August 20, 1987
"China's Economic Great Leap Forward"
San Jose Mercury News
By Timothy Taylor
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IF Botswana, China and Cameroon are the answer, what can the question possibly
According to figures released by the World Bank, those three countries had
the fastest economic growth rates in the world during the five years from 1980
to 1985. Botswana averaged 12.1 percent economic growth per year, China averaged
9.8 percent per year, and Cameroon averaged 8.6 percent per year. If I had been
asked, China might have been about my 10th guess. I would have had to run down
the membership roster of the United Nations to come up with the other two.
Unfortunately, two of these success stories don't seem to have any useful application
for the other less-developed countries of the world. Botswana is a country in
southern Africa that's about as big as California and two-thirds of Oregon, but
has only about a million people. They got rich because they discovered diamonds.
Cameroon is a country in "equatorial" Africa (as the guidebooks say)
that is about the size of California and one-third of Oregon, but has about 10
million people. They grew mainly because they discovered oil. So while everyone
who was getting edgy worrying about Botswana and Cameroon can now relax a bit,
these countries don't offer much of a policy lesson. The World Bank or the International
Monetary Fund can hardly turn to an impoverished developing nation and say: "Go
out there and dig until you hit something valuable."
China is an entirely different case. About 5 billion people inhabit all the
nations of the world; 1 billion of them live in China. Its economic success in
the 1980s may be the best (it's surely the biggest) news the world has had during
that time. Further, it holds powerful lessons for all the less-developed countries
of the world.
In 1980, those 1 billion people in China shared an economy of about $270 billion,
which is slightly smaller than the size of the economy that a mere 26.3 million
residents of California also shared in 1980. By simple long division, the Chinese
economy offered only $270 for the average person in a year. A few countries were
worse off -- Ethiopia, Nepal, Zaire -- but not many.
China certainly appeared to be a hopeless case. Too many people, not enough
land, and no imminent discoveries of diamonds or oil to come to the rescue. That
gloomy conclusion meant that one-fifth of the people in the world were trapped
in poverty with no prospect for improvement.
But under the leadership of Deng Xiaoping, China did two things that less-developed
countries rarely do. First, it offered farmers a chance to sell all that they
could produce at the market price, and the agricultural sector boomed as a result.
Most developing countries pass laws to keep the price of food low to help politically
powerful urban food consumers. As a result, they succeed in hobbling and destroying
their own farm sector.
Second, instead of following the pattern of developing countries that put their
money into huge, visible and prestigious projects that turn out to be economically
foolish, China encouraged small-scale production and light industry, which limits
the costs of the inevitable failures and provides productive jobs and useful products
Mainly as a result of these freer market policies, the Chinese economy expanded
60 percent in five years, directly helping many of the world's most needy people.
Every developing country has it in its power to let the marketplace provide incentives
to farmers and small industry, if the leadership in those countries can give up
their insistence on keeping a strong hand (in fact, a stranglehold) on their national
If the United States had tried to raise Chinese living standards a comparable
amount during those five years simply by sending aid, this country would have
had to have sent China an average of $90 billion a year, and continue that aid
to keep living standards just as high in the future. For perspective, total U.S.
government assistance to all developing countries in 1985 -- counting all grants
and loans given bilaterally or multilaterally -- was only a little over $10 billion.
China remains terribly poor, like too many other places around the world in
Africa, Latin America and Asia. But its emergence as a star economic performer
is demonstrating clearly that less-developed countries have far greater power
to change their own situation than the developed countries have to change their
situation for them.
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