Following the period of economic recovery from 1949 to 1952 and a subsequent land reform (“New Democratic Politics”), the first Five Year Plan comprising a series of command economy adjustments was implemented between 1953 and 1957. In 1955–56, China was effectively a mixed economy. Only after this did we see the start of the top-down creation of collective production units in rural areas that later entered the history books as people’s communes. From then on, in the cities, companies became government-steered production plants, while the decision making took place in sector-specific ministries. Thus, individual business considerations were to be replaced by a focus on the national economy.19
Following a failed national campaign (the Hundred Flowers Movement), the Great Leap Forward20 was announced in 1958. This was aimed at increasing the party’s influence and accelerating industrialization but ultimately resulted in a withdrawal of human and material resources from agriculture, which culminated in a catastrophic, primarily rural, famine, further exacerbated by natural disaster. As a consequence, within the apparatus of power, the group in allegiance with Liu Shaoqi grew in strength. In contrast to the voluntarist policy of the mass lines, this group emphasized material incentives, profit as a measure of success, and the expansion of markets. This policy was later described as a version of the Soviet Union’s “New Economic Policy.” The group backed agricultural development and, within companies, supported the managers over the party committees. After a new growth phase, the Cultural Revolution from 1966 to 1976—with its power struggles between the different factions of the CCP and accompanying mass unrest and military mutinies—ultimately heralded a period of political instability and economic paralysis (see Leys 1972; Dittmer 1987, 77–107; Unger 2007; Walder 2015).
Because of their importance as prerequisites for the subsequent reform policy under Deng, I will now provide a more detailed description of the emphasis on industrial upgrading (1) and the structure of the Maoist command economy (2):
(1) Central to the Maoist developmental state was, in the main, a “Big Push” development strategy, which prioritized the expansion of heavy industry (including arms production) at the cost of consumption (J. Lin 2009, 82; Saich 2004, 241). The country’s profitable production plants provided the central state with considerable resources, which this fiscal authority, in turn, used to advance further industrialization.21
As in other developing countries, this was accompanied by a transfer of the surplus product from rural areas to the cities or rather to industry, which became a catalyst for social conflict (Aoki 2011, 19). Naughton refers to a key crisis mechanism that prevailed during this period of industrialization: “Every time the system really began to accelerate, it ran into fundamental problems. The economy would overshoot and hit its head on the ceiling. What was this “ceiling”? The ceiling was the inability of agriculture to rapidly generate adequate food surpluses, combined with the weak capacity of the system to generate productive employment for its abundant labor” (Naughton 2007, 79).
Land reforms and collectivization resulted in relatively egalitarian income distribution in the countryside (at the lowest level), which, at the same time, was juxtaposed with a privileged cadre group that had amassed all political power. The urban-rural divide was consolidated with the establishment of the hukou system in the 1960s: a strict system of household registration that ascribed people with a rural or urban residency status.22
As in the countryside, the CCP also promoted social homogenization in the cities. This was, however, in contrast with the privileges of the party cadres.23 The emerging danwei system, which involved the creation of an urban work and life unit encompassing place of employment, hospital, school, administration, and cultural services, at the same time also guaranteed bonuses for sections of the industrial working class. However, the significance of the danwei could not be reduced to an instrument of control: it also had economic, political, and social functions including a paternalistic role (acting as a type of substitute family), and, in addition, it provided identity (Heberer 2008, 94–98).24 At the same time, the All-China Federation of Trade Unions (ACFTU) was ascribed the role of an arm of the party within companies. The ACFTU was subordinate to the national goal of development of productive forces: “The general direction was definitively established in a 1948 report by Chen Yun in which he proclaimed a policy of ‘developing production, making the economy prosper, caring for both public and private, benefiting labor and capital’ for trade unions in liberated areas…. In order to do this, union leadership exhorted the working class to distinguish between ‘short term’ and ‘long term’ interests, i.e. to sacrifice immediate economic and political advancement for the good of the nation” (Friedman 2011, 48).
In 1950–51 and 1956–57, for example, labor disputes and worker discontent resulted in factions of the ACFTU distancing themselves from this position politically. However, these disputes were suppressed by the party and state leadership as “economistic” or “syndicalist” tendencies.25
Some authors have compared the industrial system during this period with the authoritarian structures of the twentieth-century war economies in the capitalist West: “Individuals were asked to sacrifice for the common national cause during speed-up-production mass mobilization campaigns that swept the nation one after another” (A. Chan and Unger 2009, 7; see also Walder 1986, 85–122). The country’s limited material development combined with Mao’s collectivist practices created a factory regime that can be referred to as a type of “bureaucratic despotism” (Burawoy 1985, 12). In terms of ensuring particular levels of performance, as in the early capitalist period of “market despotism,” coercion predominated over consensus. This resulted in workplace conflicts, even before the Cultural Revolution (Unger 2007).
However, certain segments of the working class profited from the focus on industrial development: in key sectors, the industrial labor force in state-owned enterprises26 in particular benefited from social security systems, unlike workers in the collective enterprises (C. Lee and Selden 2007).27 Anita Chan thus sees similarities between the Chinese danwei work unit system and the lifetime guarantee of employment in Japan’s bureaucratic-paternalistic postwar system (A. Chan 2006, 93).28
(2) To a large extent, the structure of the command economy was based on China’s regionalized national economy. After 1949, there was frequent friction between the provinces and/or between the provinces and the central state. In the 1950s, the central state leadership deemed it feasible to make the country’s individual regions into autonomous economies (“running on their own steam” as it were).29 This position in favor of a regional autonomy was also fed by fears of serious geopolitical clashes on China’s external borders as well as by the Maoist voluntarist tradition of making a virtue of necessity. The ultimate result of all this was a plan anarchy.
On the one hand, we had the state’s attempt, using the tool of “material balance planning” (Naughton 2007, 61), to issue commands assigning specific production targets to companies and allocating resources and goods among the different economic entities. Within the national planning organization, the allocation of planning responsibilities among the various sectoral ministries was fundamental, and the Coal Ministry (and indeed other sectoral ministries) had its own planning office. In order to ensure coordination both between the sectoral ministries and the provinces and to draw up a national plan (based on the orchestration of regional and national plans), the State Planning Commission, which was under formal control of the Chinese State Council, was assigned a key role (Lieberthal and Oksenberg 1988, 63–72, 137–45). Consequently, prices lost the function of regulating supply and demand. Furthermore, the monetary and financial system served primarily to develop the command economy, not to finance private investment (Jinglian Wu 2005, 217–19).
On the other hand, unlike the USSR but, to some extent, similar to its Eastern European vassal states, the planning system in China was less centralized and less tightly controlled, however (see Lieberthal and Oksenberg 1988; Lyons 1990).30 What Kornai referred to as “plan bargaining,” which prevailed in the countries of the Eastern Bloc, was a particularly