Red China’s Green Revolution: Technological Innovation, Institutional Change, and Economic Development Under the Commune

This study began by presenting and evaluating two rival assessments of commune economic performance: the conventional wisdom, which holds that the commune’s poor productivity led farmers to abandon it; and an alternate view, which argues that the commune successfully modernized agriculture and increased productivity, thus laying the foundation for rapid growth in the 1970s and beyond. These contradictory appraisals were evaluated in chapter 1 using newly acquired data on the national and provincial levels (see appendix A) and compared with data from other large agricultural countries (i.e., United States, Soviet Union, and India). The results of this examination indicate that the latter interpretation is more accurate.

China did not experience a V-shaped growth line with economic collapse narrowly avoided by life-saving rural reforms launched in 1979. To the contrary, improvements in Chinese agricultural productivity in the 1970s and early 1980s were built on painful, forced household austerity under the commune that underwrote agricultural modernization and basic education. These investments were made not just in better-off coastal provinces but also across a broad swathe of the country. Agricultural modernization created the surpluses that supported continuous rounds of productive investment in the 1970s and freed rural workers to move, first into the local rural light industrial sector, and later from the countryside to the cities. Commune members were poor and unfree, but for the first time in history, hundreds of millions of rural Chinese acquired the basic reading and bookkeeping skills, agricultural capital, and technology necessary to reach the first rung of the development ladder. Increased food production under the commune was an essential first step in China’s industrial revolution.

Like previous commune experiments, the Chinese commune used a unifying collectivist ethos, group isolation, and institutional subunits to entice members to work hard for the collective. Most important, however, it also developed several original innovations, including the workpoint remuneration system, the agricultural research and extension system, and the Three Small Freedoms (i.e., private household sideline plots, cottage enterprises including small-scale animal husbandry, and rural markets). After the Great Leap Forward (GLF), the Three Small Freedoms remained in place throughout the life of the commune and ensured that extraction for productive investments in capital and technology would never again push the populace below minimum consumption levels. Under the commune, growth through collective impoverishment kept rural households living in austere—often subsistence-level—conditions. But it also bankrolled the investments and innovations that generated the agricultural surpluses needed to kick-start the long-run cycle of productive investment and sustained output growth explained in chapter 4.

The GLF Commune was created in 1958 and lasted until 1961. The institution was quite large (approximately twenty-three thousand members per commune2), had no subunits, and had an expansive social welfare mandate that included communal cafeterias and childcare. It instituted free-supply remuneration, collectivized all private plots, closed free markets, prioritized red politics over technical knowhow, and pulled millions of farmers off their fields to build large, often ill-conceived, infrastructure projects. The GLF Commune suffered from an overemphasis on political correctness, a shortage of skilled workers, overextraction of household resources, and excessive free-riding—factors that collectively produced a famine that killed millions. Still, the GLF did instill all Chinese with the notion that large-scale, high-modernist development was the yardstick of national virility and that everyone was expected to pitch in.

The institution’s second phase, the Rightest Commune, rose from the ashes of the GLF disaster and lasted until 1965. The GLF famine drove policymakers to reform the commune in ways that increased household consumption. Its size was reduced by roughly a factor of three, and two more administrative levels (the brigade and the team) were added in an effort to reduce the free-rider problems that had plagued the massive GLF communes. Private household plots, free markets, and cottage enterprises, collectively known as the Three Small Freedoms, were introduced and remained throughout the life of the institution. These and other reforms were introduced in the November 1960 “Urgent Directive on Rural Work” (i.e., The Twelve Articles), and expanded upon in the “Regulations on the Rural People’s Communes” (i.e., The Sixty Articles) drafted in March 1961 and adopted in September 1962 at the Tenth Plenum of the Eighth Central Committee (see appendix C). The Sixty Articles remained the commune’s primary official functional guidelines until decollectivization two decades later.

Between 1965 and 1969, another round of institutional reforms produced the Leftist Commune. In 1965, Mao gained control over the Socialist Education Movement (i.e., the Four Cleanups) and changed it from an anticorruption campaign into a broader strategy to fund agricultural modernization via a more extractive workpoint system known as the Dazhai model. Under the Dazhai model, agricultural modernization was funded locally, decentralized to commune control, and expanded nationwide. The commune, Mao argued, should introduce agricultural modernization funded by high extraction rates and a remuneration scheme that rewarded workers for prioritizing collective over individual interests. Maoism, the commune’s collectivist ideology, was propagandized with the help of the People’s Liberation Army’s veterans and people’s militia units. Maoist indoctrination and Dazhai workpoints increased income extraction, but it was only after reforms to the agricultural research and extension system were completed in 1970 that the commune took on its final and most productive form.

This final phase—the Green Revolution Commune—was initiated at the Northern Districts Agricultural Conference (NDAC) from August to October 1970 under Premier Zhou Enlai’s leadership. The Dazhai model was reformed to create a hybrid institution that included elements of collective and private production, ample local control over workpoint remuneration, and vertical integration of an agricultural research and extension system designed to target investment at productive capital and technological innovations. The reformed institution retained the Three Small Freedoms introduced in the early 1960s, along with the three-tiered organizational structure, collective ownership of capital, and the collectivist ideology of Maoism. Unlike the early 1960s, however, when the size of the commune and its subunits fluctuated considerably, in this final phase, the size and structure of the commune remained stable.

So how did 1970s commune-era China—a country with scarce capital and land and essentially unlimited labor at or near subsistence levels—raise savings rates and ensure investment in productive capital and technical innovation without pushing households below subsistence consumption levels? Simply put, reforms to the commune’s remuneration and agricultural research and extension systems accelerated capital accumulation and technical change. Both systems were nested within the institution’s subunits and worked in tandem, first forcing households to “save” and then investing locally in productive agricultural inputs and techniques.

From 1962 until decollectivization, the team administered the workpoint system, through which nearly all collective income was distributed. The fortunes of households rose and fell together, along with the value of the workpoint. The small size of teams—twenty to thirty households (or about 150–170 people)—ensured that workers could monitor each other’s performance and single out slackers (reported in brigade-level statistics as mouyanggong) at mandatory team meetings where they would be subjected to intense, regular, and inescapable social pressure. Workpoints could be removed from habitual offenders or added for top producers, known as kuofen or jiafen, respectively.

After the harvest, each household exchanged its workpoints primarily for grain produced by the team. The value of the workpoint fluctuated with each crop, so households did not know their actual income until after the harvest. This scheme incentivized workers to work as hard as possible to both maximize the number of workpoints they earned and to increase their value. The flexibility and lack of transparency of workpoints disguised gradual increases in income extraction by local leaders to support agricultural modernization, which, in turn, produced surpluses that were reinvested in local capital and technology. This cyclical process of development and growth is detailed in chapter 3 and explained using both neoclassical and classical economic growth models in chapter 4.

Equality-promoting policies gave commune cadres additional mechanisms to ensure that the maximum amount was extracted from better-off households to support agricultural modernization. Policies ostensibly designed to promote more equal resource distribution, such as arbitrary income limits, lowered disparities among households by capping the incomes of relatively better-off families and investing excess resources in collectively owned capital. After the growing season and these ad hoc income equalization schemes were applied, members redeemed their workpoints. To ensure the “safety” of their savings, households were strongly encouraged to deposit any excess funds with their local rural credit cooperative, which aimed to absorb any resources that remained after the collective took its share and households consumed theirs.

The Three Small Freedoms were approved in the Sixty Articles in 1962, reiterated in the 1970 NDAC Conference report, and reaffirmed again in the 1975 National Dazhai Conference report and in other relevant documents (see appendix C). Small-scale household production and commune- or brigade-administered local free markets became essential parts of the rural economy and remained so throughout the 1970s.⁴ These markets contributed to agricultural production, provided a consumption floor for households, and utilized leftover materials that otherwise might have been wasted. Households produced whatever foodstuffs (e.g., fruits, vegetables, eggs, or a pig or two) or handicrafts (e.g., shoe insoles, straw hats, or knitted garments) that met their needs, were permitted by local cadres, and would fetch the best price at market. Rather than compete, households worked with the collective, which rented them equipment, provided veterinary services for their sideline animals, and supplied agricultural chemicals and seed varieties for their private plots.

China’s post-1970 agricultural research and extension system ensured that household resources were invested in productive capital and technology, and disseminated basic education and vocational skills on an unprecedented scale. The system rewarded applied, results-driven science over theoretical work. To familiarize themselves with local problems and conditions, researchers spent one year in the lab, a second year in a commune, and a third year traveling throughout rural areas to teach and learn various planting techniques. Agrotechnical experiment stations at the county, commune, brigade and team level constituted a vertically integrated agricultural research network that was intended to improve communication and empower local decision-making. Each level was semiautonomous, not merely an extension unit that blindly implemented instructions from above. Communes commonly supported a dozen or more staff and experts to test and improve agricultural capital and technology. They controlled test plots and planting schedules throughout the collective to determine which seed varieties and agricultural chemicals were best suited for local conditions. Brigade- and team-level agrotechnical small groups employed a three-in-one system that included older farmers, educated youth, and local cadres with the experience and incentive to evaluate each input at the grassroots level.

Maoism was the second essential source of commune productivity. The Chinese commune was a hybrid institution that combined the dogma and structure of religious communes, the politics of socialist communes, and the development priorities of high-modernist communes. Five aspects of commune-era politics—its religiosity, the people’s militia, self-reliance, social pressure, and collective remuneration—allowed the institution to overcome the collective action problems inherent to all rural communes: brain drain, adverse selection, and moral hazard. Together, they constituted the commune’s collectivist ethos, which served as the institution’s political backbone.

Throughout history, to promote hard work and cooperation, long-lived communes have required an all-encompassing collectivist ideology, often preached by an all-powerful leader.5 The commune was, among other things, the church of Mao. Beginning in the mid-1960s, Maoism became a national religion that bound members to each other, the party, and the nation. Mao’s image, group ceremonies and rituals, song and dance, and holy texts (most notably, the Quotations from Chairman Mao) were used to secure members’ loyalty to the collective. Maoist group rituals and symbols became the emblems of a single moral community that united all members as “part of a common holy enterprise,” which compelled them to “work harder and faster on collective undertakings and devote less time to private affairs.”⁶ Even today, four decades after his death, millions of elderly rural residents throughout China still prominently display Chairman Mao’s image in their homes.

During the 1960s and 1970s, the military provided essential political support for Mao and the commune. Mao used militia units nested within every commune and brigade to expand political indoctrination. During the 1960s, all Chinese were told to “learn from the PLA [People’s Liberation Army],” which, in turn, expounded the infallibility of Mao Zedong Thought. Militia members competed against each other to memorize and recite Mao’s works. After their indoctrination was complete, soldiers and veterans led commune-based militias, which were at the forefront of Maoist political indoctrination. Militias led political study, put on patriotic plays, and printed and distributed propaganda to build grassroots support for Maoism. Militiamen, who were generally among the most capable in the brigade or commune, were also called on to lead the construction of large-scale infrastructure, assist in urgent or difficult fieldwork, and respond to natural disasters.

The commune enforced collective isolation, which kept members producing and consuming locally and ensured they remained largely ignorant of outside conditions. Self-reliance, the clarion call of the commune era, alleviated adverse selection and brain drain. The linchpins of self-reliance were the household residency registration system (hukou), relentless social pressure to influence members to place collective interests above individual ones, and strict information control. The commune’s collective remuneration system kept labor local, incentivized worker self-supervision, and counteracted the propensity of members to place individual above group interests. The goal was to cultivate a shared sense of community among all commune members, which would allow the system to extract as much as possible without pushing households toward famine or revolt.

Exploiting detailed county-level data from Henan Province for the years 1958–1979, I find that a commune’s size and the size of its subunits were powerful and significant determinants of its agricultural productivity. In chapter 6, I present an empirical model examining both cross-sectional and over-time variation that reveals a consistent nonlinear relationship between the size of communes and their subunits and agricultural productivity. The model includes various inputs that affect agricultural productivity (i.e., land, labor, machine power, and fertilizer), which, not surprisingly, all remained positive and statistically significant above the 90 percent (p < 0.1) confidence level. This model also isolates the independent effects of structural variables to identify the effects of variations in the size of the commune and its subunits over time and space on commune productivity. Examining both cross-sectional and temporal variation reveals that smaller communes with smaller teams were most productive. As commune size increases, however, the effect of larger team size is mitigated and eventually reversed, such that large communes with large subunits were more productive than large communes with small subunits. Small communes with small teams, and small communes with large teams, were the most and least productive types, respectively.

Taken together, the relative size of the commune (i.e., the number of brigades per commune) and its subordinate production teams (i.e., the number of households per team) were significant determinants of the temporal and geographic variations observed in agricultural output. In a forthcoming study with Yang Feng, we uncovered additional evidence that to create a more productive commune, county-level officials learned from their most productive neighbors and adjusted the size of their communes under their juristiction accordingly. These results suggest that future studies on the relationship between organizational size and economic performance should include interaction effects among different size subunits in their statistical models, and explore whether policy learning took place among local leaders in close proximity. Sinologists studying the political economy of contemporary China also should pay more attention to changes in the size and structure of rural institutions. These effects are more difficult to observe than economic development or political campaigns as they require an extensive county-level data set, yet they ought not be overlooked.

From an intellectual perspective, it is understandable why many researchers are drawn to collective action arguments to explain the Chinese commune’s demise. Communes around the world have generally failed because they were unable to sufficiently mitigate “the tendency of more productive members to leave (brain drain), the tendency of less productive individuals to join (adverse selection), and the tendency to shirk or slack on collective duties (moral hazard).”7 For more than two decades, however, the Chinese commune adequately alleviated these pressures, and I found no indications in official or scholarly writings before 1979 that China’s commune was an institution in crisis or on the verge of disappearing. By contrast, in February 1978, the Communist Party of China’s Ten-Year Plan praised the commune system’s performance and called for expanding its investment-driven growth model to the county level.⁸ As late as March 1979, the front cover of the People’s Daily proclaimed that the three-tiered commune was the economic and political foundation of rural China and criticized those who supported a return to household-based agriculture.⁹

The commune’s elimination was the direct result of actions taken by its political opponents who intentionally exacerbated collective action problems by stripping it of its collectivist ethos and its best workers. Through the deliberate and ingenious methods detailed in chapter 7, Deng Xiaoping and his allies at the provincial level quietly created a crisis of confidence in the commune’s collectivist ideology. They eliminated Maoism, expanded rural markets, encouraged private over collective enterprises, pitted the commune’s subunits again each other, and permitted some urban migration (including the return of Sent-Down youth and cadres). These policies, taken together, constituted decollectivization.

Decollectivization was portrayed as a response to the deprived masses’ calls to increase household consumption. But it was actually a deliberate decision taken by Deng’s “reform” faction to consolidate its political power and defeat a rival, pro-commune “loyalist” faction lead by party chairman Hua Guofeng.

When Maoism was repudiated, the unifying ideology that bound commune members to each other and to the institution was destroyed. Mao’s name and image were removed from public areas and ceremonies, and political indoctrination was ended, along with the chairman’s cult of personality. Mao’s Little Red Book was withdrawn from circulation in February 1979, and Maoism was officially removed from China’s constitution in 1981.¹⁰ These events were among the credible policy signals from the new leadership that undermined the commune’s legitimacy and deliberately catalyzed the spread of the collective action problems that ultimately tore the institution apart.¹¹ Shirking on collective labor became increasingly prevalent after 1978 as households focused on their private sidelines and skilled workers abandoned rural areas for better opportunities in cities.

Decollectivization marked a shift from super-optimal investment under the commune to consumption-led growth under Reform and Opening Up. To generate support for its broader reform agenda, Deng’s political coalition reduced extraction and increased procurement prices for agricultural products, thereby increasing incomes for impoverished rural households for the first time in nearly a decade. The commune’s productive capital was either distributed to households (as was the case with tractors and other agricultural machines) or endured as in-field infrastructure (e.g., irrigation, wells, dams) that remained productive throughout the 1980s and beyond. Commune and brigade factories were privatized, renamed town and village enterprises, and their land and physical capital (e.g., farm machines) were placed under the control of former cadres-cum-managers.

These and other ad hoc capital and income transfers from the disintegrating collectives to private control were part of the reaping that occurred when the commune was dismantled. By increasing households’ income, Deng’s coalition won political support for decollectivization and maintained social stability throughout the transition from collective to household-based agriculture. But when the commune and its subunits were eliminated, so too were the workpoint remuneration system and the agricultural research and extension system that were nested within them. This crippled the ability of various localities to extract resources from households to support agricultural modernization. Rural investment fell from 3.2 billion yuan in 1979 to 1.8 billion yuan in 1982. Government revenues fell dramatically as well, producing a extraordinary reversal from a 10.1 million yuan surplus in 1978 to a 170.6 million yuan deficit in 1979. Fiscal defects continued nearly every year thereafter until 1985.12

This study offers three primary conclusions about the Chinese commune. First, during the 1970s, Chinese communes fed and employed the fast-growing Chinese population, which added nearly 158 million people during that decade. After the institutional reforms adopted at the 1970 NDAC, the commune produced substantial and sustained increases in agricultural output. Improved productivity was accomplished primarily through investments in human and physical capital (e.g., vocational education and farm machinery) and enhanced agricultural technology (e.g., pesticides and seed varieties). Maoism was the collectivist ideology that bound members to the institution and helped it alleviate collective action problems. Modifications to the commune’s organizational structure and the size of its subunits also increased its productivity via economies of scale and helped mitigate free-rider problems.

Second, increases in rural productivity during the early 1980s were not “big bang”—that is, achieved “in less than three years.”¹³ The contention that decollectivization explains the lion’s share of subsequent rural productivity growth ignores the extensive investments made under the commune. This study concludes that the post-1979 “harvest” would not have been possible without the increased rural savings rates and productive investments in agricultural machines and technologies made under the commune. Without the commune, it is hard to imagine how China could have kick-started the long-run development cycle that freed tens of millions of skilled rural Chinese workers to staff coastal factories during the 1980s and 1990s. In China, as elsewhere, increased savings rates and agricultural modernization heralded an industrial revolution.