Home Political science Dancing with the devil : the political economy of privatization in China
Socialist Transformation and the Mao Era
The acceleration of “socialist transformation” during the mid-1950s was not what CCP leaders had planned for.  The drastic change in strategy was probably due to a number of developments after the revolution (MacFarquhar and Fairbank 1987; Riskin 1987). Euphoria from the success in economic recovery and political power consolidation in the early 1950s boosted Mao’s confidence in the ability of the new state to push through fundamental social transformation sooner and deeper than anticipated. Power struggles within the CCP and growing tension with the Soviet Union might have driven Mao to step up the effort to eliminate private ownership so as to showcase the “superiority” of his radicalized view of socialist development. Depriving citizens of independent means of living for the purpose of behavioral control (Schurmann 1968; Walder 1986), which Mao emphasized and many CCP leaders felt an accentuated need for after becoming rulers, was another possible contributing factor.
It should be noted, however, that the end of the 1950s did not see a complete elimination of private ownership in China. Owners of private companies that had merged with public enterprises during the socialist transformation continued to receive a fixed dividend (at 5% of their equity shares) annually until September 1966—four months into the Cultural Revolution (Fei Kailong and Zuo Ping 1991, 85-86). More importantly, despite the overwhelming dominance of the danwei (work unit) system institutionalized in urban China at the end of the 1950s (Lu and Perry 1997; Walder 1986), the government was unable to provide full employment to all work-age urban citizens. During the 1960s and 1970s, a small number of urban citizens were allowed to be self-employed as supplementary providers of urban services (Fei Kailong and Zuo Ping 1991). Among the activities that they undertook to earn a meager living were repair services (e.g., for bicycles, timepieces, radios, and various household appliances), personal services (e.g., hair cutting, tailoring, furniture making, etc.), sanitary work, and recycling. They were closely monitored by local offices of the State Administration for Industry and Commerce (SAIC). Their income was unstable and, for housing and other basic social service provisions, they had to rely on family members who held regular jobs in government-controlled work units. Their self-employment was irregular too, and many of them were absorbed into SOEs or urban collectives when additional vacancies opened up.
In rural areas the people’s communes were organized to produce agricultural output according to government plans. Grain was the most important product. But in most farming communities each family was allotted a small plot of public land, known as ziliu di (land set aside for self-use), to produce supplementary food items (vegetables, fruits, pigs, chickens, etc.) for consumption by household members. Despite collectivization of farmland, housing remained privately owned as part of the means of living, though it was illegal to sell private housing or use it for profit making. Unlike the urban sector, however, rural communities were not given formal allowances for self-employment. Four types ofprivate economic activities nevertheless struggled to persist under the commune system (Fei Kailong and Zuo Ping 1991).
Some rural residents sold part of the produces from ziliu di to gray (with organizational buyers) or black (with individual buyers) markets in urban areas. Some—especially those in areas with scarce farmland—drifted away from their home communities to urban areas (where they had relatives and/ or acquaintances through communal ties) to take up illicit odd jobs in construction and transportation, to peddle farm produces and/or handicraft products, or to provide various repair or personal services. Still some others made small sums of money by illegally obtaining and selling products (especially consumer goods) that were in short supply at state-controlled rural distribution outlets. Such activities were labeled touji daoba (speculative buying and selling) and faced periodic crackdowns by the government. In addition some rural nonfarm organizations, known as commune and brigade enterprises, broke the rules and farmed out part of their work to individual households with private wages, as will be discussed in chapter 5.
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