A recent NPR feature, The Secret Document That Transformed China (h/t Vijay Boyapati), tells the fascinating story about one of seminal events at the dawn of the modern Chinese experiment in their version of capitalism.
In 1978, the farmers in a small Chinese village called Xiaogang gathered in a mud hut to sign a secret contract. They thought it might get them executed. Instead, it wound up transforming China’s economy in ways that are still reverberating today.
The contract was so risky — and such a big deal — because it was created at the height of communism in China. Everyone worked on the village’s collective farm; there was no personal property.
“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.
Because of communism, “In Xiaogang there was never enough food, and the farmers often had to go to other villages to beg. Their children were going hungry. They were desperate.”
So the farmers agreed to a form of personal property, where each farmer could keep some of his own crop, above a certain threshold. This would give them incentives to work harder and the ability to keep some of the fruits of their labor. However,So, in the winter of 1978, after another terrible harvest, they came up with an idea: Rather than farm as a collective, each family would get to farm its own plot of land. If a family grew a lot of food, that family could keep some of the harvest.
This was done in secret for fear of reprisal by the state. Their agreement “recognized the risks the farmers were taking. If any of the farmers were sent to prison or executed, it said, the others in the group would care for their children until age 18.”
Their new pact was a success: “At the end of the season, they had an enormous harvest: more, Yen Hongchang says, than in the previous five years combined.”