A Communist cure for poverty 4

The Dear Leaders who run a centrally planned economy have no way of knowing what consumers want, how much of anything they will buy, at what price. In the absence of a free market, which provides that information to producers continuously, a socialist government decides arbitrarily how much of anything it will order to be produced, whom it will order to buy the thing, how much the consumer must pay for it. It is a guessing game giving birth to stories such as those that came out of Communist Russia: the nail factory that produced only one nail five miles long; the shoe factory that produced only left-foot shoes.

Below we quote a true story from China recently reported by the Financial Times (a newspaper that is pink not only physically but ideologically, so not sternly against communist regimes), that reminds the aged among us of a joke that was popular when the transformation of nations into communist hellholes had only just begun:

A Communist addressing a crowd promises, “Come the revolution you’ll all be eating strawberries and cream.” Someone in the crowd shouts out, “But I don’t like strawberries and cream!” To which the speaker replies, “Come the revolution you’ll damn well have to like strawberries and cream!”

In today’s Communist China, it is not strawberries but potatoes and oranges that the people damn well have to like. (Although Communist China relented under the pressure of necessity to a mixed economy in 1978, such private enterprise as it allows is always subject to government approval.)

China is discovering that poverty alleviation can mean too much of a good thing.

Universities that bought crops from designated poor areas as part of Chinese president Xi Jinping’s drive to eliminate poverty by 2020 are struggling to deal with a flood of produce, in a sign of how even the best-intentioned state planning can lead to a cascade of distortions.

Beijing tasked state-owned enterprises, city governments and even universities with helping to jump-start GDP growth in the nation’s poorest areas. …

For universities, buying crops from designated poor areas seemed like an easy way to support Mr Xi’s mandate. Now they are wondering what to do with them all.  Beijing has promoted potatoes as an alternative crop for areas such as Meigu county in Sichuan province where land has been degraded, even though there is little market demand for the crop in a country where rice is the staple

Pity the Southwestern University of Finance and Economics, which joined other institutions in Chengdu in a deal to buy five tonnes of potatoes every few days from mountainous Meigu county, 400km south-west of the city. The contract runs until the end of 2020. 

That has left the cooks at Southwestern University with too many tubers on their hands. Their solution was to hold a week-long potato-eating campaign in November. The cafeteria churned out spicy fries, stir-fried beef and potato, and even potato vermicelli. Cooks managed to get through 6.5 tonnes of potatoes in five days.

“It felt like the whole place had been taken over by potatoes,” one student told the Financial Times. “I ate potatoes almost every day that week.” 

The Chengdu universities also agreed to buy the potatoes at a higher-than-market [so to speak] price, according to Zhang Xue at Longtou Company, an agricultural products dealer in Meigu.

“Our company buys potatoes from the farmers at Rmb1.6 (23 cents) per kilogramme. Meigu used to have several potato-processing factories and those factories bought potatoes at Rmb0.8 per kilogramme,” he said. “Now those factories have gone bankrupt because they can’t get cheap potatoes from the farmers any more.”  

Meigu and nearby counties — all of which are badly deforested because of excessive logging in the 1990s — have applied for World Bank assistance for industrial-scale agriculture, including more potato production, with nary a mention of how they plan to sell the increased output.

A Meigu official credited the potato policy with increasing agricultural yields. “In the past, the villagers usually sold agricultural products themselves at the local market,” he said, and used the rest to fatten their pigs. But the poverty-alleviation drive has led to the setting up of large-scale pig plants in the region, crowding out small breeders.

Meigu is not the only potato-producing region that has managed to find a buyer in a nation that rarely eats them. One state-owned enterprise in Beijing required every employee to purchase at least 20kg of potatoes from a village on the border with Mongolia.

A similar problem has cropped up for teachers in a district of Jinan, the capital of the eastern province of Shandong. They are each required to buy at least two boxes of oranges produced in Hunan, about 1,000km away. 

“How can we protest? The salary I get is just enough to make ends meet,” one teacher complained. “And now the government wants me to buy oranges for poverty alleviation.”

The poverty-alleviation drive involves more than selling crops. State-owned and private enterprises have ploughed billions of renminbi into local projects — and made sure they received tax breaks when they did so. Some are more inventive than others: for instance, property conglomerate Wanda built a tourism village in Guizhou where foreigners can apply to be mayor for a week

A week of play-play power in a town in China anyone?

Posted under China, communism, Economics by Jillian Becker on Tuesday, January 8, 2019

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