Chapter 73 Price breakthrough: "unexpected failure" at the turning point

In the autumn and winter of 1988, China's economic reform suffered an unexpected major failure, which can be regarded as a watershed event in this round of economic movement. After ten years of recovering growth, China's economy has experienced periodic fluctuations. With the rapid development of the light industry, the number of private enterprises has increased sharply, the supply of materials has become more tense, and prices have risen out of control across the country.At the same time, the disadvantages of the dual-track price system have been thoroughly exposed. Illegal reselling of materials is rampant. The reform of the contracting system of state-owned enterprises has not yet achieved great results. Loss subsidies and price subsidies are equivalent to one-third of fiscal revenue. The burden has increased.In order to get rid of the predicament, the central government was forced to issue more currency, which further pushed up the momentum of inflation.At a time of danger, the decision-makers accepted the opinion of Wu Jinglian and others to "control the currency and let go of prices", and decided to take the risk of "breaking through the barriers" so that prices could quickly enter the track of market adjustment.

"Price breakthrough" is considered to be a key battle for China to bid farewell to the command-based planned economy. If this battle is successful, it means that the country will return the pricing power to the market. With the complete disintegration of price controls, the planned economic system will have nothing to rely on. land.From a broader perspective, the reform of the political system that goes hand in hand with the reform of the economic system also started at this time. On June 1, 1988, the State Council promulgated the "Organization Law of Village Committees", announcing that "villager self-government shall be implemented, and villagers shall directly elect create village councils".The flames of democratic elections have been ignited in the most grassroots villages. According to the plans of many people, if the rural democratic elections have achieved initial results, they can go further from the bottom up.

Looking at the world in 1988, we can also see that economic and political "breakthroughs" did not occur only in China.On the socialist front, starting from the spring of this year, Gorbachev launched a wide range of political and economic reforms in the Soviet Union, while liberalization movements broke out one after another in Eastern Europe, the most notable of which was The Solidarity movement in Poland.On the other side of the Taiwan Strait, in the Taiwan region of China, Chiang Ching-kuo announced at the end of 1986 that the ban on the party and newspapers would be lifted, and the Kuomintang was about to bid farewell to the era of dictatorship.

In such a macro perspective, it is not difficult for us to weigh the historical significance of "breaking through the price barrier" to China's modernization process-even though the policymakers at the time did not have such a deep awareness. Breaking through the barriers began in June. The Politburo meeting held in Beidaihe decided: "Straighten out the price plan in five years, make big strides in the first three years, and fine-tune in the next two years. It is planned that within five years, prices will increase by 70% to 90% and wages will increase by 90%. % to 100%."

As soon as this barrier-breaking policy was announced, it quickly shocked the whole country.Since that month, the price of pork and other meat in central cities across the country has risen by about 70%, and other small commodities have quickly followed suit.Contrary to the expectations of the decision-makers, the "price breakthrough" soon showed a terrible trend of being completely out of control, and prices in various places ran like wild horses running wild.At that time, the deposits of national residents were 300 billion yuan (1 trillion yuan in 1992 and 24 trillion yuan in 2008), which was not a very large number, but the public's bullish panic caused nationwide runs and panic buying Wind, this seems to be in response to Keynes' famous saying, "social psychology determines the permanent economic problems of mankind". On the evening of August 27, the central government held an emergency meeting and announced the suspension of the price reform plan.According to the "China Price Yearbook": "1988 was the year when my country's prices rose the most since 1950 and inflation intensified significantly. The total retail price index for the whole year rose by 18.5% compared with last year, and this increase continued for three years. Based on the cumulative annual price increase of 23.7%.

The failure of price breakthrough in 1988 was the biggest economic loss of control since the reform in 1978, and it was also one of the most frustrating events in the history of economic reform in New China.On the technical level, this failure can be compared with the reform of the Golden Yuan coupons 40 years ago. They both caused a "quick failure" in policy because of an underestimation of the "irrational expectations" of the people, and caused irreparable history. sexual loss.It has greatly changed the path of China's modernization, and delayed many reform propositions that had been put on the agenda at that time, and some even delayed them indefinitely.Even in a certain sense, the failure of "breaking through the barriers" made China miss the wave of democratization in the world.

After 1988, the macro economy fell into a downturn, and the whole country was filled with a dull and tense atmosphere. In the spring and summer of 1989, a political turmoil occurred in China, where social conflicts were unprecedentedly fierce.It was not until around 1992 that the economy gradually bottomed out, and then the reform strategy underwent major changes.