For more than 20 years after the victory of the Chinese Revolution, radicalism was ascendant and private ownership of land was illegal. The peasantry became estranged from the land, so that when the Cultural Revolution ended, China’s economy had been placed in difficulty and an agricultural crisis induced. The population had grown, and food was in short supply. Per capita grain production never averaged much above 300 kilograms. Of the 800 million peasants, 250 million were impoverished. The nation as a whole could not achieve self-sufficiency in grain and required massive imports.
A turning point took place in 1978 with the Third Plenum of the 11th Central Committee of the CCP, which reestablished the emancipation of the mind, the intellectual approach of seeking truth from facts, and the materialist philosophy proposition that practice is the sole standard of truth. It acknowledged that socialism means development of the productive forces, moving together toward wealth. The policy of making class struggle the key link was abolished, and the focus of Party work shifted to modernization. All of these changes liberated people from the previous ideological and institutional environment, providing the possibility of founding a new environment and new institutions.
Over the 30 years following the founding of the nation, an unfair pattern of holding resources had arisen, fostering the rise of vested interests. These interests tended to be conservative, holding back reform in the name of socialist ownership. The system itself suffered from inertia. Institutional economics speaks of institutional “path dependencies.” The Chinese system had been following its accustomed path for a long time, and these conservative interests wanted to keep following it. They feared that order would fall into chaos if they left the old track. And the equation of socialism with the system of public ownership, which had been in existence for so long, was decisive. Then peasants in Yongjia County in the region of Wenzhou, Zhejiang, and in Fengyang County, Anhui, seeking to end their food shortages, implemented a policy of contracting collective land to families. Because it violated what Mao Zedong had advocated, contracted production operated by peasant households had been a forbidden practice.