In its theoretical framework, the Chinese approach was not substantially different from what happened in the early years of transition in the CIS-7 with the dismantling of state cooperatives and the allocation of land to household farms. In fact, the CIS-7 too were able to improve household farms production rather quickly although the reform process in this respect was slower than in China<sup>30</sup> .

So, what went wrong in the CIS-7? We can depict at least two essential factors. The first is the fact that the Chinese government continued to maintain and support the agricultural extension services guaranteeing the provision of agricultural inputs and the purchase of farmers production surplus and continuing to control agricultural prices. On the contrary, the CIS-7 agricultural extension services collapsed with the collapse of state cooperatives and small farmers were left on their own with the search for agricultural inputs and markets in the course of price liberalization which increased uncertainty and discouraged investments. The main factors which are still preventing farmers from moving beyond subsistence today.

The second important difference between the CIS-7 and China during the early stages of reforms was the existence in China of non-state Town and Villages Enterprises (TVEs) established well before 1978. These were initially allowed by the government in an effort to mechanize agriculture and develop rural processing industries. With the 1978 agricultural reforms, TVEs could quickly link-up with the surplus and finance emerging from increased productivity in the household farming system and this opportunity sparked the sustained development of the TVEs sector which effectively became the intermediary between the agricultural and rural economy and the industrial and urban one.

In the CIS-7, on the contrary, during the Soviet period all kind of processing of agricultural products was demanded to very large processing state enterprises and small and medium enterprises were virtually non-existent in rural and urban areas alike. There was no structure, public or private, that could function as a 'bridge' between agriculture and industrial manufacturing and as a provider of inputs and markets for farmers. During the recession, the agricultural and industrial systems were in fact compartmentalized, a phenomenon that is clearly evident in the statistics on manufacturing and in input-output tables where the middle quadrant values (intermediate manufacturing) declined more than the values in the periphery (energy and raw materials on the one hand and households consumption on the other hand). The absence of agricultural policies in the post-land reforms scenario is partly responsible for the current incapacity of farmers to move beyond subsistence.

Government policies have also been very weak on the front of industrial policies. If one looks at the development plans developed in the post-war Western Europe and Japan, the development plans developed by South-Korea in the 1960s and 1970s and those developed in other parts of South-East and South Asia in the 1970s, 1980s and 1990s, it is evident that the greater emphasis was devoted to industrial policies, defining the role of the state in facilitating the growth and development of industry in the public and private sectors. Post-war industrial development in Italy for example was driven by IRI (Institute for Industrial Reconstruction) a state run conglomerate only recently dismantled. The reason for such a heavy state direct involvement in the economy is explained by the fact that no other national institution had the necessary financial resources and capacity to undertake a task such as post-war reconstruction. There was little debate about stateprivate division of responsibility because the private sector was too weak to take on the reconstruction task alone. In fact the state too was incapable of generating the necessary financial re-

> 30 It is worth noting that while Chinese reforms have been usually labelled as gradual and piecemeal, the implementation of the household responsibility system has in fact been faster than any other similar reforms implemented elsewhere in transition economies.

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