Managing Risk: The Suppression of Private Entrepreneurs in China in the 1950s

Abstract

Good entrepreneurs are generally recognised as good risk-takers, and there is a considerable amount of research about how different risks can be managed. This paper discusses how the Chinese Communist Party (CCP) managed, or rather suppressed, private entrepreneurs in the 1950s. Since the founding of the People's Republic of China (PRC) in 1949, the CCP policy towards private entrepreneurs was ‘utilisation’, ‘restriction’ and ‘transformation’, as defined in Article 10 of the 1954 Constitution. This paper describes how the Chinese government successfully drew private entrepreneurs into the centrally planned economy, and as a consequence suffocated market activities. It became a very effective, if unorthodox, way of managing risk. The government became the only handler of resource allocation. It is argued that this condition of ‘socio-economic hegemony’ forced private entrepreneurs to conduct underground economic activities on the black market, which posed different types of risks.