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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 be?

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 right away.

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 economies.

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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