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Financial Times Letters

Daniel Aronoff

Financial times

FT

Daniel j aronoff

landon companies

Mao inflicted horror on the Chinese people/FT 7-12-2016

Letter

July 12, 2016

Mao inflicted horror on the Chinese people

From Daniel J Aronoff. Sir, James Putzel (Letters, July 11) contends that the household responsibility system, which was indisputably the catalyst for China’s growth take-off in the 1980s, created incentives that enabled farmers to exploit “the rural infrastructure created during the communal period”

Sir,

James Putzel (Letters, July 11) contends that the household responsibility system, which was indisputably the catalyst for China’s growth take-off in the 1980s, created incentives that enabled farmers to exploit “the rural infrastructure created during the communal period”. This implies that the bizarre and inhumane policies of the preceding period of Maoist rule — which caused tens of millions to die of starvation — actually promoted progress. It is an utterly baseless claim.

Under Mao’s rule, farmers were forced to convert their fields to raise crops that would, according to central planners, increase yields and promote regional agricultural self-sufficiency. In fact, the conversions decimated crop yields and fields had to be repurposed later on. During the Great Leap Forward (when between 30m and 40m died of starvation) farmers were forced to melt their steel tools to make steel girders (which were of no value). This further reduced the agricultural capital stock. The dams and irrigation systems built under Mao were of such poor quality that, even when they served a useful purpose, which was rare, they quickly depreciated and had to be rebuilt. Finally, investment in the inadequate transportation infrastructure connecting rural areas to urban markets, which often resulted in a surfeit of food in some regions while others starved, was not made until recent decades.

I must say I find it scandalous that a professor at the prestigious London School of Economics should promote a view that confers a modicum of respectability on the horror that Mao inflicted on the Chinese people.

Daniel J Aronoff

President,

The Landon Companies,

Birmingham, MI, US

Copyright The Financial Times Limited 2016. All rights reserved. __________________________________________________

Sir:

Lucy Hornby’s otherwise excellent article on the state of Chinese agriculture focuses on the small inefficiency caused by the inability to sell land while overlooking other policies which generate more serious problems (‘China land: losing the plot’, July 5).

The household responsibility system, which removed land from collective control and granted families operational control of the land they farmed, triggered modern Chinese growth. Early on, farmers were given a 30 year contract (which routinely gets rolled over at expiration), but they were not allowed to lease, or sell their land. This made it impossible to convey land rights to others who might farm the land more profitably, which held China’s food production below its potential. This problem was cured when land rental contracts were legalized in 2008. Since that time, as Ms. Hornby shows, there has been  considerable activity leasing out land, including increased consolidation in agricultural operations. The fact that land cannot be sold is of minor economic significance because property rights can be conveyed and traded in the form of leasehold interests.

The only remaining serious infringement on rural property rights is the ability of local governments to seize land and pay farmers below market compensation. Not only is this intrinsically unjust; it acts as a deterrent to agricultural investment. Realistically, this practice cannot be abolished without a wholesale reform of fiscal policy, since local units of government currently finance their operations largely from the profits generated by land seizures.

Another factor restraining investment in Chinese agriculture is that farmers and rural businesses have difficulty accessing bank loans because of government policy which directs banks to lend to heavy industry – mostly dominated by SOE’s – and political pressure to lend to subsidiaries of local governments.

It is reform of fiscal and banking policy, not land rights, that is needed to boost rural China.

Sincerely

Daniel J. Aronoff

President

The Landon Companies

Birmingham MI

USA