| Is Any Juice Left in Agricultural
Reforms in China: Can "the Engineers" Solve the Contradictions?
by Satya J. Gabriel
There is no movement
that does not bring change,
no moment
that does not bring metamorphosis.
Chuangzi
Rural China was the focus of
my early interest in the Chinese economy. More
particularly,
I was interested in understanding the role of
productive
self-employment (which I termed in my dissertation
the ancient
class process, partly as a sort of jab at the
teleology
at the core of classical Marxism and partly because
Marx, in one of his own teleological hiccups, described productive
self-employment as the ancient mode of production) in shaping
social life
in China and of the dynamic interaction of that
social life
with productive self-employment. My first visit to
China
in 1983 came during a period when the Chinese
authorities
were legitimizing the countless acts of deviance
that had sprung up during the commune-era when
millions of farmers were producing output which they
either
consumed, traded, or sold outside of the
official/legal distribution
channels (which were controlled by government
appointed
commune administrators and purchasing agents in
state-run merchanting operations). During the intervening
years the
communes were dismantled (in 1985) and
self-employment was not only legalized but became
the norm in rural China.
Recently, the growth in
capitalist
employment in agriculture has increased
dramatically, as has the degree of unemployment in rural areas. Nie and
Bao, in their article on surplus worker migration in The Rural
Problem at the Middle Stage of China's
Industrialization (Beijing: China Planning Press, 1996),
argued that rural China has from 80 to 150
million surplus workers (this concept of surplus workers has
gained increasing use
as capitalism has become more pervasive in all parts of China).[1] Based on data from the China Statistical
Yearbook, one can estimate that the labor force in China should be
approaching 740 million this year (2003), of which a little over 71% is
employed in the rural areas, mostly in agriculture. This estimate would
not include children who are employed in agricultural work. Some have
estimated the total amount of agricultural employment (including
children) could be as high as 900 million. The potential for new
additions to the capitalist labor market in China are simply
astounding. (A side effect of this: In a more competitive,
less state regulated and subsidized, labor market, wages for Chinese workers could fall substantially.)
The early period of reform (when rural China made the
transition from state feudalism to ancientism/self-employment)
saw an explosion in agricultural output and related
surplus
value. And you did not need a spreadsheet full of
data to know that incomes in rural China were growing rather rapidly. It
was quite visible. You could see the new multi-bedroomed white stone
houses being built by the peasants. You could watch them carrying new
television sets on their shiny new bicycles or pulling refrigerators on
carts. But over time, particularly as more capitalist production
was introduced, the growth in agricultural
incomes, output and surplus
value has slowed (and, perhaps even more
problematically, the amount of arable land is being diminished as new
capitalist industrial "parks" are created on what had been farmland),
bringing back an old dilemma for the Chinese
authorities. In a country of about 1.3 billion
people, growing
enough food is never a minor matter. And, in
addition, there
is the problem of keeping up the rapid economic
growth that
has come to be expected by the Chinese population,
needed to absorb the aforementioned surplus population created by
the expansion of capitalist labor markets,
and
increasingly seen as the primary raison d'être
of
the Communist Party of China (CPC).
The CPC has recognized, since before the 1949
Revolution,
the need to simultaneously solve the problem of
generating
an agricultural surplus to help finance the
modernization
and industrialization of the country while allowing
farmers
and their families to retain sufficient resources to
meet
their consumption needs and invest in
agriculture. In an
effort to solve these problems, the CPC-led
government has
continuously transformed economic processes in
agriculture,
political processes shaping rural governance, and
cultural
processes by which the official ideology of Beijing
is transmitted
to the rural public. The basic mechanism for
capturing a
portion (or all of) the agricultural (and
rural) surpluses
available for investment in industrialization and
infrastructure
development has changed several times, from taxes on
a portion
of the surplus generated by self-employed
(ancient) farmers
after the post-1949 land reform, to the feudal
mechanism
of direct appropriation of the entire rural surplus
during
the era of the communes (initiated during the Great
Leap
Forward), to the return to taxation of a portion of
the
surplus generated by self-employed farmers and a
growing
number of capitalist farmers in the post-1978 Reform
Era. During the self-employment periods, both prior to
1958 and since the post-1978 reforms, the government has also
made use of
the so-called scissors effect by which the state's
power over input and output prices is used to price agricultural outputs below value and,
thereby, to extract an additional portion of the surplus from ancient
farmers.
Ironically, the combined effect of the price
scissors (which, on the output side, has been restricted somewhat by the
government's maintenance of only a limited monopsony over agricultural
outputs, primarily grains and rice) and taxation of a portion of
agricultural surpluses
of rural direct producers has generally resulted in
more
surplus resources going to the state than the direct
appropriation
of the entire surplus under the feudal system. In
other
words, if Y is the surplus that farmers produced
when given
the power to be the first appropriators of that
surplus
and Z is the surplus produced by the collective of
feudal
producers under the commune system, then Y exceeded
Z by
such a large factor that µY > Z (where
µ
= the average tax plus scissors rate on the farmers' surplus). In
addition,
the size of the consumption fund generated by rural
direct
producers to meet their own family needs, call this
X, has
grown substantially over the similar consumption
fund generated
on the communes, call this Ž. Thus, X + Y
> Ž
+ Z by a substantial factor, representing the
incremental
growth in value and incomes (X + Y - Ž + Z) generated by
the
shift from feudal relationships (the commune
system) to
a mixed ancient and capitalist agricultural
environment.
It turned out that class process mattered when it
came to
the size of the surplus generated by direct
producers. Not
only did class matter but the impact of this class
process transformation/transition
was measurable (although we would caution that this
approach
oversimplifies, as we economists are known to do
quite frequently,
and ignores the other panoply of changes that
accompanied
the change in class processes --- history is always
messy
in this way and multicollinearity is always lurking
in the shadows, if not making a very public show of itself). This was a critical lesson learned by
the
pragmatic modernists and has shaped their policy
approach
to not only agriculture but industry as well.
The "Four Modernizations" strategy, which
originated
with Zhou Enlai but is more closely associated with
Deng
Xiaoping, lives or dies with the success of
generating and
capturing a relatively large surplus value
(a significant portion
of which must be realized in hard currency to
finance the
purchase of foreign technology). Industrial growth,
particularly
the rapid increases in surplus generated by the
town-village
enterprises (TVEs), discussed in essay 14, but also
due
to the resurgence of the state-owned conglomerates
(SOEs),
discussed in essay 13, and the growth in private and
joint
venture firms are certainly playing an important
role in
generating the surplus necessary for the
technological and
infrastructure transformation implied by the
"Four
Modernizations," but we need to keep in mind
that nearly
half of all Chinese direct producers continue to
work in
agriculture. Agriculture remains, therefore, a
critical source of productive employment and surplus
labor. And we must not forget, as the CPC leadership is quick
to remind us, China remains a "less industrialized"
nation, despite the rapid physical transformation in
the
coastal regions, especially the large cities on the
coast, and therefore has a long way to go before the process of
modernization reaches a point where a slowdown doesn't pose a serious
threat of reversal. In other words, the "modern" capitalist economy has
developed rapidly but is, by no means, fully rooted. It's easy to see
this if you travel beyond the boundaries of the coastal areas and into the
hinterland (or even into select districts of the major cities).
It is doubtful that the "Four
Modernizations"
can be extended to this hinterland without successful
development
("modernization") of the agricultural
sector.
Indeed, if agriculture fails to generate sufficient
surplus,
it becomes very problematic to continue the current
rapid
national economic growth, particularly as the
demands of
a growing urban managerial class places increased
pressure
on distributions of the industrial surplus. The
competition
over shares of this growing surplus may further
intensify,
as various recipients fall under the spell of the
new culture
of conspicuous consumption. As the claimants to
portions
of the surplus attempt to gain higher amounts,
increased
pressure will be brought to bear on direct
producers, in
both agriculture and industry, to produce higher
levels
of surplus value. One way to achieve this increase
in surplus
value is to raise productivity (in both agriculture
and
industry) so as to lower the relative cost of
meeting the
consumption needs of direct producers. Raised
productivity
can be achieved by applying more advanced production
techniques
and means of production, i.e. modernization. In
other words,
the very process of "modernizing," that is
packaged
with conspicuous consumption in order to generate
the necessary
support from the most educated portions of the
population
(who are most likely to benefit from higher
distributions
of surplus value), creates pressures for more
modernization.
There is, however, a risk that the pressures to
raise the
surplus available for distribution will negatively
impact
the value generated to meet the consumption needs of
direct
producers. This risk is particularly acute in
agriculture,
where many direct producers are still disorganized
self-employed
farmers and an increasing number are wage
laborers. If,
in the extreme case, agriculture fails to meet the
basic
consumption needs of the rural population (X falls
below
some critical threshold Þ, which is itself
constantly
changing and influenced by the same cultural dynamic
that
raises demands on surplus value generated in both
self-employment
and state and private capitalism), the centrifugal
forces
always present in the Chinese countryside could
surface
in the form of disruptive protests that threaten the
continued
monopoly control of government by the CPC. Chaos is
the
primary worry for both the CPC leadership and many
within
the more formally educated population (the
"intelligentsia"),
particularly those who have benefited from recent
economic
growth by receiving residual benefits in the form of
distributive
payments from the surplus of TVEs or other
industrial firms.
Thus, the current iteration of the pragmatic
modernists
("the Engineers"), led by Hu Jintao (the
new primus
inter pares within the CPC), must negotiate the next
stretch
of the River by touching a brand new set of stones
(experimental
policies and programs) designed to garner an even
greater
surplus available for their modernization
project. Among
the problems that need to be solved: finding the
catalyst
to increase that portion of the agricultural surplus
that
goes to investment in more advanced agricultural
techniques
and related means of production without diminishing
the
surplus captured for industrial and infrastructure
modernization.
Given China's entrance into WTO, failure to
modernize agriculture
may result in China's farmers losing a large
percentage
of the urban market for their output. It hasn't
happened
yet, but that seems to be the result of official
foot dragging
on compliance with WTO provisions related to
agriculture
(to the ire of the United States and other nations
hoping
to crack the domestic Chinese market for
agricultural goods).
Any losses to foreign agricultural enterprises could
have
devastating consequences in rural China, reducing
incomes,
raising unemployment further, and generating more
opposition
to the CPC.
By all indications, a sizable number of
rural
farmers are already unhappy with both central and
local
government policies (as well as corruption by local
officials
that represents an additional drain on the surplus
value
generated by self-employed farmers). If rural
farmers fail
to realize sufficient value in sold output to meet
the aforementioned
Þ level of consumption, whether this failure
is due
to WTO related competition or other factors, there
could
be a widespread crisis in rural China. But that's
the worse
case scenario. More likely, problems will develop
more gradually,
as agricultural incomes fall farther behind
industrial incomes
and overall unemployment grows from redundancies in
both
the rural and urban sectors. Indeed, there seems to
be widespread agreement that the level of redundancies in agriculture
far exceeds the level in industry (where the state-owned enterprises were
generally regarded as bloated with redundant workers). If these rural
producers and urban workers join their comrades in unemployment the
so-called reserve army of unemployed (an alternative name for
surplus workers) could become a tidal force in
Chinese politics, culture, and economics.
Perhaps that is
precisely why
the government is stalling on implementing WTO
provisions
related to agriculture, to provide farmers with more
time
to prepare and hoping to keep acceleration of the
unemployment rate and the social impact of overall rising unemployment to a minimum.
Indeed, once WTO related competition hits
the
Chinese economy with full force, severe limits will
be imposed
on any rise in agricultural prices (a rise in such
prices
is often seen as a temporary panacea to agricultural
problems
--- helping to both raise income levels and
encourage more
productive investment in agriculture) and some
prices may
even fall.
What is the solution? It would be wonderful if
Chinese
farmers could be equipped with technology that would
allow
them to raise their productivity levels to something
close
to that of Japanese farmers (according to Fang Gang
the
productivity in grain production in China is already
comparable
to that of American farmers). But this is a
pipe-dream.
How do you raise productivity without a significant
rise
in the surplus value invested in agriculture? The
pragmatic
modernists reformed the Chinese economy to
guarantee
an outflow of surplus value from agriculture to
finance
modernization of industry and expansion and
modernization
of infrastructure (mostly in urban areas). Today and
for
the entire reform era, the percentage of social
investment
going to agriculture has been a fraction of the
amount of
surplus generated in that sector (and less than 2
per cent
of the total). According to Fang Gang, writing in
the China
Rural Survey, "If agriculture's share of
national investment
were to be brought in line with its share of
national income,
farm investment would have to rise to over 300
billion yuan
(at 1994 prices), or ten times its current
level."
It's a catch-22. In order to raise agricultural
productivity
surplus value would need to be transferred to
agriculture
(presumably from industry) but, even if there was a
political
will to do this (which there clearly is not), the
result
would be a sharp slowdown in the modernization of
industry
(with the concomitant slowdown in productivity
improvements
and "competitiveness" in that sector). WTO
related
competition will take its toll, either in
agriculture or
industry or both. There is simply no apparent
resolution
to this contradiction. But rest assured, the
Engineers are
going to come up with something. Right? After all,
if they
could dam the Yangzi River, then anything is
possible.
[1] Capitalist firms in china, as elsewhere, tend to
employ far fewer workers per investment outlay than enterprises of
self-employed producers or family-based enterprises (whatever the class
process underlying the family enterprise). This is indicated by the
relatively low employment elasticity of investment in
capitalism. Thus, as capitalist firms make up a larger share of
investment spending in China, then employment growth slows. It is likely
that this trend will both increase the unemployment rate over time and
make it increasingly difficult to absorb unemployed workers for any given
amount of overall investment spending in the Chinese economy. The
potential for this leading to social unrest is of no small importance in
analyzing the stability of Chinese society going forward.
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Copyright © 2003 Satya J. Gabriel, Mount Holyoke College. All
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