acreage and cotton acreage. APPENDIX C SOURCES OF INFORMATION ON THE CHINESE ECONOMY A considerable quantity and variety of information exists on the Chinese economy. Some of this information is precise and trustworthy, some is vague and dubious. On the whole, this information enables the economic observer to piece together a good general picture of policies and trends in the economy and to make reasonable estimates of major national aggregate figures. FOREIGN TRADE AN OPEN BOOK One of the key sources of information on the economy of China is the foreign trade data released in varying detail by most of China's trading partners. Some 80 percent of China's trade is with the non-Communist countries, and the more important of these trading partners publish great sheaves of trade data. The Soviet Union and some of the Communist countries of Eastern Europe also publish details of their trade with China in their annual trade handbooks. Since China depends on the outside world for equipment and technology at the “leading edge" of its industrialization process, this valuable information on foreign trade furnishes the analyst with insights on the capacity and level of technology in various branches of Chinese industry. In some circumstances, the level of imports of wheat and chemical fertilizer also are important clues to the state of the agricultural sector. TEN GREAT YEARS The economic releases of the Chinese Government itself are a second important source of information. In the 1950's the new regime adopted wholesale the accounting and statistical practices of the U.S.S.R. An increasing volume of information, including claims for the production of several dozen major commodities, was published during the First Five-Year Plan (1953-57). Unfortunately, the embryonic statistical system was among the casualties of the Great Leap Forward when "politics commanded economics." The most startling example of statistical malfeasance was the publication of the claim that grain production had doubled in 1958 to 375 million tons compared to 185 million tons in 1957. In August 1958, this claim was slashed by one-third, to 250 million tons. The actual figure was probably about 200 million tons. Whereas the figures for early years were subject only to the normal bias of the Soviet-style statistical system (notably the lack of independent checks by disinterested and adversary parties) and the growing pains of a new statistical organization, the figures for 1958-59 were often grossly distorted. With the collapse of the Leap Forward, a statistical blackout was imposed, and practically no aggregate national economic figures appeared for a decade. The indispensable reference source for the 1950's is the handbook compiled by the State Statistical Bureau, Ten Great Years, which gives detailed statistical claims for 1949–58. 29 The statistical base of the 1950's has been fading into the past, and judgments and extrapolations based on the Ten Great Years have become increasingly fragile. Nonetheless, the student of China's economy is far better off than he would be in the absence of the data released in this period. READING BETWEEN THE LINES The Government economic releases in the 1960's were low-grade ore, confined largely to adjectival claims and a few percentages of unclear parentage. The follower of the Chinese economy had to read between the lines. For example, when the Chinese press reports "excellent to bumper" harvests in six Provinces and then commends the peasants in a seventh Province for a stout fight against floods and insect pests, the reader can conclude that things are going pretty well in six Provinces and are in woeful condition in the seventh. Or if a Prov 29 The subtitle of the volume is "Statistics of the Economic and Cultural Achievements of the People's Republic of China." The Chinese edition was published by the People's Publishing House of Peking. September 1959. An English-language edition was published by the Foreign Language Press in Peking in 1960. ince is reported as being "basically self-sufficient" in grain, this means it is not self-sufficient in grains. The experienced reader also knows that claims of percentage increases in industrial production usually go down, the longer the periods being compared. For example, industrial production in Nan-ching (Nanking) in the first 3 months of 1971 was said to be 47.2 percent above the first 3 months of 1970; for the first 8 months, 36.8 percent above the first 8 months of 1970; and for the first 9 months, 30+ percent above the first 9 months of 1970. As to living standards, claims of improvements must also be generously discounted. Whereas the cumulative impact of the claimed improvements would have meant a substantial rise in well-being over the past years, other evidence shows that the per capita availability of food and the level of rations is roughly the same in early 1972 as it was 15 years earlier in 1957. A strange breach in the Government's policy of carefully managing information occurred during the Cultural Revolution when warring factions of Red Guards put up wall posters to support their respective positions. Until suppressed, these wall posters washed a lot of dirty linen in public. The subject matter was usually polemical politics rather than hard economic data. Nonetheless, the posters helped to identify the economic disruptions of the Cultural Revolution and to clarify the disputes over economic policy. The statistical blackout was partially lifted in late 1970 when Premier Chou En-lai gave several national aggregate figures for 1970 to the visiting American writer Edgar Snow. Beginning in 1970 and continuing through 1971, the official press published a growing number of percentage claims and even a few absolute figures, such as the amount of sown acreage. In November 1971, Vice-Premier Li Hsien-nien, as described in section IX of this paper, gave an unprecedently frank account of the alternative numerical estimates of the Chinese population held by different government bureaus. Finally, at yearend 1971, Peking published percentage claims of substantial gains in production of a dozen major industrial items as well as two absolute claims-steel, 21 million tons, and grain, 246 million tons. Prospects for 1972 are for a continued easing of the statistical blackout and even for a major breakthrough, such as the publication of details of the Fourth Five-Year Plan. VISITING FIREMEN A third source of information is the eyewitness reports of refugees and of journalists, businessmen, technical people, and other visitors to China. The visitors are normally persons who are favorably disposed toward the regime. The economic encomiums of an Edgar Snow or a Han Su-yin need to be taken cautiously and to be contrasted with the sour views of the occasional skeptic who slips through, like Jacques Marcuse, the permanent correspondent of the Agence France-Press in Peking, 1962-64. In The Peking Papers, Marcuse tells of his efforts to penetrate behind the official claims of universal success in production and universal popular support for Mao's policies. Since the recent thaw in United States-China relations, a few American reporters and academics have spent several weeks in China and have added a new dimension to the outside appraisal of Chinese economic developments. 30 Travelers, especially those who visit China at intervals, are able to supply information on such matters as the food supply and the pace of industrial construction. The parlous state of the economy in 1960-61, for instance, was confirmed by travelers who for the first and only time since the revolution saw widespread malnutrition in the populace. The Japanese are by far the most numerous travelers in China and have the advantages of cultural, linguistic, and physiognomic kinship with the Chinese. Recently a growing number of Americans of Chinese extraction have visited China and have reported their impressions on living conditions." Most travelers are confined largely to tourist routes and show places; nonetheless, they are now so numerous and variegated that reports of their experiences in the public press can contribute to an understanding of what's going on in China. Visitors with special background and entree, such as Audrey Topping and John S. Service,32 give especially interesting details on the attitudes of the leadership toward economic development. 30 New York, Dutton, 1967. Marcuse comments on the frustrations of the permanent foreign correspondent in Peking who is faced with the problem of interpreting China to his readers through studying the official press and attending briefings by official spokesmen. The attempt to make sense out of this raw material drove the correspondents to a permanent state of roaring mirth, according to Marcuse. "It was like watching a film version of Orwell's 1984 starring the Marx brothers" (p. 11). 31 New York Times. Dec. 20. 1971, p. 20. 32 See Audrey Topping. "Return to Changing China." National Geographic, December 1971, pp. 801-833, and the four articles in the New York Times, Jan. 24-27, 1972, by Service, who gives an incisive account of the new egalitarianism in China. Refugees come mainly from Kwangtung province and are thus a geographically biased sample. Furthermore, they are a special group, namely, those with a reason and an opportunity for fleeing. Refugees are valuable in furnishing grubby details on how the Communist system works, for example, how the sharing-out of the commune's net income is accomplished at the end of the year. SOVIET ANALOGIES A fourth source of information is from Soviet analogies. The majority of the major heavy industrial plants in China were either built or planned under Soviet auspices. Until recently, the output of the Chinese armaments industry was made up almost entirely of Soviet weapons or of Chinese modifications of Soviet weapons. A large number of middle-level economic officials either were trained in the Soviet Union or on the job by Soviet instructors resident in China. As a result, estimates of the cost, productive capacity, and certain of the production methods of many Chinese industrial facilities may be made with considerable confidence. SCHOLARLY APPRAISALS A fifth source of information is the result of scholarly research on the Chinese economy. An example of a thorough and thoughtful appraisal of the Chinese industrial scene is Prof. Barry M. Richman's Industrial Society in Communist China.33 Professor Richman draws on his long experience as a management consultant in the United States, the U.S.S.R., and India to compare the workings of management and the welfare of employees in the four countries. When visiting China, Richmand had access to more industrial plants and more management spokesmen than perhaps any other visiting management expert has had. Although directed to the problems of the society as a whole, Prof. Ezra F. Vogel's Canton Under Communism is topnotch in giving a feel for the way in which the Communist system deals with the problems of economic organization in one large city (Canton) and one populous province (Kwangtung). Professor Vogel correctly argues that the organizational patterns and responses-such as the succession of "campaigns" and the problems they pose for local officialsseen in his microcosm apply to China as a whole.35 LIGHT AND SHADOWS To sum up: The best economic information on China is on the foreign trade sector. Information on economic policies and general economic trends is good, whereas information on the absolute value of economic aggregates―population, GNP, and national output of major industrial and agricultural products-is subject to a considerable margin of error. Even though production of military goods is closely held by the Government, enough information is available from foreign trade data, Soviet analogies, and other sources, to identify general trends. Information on living standards is fairly good; information on the attitudes of the Chinese people toward these living standards is necessarily vague and speculative. The general opening by China of diplomatic and commercial relations with the outside world, together with the publication of an increasing amount of hard economic information in the official press, suggests that the flow of economic information will increase substantially in the next few years after the statistical drought of the 1960's. 33 New York, Random House, 1969. 34 Cambridge, Mass., Harvard Press, 1969. 35 For an up-to-date and informative appraisal of the Chinese economy by a Soviet writer, see M. Sladkovskiy, "The Maoist Course Toward Militarization and Its Consequences for the PRC Economy"; Moscow, Voprosy Ekonomiki, Russian, No. 11, November 1971, pp. 71-83. 76-508 0-72-5 CULTURAL REVOLUTION: IN SEARCH OF A MAOIST MODEL By EDWIN F. JONES I. INTRODUCTION-POLICIES AND POLITICS Over the past 23 years the PRC has initiated a significant process of economic development. A self-sustaining dynamics of growth has been established, as the PRC has acquired the capacity to save, invest, and develop its technology and human resources. The government accepts the fostering of economic growth as a central objective, and the people are conditioned to participate in and adjust to the imperatives of economic growth. Still, economic growth has been erratic. Rapid growth has been the norm, but it has been periodically disrupted by political upheavals. The result has been a rather low average growth rate, as shown by the following data (average annual GNP growth rates 1): The PRC has argued that these political movements were necessary to secure an egalitarian and dedicated revolutionary society, but the cost should be noted. Had the PRC maintained an average annual growth rate of 8 percent, or even 6 percent, over the 19 year period, its per capita GNP would be double or half again higher, respectively, what it is today. It is difficult to speak of a Chinese model of development, for the PRC has followed varied economic strategies. At first, Chinese leaders hoped over an 18 year period to follow the path and pace of the USSR, which in its initial industrialization raised the urban share of the Soviet population from 18 percent in 1926 to 33 percent in 1938. In China the lack of a farm surplus and Stalin's refusal of massive credits at the 1952-53 aid negotiations dashed these hopes. The USSR did, however, agree to support a respectable industrial program paid for currently through Chinese exports, and during 1950-57 the PRC employed a modified Soviet model, adopting Soviet organiza 1 See Ashbrook, supra, p. 5, for GNP estimates. |