China's new beginning

In 1946 Joseph Stalin announced one of those few great decisions which affect the course of history and the welfare of people for a long time thereafter. The great war was over. The Soviet people had performed miracles of heroism. Many of them, and much of the outside world, expected that they would be rewarded by their leaders with a period of rest, relaxation, and national emphasis on the good things of peace.

It was not to be so. The debate inside the Central Committee of the Communist Party of the Soviet Union must have been intense and bitter. The winners were the soldiers not the people. Stalin announced the decision in a speech which startled and worried the outside world. It was a "guns not butter speech." The emphasis is Soviet planning was placed firmly on heavy industry and armaments, not on consumer goods.

That decisions has influenced history down into these times. It was the foundation on which today's Soviet military power rests. Had the decision in Moscow in 1946 gone the other way the armed forces of the Soviet Union would not be the power they are today. And those armed forces would not be the cause of the deep anxiety which they arouse today among other nations.

Also, that decision of 1946 meant continued rationing, hence the need for a vast bureaucracy to preside over distribution of goods of every kind and description. It was a triump for the ideologists in the Soviet leadership and for those with a vested interest in perpetuating and expanding the bureaucracy. It has given the Soviet union what Stalin wanted, enormous military power. But it also saddled the Soviet Union with its heaviest liability -- the bureaucracy which has paralayzed initiative and produced economic stagnation.

The Soviet Union of today is a military giant and an economic invalid.

The example of what happened in the Soviet union is one obvious reason why the Chinese over the past week have announced a series of changes both in their leadership and in their economic system which point in the opposite direction. The ideologues and the lovers of bureaucracies who won out in the great decision in Moscow in 1946 are the losers in China in 1980. And so too are the soldiers. The military slice of the Chinese budget is being cut. More important for the future of China is that the new leadership is reviving competition and incentive.

In the future a Chinese factory manager wanting capital for plant expansion is to go to a bank and borrow, and pay interest. The plant's ability to borrow will depend, as it does in the West, on presumed ability to produce goods in competition with other factories. Buyers will be free to choose between the outputs of different plants producing the same goods. Successful plants will be able to attract better workers by being able to offer bonuses for good work.

There must have been a bitter battle behind the scenes in the Chinese party's Central Committee, because competition takes the place of bureaucrats. In the Soviet system all decisions about plant construction, modernization, expansion, and work schedules are made by bureaucrats. With competition there is a sharp decline in the need for bureaucrats. Goods are allocated by demand and by need as in any open market, not by a decision in the offices at the seat of government.

It would not be accurate to say that China has abandoned communism. China will continue to be a one-party state in which final decisions are made at the center and where no open opposition is tolerated. But it is accurate to say that China has rejected communism as practiced in the Soviet Union.

Where will these changes take China?

In trying to estimate the end result let us start with the basic economic facts. The united States today has a per capita national income of $7,389 (World Bank Figures). The comparable figure for the Soviet Union is $2,760. China is starting out on the same scale at $410. The target of China's planners is to reach for the affluence which Americans enjoy, not the halfway house in which the Soviets are marooned.

They have reasoned, undoubtedly accurately, that they will never reach Western levels of affluence by Stalinist methods. They have seen the use of competition and incentives improve life in several communist countries. The notable examples are Yugoslavia, East Germany, and Hungary -- all three of which are well ahead of the Soviets in per capita national income.

China is thus borrowing both from the West, which continues to offer its people the highest levels of affluence, and from the more successful of the communist countries which have escaped from the worst features of Stalinism. China is behind the US and the USSR in known natural resources. It is ahead in numbers of highly industrious people. In another 25 years those people might come a long way. They might leave Moscow behind and join the most advanced countries in a better life.

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