First, Watts and Walstad (2002), summarizing the progress of economic education at primary, secondary, and higher education levels in several countries of EEFSU
, indicate that while some younger teaching staff at universities have learned modern economic theories and teaching, many older faculty members still adhere to the Marxist-Leninist ideology and continue to teach it.
So, when a large proportion of the SOEs began to make losses during the transition, in China as in the EEFSU, the comparative burden on the rest of the economy, in terms of forced reallocation of resources to the SOEs, often via an inflation tax, was less severe.
The surge of the Chinese economy since 1978 mainly came from the new entry and excellent performance of non-state-owned firms, particularly TVEs.(2) The rise of this sector has caused the share of the state sector in GNP to shrink steadily.(3) It is this which differentiates Chinese reform from the transitions in the EEFSU, and thus should be analysed carefully.
The Chinese planning system has been organized differently from those of the EEFSU; this provided suitable conditions for the growth of TVEs.
Moreover, EEFSU, especially FSU, faced political turmoil, the economic effect of which has been magnified by their central planning system.
Although both PRC and EEFSU were centrally planned economies, the Chinese economy was organised differently.
The transformation of the organisational structure of the Chinese economy into an M-form started from the late 1950s.(5) In the mid-1960s regional governments were already much more powerful and important than ministries (as contrasted with their counterparts in the EEFSU).
But, compared with EEFSU, the Chinese economy has gained more than it has lost from such duplication.
Unlike the EEFSU, where the centre played the critical role in coordinating the economy, regional governments in China have had considerable responsibility for regional economic coordination.
In sharp contrast, during their transition, the EEFSU economies apparently suffered dramatic and persistent declines in measured output by 30 per cent or more, over a period of four, or more, years.