THE DILEMMAS of the economic reform International Viewpoint, centered on the proposed by the liberal wing of the Chinese factional struggle between the liberal and bureaucracy are the focus of the following conservative wings of the party.
The first part, published in the last issue of A MARAVER
International Viewpoint #151 • November 14, 1988
CHINA
T HE HIGH POINT in the eco-
nomic reform debate in the Chinese Communist Party (CCP) came during the Third Plenum of the Twelfth Central Committee, which approved "the decision on reform of the economic structures," and the National Party Conference in September 1985, which elaborated the lines of the Seventh Five-Year Plan for 1986-90.
In both cases, despite the conservative faction's opposition and bias, the reform line managed to provide a new vision of the functioning of a socialist economy, summed up by the formula of a "socialist market economy" and a development strategy calling for 7% annual growth rates.
Subsequently, in 1986-87, some bottlenecks began to turn up in specific industries (energy and transport, among others). Additional problems were a much larger budget deficit than expected, inflation arising from the "scissors crisis" between the towns and countryside and a reduction of foreign investment.
All this, on top of the social tensions and the political struggle among party factions, forced the government to re-orient the first stage of the five-year plan by applying an austerity program and structural reforms. The stress was put, as Zhao Ziyang explained during the Fifth Session of the Sixth People's Assembly, on a domestic тасто-economic balance.
A planned socialist market economy
The report to the Thirteenth Congress recapitulated and extended the fundamental aspects of the two documents, trying to set down the elements of correction necessary for the 1986-87 phase of adjustment. Here it should be remembered that the economic policy was supposed to be determined by the real state of the productive forces in the first stage of socialism and that its objective was "to promote the development of the socialist economy."
The concept of the "planned socialist market economy" calls for the following: Starting out from the existence of a socialist property sector planned by the workers 20 state, to develop the market as a form of integrating economic sectors with different article. property forms (state, cooperative, individual) so that the influence and hegemony of the state sector can shape the entire economy through utilizing the market mechanisms and the "law of value."
The development of a market economy involves a substantial advance with respect to the overall weight of the subsistence economy in the GNP. However, in the reformers' conceptions, its importance goes beyond this. According to the theories of the economist Sun Yefang, the expansion of the market, through the workings of the law of value, makes possible economic calculations and planning itself.
The planned market economy is differentiated from capitalism — which the economist Liu Guogang calls "the anarchic market economy"
- by the collective ownership of the means of production and the possibility for planning based on this predominant sector of the economy.
In a socialist economy, "it is up to the state to regulate the market, and the market in its turn must orient the enterprises." The regulating mechanisms must be macroeconomic, legal and administrative, avoiding bureaucratic intervention through imposed plans worked out at the top
For the reform of the present structure, six priority tasks have been outlined:
1) Changing the mechanism for managing enterprises in accordance with the principle of separating the right of ownership from the right of management. This involves conferring real autonomy and real responsibility for profit and loss. The concrete form will depend on the characteristics of the enterprise. But the relations between the state and the specific companies will always be defined by contract or other binding legal agreements.
The workers are invited to participate democratically in the running of the enterprises, although the report is very vague about this, even by comparison with the decision of the Third Plenum of the Twelfth Central Committee.! The factory managers will be chosen on the basis of merit through competition, and a system of responsibility will be applied to them according the results obtained by the enterprises.
Obtaining investment funds by issuing stock is to be accompanied by forms of participation of the stockholders in the management councils, whether this involves the state, financial institutions, other enterprises or individuals.
Expanding the market
2) Developing horizontal economic association among the enterprises in such a way as to speed up the circulation of the factors of production. This is to involve voluntary formation of cartels, inter-enterprise research centers and a general advance in the division of labor.
3) Expanding the market from consumer goods to producers' goods, services, real estate and so on. The first step is to be reforming the system of prices parallel to that of wages, assuring that the standard of living of the population is maintained and
4) Perfecting the state's capacities for in1. "At the same time as the system of personal responsibility of factory managers is set up, it is necessary to perfect the system of workers' and clerks' councils, as well as the system of democratic administration in its various forms. This is needed to give full value to the functions and role of the unions and workers' and clerks' delegates in examining all important decisions in the plants, in monitoring the work of managers and in safeguarding the legitimate rights and interests of the workers and clerks, thereby concretizing the role of the working class as the leading force in this country." (Decision of the Central Committee on the Reform of the Economic Structure.) The organization of Workers' Congresses has been very uneven throughout China. In part, the rebuilding of the unions after the Cultural Revolution was designed to create a social base of support for the alliance that stopped the Gang of the Four, which had a very active presence in the unions, by relying on a certain workers' aristocracy and reinforcing their role as a party transmission belt. (See Trade Unions in China, Lee Lai To, Singapore University Press, 1985.)
November 14, 1988 • #151 International Viewpoint direct macro-economic regulation, with the objective of maintaining a balance between overall supply and demand. The banking system has to assume a central role. The same goes for the creation of a structure for overseeing and collecting taxes as mechanisms of state intervention and distributing investment funds. Also projected is the drawing up and refinement of economic legislation and the judicial system. The state will retain direct responsibility in a series of public works and key industrial projects.
A legal framework for foreign investment
5) Maintaining and promoting the various types of ownership on the basis of the predominance of the socialist sector. The weak socialization of production requires a combined development of all forms of ownership, including a private sector with wage labor operating on the basis of a legal code. In the same way, it is necessary to offer a legal framework for foreign investment that will make such investment attractive internationally.
6) Diversifying the forms of remuneration, with the predominant formula of "to each according to their work." The appearance of dividends and interest has to be regulated so that the more rapid enrichment of a section of the population will not create excessive inequalities. Such inequalities must be corrected by the state. But the present problem is not "egalitarianism" and the theory of the "iron rice bowl," which prevent the operation of material stimuli. Indispensable in this framework are the fight against inflation and a balance between consumption and production, linking wage increases to real rises in
Likewise, the report pointed up the importance of the psychological climate. The reform was being carried out in a difficult context of readjustment, which required reviving the enthusiasm of the population but also a slower advance than that foreseen in 1984, following a tactic of cautious consolidation. In this respect, the major conservative criticism of the reform project has been incorporated, and this reflects its influence in the general balance sheet of the January 1987 crisis.
As regards the development strategy and the obstacles that the Seventh Five Year Plan has encountered, the report pointed with satisfaction to the successes of the first stage of the reform. This stage led to a doubling of the GNP in 1980, making it possible to meet the population's basic needs. The objective today is to double the GNP again in the year 2,000, as a starting point for reaching the level of the moderately developed" countries in the following fifty years.
In the present stage, the most pressing problem is the low profitability of the enterprises — unlike agriculture — and the scarcity of natural resources and investment funds. This is why it is essential to re-orient the production model toward intensive rather than extensive development. The following three aspects are fundamental:
• Giving priority to developing and applying science and technology and adjusting the educational system to them. At the same time, it is necessary to keep an eye on the rapid changes of the scientific and technical revolution and China's need to become integrated into this process.
• Maintaining a general macro-economic balance, avoiding sectoral bottlenecks and applying the policy of structural reform. It was necessary to take into account the large population migrations from the countryside to the cities that will occur in the coming years, and the need for rapid development of light industry and the consumer sector, without delaying investment in the basic industries and the infrastructure.
To avoid foreign debt stemming from imports of sophisticated products and technology transfers, it was essential to promote a dynamic export sector. Along with this orientation, which is centered geographically on the eastern part of the coun try, the existence of a large domestic market required developing, on a different technological basis, the industrial structure set up in the 1950s and 1960s thanks to Soviet aid in the central and western regions.
For an indefinite time, the foundation of sustained growth for the country's economy as a whole will continue to be agriculture. Along with this, there will be the development of small industries in the rural areas and a perfecting of the system of family responsibility that has brought such good results up until now.
• Extending the open door policy and the Chinese economy's relations with the world economy; seeking to increase currency reserves and rationalize imports policy so as to help introduce high technology. There was not, however, any balance sheet of the special economic zones (free-trade
CHINA zones), whose results have been far from what was expected when they were set up.
Finally, the report referred to the policy of population control, whose maintenance is a precondition for any other economic policy, and the need for taking into consideration ecological problems in develop-
The objective of the political reform, according to the report, was to "forge a still higher and more effective democracy" than that of the developed capitalist countries. However, this does not mean copying such countries' political model, "separating the three branches and governing with an alternation of various parties," but rather "perfecting socialist democracy and legality and trying to eliminate manifestations of bureaucratism and influences of feudalism." And the starting point for this was the people's democratic dictatorship with its system of People's Assemblies, cooperative conferences and consultation with the democratic parties and personalities under the leadership of the CCP, with the application of democratic centralism. Separating the party from the state administration
This was "a gradual process of slow accumulation," the precondition for which was "a political and social climate of stability." By no means should there be any "practicing of 'grand-style democracy,' which would undermine state legality and social stability." The immediate objective was "to create a leadership structure favorable to increasing efficiency, which would serve to increase vitality and make it possible to activate initiative in the various sectors."
Later, the report went on to list seven measures for introducing the reform:
1) To separate the party from the state administration. It was considered that this was the most important point of the political reform. "The party leadership is a political leadership, reinforced by the cadres appointed to important posts in the organs of state power. The main form by which the party exercises its political leadership is by converting its principles, through legal procedures, into the will of state."
To assure a separation of functions, "no party committee will any longer have a secretary or permanent member engaging exclusively in government work without having a governmental post." Likewise, it was necessary to "dissolve the party leading groups in the various state departments," and the disciplinary commissions should cease to concern themselves with infractions of the law or administrative errors. The objective was not only to form a modern state apparatus but to reinforce the capacity for social leadership of the party,
"must devote itself to its own construction."
2) To decentralize the government by transferring powers to lower bodies. Be- 21 cause of the scarcity of cadres, the party
International Viewpoint #151 • November 14, 1988
CHINA and the state had concentrated decision making powers at the higher levels, "becoming bogged down in routine" and restricting the "autonomy of the ranks and the initiative of the popular masses." The general principle was not to keep anything in a higher body that couldbe transferred to and resolved in a lower one.
3) To reform the state administration. "For economic and socio-historical reasons, it is necessary to extend our struggle against the bureaucracy." The political twists and turns since 1949 and the confusion between the party and state had made the Chinese administration into a labyrinth, with which any similarity to a modern state was pure coincidence. The fundamental objective was to create a capacity for indirect intervention into the country's economic system through readjustments in personnel and functions by means of a plan worked out by the State Council, to be approved by the first session of the Seventh National People's Assembly.
4) To create a body of technical functionaries as the axis of a reform of cadres and personnel. The state functionaries are presently assigned by the party's Personnel Department to the various levels, under the title of "state cadres." Separation between the party and state requires "establishing instead a scientific system of organized administration" in accordance with a specific law on this question.
A system of consultation and dialogue
The functionaries may be political or technical. In the first case, they will be proposed and monitored by the party and elected by the People's Assemblies. In the second, they will be recruited through competition, in accordance with the law, and promoted in accordance with their professional performance.
5) To set up a system of consultation and dialogue for the society. In order to stimulate activity by the population and make possible efficient and informed leadership by the leading bodies, it was necessary to "to give a more open character to the activities of the leading bodies, inform the people of important issues and give them a chance to discuss questions of a higher interest."
6) To democratize the mass political institutions. To improve the electoral system, starting from the 1979 law and its reform in 1986, "respecting the will of the voters and guaranteeing them some room for choice." In the various Assemblies, "the proportional division has not contributed to interpreting the will of the electorate." So that the candidates could be more representative, "the system of elections by zone can be complemented by one of election by social sectors and other categories."
In this way, the People's Assemblies should find their role reinforced, as well as their functions of adopting laws and supervising their implementation. Likewise, voices had been raised in favor of a greater political role for the democratic parties and the Political Consultative Conference "under the leadership of the Communist
The unions, the Youth and the Women's Federation were called upon to "act independently" so that "at the same time as they defend the general interests of the entire people, they can better understand and defend the specific interests of the masses they represent." In order to achieve this, they had to gain the confidence of the ranks and "cease to act like bureaucrats and ad-
7) To build socialist legality, "there have to be laws that can be referred to in all areas of our country's political, economic and social life, as well as at every link in the democracy and the dictatorship, which are observed, which are strictly applied, and any infraction of which is punished."
In a country without any cultural tradition of legislation, where the emphasis has always been put on social cohesion and
- something that has been enforced by the party intervening directly in the running of the state - formulating any legal system is already defining a project for constructing the state, as well as a new conception of the society as a framework in which conflicts develop that can be regulated at all levels.
Consolidation and rectification campaign
Although these measures have a limited character, they are considered the "foundations" of a gradual development of socialist democracy and "an underlying guarantee" for preventing a repetition of the "Great Cultural Revolution" and of lasting peace and stability in the country.
The party's consolidation and rectification campaign has been an arena in which the reform policy has had great difficulty advancing. The report sums up the axes of the new period opened by the Thirteenth Congress, during which the central task assigned to the party apparatus is to build itself.
The first of these axes is political homogenization of the activists around the theses adopted in order in practice to reduce the play of internal factionalism over the interpretation of the reform program, especially as regards the tempo of its application. Li Peng recognized this at the congress.
The second axis is the policy of rejuvenating the cadres, in which notable progress was made. From the Twelfth Congress in 1982 to the National Conference in 1985, 581 of the 656 civilian cadres in the provinces have reportedly been removed. The average age of the new leaders is supposed to be 53.
### "Alliance of three generations"
In fact, the "alliance of three generations" slogan has operated only at the level of the central leadership, where the factional balance is probably harder to maintain. At the provincial level, the replacement of the "revolutionary generation" and the "persecuted generation" has been conducted at a faster tempo than during the roughest years of the Cultural Revolution. Its most immediate effect has been a "technocratization" of the cadres, of whom 52% now have a university education.
The struggle against bureaucratism, nepotism, abuses of power and corruption — vices said to be caused "by the position of our party as a party of government, which has a certain tendency to become divorced from the masses" — was another central task, according to the report, and had to be a feature of Communist morality in the period of the reform. In response to the argument used by the conservatives, it was stressed that applying these political reform measures, especially reinforcing socialist legality, would reduce these negative phenomena.
The purges, criticisms and self-criticisms and other consequences of the constant factional struggles in the CCP, especially during the "ten years of chaos," have developed an acute syndrome of insecurity in the activists and cadres. Both the Twelfth Congress and the recent one tried to establish the rules of "internal democracy" and "collective leadership"
The treatment of majorities and minorities?, and the system of consultation between lower and higher bodies, has now been reinforced by the requirement that the Standing Committee account to the Political Bureau and the latter to the Central Committee, which is going to increase the 2. "The Twelfth Congress of the Chinese Communist Party," Lowell Dittmer, China Quarterly 93, May 1983. When differences appear and there is large majority and a small minority, the latter must yield but can express its positions and its protests through the proper channels. If the majority is narrow, and the minority large, the decision is to be delayed until a new discussion and a broader consensus is achieved.
November 14, 1988 • #151 International Viewpoint number of its plenary sessions. New rules are projected for the functioning of these bodies and a two-round system for electing candidates representing different options by secret ballot for all the party's committees.
This is the method that was followed for the election of the Central Committee by the 1,959 delegates. From the list of candidates drawn up by a commission of the congress, the delegates elected 173 names by secret ballot, to which two others were added for unknown reasons. This list of 175 candidates, as well as that of 110 candidate members, was then adopted unanimously.
Only a third of the 175 members of the new Central Committee belonged to the CC that the Twelfth Congress elected in 1982. The 98 members out of the 210 who made up the preceding CC that were not reelected belonged mostly to the "revolutionary generation" over 70 years of age who supported Deng Xiaoping in his fight against Hua Guofeng.
Reforms of leadership structures
However, in order to assess the speed and depth of the generational change between the Twelfth and Thirteenth Central Committees, it is necessary to take account of the resignations and cooptions made at the Fourth Plenum of the Twelfth Central Committee, which met a few days before and a few days after the National Conference of September 1985. At that time, 64 full and candidate members cleared the way for 91 new candidates, in accordance with Deng Xiaoping's appeal for the old generation to step down.
If you add to this the changes that have occurred in the provincial leaderships and the central apparatuses of the party and the state, from which the majority of congress delegates came, you get the impression that the reform faction could have formed a relative majority by respecting regional power bases.
The Political Bureau elected by the Central Committee at its first plenum had its membership reduced from 20 to 17. Seven new members were brought in thanks to the departure of ten others. Those leaving included the most important leaders of the "revolutionary generation": Deng Xiaoping; the president of the People's Republic, Li Xiannian; and Chen Yun, who was in the former Standing Committee along with Zhao Ziyang and Hu Yaobang. Among them also were the chair of the National People's Assembly, Peng Zhen, and the conservative ideologue Hu Qiaomu.
The departure of other less well-known national leaders should also be noted, such as the vice-chair of the National People's Assembly, Xi Zhongxun; the director of the Political Department of the People's Liberation Army (PLA), Yu Qiuli; the chief of the PLA, Yang Dezhi; the chair of the Science and Technology Commission, Fanf Xi; and the chair of the trade-union federation, Ni Zhifu.
### Older leaders still active in public life
With the exception of the latter, the withdrawal of these leaders from the Political Bureau was justified by their advanced ages, ranging from 71 to 85. This did not mean, by the way, their disappearance from public life or the end of their ideological influence in the factional struggle. In fact, Deng Xiaoping will remain the supreme arbiter in the party as chair of the Military Commission. Chen Yun will hold the chair of the Central Consultative Committee, where the conservatives will have a de facto majority. And there is every indication that, despite his 85 years, Peng Zhen will remain at the head of the National Peo-
Most of the new Political Bureau are clearly reformers. Among them, there has been a sharp reduction in the weight of members from the National People's Assembly and the old generation of the PLA. A conservative nucleus remains, formed by Li Peng, Qiao Shi, Yao Yilin and Song Ping. It should be noted, in particular, that Hu Yaobang remains in the Political Bureau, despite being kicked out of the post of general secretary during the January crisis.
The Standing Committee has undergone radical changes. Of its five former members, only Zhao Ziyang remains. The rise of the "replacement generation" gives the impression of filling one by one the openings left by its predecessors - Yao Yilin in place of Chen Yun, Hu Qili in place of Hu Yaobang and Qiao Shi in place of Li Xiannian. In the cases of Li Peng and Deng, we do not find such an exchange, which apparently gives the conservatives a majority in the leading body that oversees the party's day-to-day work.
The Secretariat, which is placed directly under the direct control of the Political Bureau, has had its members reduced from 10 to four. This has transformed it into a much more flexible body, which is able to coor-
CHINA dinate the functioning of the other leading bodies, and this has made possible a broader sharing of political responsibility than in the past.It is significant that it is headed by Hu Qili, who was Hu Yaobang's crown prince until the latter was removed, and is a representative of the most liberal section of
Rui Xingwen, Shanghai party secretary, also belongs to the reform faction, as well as Yan Minfu, who has been responsible for the policy of the United Front since 1985. The Secretariat's fourth member is Qiao Shi, head of the Discipline Commission, who gains the very important right to intervene as a final authority, especially at the provincial level, as shown by the consolidation campaign of recent years.
The relationship of forces between the two factions is thus being restructured in a complicated system of balancing among the leading bodies. That explains the stress put on a real collective functioning of the leadership, with a greater political weight for the Political Bureau. Although the latter body was one of the standard-bearers of the conservatives in the January crisis, it was regained by the reformers.
The new rules announced by the congress for the functioning of the leadership will be fundamental for maintaining this dynamic balance — a Standing Committee in which the main conservative leaders will have to take the responsibility, under the leadership of General Secretary Zhao Ziyang, for the day-to-day application of the policy worked out by a Political Bureau with a majority of reformers; a reformer Secretariat that will have to give impetus to the dynamic of this balance, with a Discipline Commission, the final appeal, led by the conservative Qiao Shi.
Real succession only just beginning
It remains to be seen what role the Central Consultative Committee will play. Constitutionally, its chair, Chen seems to be a counterweight to Deng Xiaoping, but unlike the latter, he does not enjoy collective, unanimous recognition as the party's supreme arbiter. From the chair of the Military Commission, Deng can, at the same time, personally direct the generational change in the army in favor of the reformers.
The real succession is going to begin with these results of the congress, because Zhao Ziyang, at 68, is at best only going to have a period of five years before the Fourteenth Congress to exercise his mandate as general secretary. From this post and that of vice3. At the Twelfth Congress, the election of the CC was done in the following way. There was an initial vote to draw up a slate of candidates. On this basis, the Presiding Committee proposed a second slate with ten more names than the number of members to be elected. This second slate in turn was voted on by the congress through a computerized system that made it possible to 23 count the votes instantaneously.
International Viewpoint #151 • November 14, 1988
CHINA chair of the Military Commission, in view of the foreseeable death of Deng, he will have to assume the latter's role as chief of the reformer faction and the party's arbiter. Li Peng holds the chair of the State Council and Hu Qili is emerging as a possible successor to Zhao Ziyang.
These are only hypotheses that will have to stand the severe test of a factional struggle in the framework of the bureaucracy's different responses to the objective contradictions and problems in applying the reform. This is, moreover, a bureaucracy whose social base, owing to the turmoil of the Cultural Revolution and generational change, is still unstable.
It is foreseeable that, far from being consolidated, the dividing lines between the factions and personal allegiances will undergo important modifications in the "replacement generation." The latter will be affected more by its own problems than by the ideological perspectives it has inherited, even if for some time its members will have to lean on the leaders of the "revolutionary generation," who today have been relegated to the background, in order to advance their individual positions in the struggle for succession that has opened in the party.
Bureaucracy far from being consolidated
The regional power bases, and to a lesser extent those in the army, will take on an increased importance in this context. Figures such as Wan Li, Li Xiannian's expected replacement as president of the republic, or Qiao Shi, who may became Hu Qili's conservative rival for the general secretaryship at the Fourteenth Congress, from having demonstrated their potential in the factional struggle.
In the press conference given at the end of the Thirteenth Congress, Zhao Ziyang warned foreign correspondents against a temptation to interpret the Chinese political situation as a clash between reformers and conservatives. In a sense, this advice is val1d, and will be so to a larger extent with the generational change in the CCP.
As a social caste, the bureaucracy is far from consolidated and stabilized. In no other section of the Chinese population is the Cultural Revolution syndrome so patent. This means at the same time that broad sectors of the bureaucracy subordinate any dynamic of change or reform to consolidating their place in society.
The reform faction's economic and political project is a program for transforming Chinese society that, on the threshold of the twenty-first century, will make it possible to consolidate the bureaucracy's power. With all its contradictions, this scheme expresses the very nature of a social stratum that in order to exist has to base itself on the gains of the socialist revolution - whose 24 fruits are more evident today in China than ever — while at the same time having to politically expropriate the working class in order to hang on to its privileges.
This bureaucracy is appealing for enthusiasm, mobilization and activity by broader and broader sections of the population in order to carry through the "Four Modernizations," at the same time as it divides them, atomizes them and controls them in the name of the "Four Principles."
The Thirteenth Congress resolutions represent a vision of the future by the "enlightened" bureaucracy, as the reform faction considers itself to be. It is a project for social domination that makes the bureaucracy into an arbiter of the conflicts among the "special interests" to which the reform itself will inevitably give rise. Throughout 1987, it was building itself a social base among the intellectuals who were repressed by the Maoist left, the sections of the working class employed in the state enterprises with the most modern technology, the new industrial managers - who the press call qiyejia — and the immense section of the peasantry that has profited from the "system of family responsibility, achieving a very rapid increase in their standard of living.
On the other hand, the conservatives lack a general long-term political project, and reflect in particular the Cultural Revolution syndrome from which the entire bureaucracy suffers. Peng Zhen, one of the first to be purged in those "ten years of chaos," has been able, from a platform offered by the PLA, to give a positive form to these fears by advocating a system of "socialist democracy and legality" that would establish the rules of the game in order to prevent a repetition of the past. But it is not by chance that at the same time he was the conservative spokesman in the January
The conservative faction has sought social support in the intermediate bureaucracy, especially in the provinces, which is threatened by the generational change or has to resolve the contradictions created by the reform, in particular the social conflicts, with means that do not permit it to play an arbiter's role. It has also sought support here and there among sections of workers who have found themselves deskilled by the new division of labor or who work under subcontracts in less productive industries and, to a lesser extent, among peasants in the less fertile regions.
In an underdeveloped country like China, with 800 million peasants, the existence of a national market, with varied forms of ownership, is inevitable and necessary. Recognizing this, in opposition to the dogmatism of the Maoist left, is a giant ideological step forward. In China, the socialist revolution has the advantage of having a dominant public economic sector that offers the possibility, through planning and intervening in the market, of socially orienting economic development as a whole. This is why the question of who decides on this orientation is so important.
Regardless of where it hits or misses the theoretical mark, the reform faction's fetishization of the law of value in the "first stage of socialism" is a whole ideological construction that is designed to explain the growing social inequalities, the economic division of China into an advanced region in the east and a backward one in the center and west, as well as the privileges of administrators resulting from objective economic laws, which the bureaucracy limits itself to respecting.
The political reform is thus being converted into a means of managing the inevitable social conflicts. It does not challenge the political domination of the bureaucracy. It makes possible maintaining a certain social consensus, enabling the bureaucracy to mobilize the population in a controlled way to achieve the objectives of the economic reform. It is the basis of the second central element of the reform program, its gradualism, which establishes a direct relationship between economic development and broadening the democratic market.
The problem lies precisely in the search for a median point of equilibrium between opposing social interests. Up until now, the urban population has oscillated, depending on its own perspectives and interests, between the most total cynicism and independent mobilization. And, as happened in January 1987, this has divided the reform
Impact of the reforms on agriculture
In the economic area, while the application of the reform in the countryside has in fact brought an extraordinary increase in productivity - so much so that it merited a cover story in a magazine as reactionary as The Economist — this has produced a major imbalance in the production of basic
In 1986, through the criticisms of Chen Yun, an effort was made to increase agricultural produce purchasing prices. A system of contracts and mechanization credits was introduced. The price of fertilizer for these crops was cut, and the budget appro-
November 14, 1988 • #151 International Viewpoint priation for infrastructural projects in the countryside was increased by 40%. The results pointed up the state's capacity for intervention, since the area under cultivation increased by 2 million hectares, and the harvest amounted to 391 tons, or 11 million
The combination of the austerity policy in the cities and the increase in agricultural productivity in 1985-86 affected agricultural prices in some sectors, increasing the pressure for emigration on the rural industrial nucleuses. The result is a big contradiction: Given the features of Chinese agriculture, increasing productivity is possible in this phase only through mechanization, and the precondition for this is the transfer of labor from the rural areas to
In 1986, gross non-agricultural production in the rural areas (industry, building, transport and trade) grew by 22.3%, and already exceeded 46.9% of the rural GNP. But, on the other hand, the total power of agricultural machinery increased only by 9.1%. The "scissors crisis" in rural-urban exchange prices is going to be a sort of Sword of Damocles lems of inequality and tions of the population.
With respect to the economy, the state, in the name of a strict application of the "law of value," has responded to the problems of maintaining the with a reluctance or even an unwillingness to intervene with corrective measures. The final result has been the general application of an austerity policy, with calls for relaunching the reform in specific sectors through new investment. This stop-go pattern has had important psychological effects on plant managers, eliminating the traditional bottlenecks in energy and transport.
However, the two problems that most worry the urban population are inflation and the threat to job security. Early on in the reform, wages were raised for political reasons. Then, shortly afterward, they were frozen and tied to real productivity per worker and per enterprise.
The elimination of price control at the end of 1984 touched off an explosion of inflation, and only the fall of agricultural prices at the end of 1986 managed to bring it down by a few points. But it is clear that it remains at more than 10% a year, and the only solution that has been found so far is to cut wage costs. Any new advance of the reform of the price system, one of the key aspects of the urban industrial reform, will have similar results. This explains the postponement in 1986-87.
The most vexed, and therefore the most dangerous question, however, is job security and the restructuring of personnel. In 1983, 96.8% of the workforce came under the category "workers with stable jobs." The Danwei, or work units, were actual micro-societies, responsible not only for the production targets but also for providing their members with housing, day-care centers, schools, social insurance and pensions.
A fundamental aspect of the reform has been to to break the "iron rice bowl," that is to end job security and the immobility of the workforce and replace it with a system of contract labor."
The contracts specify the "responsibilities, powers and advantages" of the workers and the enterprises for a given length of time, and their renewal depends on the needs of the firms and the workers' productivity. The work units' social security systems have been passed into the hands of workers' insurance companies, which in practice involves destroying the Danweis' internal cohesion. In addition to the workers hired under this new system, the enterprises can recruit temporary workers with
The application of this system since 1983 has given rise to important differences within the bureaucracy itself, to say nothing of the resistance put up by the workers. At the Zhengzhou National Conference in 1984 on this question, four positions emerged. Some were in favor of the immediate application of a "socialist labor market." Others, like the minister of labor himself, wanted a step-by-step application of the labor-contract system to keep the restructuring from creating temporary unemployment that would aggravate the already grave jobs problem. Others defended the old system of stable jobs, arguing that there were other more important reasons for the fall in productivity, and that it was an anti-socialist measure.
Still others, such as the economist Jiang Yimei, spokesperson of the big public enterprises that require a specialized and ex-
CHINA perienced workforce, advocated a threefold system of stable jobs, as well as contract and temporary labor. Each of these categories would enjoy benefits in accordance with its status. In Jiang's opinion, the contract system involves a shift in power within the enterprises in favor of the managers, a fact that put its socialist character in
The reform faction is aware of the danger of social tension involved in applying the new labor system. In 1980, in the Wuhan steelworks, there was a first experience of an independent trade-union nucleus showing up. It was severely repressed. Throughout the Thirteenth Congress, there were repeated allusions to the need for a reform of the unions, which embrace 80 million workers, to make it possible to manage the labor conflicts that will inevitably arise.
Along with reform of the trade unions, the other axis of the reformers' strategy is dividing the working class by introducing new categories that will de-skill a major section of the Chinese workforce and expose it to unemployment.
This last aspect has been essential in the annual growth of the urban workforce by up to 8 million people. This has created an unavoidable clash between the objective of raising productivity through a restructuring of personnel and averting the social consequences of unemployment. Up until now, the reform faction has chosen the first option, and found no other solution to the second problem than calling on people to seek self-employment and massive executions in the countryside
It will be Chinese cities, and not the countryside, that will be the new social focus of conflict in the coming period. As the application of the urban industrial reform is pursued, these conflicts will center on the factories. In opposition to the reformed, narrowly professional unions and the administrators, the Workers' Congresses, whose prerogatives have been cut back since the Third Plenum of the Twelfth Central Committee, may become centers of united resistance by the workers.
Whether or not the reform becomes a second Long March will depend on the solutions found for these conflicts of interest. But only the massive mobilization of the urban working class, a return to its alliance with the peasantry through democratic control over planning and the state apparatus and the full expansion of democratic freedoms will enable it, as in 1949, to break into the Forbidden City where the members of the Central Committee today hold court 25