Thanksgiving in Little Hill Village
By Scott Sumner
The residents of Little Hill Village were suffering from hunger. The problem was easy to diagnose—they had relied on a communal system, which stunted incentives and led to too little food being produced. Then in late November, a sort of miracle happened. The villagers decided to scrap the communal system of agriculture and adopt a system of private property. Food production increased rapidly. In retrospect, this can be seen as the beginning of an astounding economic growth story, which eventually produced the largest economy the world had ever seen.
That sounds a lot like the story of the Pilgrims of Plymouth Massachusetts, but it’s also the story of Xiaogang village (which translates as Little Hill Village), whose residents risked their lives to experiment with private markets in late November, 1978:
In 1978, Yan Hongchang was 29 years old and the father of four hungry children. He knew that the system wasn’t working. If Xiaogang’s residents were going to get out of poverty, he thought, they couldn’t rely on state planning to achieve it. They had to do it themselves.
One night in late November, Yan called a representative from each of the 20 families in Xiaogang to a meeting at his home. There, he proposed a radical idea: Why not return responsibility for the village’s cropland and farm tools back to individual households, and allow them to keep all the surplus grain for themselves, after paying taxes?
It was a dangerously subversive plan. The trauma of the Cultural Revolution — a hardline and sometimes violent campaign to eradicate capitalist and traditional elements from Chinese culture — still loomed large in the national psyche. Yet Yan openly rejected the planned economy — the cornerstone of Chinese socialism — and advocated a return to private property, the profit motive, and individual gain. Two years prior, such ideas were condemned as counterrevolutionary and worthy of condemnation by mob justice. They were still tantamount to sedition.
Farmers who enacted similar reforms in the past — for example, in the famine-ridden eastern Chinese county of Yongjia in 1956 — were arrested and sent to labor camps. Understanding the risks, Yan asked his fellow villagers to look after his children if he was jailed or sentenced to death. “But if I didn’t take that risk, people would die,” he recalls. “Some people were already suffering severe health consequences due to hunger. They were confined to their beds. Even the cattle were too weak to plow.”
Some of Xiaogang’s villagers voiced unease at the plan, but the survival instinct eventually trumped any fears of retribution. The literate signed Yan’s agreement in lurid red ink. The illiterate signed with their fingerprints.
When you think of the most influential people in history, the names that come up are often political leaders, religious leaders, or great scientists. Yan Hongchang (pictured below) was certainly among the most important.
Let’s think about why:
1. Start with the fact that Yan is a Han Chinese, by far the largest ethnic group in the world—numbering almost 1.3 billion.
2. The Han have a rich cultural tradition, responsible for key inventions such as paper, gunpowder, the compass, etc., and also great achievements in the arts, literature, etc. And yet by 1978, The Han regions of China were some of the poorest places on Earth. The communist system had held China far below its potential.
3. Back in 1978, almost 80% of the Han Chinese were peasants living in villages and farming the land.
This was like a powder keg, waiting to explode. Xiaogang village lit the fuse, and when other villages saw their success the system spread like wildfire. In just a few years, living standards across rural China had risen dramatically.
That combination of cultural homogeneity, great untapped potential, and disastrous policies imposed by a totalitarian government, set the stage for a dramatic breakthrough as soon a the repression eased just a little bit (after the death of Mao in 1976.)
There will be other economic miracles, but it seems unlikely the world will ever again see anything quite so dramatic.
The current Chinese government views these reforms positively, but there is a bit of ambiguity in the official treatment of this sort of historical event. After all, it was an act of rebellion, which exposed the horrific consequences of Communist Party policies. Thus in China there are contradictions in the history being taught to students. Reforms are praised, but people are discouraged from looking too closely at the events that made those reforms necessary. It might give people ideas—perhaps a future Yan Hongchang will challenge political repression, or the lack of democratic rights.