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The course Institutions, Governance and International Development examines two critical questions in international development: (1) How can we deepen and broaden markets so everyone can have a job and benefit from the gains from trade? And (2) How can we strengthen the government so it can complement, sustain, and tame these markets?
To tackle these questions utilizing what I have observed and learned from our discussions in this course, this paper will use the government interventions to reduce poverty in different countries as examples to present my understanding of the course.
This paper will discuss the poverty issues in China, Vietnam, Colombia, and Malawi, as well as introduce and analyze the effectiveness of several government intervention programs(or policies) that have been implemented in the past decades in a chronological order.
1.1 Background-From the Great Leap Forward to the Great Famine
In October 1949, the Chinese Communist Party defeated the Nationalist Party and proclaimed the establishment of the People’s Republic of China. Soon after that, landlords and wealthier farmers were forced to redistribute their wealth to poorer peasants.
Although a moderate fraction within the party voiced their concerns and argued that the collectivization should be more gradual, Mao insisted that the best way to finance industrialization was for the party to take control of agriculture by establishing monopoly over distribution and supply, in order to allow the state to buy at a low price and sell at a much higher price.
Before 1949, peasants were able to farm their own lands. Once the collectivization policy platform had been implemented, private ownership was entirely abolished in China.
Every land, every household, and every piece of crop were turned into state-owned property. Along with the radical collectivization, the government also promoted several controversial agricultural innovations that had been untested at the time. These innovations backfired and led to decreases in grain production. Meanwhile, local farmer leaders were pressured into reporting false grain production figures, some inflating the numbers up to 10 times actual production amounts. In addition, over 21 million workforce shifted to non-agricultural state in order to facilitate the industrialization agenda.
Because Mao believed that population growth would empower the country, the government strongly encouraged families to have as many children as possible. The population grew rapidly from 540 million to 940 million over just a short few decades. As the nation quickly became overpopulated while the Party enforced collectivization, scarcity of resources and lack of employment opportunities followed the population boom and radical agricultural policies immediately. A combination of rapid population growth, adverse weather conditions, social pressure, economic mismanagement, and agricultural policies led to the Great Chinese Famine. Food supply was strained. The famine killed nearly 30 million people over the course of three years.
1.2 Government Intervention
In 1970s, Deng Xiaoping, a leader within the Communist Party, started the famous Chinese Economic Reform which later on made China one of the world’s largest and most advanced economies prior to the 19th century. The Communist Party. Through a series of reforms, the Chinese government successfully more than 700 million people above the national poverty line, and led the nation’s rise as a world power. This section of the paper will discuss a number of government interventions that contributed to the great success of poverty reduction in China.
1.2.1 Five Year Plan
The five year plans are a series of social and economic development initiatives issued every five years since 1953, mapping strategies and setting growth targets for the nation. To fight poverty, the Chinese government adopted a poverty alleviation strategy during the 7th Five Year Plan(1986-90). The plan put an emphasis on economic development programs in the poorer areas. Education was also one of the priorities in this plan. One of the specific growth target set out in the Plan was to ‘gradually popularize and implement the nine-year compulsory education scheme, and train five million professionals, twice that during the previous planning period'(http://www.china.org.cn/english/MATERIAL/157620.htm). This The plan established special aids to improve education and healthcare delivery to the poor especially. The Agricultural Bank of China also offered subsidized loans for regional development to help rural areas to get back on track.
In the 8th Five Year Plan, two key poverty reduction initiatives were introduced. One was the extension and strengthening of assistance to the poor population residing in the worst physical environments; the other one was the integration of comprehensive local intervention packages.
Both plans put poverty alleviation on the agenda for the nation, made it the top priority for policy makers on state and local level. The Five Year Plans presented the strong commitment the Chinese government held to alleviate poverty throughout the reform period.
1.2.2 Decentralization of Public Services
The rural poor in China found that educational fees could take as much as half of their disposable cash incomes. Those who lived in the extremely impoverish areas found the costs totally beyond what they could afford. Similarly, the cost of medical care hampered the poor’s access to healthcare. To tackle these problems, the Communist Party made changes to the public service delivery. The central government transferred some of the public service responsibilities to regional or local government, usually in the fields of basic education and healthcare services. Regional and local governments were more incentivized to invest in production projects which can solve the problem of unemployment and gain profits instantly.
The central government made it its goal to provide universal education to the entire nation. The state also demanded that local communities much devise its own plan to achieve the state mandated goal. As for welfare and healthcare system, the government adapted reforms to open rural access to a variety of health enterprises and allow various types of ownership of health facilities to flourish. Private practitioners were given legal status finally. The privatization was specifically successful in the developed areas.
The education and health care reforms improved sanitation and health standards especially in rural areas.
1.2.3 Public Policy Reforms
Throughout this period of time, the Chinese government took several public policy measures to alleviate poverty including expanding marketing networks, freeing up prices and encouraging diversification and commercialization of agriculture. These policies all contributed to the rapid agricultural growth in the 1970s and 80s.
There were a number of specific policy reforms that significantly enhanced the effects of agricultural growth. The first one was land reform. The central government entirely reversed the collectivization system, giving back the land ownership to the farmers. Collective land in most areas were distributed in accordance with the size of households. Farmers were more incentivized to increase their household agricultural production. The national agricultural output was 20%-30% more productive. A study found output growth was increased by 42.2% in the cropping sector in 1978-84, about 54% was attributable to productivity growth due to reforms.(http://hdr.undp.org/sites/default/files/amei_zhang_0.pdf)
The second significant policy reform was a market-oriented reform. The Chinese government cut the grain procurement quota and reduced the number of products covered by plan control to increase grain production. n. For example, the number of planned product categories were reduced from 21 in 1978 to 13 in 1982. (49) The government took measures and opened up regional trade in agricultural products. This policy encouraged areas that traditionally had a comparative advantage to expand their agricultural output.
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