CHINA the race to market

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Keywords Chapter Five: Why the trend to market-democracy (Part Three)

Why the trend to market-democracy
Marx on the farm
Table 5.2 Employment + sectors' proportion of the national economy (%)
Where will all this population go?
Marx in the towns and cities
Box 5.2 Jiang Zemin's 'Three Representatives' Theory
Box 5.3 Social discontent
Chapter Five: Feeling the Stones as You Cross the River (Part One)
Chapter Five: No alternatives to market-democracy (Part Two)
Chapter Five: Key characteristics of totalitarian regimes (Part Four)
Chapter Five: A post-totalitarian regime (Part Five)
Chapter Five: References (Part Six)
Chapter Five: (Full Printable version)

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Chapter 5 (Part Three) >

Why the trend to market-democracy

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Market-democracy as a governance form may have swept all competitors before it, but the reasons remain controversial. There are two types of explanation from an earnestly progressive view of history’s ways.

Modernisers see people mounting the staircase of history, from a lower to a higher form of existence.
Marxists see history driven by class struggles, resulting from technological progress.

Now the Chinese party-state is both a moderniser, and officially Marxist-Leninist-Maoist in inspiration. So it is a fit subject for a modernisation/Marxist analysis. This predicts a variety of possible destinations -

democracy,
fascism or
communism,

and a passage to modernity, contingent on relations between classes - peasantry, land owners, urban bourgeoisie. Reference [7]. Substitute land owners for party officials, and we have the foundation for a witch’s revolutionary brew; stir in economic growth as a sure-fire predictor of instability, Reference [8] add the erosion of traditional solidarities, throw in widening wealth gaps, sprinkle multiple sources of dissatisfaction and pepper with a layer of political decay. Reference [9] We are in the heartland of the determinist sudden-regime death-syndrome school of thinking.

Marx on the farm

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Consider how this story plays in China’s countryside. The arithmetic is straightforward: officially China’s population is 1.3 billion, including 800 million peasants who live in the countryside, in often Malthusian conditions of rising population, limited arable land, and diminishing returns. Reference [10]. As we have seen this population is expected to rise by 2015 to about 1.5 billion. In many provinces, land per farm worker is less than Bangladesh; and the quality of land under the plough is declining, due to land erosion, deteriorating organic content, and salinization of the soil. This provides China with its primary challenge: it has to feed 20% of the world’s population with 6% of the world’s arable land.

The vision is inspired by Anglo-American liberal ideals, suggesting the removal of all constraints on individuals’ pursuit of self fulfilment, except where the exercise of one man’s freedom limits the freedom of another. From this follows the idea of a government with a limited mandate to manage public affairs, renewable through regular elections, and a broad obligation on society to assure all individuals equality of opportunity but not of reward.

We have seen that market reforms attributed to Deng began as local initiatives in Anhui province. There were a number of reasons for reforms starting first in the rural areas: after Mao’s years, China’s peasantry was seething with discontent, bureaucratic resistance to change was weak, and China was failing to feed its growing population. The initial step was to free farm prices, and then to allow farmers to sell their surplus in the market. Next, rural communes - established in 1958 - were replaced by the household responsibility system, whereby farmers leased land (from the party-state) for a period of fifteen to fifty years in return for contracts to deliver supplies at fixed prices.

The result was a sharp rise in output and a return of China to food self-sufficiency.Yet farm output per worker by the mid-1990s was still $296, against $343 in India, $355 in sub-Saharan Africa and $745 in Indonesia. By 1998, the farm population of 370 million, representing just under 50% of the workforce, produced 18% of the gdp With labour productivity in farming under 1% of that in the US, there is enormous scope for a continued and rapid drop in the farm population.

Looking backwards, the farm workforce fell from 76% of the total in 1975 to just under 50% at the turn of the millenium, while the farm workforce rose slightly from 365 million to 370 million. (see Table 5.2 below) Furthermore, the traditional preference among peasant families for male rather than female children encouraged a cruel culling of female infants.

Table 5.2

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Employment + sector’s proportion of the national economy (%)

Industry	1985	1990	1995	1996	1997	2000
Primary
Employment	62.4	60.1	52.2	50.5	49.9	50.0
% of the national economy	28.4	27.1	20.5	20.4	18.7	15.9
Secondary
Employment	20.9	21.4	23.0	23.5	23.7	22.5
% of the national economy	43.1	41.6	48.8	49.5	49.2	50.9
Tertiary
Employment	16.7	18.5	24.8	26.0	26.4	27.5
% of the national economy	28.5	31.3	30.7	30.1	32.1	33.2

Source: China Statistical Yearbook, 2000

Where will all this population go?

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Perhaps, the one child policy, most effectively enforced in the cities, also played its part. Whatever the complex of causes, China at the turn of the millennium has a male:female ratio in the order of 1.35: 1. One prognosis suggests that so many randy males will only be too ready to turn to violence. The regime’s temptation would be to turn that violence outwards against foreign enemies. Reference [11].

The last quarter century witnessed, not a massive flood of population to the cities, but rather a regular stream and a natural increase in the number of urban dwellers, rising from 18 % of the total to 30%. Surplus rural labour was absorbed in township and village enterprises (TVEs). They provided the main engine driving China, in Barry Naughton’s terms, to grow the market out of the plan. Reference [12]. By the end of the period, two-thirds of rural output was accounted for by TVEs.

Rural labour productivity soared as human resources were used to more effect. This went with sharp rises in income and savings rates. Rural industrialisation also went with unprecedented pollution. TVEs, as often as not under management of party members, sprouted like mushrooms in China’s huge countryside, where infrastructure for water, energy, waste disposal or communications are bare to non-existant. For the party state, this suggests the need to concentrate the migrating rural population on medium-size townships where infrastructure is affordable.

Maintaining rural economic growth while keeping political control there is a crucial determinant in China’s future evolution. But problems have multiplied. Up to 175 million workers in the countryside cannot be absorbed in work on the farms or in the townships, and therefore have no option but to try their luck in the cities. Such a huge army of the unemployed is potentially a major source of trouble for the regime.

The regime has relaxed rural-to-urban migration, but this is likely to pull more people to the rich rural development areas along the coastline, where TVE’s account for 80% of rural incomes, compared to 8% in China’s far west. Central and western areas of the country is where 60% of the population live, often as not in crushing poverty. Add to that, rural enterprises devour scarce water resources, are major polluters, and often operate outside the formal economy.

Meanwhile, local officials have become more burdensome in their exactions on local populations, just as the government has cut back on subsidised housing, health, education and transport. This has resulted in violent outbursts, attacks on party officials, the burning of their homes and their assassination. Banditry has returned with a vengeance in many provinces of China. Reformers within the party argue that without the extension of direct elections, the party-state will lose control of the countryside.

Marx in the towns and cities

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China has seen an enormous rise in working age population, much like the rest of East Asia, and a sharp decline in births. This is due to improved health provision, as well as to the regime’s one child policy, introduced in the late 1970s to curb the population growth. As mortality rates have fallen, the average number of children per woman has fallen, despite a 95% marriage rate of Chinese women. This has created first a bulge of the young, now a bulge of the employed population for the period 1990-2025, and thereafter a bulge in the old.

Such a demographic structure holds a number of implications:

One is that at least 700 million people will have to be living off incomes earned outside of agriculture. If the peasantry were to shrink to the one third represented by the farm contribution to output at the turn of the millenium, up to 1.1 billion people would have to find jobs in the non-farm sectors. In other words, the party-state faces the task of creating an economy which supports between 400 to 700 million additional jobs within the next fifteen years.

Another is the financial implications of such a rapidly ageing population. Fortunately, the habits of abstinence required in the past to maintain a large family presently carry over to a working couple with one child. Small wonder that savings rates in China are 43% of national income—the world record. Those savings for old age, and ill health,will come in useful as a wealthier, urban Chinese population puts aside savings between now and 2025.

It is very important for China to raise the quality of its labour supply if it is to prepare well for the retirement bulge after 2025, when returns to capital will be falling in any event. Yet China's human capital is under-developed: While China has 22% of its population living on less than one dollar a day, compared to India’s 47%, the average for children in school is 5.6 years, the same as in India. China ranks no 119 in the world league for per capita spending on education.

The implications of China’s demographics are clear enough: only a dynamic, privately-owned market economy can hope to generate the jobs needed in China over the coming decades; China’s abundant savings will have to be channelled efficiently in order to raise the productivity of labour and capital to levels where the economy can readily carry the growth in pension and health costs of an ageing population; to ensure that wealth grows rapidly if not evenly, China’s potential in human capital must be developed.

Now one of the prime effects of Deng’s reforms in the 1990s has been the creation, in Marxist terms, of new classes in society. State functionaries represent the shock troops of China’s nomenklatura capitalism, a phenomenon well-known in former communist party-states moving out of the command economy. Over the past decade, the party cadres were the largest social group to establish businesses, alongside workers and peasants. They have also benefitted as insiders in the sale of party-state assets to financial institutions held by other party- state institutions.

Quasi-private entrepreneurs, with unclear claims to property, emerge from the TVEs, or the larger corporations to have listed since the early 1990s on the country’s major stock markets. Conversely, marketisation in China has stimulated the rapid growth of a private entrepreneurial class, whose members are clamouring to create their own associations and to participate in public policy. Jiang Zemin’s decision to open membership of the party to business people is thus part of a larger re-definition of policy to widen the party’s reach to embrace new social groups created in China’s on-going transformation (See Box 5.2 below).

Box 5.2

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Ziang Jemin’s 'Three Representatives' Theory

In February 2000, Jiang Zemin announced a new concept, san ge dai biao. The concept declares that the CCP represents “the most advanced mode of productive force, the most advanced culture, and the interests of the majority of the population”. What this theory indicates is the party’s efforts to open membership to new social forces and classes. Undoubtedly, this is a significant step to pluralism within the party structures.

Meanwhile, China’s workers stay entrapped in a Marxist-Leninist prison. Not for them the new freedoms open to China’s businessmen. The party-state retains the monopoly over worker representation, Reference [13] and has no intent of allowing an independent trade union movement to emerge, along the lines of Solidarity in Poland. Free trade unions also complicate management’s task within enterprises. Indeed, many companies in southern China depend on bonded labour, in that workers surrender their papers and pay a deposit on recruitment. They thereby become the captives of management.

They have no protection against arbitrary lay-offs, and no social net to ensure a minimum standard during illness, unemployment or old age. Hence, the party-state’s efforts to channel worker discontent against foreign devils, rather than against abuses in its own backyard. Working people are the sacrificial lambs of China’s present arrangements.

Here we have all the ingredients of our Marxist story:

class war in the countryside,
harsh conditions for the urban poor,
the creation of new social classes,
a well-entrenched ruling class.

Future direction of policy is clearly to promote the private sector across the whole economy in order

to absorb the new entrants to the labour markets,
the unemployed from failed firms, and the
underemployed from the countryside.

That in turn implies boosting the prestige of business people, and of granting them security in the enjoyment of their property. In turn, this stimulates civil society, prompts demands for the rule of law, fosters the need for a better-trained bureaucracy, and promotes the circulation of information. In addition, the spread of mobile phones and the internet facilitate communication among the discontented, and the means to discuss what to do about it.

Organisation of opponents is the point where the economics-drives-politics school of thinking runs into trouble. People do not rebel just because they are discontented. A prerequisite to rebellion is that rebel leaders mobilise the discontented into a collective, organised force able to take advantage of the political opportunities on offer.(See Box 5.3 below) In short, it is opposition élites that organise discontent rather than discontents that mobilise people. The economics-drives-politics argument thus transmutes into an observation of the primacy of politics.

Box 5.3

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Social discontent

Signs of social discontent in China include peasant demonstrations, laid-off workers joining criminal gangs, and Falun Gong sect members gathering to be arrested in Tianenmen Square. In June 1999, the official People's Daily newspaper, noted that some party members and officials who pursue personal gain have been deeply involved in worshipping Buddha and practicing astrology, divination, geomancy and physiognomy. Since Falun Gong was banned in July 1999, at least 93 adherents are believed to have died in police custody. Li Hongzhi is the sect’s guru, and lives in the US. But these disparate movements have a long way to go before they pose a major threat to the regime. Democracy advocates, Tibetan independence proponents, Islamic militants and disgruntled workers have little in common, other than dislike of the regime. Democracy advocates are often Han chauvinists, laid off workers can find little comfort in Falun Gong teaching about the ills of the world as stemming from homosexuality and rock n’ roll, and Islamic fundamentalists have little in common with Tibetan Buddhists. Not least, there is deep popular support in China for continuity, and this is strengthened by fear of chaos—only too vivid in the collective memory of the Chinese. The perception in Chinese public opinion is that there is no viable alternative to communist party rule.

From here on out, the Marxist story becomes more diluted. The reason is simple: opposition and incumbent élites interact in a political logic with its own dynamics. The essential point is that what matters is perceptions of both rulers and ruled about policy and performance. Reference [14] Governing élites may differ about appropriate policy, while significant sections of the population judge performance in the light of their beliefs about the legitimacy of the regime. They ask the governors: by what right do you rule".

Governors may reply that they govern by consent or by force, or some combination. Constitutional democracy enables governments to combine both over the long term: governments may enjoy popularity when the going is good, but when the going gets tough, electorates can vote them out of office for past errors. Disenfranchised peoples do not have that elementary right: if they wish to kick out the ruling incumbents they have three options: endure, rebel or negotiate. It’s time to look at China’s political transition.

Chapter Five: Feeling the Stones as You Cross the River (Part One)
Chapter Five: No alternatives to market-democracy (Part Two)
Chapter Five: Key characteristics of totalitarian regimes (Part Four)
Chapter Five: A post-totalitarian regime (Part Five)
Chapter Five: References (Part Six)

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