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Week 8 - Emerging Economies India and China, Negative:, image, image,…
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- Big Push Industrialisation 80% investment in heavy sector
- Command Economy all was centrally plan
- Underinvestment in agriculture (Output 51% to 28%)
- The great leap forward (1958-1961)
People's communes - were used to mobilise labour backyard furnaces
Outcomes:
Postive - China had a strong industrial base (Industrial output grew at 11% a year)
Life expectancy and literacy rates increased
Foundation for future reforms was laid.
Negative: Instability and food security
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- Gradual movement to free market system
- Moving away from planned economy
1st phase - Rural Reforms
Household responsibility system - increased output by 1/3
Dual track - they had to sell a certain amount at the fixed planned economy price and then the surplus at whatever they wanted
TOWN AND VILLAGE ENTERPRISES TVE
- set up by the local governments to create non-rural jobs freed from the freed up agriculture.
SPECIAL ECONOMIC ZONES
- Were opened up to free trade
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- removed the dual track system
- Small state firms were privatised and larger ones were given hard budget constraints
- State output fell to 30% by 2000s
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The reason why China was able to grow so rapidally is because it was able to break down the barriers that stopped it from growing
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Kotawal et al (2011) - Tariffs were up to 200% and a general open license was needed for other items
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Kotawal et al (2011) - argue that the license Raj was dismantled in 1991 and many restrictions were taken away
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The reforms in 1980s were pro-business and the reforms in 1990 were pro-market (Rodrik and Soboninam)
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- They claim that the 1980 reforms changed animal spirits and made people work more and TFP growth increased by 2.5%
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