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p Mao began to put through his economic conception by breaking up the “old framework" of the first five-year plan. He did so in the hope of whipping up the advance which was evident in the early years of the five-year period. Accordingly, the 1956 plan targets for capital construction and industrial production were sharply increased. In 1956 outlays on capital investments went up by 62 per cent, and the pace at which the peasant farms were collectivised was sharply increased. Whereas only 14 per cent of peasant farms in China were united in co-operatives in 1955, by the end of 1956, the co-operative sector already covered over 90 per cent of the peasant farms. Within a few months, the bulk of agricultural production and the handicraft industry was co-operated, while private industrial and commercial enterprises were converted into mixed state-private enterprises.

p However, there was no reason to regard the state-private enterprises, which were essentially a part of the statecapitalist sector, as a form of social socialist property in the means of production. As for the co-operative sector, which was hurriedly set up almost throughout the whole of agricultural and handicraft production, if socialist relations of production were to develop and to be solidly established in it, there was need to provide a corresponding material basis for the collective forms of economic operation, without which they could not be stable. It was impossible to do this while keeping the level of mechanisation of agricultural labour extremely low and without creating the conditions for ensuring the technical equipment of agriculture.

p Mao was apparently hoping that the favourable weather in 1955 would continue in the following few years, thereby ensuring good crops and helping to win the peasants over with more or less adequate incomes from the collective farms. However, his expectations were not realised. The last years of the five-year period—1956 and 1957—were marked by heavy crop failures. Far from increasing, the incomes of a sizable section of the peasantry were in fact reduced after they joined co-operatives. The situation in the social sector of the co-operatives became more complicated.

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p The attempt to step up industrial output likewise came to nothing: capital investments, scattered over an excessive number of construction projects, were largely frozen and shortages of the necessary raw and other materials developed. Serious disproportions appeared in the national economy. There were interruptions in the supply of consumer goods and food to the cities. This caused discontent and strikes were staged by workers and students in some parts of the country.

p Thus, the experiment which, it later turned out, was a peculiar dress rehearsal for the “Great Leap Forward" proved to be a fiasco. In the circumstances, it would have been wise to resume consistent fulfilment of the general line set out in 1953 and to correct the situation in agriculture by resorting to the economic instruments inherent in socialist production, enhancing the material incentives for peasants in developing the social sector of economy and by increasing state assistance to the co-operatives.

p While the possibilities were limited, they were still there: in the five-year period the growth rates of gross industrial output averaged 12.8 per cent (as compared with the planned 9.9 per cent). By continuing to give priority development to large-scale industry while making rational use of handicraft production to turn out simple farm implements and consumer goods, carrying out repairs and providing everyday services for the population, China could have built up her industrial strength at a relatively rapid pace, and allocated more and more money and machinery to agriculture. That was exactly what the 8th Congress of the CPC suggested for the second five-year plan (1958-1962). It said: “The value of industrial output . .. will be about double the planned figure for 1957 and that of agricultural output will increase by about 35 per cent."  [224•1 

p However, Mao’s hegemonistic aspirations induced him to ignore the realistic targets set by the congress and, despite the lessons of the unfortunate experiment in 1956, to advance a full-scale programme for even hastier economic development. This programme was approved by the 3rd Plenary Meeting of the CPC Central Committee in September 1957, 225 and adopted by the 2nd session of the 8th Congress of the CPC in May 1958 as the Party’s new general line. That year saw the start on the practical implementation of Mao’s new line, the “Three Red Banners" line, that is, the new general line, the people’s communes and the “Great Leap Forward”.

p This policy did not win unanimous support in the Party, and was opposed by those who favoured a realistic economic policy. Mao and his followers resorted to harsh measures in fighting their opponents. In 1955, Mao already levelled the charge of “cowardice” against those who did not accept the idea of stepped up co-operation in agriculture, while the realisation of the new line started with a political campaign aimed at routing those who opposed it. In the course of a discussion on “bourgeois law and distribution”, those who stood up for the principle of remuneration according to labour were declared to be advocates of “bourgeois corruption”, while the principle of levelling was strongly boosted; the population was invited to reconcile itself with the hardships that were allegedly inevitable because the country had to remain in a state of full alert; the armed border conflict with India was used to screw up nationalistic “enthusiasm”.

p In this political atmosphere a start was made on setting up the people’s communes, which Mao hoped would help carry the Chinese people into instant communism bypassing the socialist stage. Each commune was set up through an amalgamation of all the co-operatives of one or several districts and covered a territory with a population ranging from 25,000 to 100,000. Mao’s followers believed that the substitution of tens of thousands of communes for over 700,000 co-operatives would allow them to manage and deploy labour power and the means of production “in a unified way to ensure that they are used still more rationally and effectively...".  [225•1 

p The local organs of power were merged with the commune boards and were empowered to dispose of the peasants’ property, labour and the products of their labour. Rigid administrative control was established over each working man’s labour and leisure. The peasants’ house-and-garden plots, which in 1957 had on the average provided families with 27 per cent of their incomes, were confiscated.

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p This led to a reduction in rural living standards. Work on the fields or in the handicraft enterprises, which were a part of the communes’ social sector, yielded very little income for their members, first, because farms remained on a low level of development and second, because communes’ governing bodies were put under an obligation to increase accumulations to the utmost. In 1958, the accumulation of the state and the people’s communes came to 30 per cent of net agricultural output, that is, an increase of roughly 100 per cent over the average for 1953-1957. This was achieved by reducing the share of the product which went into personal consumption and which was in the main distributed in the communes on the levelling principle.

p The barrack-room atmosphere in the communes and the administrative control could not compensate for the peasants’ loss of personal material incentive in developing agriculture. Moreover, a large part of the manpower was withdrawn from agricultural production, because tens of millions of peasants were switched to industrial and building operations through the “labour armies”, which were set up at the same time as the communes, and worked under contracts concluded between the communes and industrial enterprises. Stripped of manpower in this way, agricultural production went into decline. While the crops were saved by the good weather in 1958, the crop failures in 1959 and 1960 showed that agriculture was in a very bad state and that the country was faced with massive famine. The acute shortage of foodstuffs, increasingly felt with the rapid population growth, forced the CPR government to fall back on grain purchases abroad.  [226•1 

p Mao had expected that the “Great Leap Forward" would help to boost agriculture, which had been switched to the commune system, and bring about unprecedented growth in production on the basis of a special type of “ industrialisation”. The idea behind this “industrialisation” was that the line of the priority development of large-scale machine industry, effected in the first five-year period, was supplanted 227 by the “walking on two legs" line, with equal emphasis on large-scale industry and on handicraft production. In actual fact, it was the latter that became the main source of industrial products. In order to enlarge it, 7.5 million small and medium-size enterprises were set up during the “Great Leap Forward" period (1958-1960). These were technically weak enterprises using the simplest equipment operated by tens of millions of peasants and urban dwellers lacking industrial skills and knowledge.

p This incredibly inflated handicraft and artisan production was urged not to confine itself to turning out consumer goods, carrying out repairs, etc., but also to take over, on a large scale, the functions of heavy industry, like the mining of coal, the casting of metal and the making of machinery and mechanisms for every branch of the national economy. Under the 1958 plan (which the Maoists soon declared to be “conservative”, without sufficient orientation on the production of the means of production), the handicraft industry was to produce over 1 million tons of standard pig-iron, 200,000 tons of steel, 18,000 metal-cutting machine tools, over 21,000 electrical machines, and 8,300 motors of different kinds.  [227•1 

p Mao’s followers promised the Chinese people that the establishment within a short period of an extensive network of small and medium-size enterprises covering every part of China would “inevitably result in: 1) quickening the pace of the nation’s industrialisation; 2) quickening the pace of mechanisation of agriculture...".  [227•2  The rate of acceleration, allegedly guaranteed by the growth of handicraft production, was fantastic. In the five years from 1958 to 1962, industrial output was to go up 6.5-fold.

p It very soon turned out that these calculations were groundless. The extremely low standard of equipment at the newly-established handicraft enterprises, the switch of many old enterprises of this kind to the manufacture of unaccustomed products, which deprived the workers of the possibility of using their old labour skills and which obliterated the distinction between them and the unskilled newcomers, 228 the disruption of the production, supply and marketing activity of the handicraft industry and of the management of its enterprises due to the hasty conversion of co-operatives into enterprises of local state industry and people’s communes—all this had disastrous consequences. There was a sharp drop in the output of consumer goods, while the means of production, to the making of which most handicraft enterprises had switched, turned out to be unfit for use. This meant the waste of vast financial and material resources and the labour of tens of millions of men. Only in the handicraft metallurgical industry, which produced substandard pig-iron and steel, the CPR suffered losses in excess of 4,000 million yuan. The overwhelming majority of the handicraft enterprises set up in the “Great Leap Forward" period had to be closed down because they were patently unprofitable and turned out low-quality goods. Only a small part of them were later remodelled.

p The “handicraft industrialisation" also hit agriculture, first, because it siphoned off large numbers of workers (from 25 to 50 per cent of the working population in rural localities), and second, because it prevented the development of irrigation. In the first five-year period, the state had allocated resources for the construction of large-scale irrigation installations, but in 1958 irrigation construction, an extremely vital element in China’s agriculture, was switched to handicraft operations. There, too, the line was to set up small installations which the peasants were to erect through their own efforts and pay for out of local budgets. On February 1, 1958, Jenmin jihpao reported that 100 million people were taking part in a mass irrigation movement. According to the Chinese press, in 1958 the irrigated area increased by 32 million hectares (as against an annual average increase of 1.5 million hectares from 1950 to 1955), and towards the end of that year covered 62 per cent of all farmland.  [228•1 

p However, in 1963, Jenmin jihpao reported that only onethird of all the farmland was being irrigated, with a large part of the irrigation system functioning badly or not at all.  [228•2  This means that the irrigation installations thrown up hastily 229 and in large numbers during the “Great Leap Forward" period, turned out to be useless, like the handicraft enterprises run in at the time.

p Thus, vast damage was inflicted on the national economy by the adventurist “Three Red Banners" line. It was disrupted. The people’s communes turned out to be an impediment to the development of production, so that the “Great Leap Forward" hurled it back instead of advancing it. The increase in the output of coal, pig-iron and steel in 1959 and 1960 turned out to be fictitious, because a large part of the products made by the handicraft industry was unfit for use. The years 1961-1962 were marked by a direct drop of production in the various lines of basic industrial products by something like 20 to 50 per cent. Instead of accelerating the development of the productive forces, the new line noticeably slowed down the country’s pace of industrialisation, hit its agriculture and worsened the material conditions and working capacity of the workers and peasants, the country’s chief productive force.

p The grave condition in which the economy found itself forced Mao into a partial retreat from the programme of the new economic line. In 1959, at the height of the “Great Leap Forward”, the 8th Plenary Meeting of the CPC Central Committee was forced to scale down the plan targets for the current year (from 525 million to 275 million tons for grain and from 18 million to 12 million tons for steel). The Plenary Meeting proposed that the production brigades in the communes (about the size of the old co-operatives) should be given more freedom to operate on their own, and that remuneration by labour should be restored. The decisions of the 9th Plenary Meeting in January 1961 and the 10th Plenary Meeting in September 1962 were even more drastic: they laid down the line, declared to be temporary, of “regulation, strengthening, replenishment and enhancement, with emphasis on regulation".  [229•1 

p This line provided above all for an abandonment of the priority development of industry and concentration of efforts on boosting agriculture. Handicraft blast furnaces and many other similar-type small enterprises were dismantled, and 230 construction of such enterprises stopped. The enterprises which continued to function were set the task of mainly servicing agriculture and turning out consumer goods.

p The decline in production during the “Great Leap Forward" created a grave financial situation; budget revenues fell short of the need to make large-scale purchases of industrial equipment abroad in addition to redeeming debts under old loans, and buying foreign grain and mineral fertilisers. The lack of funds was compounded by the consequences of the Great-Power chauvinistic attitude taken by the Maoist leadership of the CPC: it decided sharply to worsen economic ties with the USSR and other socialist countries, and deprive China of the possibility of using the extensive assistance which it had been receiving from these countries before; at the same time, the CPC leadership saddled the country with the intolerable burden of fabricating nuclear weapons, a goal that was dictated by hegemonistic considerations. All of this resulted in a sharp reduction of capital investments in large-scale industry (with the exception of the arms industries).

p The cut-back in appropriations for industry made it possible somewhat to increase investments in agriculture. At the same time, Mao and his entourage had to agree to some restoration of the principle of material incentive for working people and a return from levelling to distribution in accordance with labour, and some invigoration of commoditymoney relations. The communes were split up (their number increased from 24,000 in 1958 to 73,000 in 1965). They retained the functions of local organs of power through which the state continued to determine production plans and the volume of farm procurements, rates of food consumption by peasants, etc. But the role of principal production unit in the countryside now went to the small production brigades, economic cells similar in size to the productive co-operatives of the first five-year period (they usually consisted of 20-40 peasant households). The house-and-garden plots were returned to the peasants and they were permitted to sell the produce from their personal plots on the village markets.

p These measures helped to bring about a relative stabilisation of China’s economy. They were a forced concession on the part of the Chinese leadership to the Party members 231 and economic personnel whom life had convinced of the need to pursue a realistic economic policy. Their efforts were aimed at restoring the economy, disrupted during the “Great Leap Forward" period, and by improving industrial management to prepare the conditions for returning the economy to planned development. A conference of the State Economic Commission in 1965 discussed a set of instructions, formulated by Liu Shao-chi, concerning the economic measures to be taken to improve management in industry. Articles appearing >in the Chinese press in 1964 and 1965 dealt with the need for industrial co-ordination both within the individual industries and between industries, and the need to develop specialisation and co-operation under a single state plan.

p This tendency was clearly expressed during the discussion of production targets for 1965 by the State Conference on Industry and Transport. Among other things, its resolution said: “It is necessary to get rid of prejudices and not of science. There is need to act in accordance with objective reality and not on the basis of subjective desires. Production must be boosted, wherever it is possible, instead of blindly trying to do so where it is not possible. The boosting of production must be based on growing labour productivity, better management of production, the use of advanced techniques, the achievement and surpassing of international standards and improvement of co-operation between enterprises."  [231•1 

p However, Mao did not like this line, to say nothing of the growing influence of those members of the Party who backed it up. The Maoists built up their positions through the armymen who were appointed to the political departments set up to keep an eye on the Party branches of economic bodies. In the press they attacked articles calling for a common sense approach to economics and urged the “destruction of boundaries" and fresh “leaps forward”. This was their preparation for. the fierce offensive which they launched in 1966 against the advocates of realistic economic policies under the banner of the “great proletarian cultural revolution”.

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p This time, the political campaign against those who were, wittingly or unwittingly, encroaching on the Maoists’ dictatorship, assumed unprecedented proportions. Those who dared point at the unfortunate lessons of the past and try to introduce rational methods into economic management were branded as class enemies, and revisionist accomplices of imperialism. The Maoists began by denigrating the Party, government and economic cadres who disagreed or were suspected of disagreeing with Mao’s line, and then went on to dismiss them from office and execute many of them. Speculating on the political immaturity of young people and implanting in their midst a spirit of mindless adulation of Mao Tse-tung, his henchmen organised Hungweiping and Tsaofan detachments, which they used to break up Party and other social organisations.

p This political campaign was carried on in an atmosphere of growing chauvinistic intoxication and war hysteria, and it gave Mao and his followers a free hand in preparing for the next “leap forward”, which was announced by the llth Plenary Meeting of the CPC Central Committee in August 1966. Preparations were started for a fresh offensive on the living standards of the working people. From the end of 1966, it began to assume ever greater proportions, being advanced under the slogans of fighting against “economism” and the principle of material incentive which was declared to be “bourgeois”.

p The exploitation of the peasant masses was again intensified. Production brigades were put under an obligation to increase their deliveries to the state and to reduce the rates of personal consumption fixed for their members. In 1966, average food consumption among peasants (much lower than that for urban dwellers) came to roughly 200 kilograms per man a year for grain (including sweet potatoes and potatoes, in terms of grain) as compared with 229 kilograms in 1957, and 900 grams per man a year for vegetable oil, as compared with 1.25 kilograms in 1957. Over the next few years, the level of consumption for these and other foodstuffs in the countryside was further reduced. The personal consumption funds in the production brigades were reduced and were in the main—70-80 per cent— distributed on the levelling principle, under so-called guaranteed norms. Many peasants in fact found themselves 233 incapable of purchasing even these famine rations because of their extremely low incomes which were roughly half the average incomes in industry.

p The condition of the urban working people also sharply deteriorated. Housing and all construction for service industries fell into a state of complete stagnation, and in many parts of China it was officially wound up. The policy of “low and rational wages" was fully implemented; in 1966 and 1967, the bonus system of wages, which had been partially restored at the enterprises in 1960, was once again abolished, so that nominal wages among workers, engineers and technicians were reduced on the average by about 10-15 per cent. Real wages dropped even lower because of the growing prices of rice and other foodstuffs. The number of items being rationed was greatly increased (in 1968, ration cards were introduced even for laundry soap). A campaign was started that year to switch schools and public health establishments from the state budgets to maintenance by enterprises, city blocks and communes, all of which fell as an additional burden on the shoulders of the people.

p This time they put up more active resistance to the offensive against their living standards than they had done in 1958-1960. Industrial and office workers staged massive strikes in response to the reduction of their living standards.

p In many parts of the country, the peasants broke into foodstores, shared out the social funds. Numerous reports in the provincial newspapers testify to the massiveness of this action. Among the urgent tasks formulated by the “revolutionary organisations" of central agricultural and forestry establishments, this special point was made: “It shall not be permitted in any circumstances to share out seeds, feed, social accumulation funds, communal funds.. . . The seeds, feed, reserve grain, resources from social accumulation funds, from communal funds, and from production funds already shared out must be returned."  [233•1  In the countryside there was sabotage of agricultural operations, and this forced the Maoists to send regular army units into the rural localities.

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p Mao and his followers did not shrink from using armed force to suppress the massive protest, with the army being used as the main force to ensure implementation of their domestic policy. Following the “revolutionising” of enterprises and offices, and the establishment of the political department system, designed to exercise political control over the behaviour of industrial and office workers, the functions of such control were transferred directly to the army. By intensifying the barrack-room regime, sending demobilised soldiers to the enterprises, and using the armycontrolled Hungweipings and Tsaofans to put down the discontented working people, the Maoists expected to prevent social production from being disrupted. However, these expectations were not justified. The “cultural revolution" led to rampant anarchy, clashes between hostile groups at enterprises, distraction of working men from their jobs for participation in various political acts, and relaxation of management in production. All of this necessarily had an effect on the state of China’s national economy. While the Maoists did manage to safeguard the arms and to some extent the chemical and the oil industry from the effects of the “cultural revolution”, it did have a devastating effect on the other industries, including metallurgy and engineering. In 1969, steel output was down to 12 million tons from 13 million in 1966; coal extraction was down respectively from 245 million to 210 million tons. The coal shortage had an effect on electric power generation: 60,000 million kwh was generated in 1969 as compared with 70,000 million in 1966. In Wuhan, Kunming, Tsinan, Chungking and other cities electric power supplies to enterprises and homes were repeatedly interrupted. In early 1968, the level of production in Peking and many other industrial centres was only 40-50 per cent of the 1966 level.

p The normal operation of industrial enterprises was further disrupted by snags in transport. The transfer of Hungweipings and other “representatives of the revolutionary masses" from one part of the country to another (from the autumn of 1966 to February 1967, the railways carried over 20 million such unpaying customers), the disturbances and other armed clashes, the strikes—all this upset the railway timetable and kept some consignments of freight lie for months waiting delivery to the place of 235 their destination. China’s seaports operated with great interruption.

p The disruption of transport had an effect not only on industry but also on agriculture, because a large part of the chemical fertilisers was not delivered for use in good time. This factor was added to the disruption of agriculture, which was bred by the “cultural revolution”, the sabotage, and so on. The use of the army on the farms helped to prevent grain production from dropping sharply, and to maintain it on about the 1965 and 1966 level, but there was a drop in per capita output, which worsened the already poor state of food supplies.

The damage inflicted by the “cultural revolution" on China’s national economy will be seen from the following data characterising the changes in the principal indicators for the 1957-1969 period.

Unit 1957 1959 1965 1966 1968* 1969* ’000 National income mln yuan 83.7 150.9 125.0 137.0 125.0 131.0 Gross industrial out- put “ 70.4 163.0 122.0 135.0 120.0 130.0 Gross agricultural output “ 53.7 60.0 55.0 55.0 55.0 60.0 Total investments from budget “ 13.8 26.7 13.5 13.0 8.0 ____ Investments in in- dustry i> 7.2 20.2 6.5 6.5 4.0 ___ . Military expendi- ture (direct) »» 5.5 5.8 12.5 13.0 17.0 18-19

p * Preliminary estimate.

p These data show that the gradual edging up to the 1959 level, as expressed in the 1965-1966 indicators, was interrupted by the “cultural revolution”, which went hand in hand with abandonment of the “line of regulation" and a return to Mao’s economic line. This line had brought about a sharp decline in China’s economy during the “Great Leap 236 Forward" period, and in 1967 and 1968 led to a fresh decline, thus showing itself to be completely untenable.

p In a speech in August 1967 Mao was forced to admit that “we have had to pay a very high price for the present cultural revolution”. Alarmed by the economic losses, the Maoist leadership started in late 1967 to put through measures intended to clamp down on the Hungweipings and the Tsaofans, and to intensify the army’s control in the economic bodies and at the enterprises. The functions of economic organisation, once performed by the now-routed Party and government apparatus, were transferred to the “revolutionary committees" in’ which army representatives play the leading role, and which, the Maoists hope, will help them to make good the economic consequences of the “cultural revolution”.

In a speech before the Peking revolutionary committee in September 1967, Chou En-lai dealt with the matter of economic losses caused by the “cultural revolution" and gave this promise: “If the revolution succeeds, we shall make up for everything in six months.” Much more time has passed since then, but the “making up" has not quite succeeded. With the army’s help, the Maoists have stopped the decline in production, but military methods cannot help to solve the strident task of economic development. The rate of economic development has been heavily affected by the actual suspension of capital construction caused by the “cultural revolution”, and by the debilitation of the management and technical services at the enterprises because of the massive reduction in the number of specialists and the increase in the military outlays, which hamper the development of power engineering, transport and other industries producing bottlenecks in China’s national economy and acting as a drag on its development.