[Here is a briefing paper talking about China and globalizaiton in case anyone is interested. I got it from the author in email, so there is no link]
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Reforms that Makes a Few Rich
China and the Path to Economic Globalization
A Briefing Paper By Dale Wen, Ph.D., Visiting Scholar,
International Forum on Globalization
Table of Contents
Executive Summary
I. Introduction
II. Reform Policies and Their Consequences
The Plight of Rural Areas and Its Making
Box: The Taste of Sugar is not Always Sweet
Urban Reform and the Rise of Sweatshops
Box: A Chinese Perspective on the Textile Trade
III. Impacts on Quality of Life and the Environment
Poverty and Inequality
Health and Education
Box: Fast Food Invasion
Environment
IV. Alternative Voices and Actions from within China
Recent Progressive Measures by the Government
China’s Environmental Movement
New Rural Reconstruction Movement
China’s New Left
V. Closing Words: China at the Crossroads
Appendix A: Restoring the Grasslands of China --A Case Study of Environmental Challenge in Inner Mongolia
Appendix B: Has China really Joined WTO?
Introduction of International Forum on Globalization (IFG)
Executive Summary
By Debi Bark and Dale Wen
This summary gives a brief description of China’s history since 1949, and analyzes the reform process since 1978.
Maoist Era (1949 – 1978)
The Maoist industrialization drive from 1949 to 1978 was far from perfect, yet some of the overall achievements are quite impressive. U.S. historian Maurice Meisner’s book Mao’s China and After notes some of the highlights: China’s national income grew five-fold in 25 years (1952-1978); the industrial working class grew from 3 million in 1952 to 50 million in the mid-1970s—this includes 28 million peasants who worked in communal industries under a policy of small-scale rural industrialization. Additionally, China’s industrial output increased at an average annual rate of 11.3 percent between 1952 and 1978.
Prior to 1978, there were two forms of ownership with industrial enterprises in China: all people’s ownership (which was changed into “state ownership” in late 1980s), and collective ownership (owned by villages or communities). The phrase “iron rice bowl” was often used to describe industrial employment and its associated benefits. Wages were quite low; however, employees enjoyed lifetime employment, guaranteed pension benefits, health care, housing, and education for dependents, paid maternity leave, and other such benefits which created a high level of societal equity and security.
In addition to lifetime employment and material benefits, many Chinese workers engaged in decision making and management issues at their place of employment. In 1960, employees of Anshan Iron and Steel Corporation wrote the Charter of Anshan Iron and Steel Corporation which laid out principles of participation, reform, and integration. In recent years, many management experts acknowledge the similarities between the Charter and “new management” styles adopted in recent years in Japan, Europe, and the U.S.—ideas such as total quality management (TQM) and other employee participatory programs.
This high level of engagement in the management process fostered an elevated sense of ownership among all levels of employees and created a corporate culture unique to China reflected in a popular saying, “treat the factory as one’s own home.”
Researcher Dic Lo in his 1997 book Market and Institutional Regulation in Chinese Industrialization argues that Chinese state owned and collective enterprises were institutions accountable to major stakeholders—such as creditors and employees. In contrast, private and publicly traded enterprises are driven by the principle of maximizing shareholder profits only.
China’s Reform Era—A Move Toward A Market Economy (1978 – 1992)
In 1978 the Chinese government began an official “reform” era. During the initial ten to fifteen years, some salient features of the reform included: breaking up of rural communes; designating Special Economic Zones (SEZs); introduction of “market mechanisms” into State Owned Enterprises (SOEs). Worker benefits were reduced and existing social safety net were steadily eroded by the market-oriented reform.
A host of reasons contributed towards reform. Ideological differences have always existed among high-ranking Party members. Deng Xiaoping, the officially recognized “architect of China’s reform”, had been repeatedly labeled as a “capitalist roader” in many internal debates and struggles between 1949 and 1976. When Deng consolidated power in late 1978, he probably was ready to take the country into a new direction. Furthermore, Deng’s accession to power was marked by his triumphant visit to US in January 1979, the first official state visit between the two countries. In December 1978, Washington and Beijing announced that the two countries had agreed to establish official diplomatic ties. The normalization of relations between China and US (and the west in general) had been long in the making, starting with Nixon’s surprise visit to China in 1972. Deng had the good luck to preside over the climax of a diplomatic process initiated by Mao, and he fully capitalized on the opportunity. His US visit was widely publicized in both countries. It was reported that he was deeply impressed by the material wealth of the US, and it probably significantly influenced his thinking and consequent policy measures. Reform slogans such as “to get rich is glorious”, “development is the absolute need” certainly bear this mark.
Western readers should be reminded that in the US, Ronald Reagan presided over the White House between 1980-1988; in the UK, Margaret Thatcher came to power in 1979. They ushered in a “golden age” of privatization and neo-liberalism. In hindsight, it was a rather tragic coincidence that China’s full engagement with the west started at that particular time. The ideology of market competition and social Darwinism were introduced into China as “the recipe” for success, and convinced many officials and intellectuals. Additionally, the East Asian Tigers (that is, Hong Kong, Singapore, South Korea, and Taiwan) were experiencing great economic success, offering attractive examples of export-oriented models. The setup of SEZs along the coast was certainly modeled after these regions.
While the reform was largely a “revolution from the top”, it did gather some popular support at the time. There was some general dissatisfaction among Chinese citizens—Mao’s promise of a utopian society had yet to manifest itself in the eyes of many. In his pursuit of egalitarian values, Mao had repeatedly tried to strip the elites (especially party bureaucrats and the intelligentsia) of the privileges they normally enjoyed. For example, many were sent to the countryside or factories to work with peasants and workers, to be “re-educated” by the working people. Many felt that they had been wronged and victimized in the process. By speaking to their grievances, Deng successfully garnered sympathy and support for reform from this group. While the elites only made up a small minority of the population, their political clout was quite considerable, especially as the workers and peasants were largely silent politically.
Television was introduced into both urban and rural communities in the early late 1970s and early 1980s, and it played a role as well. Movies and TV series from Hong Kong, Taiwan and Japan flooded in, often giving examples of a more luxurious life. Started from mid and late 1980s, more and more American shows were introduced, fostering a culture of US worship.
Smashing the Iron Rice Bowl
All of the above factors, and others, contributed to a new direction in China’s economic policies. Central features of the urban reform, directed by “reform architect” Deng Xiaoping, included market reform of SOEs (characterized by contract system in these early years, and more radical privatization in later years), and opening up to foreign capital and investment. Some SEZs were created during this period.
In late 1979, the government selected several thousand state-owned enterprises to be operated on a profit-making basis. In early 1980, the program was expanded to cover 16 percent of SOEs. The program was suspended at the end of 1980 because of a host of unanticipated fiscal and social problems including a burst of inflation. However, in 1984, the market-oriented reform resumed.
The restructuring effort was centered on “smashing the iron rice bowl,” as reformist rhetoric of the time had it. The logic was that labor productivity could be increased greatly by ending the lifetime job security. Some new bonus and profit sharing schemes were implemented to stimulate production, as well as to mitigate opposition from employees.
Still the opposition was intense and bitter, and the reformers compromised eventually: regular workers already employed in SOEs would retain their job security and welfare guarantees, but new workers would be hired on a contractual basis. Over the years, a bewildering variety of contractual arrangements were worked out in different localities and enterprises, often with watered down benefits for new employees.
Special Economic Zones in China functioned in a similar manner as other “special” or “free” economic zones such as the maquiladoras in Mexico. SEZs gave tax incentives to foreign- and jointly-owned corporations to attract foreign direct investment. Tax favors included: exemption from paying taxes in their first two profit-making years; tax write-offs of employee wages; and other such privileges. Sweatshop conditions did not arise immediately. New private enterprises were compelled to maintain fairly decent labor conditions and offer generous salary in order to compete for Chinese workers: many still received benefits including public education and health care; guaranteed pensions; subsidized housing in urban areas; and other amenities similar to those at SOEs.
In 1982, with little fanfare, the Chinese government quietly removed a clause granting the right to strike from the constitution, a right previously enshrined by Mao in 1975. At the time, the change raised little concern: after all, who would want to strike when people are treating the factories as their own homes? In hindsight, it marked the beginning of a slippery slope towards total commodification of labor.
Rural Communities in Crises
The key component of the rural reform was the de facto privatization of agriculture: rural collectives were disbanded. Though land ownership continued to belong to the village officially, usage right was contracted to individual households. Contrary to popular belief in the West, the collective system was not an entirely new invention by the communists— for thousands of years, various forms of communal land ownership had coexisted with private land ownership in China, particularly in areas of high population density. This system of sharing land enabled regions to produce enough food for the community. The collective system under Mao was not perfect and some communes were failing. But at the time, the majority of rural people experienced secure, dignified lives with social benefits including public healthcare and education.
Instead of adjusting the collective system, radical reform was enacted. The individual household contract system was implemented. Hand in hand with the de facto privatization, the government decreased expenditure in rural investment. No collective institutions such as marketing coops or health coops were established to provide the functions previously offered by the communes. The early years of rural reform did experience a surge of agriculture outputs and rural income, largely due to introduction of chemical fertilizers, pesticides, and hybrid seeds. But ever since the government lifted the price control on agricultural inputs in the mid 1980s, the price of these items has been going up steadily, posing an increasing burden on the peasants. Since China joined WTO in 2001, the country has opened its borders to cheap, highly subsidized agricultural commodities from industrial nations, posing further challenge to the already ailing rural sector.
The tiny family farms (almost all under 1 hectare) were more vulnerable to natural disasters and market fluctuations. In addition to declining rural public services, income losses were staggering—for example, 42 percent of rural household income decreased in absolute terms between 2000 and 2002. As a result, millions from rural regions migrated to cities and manufacturing centers.
Decollectivization had important social impacts as well. Women’s previous entitlements under collective rights were undermined, as the male heads of household were designated as contract owners. Communes used to provide support for old people who did not have family support. The deterioration or total disappearance of such benefits created a strong incentive to have more children. The fragmentation of rural community resulted in sharp increase in crime and other social maladies. While traditional Chinese rural life might not have been a utopia of material goods, many now look back to a time of dignified livelihoods and relatively harmonious communities as a kind of utopia that quickly disappeared under the reform.
Period of Economic Boon
During this period, China experienced remarkable economic growth. In terms of GDP numbers, its progress in reducing extreme poverty is impressive. In 1999, the World Bank raised China’s classification from a “low income” to a “lower middle-income” country based on its rise in income per capita. The rationing system of the late 1970s, which covered basic items such as grain, cooking oil, sugar, eggs, meat, and clothes, disappeared and many modern luxuries like TVs, washing machines, and refrigerators are now in millions of homes, particularly in urban areas. Car ownership, unheard of 20 years ago, has skyrocketed today in the capital city of Beijing to 11 cars per 100 permanent residents.
Many in the West have hailed China’s adoption of the free market as being central to its economic success. However, it is noteworthy that central planning continued to play an important role in the first 10-15 years of reform. In many ways, the Chinese government followed the model of the Asian Tiger economies by heavily regulating foreign trade and foreign investment as well as domestic industry. The central government also maintained control of public services. China’s state-directed development greatly contrasts with the shock therapy programs implemented in Eastern Europe and the Soviet Union, where foreign capital and corporations have flooded in with little government intervention or regulation. Still, the destabilizing effect of reform (corruption, growing social inequities, etc.) started to be felt across the sectors by the end of 1980s, leading to growing dissatisfaction.
Tiananmen Square
The massive protest in Tiananmen Square in 1989 was represented in the West as a demonstration calling for freedom and democracy. This was indeed part of the impetus from the student protesters; however, the most popular and well-supported call of the movement was denouncement of official corruption—reflecting that social ills brought by the reform process were at the center of discontent. In the early months of 1989, the annual inflation rate reached a record high of 25% (inflation was kept below 1 to 2 percent throughout the Maoist Era), setting up the stage for the later protests. Western media has often neglected the important social and economic background of this movement, describing it in simple terms of pro-west and anti-communist. Wang Hui, a leading new left scholar in Bejing, has a different interpretation about the cause of the movement. According to Wang, these protests emerged in response to a series of market-based decentralizing policies and are therefore a part of the worldwide resistance to neo-liberal policies (see Wang’s book China’s New Order). Indeed, three months prior to the Tiananmen event, Deng Xiaoping, the architect of the reform period, realized that “China cannot allow demonstrations to happen too easily, …or else foreign investment will stop flowing in.” (INCLUDE IN FOOT NOTES: Deng Xiaoping Wenxuan (Writings of Deng Xiaoping), vol. III, People’s Publishing House, Beijing, 1993, page 286.)
Further Reform—Rapid Adoption of Globalization (1992 to 2003)
After the protests at Tiananmen square, the market-oriented reform was first put on halt. But in 1992, Deng Xiaoping visited Shenzhen, the first SEZ, and this much heralded “Southern Tour” started the market-oriented reform once again. Since then, the Chinese government has further embraced the tenets of economic globalization. Privatization of collective enterprises and SOEs increased. Many believe this period triggered an intense “race to the bottom.”
The number of SEZs has exploded and foreign enterprises have further flourished. Apart from their already generous tax advantages, foreign enterprises can often successfully hide profits to avoid paying taxes in China. For example, a Nike subsidiary in Suzhou earned around $85 million in revenues in 2001, with its Chinese market share growing in double digits annually, yet it reported a loss over several years. In fact, 51 to 55 percent of foreign enterprises in China claimed losses in 2003. (CITATIONS?)
According to a 1995 Industrial Census, SOEs and collectives paid two to three times higher taxes than foreign-owned industry. This trend continues. Additionally, SOEs and collectives contribute to education, healthcare, and other benefits for employees; privatized firms are not required to do this.
Birth of Sweatshops
Unable to compete with advantages given to foreign-owned firms, SOEs shed millions of workers and decreased social benefits during this period. Millions more from rural regions were added to the labor pool because of the loss of livelihoods and degraded community due to the rural reform program. These new migrant workers flooded into coastal regions, desperate for jobs. With a surplus of workers, and no competition from diminishing SOEs, enterprises have tightened their grip on workers and sweatshops have become the norm. Especially in the coastal SEZs—where most foreign corporations do business—Chinese workers now have lower wages, in terms of purchasing power, fewer benefits, longer work hours, increasing work-related injuries, and other associated problems compared to ten years ago.
WTO Accession
The first step of China’s reform package as envisioned by Deng Xiaoping was the structural reform of its internal economy. The second step was to further engage with world markets. Joining the WTO in 2001 signaled a huge move towards completing the reform.
Under WTO accession terms, China is obligated to eliminate all import quotas by 2006 and significantly scale down its tariff protection on industrial imports. Foreign firms and investors have greatly expanded rights—they can own up to 50 percent of foreign-owned enterprises in industries such as telecom and insurance (percentage of foreign ownership in some industries was previously monitored and restricted). There are many other trade rules that China must now subscribe to, including the expansive WTO “national treatment” clause which states that foreign investors must be given the same considerations and treatment as domestic businesses. This, of course, greatly inhibits China’s ability to direct its economy and gives more rights to global markets and investors.
Consequences for the Environment
The state of the environment is one of the most critical factors that will determine China’s future. Admittedly, many SOEs were not perfect stewards of the environment. Mao’s industrial development was mainly focused on creating a system of social equity. The link between natural resources and social well-being was poorly understood in many aspects. However, as bad as some industrial practices were then, China’s shift into an export-oriented market system has pushed its natural environment to the brink of collapse. It has become the world factory floor, as well as the world dumping ground.
Natural resources have been abused by the rapid adoption of chemical farming as well. Chemical fertilizer usage, for example, more than doubled between 1978 and 1984 while application of manure and green fertilizers declined significantly. In combination with other factors, chemicals have seriously polluted water systems, contributed to high degrees of soil erosion and salination, harmed wildlife, and compromised the health of Chinese citizens. Estimates reveal that around 40 percent of the country’s arable land is degraded. About one fifth of arable land is contaminated by heavy metals (cadmium, arsenic, lead, and others). Water run-off from fields, along with municipal and industrial wastewater dumped into the rivers, has rendered around 60 percent of the water in China’s seven major river systems unsuitable for human contact.
In a candid interview with the German magazine Der Spiegel, China’s deputy minister of EPA, Pan Yue, addressed the environmental crises: “Our raw materials are scarce, we don’t have enough land, and our population is constantly growing. …Cities are growing, but desert areas are expanding at the same time; habitable and usable land has been halved over the past 50 years…. [China’s GDP miracle] will end soon because the environment can no longer keep pace.”
The situation is dire not only for China. Climate change, water pollution and shortages, acid rain, wildlife extinction, and many other environmental factors affect the health of the entire globe.
Continuing Labor Abuse
Western corporations point proudly to their contributions towards creating happy workplaces—introduction of clean technology, worker safety measures, etc. While some factories have incorporated higher environmental and labor standards, they are the exception. Many corporations eagerly display such “flagship” factories; however, they do not reveal that the majority of manufacturing is done by contract factories where worker and environmental abuse continues far from the view of western consumers, shareholders, and media.
Global trade policies, such as agreements in the WTO, effectively place a ceiling on labor, environmental, and public safety standards; yet no minimum standards are required. The resulting trend is that corporations roam the world seeking the lowest worker and environmental requirements. Today’s definition of market competitiveness is that countries lower labor and environmental standards in a bid to attract industry. Industry moves to regions and countries providing the lowest labor and environmental requirements. Today’s market competition pits workers and farmers around the world against one another as they fight to maintain jobs and livelihoods.
Today, China is a corporate haven of low worker and environmental requirements and it is mainly foreign firms and western consumers who benefit from this arrangement. In 2003, foreign funded enterprises accounted for 55 percent of China’s exports. Additionally, research shows that most foreign investment flows out of China .
2003-now: China at the Crossroads—Which Way Forward?
China is now an economic powerhouse in the world, largely because of its political decisions to open its borders and adopt a “free” market system. The top 15-20% of the population are joining the global consuming elites—the much heralded “middle class” according to western media, but in reality, there is nothing “middle” about these wealthy elites except that they are copying the consumption patterns of the western middle class.
In keeping with the repeating pattern of globalization, the gap between the haves and the have-nots in China has greatly increased. In the early 1980s, the richest 10 percent of the population earned less than 20 percent of the national income. By 2005, the top 10 percent earn 45 percent of the income, while the bottom 10 percent make only 1.4 percent. And many measures for quality of life stagnated or declined for millions. Along with many other countries, China is experiencing the apparent paradox of globalization—economic indicators may rise, yet an increase in poverty, loss of jobs, and social inequities often accompany the financial indicators of “success.”
With the mounting rural crisis, worker abuses, environmental degradation, income gap, and many other problems, China is standing at the crossroads. Millions of those who are negatively impacted are getting more vocal day by day. China’s official media reported that last year there were 74,000 incidents of social unrest, up from 10,000 in 1993. There is a strong resurgence of Maoism, especially among the working poor.
Since President Hu Jintao and Prime Minister Wen Jiabao took office in 2003, there have been signs of policy adjustments. The plights of marginalized groups are increasingly covered by media, and the government have taken some measures to address their grievances. Instead of saying “development is the absolute need”, the new government is now advocating for “scientific development” and “people-centered development”. Yet, so far the adjustments have not touched the essence of the neoliberal policies carried out in the last two decades. Should China continue on the path of market-oriented reform? Can the US way of life be achieved for the mass as promised by the reformers? Or is it time to reexamine this process and think about alternatives? These are some of the questions that Chinese leaders and Chinese people are discussing today.
I. Introduction
China entered the World Trade Organization (WTO) in December 2001 after more than two decades of reforms aimed at gradually shifting the country toward a free market economy that is more open to foreign investment and trade. These reforms not only gained the country acceptance into the global trading body, they have also earned the praise of the World Bank and other economists who herald China as a great success story of economic globalization. China has indeed become a magnet for foreign investment and an export powerhouse. Its strong economic growth over the past 25 years (averaging more than 9 percent annually) is unparalleled in modern history. According to standard GDP measures, China’s “economic miracle” also coincided with a dramatic drop in extreme poverty (people living on $1 or less per day), from 250 million people in 1978 to 30 million in 2000 .
However, official figures on exports and investment do not give a complete picture of the experience of the Chinese people during this period of rapid social and economic change. This report examines the reform policies and looks at how they have affected broader quality of life indicators, such as inequality, employment, health and education as well as jobs and poverty. It also examines the environmental costs of China’s rapid, export-oriented growth strategy and ramifications for the future of the country and the world.
Several indicators cause concern about China’s embrace of economic globalization policies:
• The gap between the “haves” and “the have nots” has increased dramatically since China’s adoption of a “free market” economy. In the early 1980s, the richest 10 percent of the population earned less than 20 percent of the national income. By 2005, the top 10 percent now earns 45 percent of the income, while the bottom 10 percent earns only 1.4 percent .
• Despite spectacular growth in China’s Gross Domestic Product (GDP), 42 percent of rural households in China experienced a decreased income in absolute terms from 2000 to 2002 . Healthcare and education has dramatically decreased in rural China during the last twenty years as the shift is made away from government supports to free market services.
• The measure of inequality used by the United Nations (UN), called the “Gini ratio,” indicates a growing gap in China. Between 1980 and 2005, the ratio rose from less than 0.2 (considered quite egalitarian) to higher than 0.45 (signifying serious polarization and increasing social unrest).
• China is experiencing a net loss of manufacturing jobs. Employment in Chinese state-owned enterprises (SOEs) declined from 110 million in 1995 to 66 million in 2002. Contrary to popular belief, private corporations have not made up the difference. From 1995 to 2002 manufacturing jobs decreased overall by 15 percent .
• Sweatshop factories have sprung up during the last 20 years. China privatized many enterprises and opened the door to foreign and joint-owned firms—the majority of which are used to produce goods for foreign companies to export. Lifetime employment, health care, education, and other social benefits were guaranteed for workers at state-owned factories. Today, the mantra of competition in global markets has spawned a “race to the bottom.”
• Rapid industrialization is producing massive environmental devastation. China is the world’s second largest greenhouse gas emitter (the U.S. is first); around 60 percent of the water in China’s seven major river systems is classified as being unsuitable for human contact ; and seven of the most polluted cities in the world are in China. China represents 40 percent of the increase of energy consumption in the world.
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Contrary to common perceptions, instead of cheering for the economic development, the Chinese people are increasingly raising questions regarding their country’s transformation. Many are concerned that the leap into the global economic system and the WTO is generating serious problems. The final section of this report highlights some of the efforts in China to call for alternative models—the environmental movement, the rural reconstruction movement, the new left scholars, and some recent positive measures by the government itself.
This report intends to serve as a primer on the implications of China’s new role in the global economy and contributes to the efforts to build bridges and greater understanding between emerging social movements in China and international civil society.
II. Reform Policies and Their Consequences
The Plight of Rural Areas and Its Making
Deng Xiaoping’s reforms began with China’s rural areas in the late 1970s. Initially, agriculture output and rural income increased significantly, a fact that was used to justify further reforms in rural as well as urban areas. But economic growth in rural areas slowed down considerably in the mid 1980s. By the late 1980s and early 1990s, most rural areas entered a state of stagnation or even degeneration. Today, China’s rural areas face an unprecedented crisis.
Break Up of Rural Communes and De Facto Privatization of Agriculture
Before 1978, most Chinese farmers were organized into collective communes. Several studies found that about one-third of the communes were doing very well; one-third in the middle showed potential but were facing some problems; and the bottom one-third had serious mismanagement problems and were stagnating. Based on this data, some communes required serious reform, possibly including new forms of organization and management, but the majority only needed fine-tuning. Nevertheless, the entire commune system was put through a major overhaul beginning in 1978.
The first step of the reform was the implementation of the family contract system. This system broke up the communes and gave contracts of land to individual families. They were obliged to sell a certain amount of grain to the state at a set price and pay certain taxes, but could keep everything else. In September 1980, the government took another major step when it ordered the de-collectivization of agriculture production. This involved a series of measures to replace the commune-based system with a family-based household production system. While the majority of officials and farmers of the bottom one third of communes welcomed the top-down reform, many with the top two-thirds of communes were critical. However, officials who opposed the plan were persuaded or pressured to change their position, while the stubborn ones were fired and replaced.
Up to now, the privatization of the agriculture sector is only partial: the land itself is still collective property of the village; only the usage right is contracted to individual families and can be freely traded. This continued communal land ownership is probably the most important reason preventing increased land concentration and the further emergence of large numbers of landless farmers.
The Rise of Chemical-Based Agriculture and Declining of Good Environmental Practice
During this period, Chinese agriculture was also transformed through the massive introduction of chemical fertilizers, pesticides, and hybrid seeds, which had been made possible by the industrial and technological build-up of the pre-reform era. They were allowed to work wonders thanks to the water works and irrigation system built in the previous 30 years. Fertilizer usage more than doubled between 1978-1984, helping farmers to achieved record harvests. In 1979, the government raised the price it paid to farmers for the grain they were obliged to sell to the state by 20 percent and offered a 50 percent premium on grains delivered above quotas .
Another factor that contributed to the short-term increase in household income was the exploitation of communal assets. For example, there was no control over rampant cutting of trees, which had be planted by communes over the previous 30 years as roadside windbreaks to prevent erosion. In merely four years, between 1985 and 1989, there was a 48 percent decline in the area covered by windbreaks nationwide.
The official media still attribute the rural boom period (1978-1984) to the de-collectivization process. Yet, more than two-thirds of the gains were achieved before 1982, the year de-collectivization was carried out on a large scale. Other factors, such as rising grain prices and the use of chemical fertilizers, contributed much more to the short-lived success. The same technical factors also contribute to the following stagnation. After the state price control on agricultural inputs was lifted in the mid-1980s, prices skyrocketed. Within two years, fertilizer prices rose 43 percent and pesticide prices rose 82.3 percent . And the prices continued to rise by more than 10 percent annually through out the 1990s. But by now, farmers are trapped in a vicious circle, compelled to pump more chemicals into the fields to keep up yields as the organic matter in the soil declined.
The de facto privatization of agriculture has had profound long-term environmental and economic effects. Given the high population density, family farms are often less than one hectare, or even less than half a hectare. This has destroyed any possibility for economies of scale, and utilization of equipment once owned collectively, such as tractors. The inputs are too expensive for individual families. As a result, many villages experienced de-mechanization in the initial years of privatization. And as farmers put more labor into tasks previously done by machines, they have to cut back on other types of work, including good environmental practices like the application of organic and green manure. Compared to the communes, the family farms are also much more vulnerable to natural disasters and market fluctuations, which can put pressure on farmers to overtax the environment. The small size of the farms leads to other environmental problems. As one farmer observed, “When I apply pesticide, the pests simply migrate to my neighbor’s field; the next day when he applies pesticide, all the pests come back to my plot. We end up wasting lots of chemicals while achieving very little.” In many villages, even the tiny family farms are spatially fragmented, posing further difficulties for integrated management—the villagers demanded the land distribution to be fair and equal, consequently, one family might end up with some high-grade plots on one end of the village, some low-grade plots on the other end, some medium-grade plots somewhere else. Some villages attempt a different scheme: each family is allocated one chunk of land, and the plots are rotated over the years. But this creates another problem: farmers lose incentives to invest in land and soil for long-term gain.
Impact on Women
The family contract system has also had negative social impacts. The male heads of household are designated as the major contract holders. Such restoration and strengthening of old patriarchal tradition has serious negative implications for women, whose previous entitlements under collective rights are undermined . In the collective labor arrangement, women’s contributions were officially acknowledged and rural women enjoyed unprecedented participation in public affairs, as reflected in one famous slogan of the time — “women can support half of heaven.” The communes also provided a public space for socializing. Especially in the well-run communes, collectives labor could be quite enjoyable: elders told stories, young people engaged in friendly labor competitions, people sang songs while working—or even flirted, with many romances and marriages starting then and there . The disappearance of such public space plummeted women back into the constraints of their families. Not surprisingly, in many villages, young women were the first ones to leave in search of job opportunities in the cities as nannies or assembly line workers.
Declining Public Goods
De-collectivization would not have been so catastrophic if the government had invested in rural collective institutions, such as health and marketing cooperatives that could work with family farms and supply the services and functions provided by the communes previously. But this did not happen. Government expenditure on agriculture, as a percentage of total national expenditure, has been in steady decline since the 1980s. From 10.5 percent in the period 1976-1980, it had fallen to 5 percent in 1981-1985 and 3.3 percent in 1985-1990 . Though the total infrastructure investment increased by several folds in the reform era, the share of infrastructure investment in the rural sector decreased from 10.6 percent in 1979 to 2.8 percent in 1992 and 1.7 percent in 1994 . In addition to direct monetary investment, the government used to provide lots of human resource support for rural public goods including water works, flood/drought management, health care and public education. Most of these programs have deteriorated or evaporated completely in the reform era.
Starting in the mid-1980s, the rapid appropriation of communal capital and de-investment of rural infrastructure began to be felt in many aspects. Tree farms were cut down and this loss of windbreaks resulted in more soil erosion. Declining canal networks and other water works led to decreasing productivity and increasing vulnerability to droughts and floods. For example, deforestation in the Yangtze and Songhua river basins has accelerated greatly since the late 1970s , which eventually resulted in catastrophic flooding in the 1990s.
The dissolution of the communes also led to a medical “free fall” for the rural population. Previously, 80-90 percent of the farmers had access to some form of free medical care, best represented by the “barefoot doctor” system, each community had a doctor who would provide basic health care. This system was a cost effective measure geared to preventive and routine healthcare for the villagers while the treatment of more serious diseases was relegated to higher level clinics. After the reform, the barefoot doctor system and free rural clinics crumbled without the necessary infrastructure support. It is estimated that of the public health organizations (clinics, hospitals, monitor stations ,etc.) below the county level, one-third are on the brink of bankruptcy and another one-third have collapsed completely.
Many doctors who are still serving the rural population were trained thirty years ago, with little further training since then. As they are retiring, very few young people can be motivated to carry on their work. Recognizing this problem, the government has initiated a few attempts to rebuild rural health care in some pilot areas since 1990s. So far, none of the experiments managed to establish a scalable model. One problem is that the clinics and hospitals are increasingly profit-oriented, preferring expensive treatments over preventive care, which in turn makes health care prohibitively expensive. The system also has to deal with individual patients instead of communes, making transaction costs much higher.
Besides health care, other state-guaranteed entitlements for individuals declined as well. For example, for those who could not work and did not have family support, the state used to provide “five guarantees” of food, clothing, shelter, education, and decent burial (Aziz, S. 1978. Rural development: Learning from China.). The declining entitlements undermine state legitimacy and reduce government leverage to carry out its policies. Take the birth control policy as an example. Due to the small acreage of arable land per person, most of Chinese peasantry are acutely aware of the population pressure and support the government policy in principle. Yet the recent social change is not conducive for the implementation: elders without family support are no longer being taken good care of; rural women’s rights deteriorate rapidly, etc. All these promote a conflicted mentality among farmers, “I hope everyone else abide to the one child policy (so more land will be available per person), but I want to have a son, I want to have more kids.” As birth control is so desperately needed for the long-term sustainability of China, government has to resort to combative means to implement it.
With declining support from the central government, rural expenditures are increasingly financed by local taxation and fees. Yet while local government services are in decline, expenditures and taxes continue to rise. Several empirical studies find that in the mid 1990s, various taxes and fees added up to one fourth or even one third of peasants’ income, much higher than the 15-20% tax rate levied on the communes in the collective years . The most fundamental reason is that the de facto privatization has fragmented Chinese rural society, and because of this fragmentation, administration costs are much higher than before. Furthermore, the fragmented village community has lost its collective power and falls prey to the unchecked bureaucratic power of rural cadres and their corruption (also see C. F. Mobo Gao “Gao Village: a portrait of rural life in modern China” for case studies).
Rural fragmentation is also cited as a reason for a rise in crime. According to Dongping Han, a U.S. sociologist who grew up in rural China: “The collective created a new community spirit in rural China, and people cared about each other’s well being. It was very hard for criminals to operate in the countryside when there was a strong coherence in a community. The individual household system destroyed the rural community created by the collective institutions, which created an environment more susceptible for crimes.” He points out that while the rural police force has quadrupled in size, most cases go unsolved, reflecting the fact that crime has become a social problem beyond the control of the police.
Cultural Colonization
Rural education also suffered greatly in the reform era. Apart from financial problems like diminishing funding and skyrocketing tuition fees, it has gone through dramatic regression towards elitism in the last two or three decades. This makes it much harder for rural children to get a good education and widens the divide between the mass of Chinese peasants and the urban elite.
To better understand this, let us briefly examine the history of education in China. Education has played an important role in Chinese history ever since the “imperial exam system”(Ke Ju Zhi Du) was introduced 1,400 years ago. From 605 A.D. to 1905 A.D., imperial rulers used the system to select the best educated to be state administrators. At its birth, the exam system was far more advanced than hereditarys system practiced in many other parts of the world, and it made significant contribution to Chinese civilization. But as history progressed, it became a tool of the educated elites to promote their self-interests and a barrier to equality and democracy. Though the exam system was officially banished in 1905, the elitist tendency in education fostered over the centuries is not so easy to shake off. During the first 17 years of communist rule (1949-1966), despite of the strong egalitarian tendency of the central government, most of primary and secondary education was focused on perfecting exam-taking skills—the goal of a student was to pass the national college entrance exam and thereby move up the social ladder. The system was essentially a re-installation of a meritocratic system very similar to imperial exams. Not surprisingly, rural education made little progress. In his paper “Impact of the Cultural Revolution on Rural Education and Economic Development—The Case of Jimo County” , Dongping Han documented that a county of 750,000 people only produced 95 high school graduates annually during that period; more importantly, more than half of the graduates left the countryside for good.
Many western readers are probably familiar with the disasters brought by the Cultural Revolution (1966-1976), but many positive changes happened during the period as well. Rural education was one of them. The privilege of the educated elites and their strong hold on the policy was challenged and shattered during the Cultural Revolution. The educated elites were required to learn from workers and farmers though regular participation in manual labor; an “open door education” policy was implemented where working people were actively involved in the education process. As a consequence, primary and secondary education in rural areas exploded—the above-mentioned county produced 2,362 high school graduates annually in comparison to 95 in previous years . A "popular model" of education was developed in response to demand of the peasants. Schools introduced new sets of textbooks with local legends and local knowledge; experienced workers and farmers were invited to give lectures and contribute to curriculum design. In a paper titled “Professional Bias and Its Impact on China's Rural Education: Reexamining the Two Models of Rural Education and Their Impact on Rural Development in China” , Dongping Han described some of the better run rural schools at that time, “Since village school was completely under the control of the local community of the village, the content and structure of education had been completely transformed. There was a high level of integration between education and village life at the time. The curriculum was oriented toward the rural needs. For example, the important lessons and experiences farmers accumulated over the years entered the language textbook, like when it was time to plant wheat, to plant beans and sweet potatoes, how to take care of different crops. These materials were not only useful to rural students but were also much easier for rural children to learn… Students studied the fundamentals of internal combustion engines, generators and electric motors, and water pumps, and how to operate and repair these machineries. Instead of studying traditional biology and chemistry, students studied plant genetics. Students in Fuqian village middle school experimented in their own fields the crossing of two different corn crops to see the result. In mathematics classes, students studied how to measures the volume of piles of grain, a pile of organic fertilizer and the size of a piece of land, as well as principles and rules of bookkeeping for the collective farm.” The transformed schools became important part of village communities and helped to center attention on the village life: most of the energy and effort was focused on building local economy and improving community conditions. There were documented cases where people gave up better paying jobs in the cities to come back to the countryside because they preferred the environment: outside of the short busy seasons, farmers only worked 4-5 hours per day; working in nature was much less stressful.
All this changed in the reform era. Deng Xiaoping’s famous quote “education should be oriented toward modernization, the world and the future” was used by the educated elite to completely restructured the curriculum. In the name of quality control and standardization, national standard textbooks have been adopted. Local contents have been completely eliminated and working people no longer have any say in the educational process. The national college entrance exam was reintroduced in 1978 and has once again become the most important yardstick for evaluation. As an example of what is being taught and tested in today’s schools, here are some multi-choice questions from the 2002 college entrance exam:
1. Frankfurt is Germany’s
A. Most populated city
B. Biggest harbor city
C. Biggest airport hub
D. Biggest high-tech center
2. Which of the following countries belong to the European Union, is next to North Sea and Baltic Sea, and is not using Euro?
A. Sweden B. Germany C. Denmark D. Poland
Millions of children are forced to mesmerize such trivial facts about distant western countries, while learning nothing about their own community—the detachment and alienation has gone to such extremes that some high school students in villages I visited do not even know whether their own parents keep chickens or ducks as part of their livelihood. Many educational materials carry the implicit message: everything urban is modern and desirable; everything rural is backwards and despicable, and should be discarded as fast as possible to achieve modernization—or more precisely, Americanization of life styles. Farmers’ traditional attachment to the land is considered a stupid sentiment and should be replaced by upward mobility at all cost. For the majority of rural children who have little chance of entering college, education become irrelevant after they have learned how to read, write, and count in the first few grades. Combined with rising tuition fees, this has driven many kids out of the school. One case study by Dongping Han found that high school enrollment rate of a rural county dropped from more than 70% in 1976 to less than 10% in late 1990s . Those who are lucky enough to enter college either leave the countryside for good, or come back as government employees or officials. Needless to say, it is questionable that their education has prepared them well to be community leaders and decision makers.
In short, the elitist model of education has become an active agent for cultural colonization of the rural areas. While it has inspired a selected few to be fierce competitors in the catch-up game, it has demoralized the majority and helped to poison the community spirits. In many rural areas, the brain drain and labor drain is so severe that some Chinese sociologists have coined the term “empty nest villages” to describe the phenomena: the most capable escape by entering college; the young and healthy become migrant workers; those who are left behind are predominantly women with heavy family burden, elders, children, and the handicapped. The young and healthy migrant workers spend their best years building highways and skyscrapers for urban centers or toil in sweatshop factories; yet with minimum labor protection and no social safety net, most of them will be cast back to the countryside when they become old, sick or injured—which is quite common given the harsh labor conditions they often face.
Educational problems like skyrocketing tuition have caught the attention of the general public and the government. In March 2005, Prime Minister Wen Jiabao announced a new policy to remove fees for 14 million students in China's poorest counties. This policy will be expanded until 2007, when all rural students will receive a free primary education. But the government still needs to realize that besides fees, the style and content of the education is also a vital problem. This is best exemplified in the case of Tibet. Chinese government has poured huge amount of aid into Tibet. So unlike other areas, most schools in Tibet have remained free, and in some places parents are even getting paid by sending their children to school. Yet, many kids are not going to school, especially in traditional communities of nomadic pastoralists. The mainstream media often blame the problem on the parents, saying they are backwards and do not understand the importance of education. Nothing is further from the truth. Many herders still have fond memories of horseback schools or tent schools in Mao’s era. As their names indicated, these mobile schools traveled with the nomads and were integrated into the community life. But today’s schools are centralized and settled, which means a pupil has to live away from its parents. The problem goes beyond high living cost or separation from family. In the words of some parents, “Today’s school only teaches a child to be lazy and picky. The family tent is no longer good for him; traditional food is no longer good for him; and tending to animals is a stupid task for him. When a child comes back from school, he just thinks everything is wrong and does not want to do anything.” These parents are not backwards or stupid. Many of them would like their children to get an education, but they also understand that the current type of education is destroying their children instead of empowering them. The problem is with the educators who fail to deliver the type of education most wanted and needed in rural areas.
Exceptions to the Crisis and a Hint of Hope
There are exceptions to the general rural crisis. For example, it is estimated that there are 7,000-10,000 villages that have continued with the co-op commune model by resisting the top-down pressure to break up. It is reported that most of them are doing much better than their privatized neighbors: living standards have improved; public education, health care and other benefits have been maintained and improved. For example, in Nan Jie village, a well-known collective, the full cost of college education is now being paid by collective funds. But these collective villages only account for 1-2% of the rural population, indeed a small minority.
On the positive side, collective ownership of land has continued in general; this offers some hope of reviving collective farming, or at least the collective provision of certain basic services. Many villagers had accumulated rich experiences in the collective era; they could be re-mobilized to build up the commons once again. More and more farmers are realizing that family farms cannot possibly fend for themselves alone in the market. So there are growing grassroots efforts to rebuild a community-based economy. Battles are being fought over the land issue right now. There are powerful forces that push for further privatization—many neo-liberal scholars argue that full-scale privatization of land ownership is the only way for agriculture to achieve economy of scale, thereby solving all problems. If that were to be achieved, then it would be even more difficult to promote building of the commons.
Conclusion
In a 2005 seminar on China, Joseph Stiglitz commented, “as China’s experience shows, partial and gradual privatization is more beneficial than sudden 100% privatization.” It is probably more accurate to say that partial and gradual privatization is less harmful. But as evidence pours in, the detrimental effect of even partial privatization of China’s rural sector is increasingly undeniable. The tiny family farms that resulted from the de facto privatization are extremely vulnerable to natural disasters and market fluctuations. Between 2000 and 2002, income of 42% of rural households decreased in absolute terms. De-investment from the central government and fragmentation of rural society has lead to declining public goods: irrigation canals and other water works have fallen into disarray; public health care has deteriorated or disappeared completely; education has become prohibitively expensive; crime rate has gone up several-fold. Instead of empowering and enriching rural communities, the elitist education is exacerbating the brain drain and labor drain. All these factors help to create a seemingly “indefinite” supply of cheap labor that largely fueled China’s boom in the last twenty years. Yet one cannot help asking: what have these hard working people get in return? Why are their lots worse than thirty years ago in so many aspects?
With China’s WTO entrance in December 2001, the future is even bleaker. As farmers are too fragmented to be a viable political force, the Chinese government has made huge concessions in the agricultural sector. Once the WTO rules are fully implemented, China’s agricultural market would be more open than those of Japan or South Korea. Yet even with the supposedly “more protected” South Korea market, a South Korea farmer was so desperate that he set himself ablaze in protest during 2003 WTO Cancun talk. How can Chinese farmers survive the blow? In later parts of the report, we will discuss some of the on-going debate about China’s rural problems and alternative solutions.
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