Economic reform
CHINA has been divided into such watertight compartments that relations between the various industries have been possible only through the top. So, the center has presided over the most minute aspects of economic life. All these problems and a good against the workers many others flowing from them call for deepgoing reforms.
I do not propose to deny the weight of Maoism or its specificity. But while Maoism had different effects, often disruptive ones for economic life, it did not put an
THE OCTOBER 1984 Central Committee plenum decided to introduce in a bolder way the process of economic reform started up at the end of 1978 (1) in urban and industrial life. Having first been applied to the peasant world and having profoundly transformed the life of the villages through decollectivization, the reform was now to be applied to the social groups in the cities.
The aim first of all of the economic reform was to change the modes of economic life and therefore of social life. But the tempo, detours, and re-routings owe a lot to the mute or more open pressures of the various social groups concerned.
What explains the desynchronization in the application of the reform in the countryside and in the cities is the difference in attitude, • bution to rapid industrial accumulaexpectations, fears, and resistance in these two worlds, the urban and the rural. (2)
In this article I will present first the major features and stages of the economic reform, and then show what is at stake in this for the working class.
ROLAND LEW
The need for reforming the economies of actually existing socialism"
is making itself felt everywhere. But the Chinese reform would not be what it is - with the radical transformations in the countryside and the hesitations and delays in making changes in the industrial sector - if it were not for the influence of the
Maoist legacy.
that can be said is that this heritage presents a great liability.
These negative features are, first of all, intrinsic to the economy existing socialism."
a commonplace to say today that
Maoist China was — and China still
- a very typical economy of the Soviet type. But not so long ago, the recognition of this fact was a great surprise vers, so great had been the insistence on the originality of Maoism.
The balance sheet of post-Maoism puts China in the same boat with the other "socialist" economies, with their advantages and problems. While the advantages are striking at the outset, bringing rapid growth, the difficulties come progressively to overshadow the horizon, a commandist economy, rigid, top-heavy planning,
International Viewpoint 11 November 1985 and so forth. In the Chinese case, а от заря во ві the economy with asphyxiation. Simply to give an indication, without going into detail, while in the first five-year plan 1.68 yuan were needed to increase the national economy by one yuan, in the current five-year plan (1982-1986), 2.74 yuan are required.
There is a hypertrophy of heavy industry, which in 1978 accounted for 41% of the GNP, as opposed to 27.8% in 1952. The economic system
1. The various measures projected by the new Chinese economic reform were presented in the following way in Le Monde' of October 13, 1984: (a) A change the relations between the enterprises and the state, with the latter no longer to turn over their profits henceforth they a tax, and will be able to do as they please with what is left over. (b) A reform in the plan reducing the number of sectors subject to direct planning. (c) Reform of the system of employment creating looser conditions (d) reform in the status of intellectuals and specialists giving greater responsibilities to (e) The establishment of a responsibility system in the plants similar to the contracts that exist in agriculture. That is, on the system's modes original stamp of functioning. For example, although came out of a revolution conducted by the peasants in the countryside, it did not accord the and agriculture a favored place in economic development. To the contrary, the countryside (80% of the population) was the ugly duckling of economic development during the Maoist period. The rapid collectivization carried out in 19551956 put the peasant world in a vise to force it to make a big contrition. With little motivation, the countryside in fact stagnated.
The urban scene was much more active. It was in the cities in fact that the regime sought its new allies. The working class, which was numerically small at the outset but expanding rapidly with industrializaiton, became the regime's special ally. This working class responded positively to the regime's solicitations inasmuch as it gained unquestionable advantages in return - an improvement in its living standards; job security; and even, in the initial period of the regime, a genuine social advancement. (3)
When Mao died in September 1976, the balance sheet of Maoism seemed to the population to negative overall. The Great Helmsman's successors have faced a society fraught with tensions, in which the usual ills of rigid social and economic regimentation were compounded by the effects of reckless attempts to alleviate these problems. An economic units, the "shops, will sign production contracts with management and get more money if they exceed their quotas (f) A modification of wages and prices the direction of adapting them the criteria of the market, productivity, and profitability. (g) A reform of the trading system.
2. For a more detailed analysis of the evolution of the economic situation, see Pierre Gousset's article "Developpement et avatars de la nouvelle politique economique en Chine," which appeared in publication), Februery La 1980; and Ernest Mandel's article crise economique in 'Inprecor en No. Chine" 94-95. February which appeared 16, 1981.
On the situation of the workers see "The current state of the Working Class' by Zhang Kai in 'International Viewpoint' No 35, August 1, 1983.
15
Street vendors in Peking (DR) reform sort of reform and in what stages?
While transformations were necessary, the new leaders were uncertain about what means should be used to accomplish them. Immediately Mao's death, the press was full of about the changes that had to be made in economic life. But it took two years for solutions to begin
These two years were needed to get a certain consensus in the leading team and for Deng Xiaoping to get out ahead of the pack and start to push aside Hua Kuofeng, Mao's anointed crown prince.
Then the reform started off on its sinuous course, in which markers were laid down by two important plenums - the Third Plenum of the Eleventh Congress in December 1978, which launched the process; and the Third Plenum of the Twelfth Congress in October 1984, which relaunched the reform, extending it systematically to the cities and the industrial system. The Zig zags of the reform
In order to follow the zigzag movement of the reform, produced by advances and retreats, by abrupt lurches forward in the countryside and the putting on of the brakes in the cities first, followed by acceleration in the urban areas, I will utilize essentially the typology proposed by W. Zafanolli, a researcher at the CNRS [the French National Centre for Scientific Research]. In his view, the six years of reforms can be broken down into three phases. (4)
In the initial phase of readjustment in 1979 (opened by the December 1978 plenum), there was a return, under the aegis of the veteran leader Chen Yun, to the methods that he himself had advocated in the 1950s. 16 this meant was improving the classical system of centralized planning without really changing it, adding an element of market relations that was to play a marginal balancing role. The market was only there to respond to demands not satisfied by the plan, it being understood that the plan should be directed toward meeting all demands.
So the stress was placed on a better realization of the plan. But the operation was conducted on the microeconomic level, that is, on the plant level, and in an experimental way. The province of Sichuan was the testing ground. In 1980, the experience was extended on the national level to 6,600 enterprises, representing 16% of all enterprises but 45% of production and 60% to 70% of profits.
The enterprises achieve the targets of the plan. They could keep a part of their profits (from 10% to 20%, varying according to the location). They were, moreover, encouraged to produce a surplus over the plan to meet demand not covered by the plan. The logic of the planning remained unchanged, but it was hoped to remedy the inadequacies of the plan. It was a small reform, which was not extended immediately to all the enterprises. sectors in 1979-1980, the reform enabled the industries concerned to increase their profitability. In reality, the dynamic set in motion made its impact elsewhere. It was not the timid industrial policy but a considerable upset, a veritable "silent revolution" (5) that radically transformed the countryside in a short period of time. It was here that the market logic that was introduced as a supplementary element in the economy took off.
What at the outset was a "responsibility system" designed to displace a form of payment, calculated in labor points, equal for all and bearing no relation to the work actually done (the "one big pot"), (6) led rapidly to complete decollectivization of the countryside, a de facto distribution of the land, and a return to the family farm.
By 1981, the rural economy consisted of 180 million small family holdings. And this was only the beginning. Among the various types of contracts between the peasants and the state, the most popular is the one that goes furthest in privatization. It is the system of "the lump," requires of the family unit only that it make the compulsory deliveries and pay the agricultural tax. In everything else, the peasants are free to manage their business as they please.
therefore, seeing a rapid and far-reaching social differentiation in the peasantry, and the emergence - accepted if not actually desired -of a rich stratum that is concentrating land ownership in accumulating capital through the sale of its products to the cities (that is, the part that is not requisitioned or consumed at home). This capital, moreover, can be legally invested in not directly concerned with tillage and husbandry.
Quite recently, compulsory deliveries of produce to the state, making possible greater private sale of the products of the land. This revolution in reverse has been fueled by the success of these measures. They have been successful with the peasantry, who remain attached to family unit. They have been successful also in terms of agricultural policy, bringing with them a growth rate of 7.5% a year in farm produc tion after 1978. Above all, they have been successful from the standpoint of peasant incomes, which have doubled since 1978 (in current prices), while in 1977 the standard of living had not yet risen above the 1955 level. Such great success, with so few apparent disruptive effects gained a consensus of support among the leaders. The reform was sort of carried forward by its own momentum.
A second phase of the reform then came into play. In industry the cities, however, the logic of the market and of profitability came into conflict with a system that is alien to them. While we are seeing in fact a shifting of the balance away from heavy industry toward light industry,
4. See W. Zafanolli, "La reforme economique Chine, " to be published in the magazine 'Est-Ouest', Paris.
5. Claude Aubert, "Chine rurale, la revolution silencieuse, "Projet", September-October 1982.
By the expression "eat out of one big pot," the Chinese describe the egalitarianism that resulted in unproductive workers getting as much as those who really worked. International Viewpoint 11 November 1985
with the percentage of the former in GNP falling from 41% in 1978 to about a third in 1982 and a fall in the rate of accumulation from 36.5% in 1978 to 29% in 1982, in respects the industrial system continues same deficiencies.
The marginal effectiveness of enterprises remain sharply diminishing. The quality of products remains poor. The rate of utilization of equipment does not exceed 50% to 60%. Prices remain arbitrary, if not outright irrational. At bottom, the little reform of 1979-80 only provided for a certain relaxation of the rules. It simply legalized what the old black market was already doing without any concern for the rules. And what remained illegal continued to be done surreptitiously. Resistance
What is the threatened sections of apparatus (for endangered by reform) have often laid down an when 10% to 20% for the 1979-1981 for sector. Heavy the big budget, has duced.
adjustment to compensate windfalls system).
Moreover, authonzed engage ing, which offers flexibility in the management of the wage fund and helps to break the "iron rice bowls," a problem to which I will return later.
Nonetheless, it was possible to make the observation in 1983 that
International Viewpoint 11 November 1985 ed by not ioning
1983-
1984),
This ement going market,
But
1983, limit hat is, pitalist eacted by pushing party have the right to nalties.
lerable.
will ey hat the will easily relinparty their authority. In any case, quish at the end of 1984, only 2,900 enterprises were applying these new principles.
The October 1984 plenum, with its resolution on "the reform of the economic structure,"
codified the changes. The watchword was increasproductivity. There was talk ing about introducing truth in prices, prices that should come into line and progressively with demand costs. Changing the production pricing system, however, is a vast program. It does not seem that they have gotten very far today in this regard. It has to be said that they had a long way to go. To give two that indicate the two examples extremes, the petroleum sector has a pricing system that makes possible a 70% profit, the coal industry had one that involved 0.7% profit. So, there is a range of one to one hundred in prices set by the government.
The October plenum also decided the enterprises separated from the overall administra. tion of the economy. Small unprofitable enterprises are contracted out to collectives of workers, or even to private persons. The volume of wages tied to the results of the enterprises and the wage ended. So, the elevation of equality over criteria of productivity was out. macroeconomic level with the reorganization of planning. The economy is to be divided into three sectors. one sector, embracing industries), the targets of the plan will extend to 1.020 big enterprises accounting for 52% of profits and
In another sector, which has still not been very clearly defined, the plan will operate only indirectly (through credits and budgetary appropriations). They are talking in terms of a sector that would include 48.6% of light industry and 72% of its production.
The third is to be a privatized sector, which is still largely embryonic privatization applies to 4.2 employing 54 million persons. But this sector could extend to a part of collective enterprises that presently employ 27 million persons, which, because they often run in the red, are subject to privatization.
However, we should not extrapolate. It should be noted that the state
"control of the main sources feeding the economic circuits." (8) In the words of a Chinese author, the "visible hand" of the plan will not substitute for the "invisible one" (the market), but will operate at the source by regulating economic flows. It is still too early to make a practical balance sheet of the reform project. Let us try rather to assess its consequences for
The Chinese "Communist" regime came out of the military largely passive cities thereby of the urban proletariat). relatively privileged place to the
It can even be said that the working class occupied a privileged place in the system of alliances set up by the new regime to consolidate its power.
First we should ask what this working class represented numerically then and what it represented now. The
"Les politiques de la demaoisation (1977-1982), etudes comparatives Est-Ouest', Vol. 4, No. 3, September 1983.
8. W. Zafanolli, op. cit. 17
statistics do not distinguish between blue and white-collar workers. What they give is the number of urban wage earners, that is practically the entire economically active population of the cities, from ministers to postal workers, to clerks in state stores. We know that there were 100 million blue and white-collar workers in 1 1982, the nuder were men. of whom 67.1% were men. million of which 63.7% were men (17% were women in 1957).
In the industrial sector properly speaking, the number of blue and white-collar workers rose from 2.446 millions in 1952 to 13.480 millions
44.367 millions
In order to get a clearer idea of the size of the proletariat, for the you have to add transport, telecommunications and the building industry. In the first two sectors, the number employed in 1952 was 1.129 million; in 1957 it was 1.669 million; and in 1979, it was 6.725 million. In construction, the number in 1957; and 8.093 million
In a nutshell about 60% of the 100 million urban wage earners in 1979 belonged to the productive apparatus (blue and white-collar They represented about 15% of the total workforce. It should be added that about three quarters of this workforce are agricultural producers. It should be specified, moreover, that in 1979, the metal industry accounted for three million and white-collar), mining for 3.8 million, the mechanical industry for 9.175 million, and the textile industry for 2.740 million.
Also to be taken into account is the presence of a proletariat in the countryside. Half workers, they amount to around twenty million wage workers (and perhaps more). In total, therefore, it seems that 30% to 35% of the economically active population in China are wage workers.
These figures show a considerable growth in the numbers of the working class and its central place in the cities. An indisputable social mobility security, the certainty of never being fired (the famous 'iron rice bowl'). An eight-level wage scale was established, assuring regular raises for seniority, as well as for calendar age.
The educational level was sharply increased. In 1957, 20% of urban workers (blue and white-collar) were illiterate. This figure fell to 1.6% in 1982. In 1957, 19.1% only had high-school diploma. In 1982, this figure had risen to 72%. These figures more favorable than the corresponding ones in the rural areas.
The most privileged blue and whitecollar workers are in the state sector, which accounted for three quarters of urban wage earners in 1978 and almost three quarters of industrial wage earners (thirty million as against 12 million in the collective sector). Workers' advantages
Moreover, especially in the state enterprises, the workers have enjoyed numerous indirect benefits, to the extent that the state sector, accoun ting overall for less than 20% of the total economically active population received almost all the social subsidies and benefits. In 1978, it could be calculated that the subsidies and indirect benefits accruing to those amounted, on the average, to 526 yuan, which corresponded of the average wage. On top of this, these workers get some other advantages that make their indirect wage at least equal to their direct one.
Such benefits do not, however, exist for the peasantry. And while the direct urban wages times the incomes of peasants in 1978, the extent of the various benefits accruing to the workers probably doubled this gap.
What is more, since 1978, there has been a major growth benefits, exceeding that of wages. increase in peasant incomes, the gap between the cities and the countryremains marked, as Table 1
The improvement in the condition of the blue and white-collar workers is also shown by the increase in the consumer durables owned by urban households. (Table 2)
TABLE 2
For every hundred urban families 1982 1981 sewing machines 73.10 70.41 washing machines 16.09 6.34 refrigerators 0.67 0.22 bicycles 146.65 135.90 radios 103.04 100.52
TVS 73.00 57.65 tape recorders 17.99 12.97 cameras 5.57 4.29
One can see the stagnation of workers' incomes between 1957 and 1978 and then a rapid increase, with a gap persisting between the workers' incomes and those of peasants. But as regards the latter it is also necessary to add the growing share of income from private activity, which little by little has come to absorb all farming.
A more detailed sector-by-sector study shows a wage spread going from a top average annual wage of 948 yuan in construction to 909 yuan in transport, to 860 yuan in research, only 819 yuan in administration, and 852 in light industry. In general, the corresponding wages in the collective sector are 15% to 25% less (738 yuan in construction in the collective sector as against 948 in the state sector; 644 yuan in the collective sector of light industry, as against 852 in the state sector).
However, the absolute level of wages and indirect benefits only partially reflects the privileges of urban wage earners, and of bluecollar workers in particular. Because these strata have access to what is running water, a real sanitary system, quality primary and secondary schools for children, movies, and so on.
Moreover, in order to deal with the considerable urban underemploy. ment that was creating social tensions in post-Maoist China, workers have been allowed to take early retirement for the working class has made it possible for a not insignificant number of workers to start to go up in social scale (becoming plant managers and
Annual Income trade-union cadres). This could be seen in particular in the early years
(in yuan)
of the regime. But it is less important the more durable advantages than acquired by the working class.
In exchange for its support for the regime and its participation in the industrial process, the working class has gained various benefits.
First of all, they got iron-clad job
18
TABLE 1
Year
State sector
1957
637
1978
644
1983
865
Collective sector
Peasant income
(collective part)
43.40
614
88.53
826
169.00
International Viewpoint 11 November 1985
and to leave their jobs to one of their children. Thus, out of eight million million of them inherited their job from a parent (this is the so-called substitution method).
These impressive comparison with the life of the peasants involved the workers' submission to the regime and more directly to the authority of the plant managers (in fact, to the party secretaries). This submissiveness was all the greater because the benefits were directly industrial unit. Workers could not be fired from the enterprises (unless they committed some grave offence), but they could not change enterprises either.
More workers can afford consumer goods now (DR wages stagnated (especially during the Cultural Revolution), the low productivity of labor the indirect benefits accorded made the position of state factory workers one of the most envied (leaving aside of course the very privileged positions of the top leaders).
This status was so envied that it was not accessible to all workers. Apprentices, who were paid on various limited scales and could be assigned to any job (and often pushed around) and who did not enjoy all of the indirect benefits were excluded from it. But at least the apprentices could hope to enter into the central ranks of the working class and aspire to the famous "iron rice bowl." Temporary workers were not so fortunate. Becoming numerous after the onset of the Great Leap Forward, they were peasants rented by industry for a given period of time from their people's communes. Paid less than the regular workers, they enjoyed no sent back at the end of their contracts to their people's communes, which collected a part of their wages.
Despite all this, the temporary workers earned more than they got from their work in the fields. There was also a less well-known category of temporary workers who were of urban origin. They were often wives of very unskilled workers. They seem to have gotten the status of workers but there is little information about this.
A good part of the tensions in the working class, especially during the Great Leap Forward and before the Cultural Revolution, were generated by conflicts of interest between the underpriviledged sections of the working class.
In any case, the better part of the identified with the that marked the situation of the regular workers during the Meist period.
objectives of the economic reform underway
International Viewpoint 11 November 1985
"iron rice bowl," that is, to eliminate the gains of the workers and above all the guarantee of a job
Of course, caution is de rigueur. Although they are often attacked and denounced in the press, the so-called economically harmful effects of the "iron rice bowl" have so far not prompted a head-on assault on the privileges attached to the status of workers in the state factories.
In fact, challenging the gains of the workers and egalitarianism, which they are clearly would mean attacking one of the two main pillars of the regime the other was the regimentation of the peasantry through the collectivization that has
Unlike the peasantry, the workers have shown that they can react otherwise than silently. There are limits to the submissiveness of the workers when it comes to defending their
The logic of the reform, nonetheless, pushed in the direction of a greater mobility of labor, which is incompatible with the rigidities of the past. This means nothing less than letting go - firing - excess workers in the enterprises. Moreover, it calls for introducing a process of differentiworking class by permitting the widening of the wage spread, adjusting bonuses productivity of the workers and the enterprises. (9)
Two methods have been proposed. The first is a new hiring policy. To replace the old "labor and personnel services," of which it has been said that they were "bodies operating in the 1980s with a mentality of the 1960s that functioned in the framework of a 1950s planning system," new organs are being formed. They are the "Labor Services Corporations, which are to place workers on the basis of contracts.
The contracted workers get the same wages and the same benefits as counterparts, but they no longer have a lifetime entitlement. During the interval between contracts, the Labor Services Corporation takes charge of paying the workers. (People's Daily) of March 8, 1983, in the future all workers are to come under the contract system. But that is still very far away now.
In the meantime, the regime is trying to outflank the resistance of the workers. The unions are being pressed into the breach to prevent strikes and educate the workers in the new course. This is not at all easy.
In fact, such an important gain as a lifetime guarantee of a job, which is probably offered by "actually existing socialism" in the various countries prevails, will not be easily given up.
Working class resistance is fierce. We are seeing work stoppages and demonstrations of hostility toward the new contract workers. There is strong managerial and technical professionals in the enterwho often have reactions and the same interests as the workers.
In its February 27, 1984, issue, Renmin Ribao managerial or technical professional [cadre] in these times is like sitting on a volcano." This shows how strong the pressure is from both above and below. (10)
9. An example, no doubt an extreme one, has been recently that also indicates the competition among enterprises to get skilled workers. Thus, a small firm offered four highly skilled Shanghai technicians 10,000 yuan in compensation for making the move, 600 yuan for moving costs, monthly wages of 250 to 300 yuan, an initial bonus of 2,000 yuan, and one percent of their future profits. The aim was to create a new enterprise. And 1,000 yuan a year is considered a good wage!
More significant still, the Chinese press notes that during the first quarter of 1984, wages increased more than productivity, which is just the opposite of the aim of the economic reform.
19
CHINA
The regime is trying to handle this situation tactfully. At the same time as demanding the dismantling so-called "workers democracy, it is urging that the "voice of the workers" be listened to, and that a certain participation of workers in' management be encouraged
This is so that, as the Workers Daily of August 15, 1984, pointed out - the workers will "make suggestions to the management and not problems for them."
Moreover, the regime is trying to convince the workers that it is in their interests to change the old situation. Is not the present system of eight wage grades very rigid, it asks.
Statistics provided for the Tenth Congress of Unions in October 1983 showed that 71% of workers are on the bottom of the scale (incomes of less than 35 yuan a month), only 2% are at Grades 7 and 8 (incomes three times higher, repectively 90 and 120 yuan).
Overall, caution is in force, and managers are far from having complete freedom of maneuver. They are counting on reform of wages to move things forward and to induce order to sabotage the experiment in
There is a between cities such as Peking, which are in the forefront of the reform and those such as Shanghai, which are bringing up the rear. While the authorities in Peking have just launched an energetic reform of the planning system (in March 1985), Shanghai is being subjected to constant pressure to catch up with the reform in other cities.
The delays in Shanghai are certainly owing to the elderliness and inertia of the local apparatus, as well as the aging of the industrial plant. But they also reflect the traditions and gains of a great working-class metropolis. Morecity represents by itself alone 11.1% of the total industrial product and 16.6% of the state's
So, nothing is yet decided. But overall the direction is toward a decline in the influence, prestige, and status of the workers. The era when managerial or technical professionals got their children a "place" in the factory to keep them from being sent off into the countryside or to assure them a comfortable life is rapidly receding into the past.
When you look at the legal (to say nothing of the extensive extra-legal possibilities) powers of the new managers, you can understand the lack of concern for the conditions of workers.
We are far from the era when the new ruling elite recruited its new members in part from the working class. The modernist techno-bureaucracy that is to be the agent and the beneficiary of the new reform draws its members from the children of apparatus and party families.
The surge of urban growth today is going hand in hand with weakening of the working class. It remains to be seen whether the workers will stand by passively and watch this evolution happen. the caution, even delay in working out an urban NEP [New Economic Policy] can also be traced to the regime's uncertainties about people to drop overly egalitarian traditions.
The tendency is toward the granting of bonuses in a flexible