cancel
Showing results for 
Search instead for 
Did you mean: 

The Secret Agreement that Revolutionized China

Author
Author
0 0 172

Originally posted on January 20, 2012.

 

In our first chapter on growth Tyler and I illustrate the importance of property rights with the incentive effects of collective farming and the secret agreement of Xiaogang village. We write:

 

00142ad54b730bc0ee3d02.jpegFarmers of households from Xiaogang signed a secret life-and-death agreement with their thumprints. (From Cowen and Tabarrok, Modern Principles: Macroeconomics)

The Great Leap Forward was a great leap backward – agricultural land was less productive in 1978 than it had been in 1949 when the communists took over.  In 1978, however, farmers in the village of Xiaogang held a secret meeting.  The farmers agreed to divide the communal land and assign it to individuals – each farmer had to produce a quota for the government but anything he or she produced in excess of the quota they would keep.  The agreement violated government policy and as a result the farmers also pledged that if any of them were to be killed or jailed the others would raise his or her children until the age of 18.

The change from collective property rights to something closer to private property rights had an immediate effect, investment, work effort and productivity increased.  “You can’t be lazy when you work for your family and yourself,” said one of the farmers.

Word of the secret agreement leaked out and local bureaucrats cut off Xiaogang from fertilizer, seeds and pesticides.  But amazingly, before Xiaogang could be stopped, farmers in other villages also began to abandon collective property. In Beijing, Mao Zedong was dead and a new set of rulers, seeing the productivity improvements, decided to let the experiment proceed.

 

For more background, NPR’s Planet Money has a great story on this secret agreement including this:

“Back then, even one straw belonged to the group,” says Yen Jingchang, who was a farmer in Xiaogang in 1978. “No one owned anything.”

At one meeting with communist party officials, a farmer asked: “What about the teeth in my head? Do I own those?” Answer: No. Your teeth belong to the collective.

In theory, the government would take what the collective grew, and would also distribute food to each family. There was no incentive to work hard — to go out to the fields early, to put in extra effort, Yen Jingchang says.

“Work hard, don’t work hard — everyone gets the same,” he says. “So people don’t want to work.”

…Before the contract, the farmers would drag themselves out into the field only when the village whistle blew, marking the start of the work day. After the contract, the families went out before dawn.

 

“We all secretly competed,” says Yen Jingchang. “Everyone wanted to produce more than the next person.”

It was the same land, the same tools and the same people. Yet just by changing the economic rules — by saying, you get to keep some of what you grow — everything changed.

About the Author
Alex Tabarrok is Bartley J. Madden Chair in Economics at the Mercatus Center at George Mason University and director of research for The Independent Institute. Tabarrok is co-author with Tyler Cowen of the popular economics blog, Marginal Revolution. His recent research looks at bounty hunters, judicial incentives and elections, crime control, patent reform, methods to increase the supply of human organs for transplant, and the regulation of pharmaceuticals. He is the editor of the books, Entrepreneurial Economics: Bright Ideas from the Dismal Science; The Voluntary City: Choice, Community, and Civil Society; and Changing the Guard: Private Prisons and The Control of Crime. His papers have appeared in the Journal of Law and Economics, Public Choice, Economic Inquiry, Journal of Health Economics, Journal of Theoretical Politics, The American Law and Economics Review, Kyklos and many other journals. His popular articles have appeared in The New York Times, The Wall Street Journal, and many other magazines and newspapers.