PeakTrader.com

[administrator]

"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 (pictured above), who was a farmer in Xiaogang in 1978. "No one owned anything."

In theory, the government would take what the collective grew, and would also distribute food to each family. There was no incentive to work hard — to go out to the fields early, to put in extra effort, Yen Jingchang says. "Work hard, don't work hard — everyone gets the same," he says. "So people don't want to work."

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, 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 is an old idea, of course. But in communist China of 1978, it was so dangerous that the farmers had to gather in secret to discuss it. Despite the risks, they decided they had to try this experiment — and to write it down as a formal contract, so everyone would be bound to it. By the light of an oil lamp, Yen Hongchang wrote out the contract.

The farmers agreed to divide up the land among the families. Each family agreed to turn over some of what they grew to the government, and to the collective. And, crucially, the farmers agreed that families that grew enough food would get to keep some for themselves. The contract also 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.

The farmers tried to keep the contract secret — Yen Hongchang hid it inside a piece of bamboo in the roof of his house — but when they returned to the fields, everything was different. Before the contract, the farmers would drag themselves out into the field only when the village whistle blew, marking the start of the work day. After the contract, the families went out before dawn. "We all secretly competed," says Yen Jingchang. "Everyone wanted to produce more than the next person."

It was the same land, the same tools and the same people. Yet just by changing the economic rules — by saying, you get to keep some of what you grow — everything changed. At the end of the season, they had an enormous harvest: more, Yen Hongchang says, than in the previous five years combined."

--------

liberal_slayer said...

This is another example of when you allow people to freely compete in selfish fashion (keep what they earn - liberals would call this Greed) then the end result is a much more prosperous society. So free market capitalism works every time its tried.

Unfortunately, we have a major political party in this country (the Democrats) that do not believe in such a system anymore and actually claim it has led to poor economic conditions and great inequality in this country.

Years ago I used to believe that these people could be educated of there ignorant ways but after 20 years of trying to convince then it saddens me to say that many of them are hopelessly lost souls. I figure there is too much power and money behind their philosophy of victimhood and helplessness that they will try to suppress and demonize anyone who pushes for the truth of how a healthy economy works.

-------

PeakTrader said...

This weak recovery was caused by disincentives and uncertainties.

The output gap:

http://voices.washingtonpost.com/ezra-klein/outputgap.jpg

Perhaps, Obama believes a poorer U.S. will make it easier to "spread the wealth."

******

According to "Government Spending - Wikipedia:"

U.S. Federal, State, and Local Government spending was 40.0% of GDP in 2010, or $5.79 trillion.

Major categories of government spending 2010 in billions of dollars:

Pensions $939.2
Health Care $1028.8
Education $887.3
Defense $848.1
Welfare $727.3
Interest $296.3

******

According to "usgovernmentspending.com:"

U.S. Federal, State, and Local Government Spending - 1800 (in billions of dollars):

Pensions $0
Health Care $0
Education $0
Defense $0.0061
Welfare $0
Interest $0.0034

Total Spending: $11.0 million

GDP: $480.0 million

******

And how accurate is the economic data?:

Beijing releases pollution data; US figures higher
Associated Press – 11 hrs ago

Steven Andrews, an environmental consultant who has studied Beijing's pollution data since 2006, said he was "already a bit suspicious" of Beijing's PM2.5 data.

"In all of 2010 and 2011, the U.S. Embassy reported values at or below that level only 18 times out of over 15,000 hourly values or about 0.1 percent of the time," said Andrews.

******

It could be a few cities booming, while the rest of the country is worse off.

******

Both living and labor standards are low in China, unless you're a communist elite:

Apple’s Sweatshop Problem: 16 Hour Days, ~70 Cents An Hour
Jan 20, 2012

The Chinese city of Shenzhen...30 years ago, Shenzhen was a little village on a river. Now it's a city of 13 million people — bigger than New York.

Foxconn...has a factory in Shenzhen that employs 430,000 people.

There are 20 cafeterias at the Foxconn Shenzhen plant. They each serve 10,000 people.

Most of the factory floors are vast rooms filled with 20,000-30,000 workers apiece. The rooms are quiet: There's no machinery, and there's no talking allowed. When labor costs so little, there's no reason to build anything other than by hand.

Assembly lines can only move as fast as their slowest worker, so all the workers are watched (with cameras).

The workers stay in dormitories. In a 12-by-12 cement cube of a room...Normal-sized Americans would not fit in them.

Unions are illegal in China. Anyone found trying to unionize is sent to prison.

Some workers can no longer work because their hands have been destroyed by doing the same thing hundreds of thousands of times over many years (mega-carpal-tunnel).

One former worker had asked her company to pay her overtime, and when her company refused, she went to the labor board. The labor board put her on a black list that was circulated to every company in the area. The workers on the black list are branded "troublemakers" and companies won't hire them.

One man got his hand crushed in a metal press at Foxconn. Foxconn did not give him medical attention. When the man's hand healed, it no longer worked. So they fired him. (Fortunately, the man was able to get a new job, at a wood-working plant. The hours are much better there, he says — only 70 hours a week).

A Foxconn worker dies after working a 34-hour shift.

Without Foxconn and other assembly plants, Chinese workers might still be working in rice paddies, making $50 a month instead of $250 a month.

-------

http://www.blogger.com/comment.g?blogID=28997633&postID=381437415035626587