Al-Ahram Weekly 30 Sep. - 6 Oct. 1999 Issue No. 449
Published in Cairo by AL-AHRAM established in 1875

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Workers brandishing Chairman Mao's Red Book during the Cultural, or "Corrective" Revolution (1976-79)

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Mao and the market

By Mariz Tadros

SOCIALISM WITH CHINESE CHARACTERISTICS: The Chinese economy is one of the fastest growing in the world, roundly beating even that of the United States by all accepted measures. Per capita GDP is growing at an astounding 8.2 per cent a year. In the last fifty years, 200 million people have been lifted out of poverty -- a significant proportion of the country's 1.3 billion population. Yet despite such successes, a fierce debate is raging, both among the people and within the party, as to who should take the credit for the nation's progress. Should they thank the founder of the Republic, Mao? Or is this rapid development due to the reforms initiated by Deng Xiaoping and largely continued by the present President Jiang Zemin? And beyond the purely abstract, numerical indicators, what has been the real impact on people's standard of living?

In 1979, the country began "opening up", through the gradual transition from a centrally-planned to a market-led economy. "We have a socialist market economy," as one informed official source, speaking to Al-Ahram Weekly on condition of anonymity, phrased it. "This means that, politically, we are under the leadership of the Communist Party, representing the will of the people. From an economic point of view, we rely principally on the public sector, where state enterprises are the driving force of the economy." He was shocked when I suggested that this sounds like a state capitalist system. "Of course not! Our political system is headed by the People's National Congress. It is a socialist leadership. The main institutions and sectors of the government are still run according to socialist principles. Also, do not forget that with respect to ownership, a third of all enterprises are collectively owned by the workers, who share the profits equally."

Thus state enterprises are supposed to be complemented by a mixture of collectively owned and private enterprises. But this situation is rapidly changing, as much of the public sector is progressively put through the grinder of reform.

"In the past," confided the official, "the Chinese economy was planned, and the market played a very limited role. Gradually we have been moving to a market economy, and now we no longer have a 100 per cent socialist economy. More than 95 per cent of prices are controlled by the market, and the remaining 5 per cent are essentially for rare resources, such as oil, and certain public utilities, such as transport and natural gas."

State enterprises now have to compete in the market. As a result, some have been closed down altogether, while others have been floated on the stock exchange. Preferential treatment persists only for a few industries, such as the textile sector. The reform process has essentially served to enact gufenhua, turning state-owned enterprises into shareholder-owned companies.

Many enterprises have already been launched on the stock markets of Shanghai and Shenzen. "The total market capitalisation of the 900 companies that are now publicly traded amounts to more than three thousand billion yuan," explained the official. "More than a third of their stock can be bought and sold by the public. However, the state still owns a majority of shares in each company, though it is possible that, in future, more shares will be offered to the public."

The result, as the official was at pains to point out, is quite different from "privatisation", which is a course that China will not take. "China's resistance to privatisation is based on a number of considerations. To begin with, a large number of Chinese people work for state-owned companies. Their salaries are too low to allow them to buy shares. Since they cannot afford to become shareholders, there is a risk that these shares would be bought by foreigners. We do not want to sell out our assets to foreign enterprises. At the same time, the Chinese state firmly believes that economic development cannot be led by the private sector. They are simply not strong enough to show the way."

Yet even more significant than the arguments which lie behind it, perhaps, is the fact that the decision not to privatise is being declared with so much pride. It is seen as a patriotic act of defiance. The official explained that Western policy was deliberately to weaken the state enterprise system by supporting the private sector and making privatisation a condition for granting loans. The Chinese government, in contrast, has consistently refused to give in to pressure to adopt an analogous approach. "Following the Tiananmen Square 'incident' in the spring of 1989, negotiations with the IMF and the World Bank were especially tense," he told the Weekly. "They refused to give loans to state-owned enterprises, offering them instead to the private sector. Subsequently, the Chinese economy improved, and the state decided to refuse the IMF and the World Bank's offer altogether."

China is determined not to allow Western-dominated institutions to meddle in its economy, and refuses to follow any internationally-imposed recipe for reform. As a result, state enterprises will continue to play a dominant role.

"The market alone cannot be trusted," explained the official, "There are too many fluctuations, too many inequalities of distribution." Yet despite his insistence on the fact that China's move towards a market economy is different from that which has been seen in other developing countries, having been managed over a long period of time, and in the absence of any international pressure, China nevertheless shares the two main anxieties that are today to be found throughout the world -- labour lay offs and inequalities of income.

From top: power-dressing in Beijing; businessman with mobile and sexy car; the new poor

NO MORE IRON BOWL: To date, the number of workers laid off under the reform programme comes to approximately 10 million, a large proportion of them in the textiles industry. "Workers are laid off when a company is closed down, when certain products are not selling well or as a means to reduce the cost of production," explained the official. A third of those laid off are supposed to go through retraining, the main providers of which are the retrenching enterprises themselves, assisted by the government. While retraining, these workers still receive their salary, minus all bonuses, for a period of up to three years. After the three years are up, the training centre stops making payments, and the government will only provide a substantially reduced income to those still without work. After another year, even the government payments come to an end.

The official admitted that if there is no other salary in the household, this would probably imply an extremely low standard of living. And the evidence for this is to be found in the large number of people who have already taken to the streets. Last March, for example, 300 laid off workers in Sichuan province mounted a protest after their factory said it would no longer be paying their monthly living expenses. According to the South China Morning Post, the former machinery factory had shed all but 100 of its 1,300 staff and was subsequently sold off cheaply to a development company. Other protests have taken place as workers suddenly find themselves jobless and with no means of support, or retired workers are forced to go without their pensions for months on end.

But losing your job is not the only hardship facing China's workers. The welfare system, in place since the 1950s, is faltering too. The social security system traditionally covered every need from retirement, through industrial injury and illness, up to death. It initially covered workers in the state sector, private-public joint ventures and cooperatives, and was gradually extended to include collectively-owned enterprises. Once the reform wave hit, however, some people were swift to point the finger at the welfare services as the burden that was suffocating Chinese business.

The official did not hesitate to present such an analysis. "Under the market economy, the drawbacks of China's traditional social security system have become increasingly obvious," he told the Weekly. "This made reforming the system an important and urgent task, and especially the lack of any consciousness of costs and expenditure."

These are not arguments with Chinese characteristics: the same rhetoric has been used worldwide to do away with basic rights for workers. Now, they are reiterated day in, day out, throughout the People's Republic.

"The present social security system is characterised by the state taking care of the entire cost while individual workers contribute no payment whatsoever," wrote Gao Snagquan and Chi Fulin, two political analysts who have been among the strongest proponents of the reform agenda. "Such a system does not encourage self-sponsored insurance consciousness on the part of individuals. Instead, it leads to a total reliance on the state and enterprises, thus inducing various kinds of waste."

So, the system has been reformed. Under the new system, welfare services are paid for in part by the government, in part by the employer and in part by the employee. In this way, according to Sun Bingyao, associate professor of sociology at the Chinese Academy for Social Sciences (CASS), many of the rights won by workers in the 1950s and 1960s have been jettisoned virtually overnight. In those days, trade unions were very strong, and all kinds of special schemes were set up for underprivileged workers. But now the iron bowl has been relegated to the past.

For a long time, there was no unemployment benefit, because the government believed there was no unemployment. According to one government estimate, the unemployed now constitute about three per cent of the urban population. Some estimate the real figure to be closer to eight per cent. If you include the chronically under-employed, that number would rise to 10 per cent. Then there are also those who have been laid off, but are not officially unemployed, because they are supposed to be awaiting re-employment or retraining.

Nowadays, there is unemployment benefit. But, as Bingyao points out, it does not exactly provide for a comfortable living, since it is set at a mere 40 per cent of the average wage.

Moreover, the new "self-sponsored" insurance system has many flaws. For one thing, the company's contribution is not enforceable, because it is required only by decree, and not by law. As a result, companies can easily evade payment on the pretext that their profits are too low. Bingyao also argues that as different cities and towns compete for foreign investment, it is likely that urban workers' rights will be compromised in the process, those states which offer the least expensive production costs getting the largest slice of the investment pie.

Faced with a shrinking social security system, there is ever more pressure on people to join personal insurance schemes, many of which only cover a limited percentage of the costs insured. Old age benefits have also undergone drastic changes in recent years. Before, in the years after the revolution, pensions were set at 85 per cent of the worker's preceding wage -- one of the highest rates on offer anywhere in the world. "Now, the benefits for old people are not as good as before," Bingyao told the Weekly, "especially as inflation has increased, and incomes have risen, but adjustments have not been made to pensions. Twenty years ago, the pensions were enough. But not anymore." This is a serious problem, as China is faced with a rapidly ageing population. By next year, there could be anything between 129 and 135 million people over the age of 60 in the country -- more than 10 per cent of the population.

Housing benefits are also going down the drain. The houses that were made available for workers in the 1950s could not exactly be described as luxurious and spacious. These "iron houses", as they were called, gave each family a unit no more than 20 to 30 square metres in area. But the rent was extremely low, as Bingyao pointed out. Until the '70s, workers paid 2-3 yuans in rent out of an average salary of 30-60 yuan. For some, even 20 to 30 square metres represented an unattainable luxury. For poorer workers, especially those who worked in collective enterprises, as well as in small businesses, the Bureau of Housing Management built houses of 5 to 6 square metres.

Despite these efforts, slowly but surely, a housing crisis began to emerge. The unemployed, young workers and dependent women could still apply for houses, but would have to wait for years to get one. Entitlement to housing was still considered a right which the government had a duty to provide, but one which it was increasingly slow in honouring.

Meanwhile, following the revolution, there was a nationwide move to redistribute agricultural land, in the largest operation of its kind in China's history. Three hundred million poor peasants, both landless and land-owning, were given about 700 million mu (15 mu =1 hectare) between them, together with substantial means of production. They were not, however, entitled to any of the welfare benefits enjoyed by urban workers. Medical services in the countryside were basic, largely dependent on so-called "barefoot doctors". Collectivisation brought additional hardships, and peasants saw only a temporary improvement in their standard of living thanks to the land reform policy.

Economic reform in the rural areas began in 1978, when collectivisation began to give way to a family ownership system. But the peasants still had to contribute a certain percentage of their production to the state. A decree will soon be issued which will implement this system throughout all of rural China.

But the situation in the countryside has by no means improved under reform. According to one estimate, at least 42 million peasants are presently unable to feed themselves. Meanwhile, millions of landless peasants have moved to the city in search of employment, despite their position as illegal outcasts. It is estimated that there are 100 million "floaters" in the towns, and 150 million in the urban areas. The jobs open to them are those with the worst conditions and lowest pay -- and they are not entitled to any welfare services whatsoever.

MISSING MAO?: The poor Chinese migrants who live in makeshift homes in the city are well aware, however, that their plight is not shared by all. The flagrant display of wealth put on by certain people is a clear enough clue to the ever-widening gap between the economic elite and the rest of the nation.

A new class has emerged in China -- a class that has barrelfulls of money. The contrast between the ultra-rich and the average Chinese is most striking in the cities, especially Beijing. What do the Chinese make of such contradictions? One young educated man, who spoke on condition of anonymity, said that the growing disparities make some feel nostalgic for the time of the revolution, when everyone felt equal, and there was a pride in the absence of class. "You had the same as your neighbour had. If you were poor, he was poor too," he said. "But now, you look at your neighbour and you wonder where all this money comes from. You may be living in a tiny room with a big family, and you know there are some who now have villas and drive in limousines and eat at expensive restaurants. So people are asking, why? How come? They are becoming nostalgic for the Maoist period, when everyone was the same."

Many informed sources believe that the nouveaux riches owe their wealth principally to dealings in finance, trade, commerce, real estate and stock market investment -- and, of course, to the opening up of the Chinese economy. The task of accumulating capital has also been made that much simpler by the ease with which it is possible to evade taxes.

"There was a time when rationing systems and allowances were strictly enforced," said a journalist working for the People's Daily. "You couldn't buy a bicycle if there was already one in the family. Now, you can buy as many bicycles as you can afford, and with whatever specifications you like." The same journalist also pointed out the striking disparities in income that characterise the new China. For example, a journalist working in the Shenzhen Special Economic Zone might earn three times as much as one based in Beijing.

"The problem is that people have seen how some people suddenly got rich overnight, not by dint of hard work or intelligence, and possibly not by any very ethical means," Bingyao explained. "So they become nostalgic for the times of Mao Zedong. What makes it tolerable for some is that they themselves have witnessed an improvement in their own lives. But as for the others..."

In the near future, it is anticipated that the rate of economic growth in China will inevitably slow. So even fewer people than in the past will see their incomes rise. As inequalities of distribution become more obvious, so the general level of tolerance will wane, Bingyao predicts. As another Chinese told me, many in the older generation expected to reap the fruits of their hard work and sacrifices. Some have. Others have been left behind.

RESTLESSNESS: Yet for all that, would the people of China want to go back to the earlier days of the communist state? Many of the landless peasants, and some of the older rural generations, do visibly long for the Maoist era. And there are certainly some ageing cadres in the Communist Party who would prefer a return to the strict doctrine of the Little Red Book. But many of the people interviewed by the Weekly were hesitant when faced with the choice. It was Bingyao who perhaps articulated their dilemma best. "People feel disenfranchised under the political system," he explained. "But even though they remember Mao Zedong very fondly, and they are nostalgic for the days when the policy was egalitarianism, I am not sure they would want those days back. People want to move on, beyond the party that controls every aspect of your life. The party has too much power, and people feel that."

Indeed, many questions have begun to be raised about the abuse of that power -- a phenomenon of which high cadres have long been aware. A major campaign has been launched to boost the party's image, through what the Chinese refer to as the three things to "talk about more" -- Marxist teaching, righteousness and politics. But some people still insist on finding other subjects of conversation. In the first half of this year alone, 1,000 Communist Party and government officials were placed under investigation for graft and dereliction of duty. Whether this gesture will be enough to recapture the hearts and minds of a population that is now highly disillusioned with party politics remains to be seen.

According to a recent independent opinion poll, rampant corruption in political life is the single issue that most concerns the Chinese, replacing unemployment, which won first spot in both of the last two years.

While the party is failing to deliver a belief system that has much hold on the people, other creeds are gaining ground. On Sundays, Buddhist temples are full of worshippers burning incense, and new movements and cults are attracting more and more followers. If such cults dare to contest people's loyalty to the party, they will certainly not be tolerated, as the recent crackdown on the Falun Gong last July illustrated. Falun Gong is a meditative form of movement based on qi gong, a traditional practice of breathing exercises. The Falun Gong were tolerated until 25 April, when 10,000 of their members staged a demonstration outside the Communist Party headquarters. The crackdown that followed surpassed anything that has been seen since the brutal massacre of peacefully protesting students and workers at Tiananmen Square in 1989.

"The Falun Gong proved to be a warning for all those who consider political activity and who are a threat to the government," said one journalist. But according to Bingyao, the hysteria over the Falun Gong was completely undeserved, as the movement's members were in no way ideologically driven. They were simply pursuing a form of mild exercise that was particularly suitable for the elderly. "When the government turned against them, everyone was surprised," he told the Weekly. "The mass media should have been used to discuss the Falun Gong openly, rather than to carry propaganda messages condemning it... They should have been tolerated and allowed to have a voice. The way they were treated only served to convince many that the party holds far too much power."

As one Chinese man explained, "little" freedoms have been granted, "like choosing your own job, living in the city if you wish. Individuality is more tolerated now. When I was in high school, I was not allowed to have any hairstyle except one, and the uniform had to be of only one kind of material. Now this has changed." However, he added that the level of freedom allowed, especially political freedom, is far from being enough. Faced with such widespread demand for more room to manoeuvre, it is debatable how long the party can hold back.

Yet demands for greater political freedom, warned Bingyao, should not be interpreted as a desire for a Western-style democracy. "Personally, I am not advocating a Western-style democracy, because I don't think it is necessarily the right system for us in China," he said. However there are some who crave for just that, if the long lines of Chinese waiting outside the consular sections of the American and British embassies to request a visa are anything to go by.

But there is also a strong anti-American sentiment, reflected in the large numbers of students who came out onto the streets to protest at the NATO bombing of the Chinese Embassy in Belgrade earlier this year. It is this same sentiment that has led to repeated attacks on the government's negotiations and compromises with the Americans over China's membership of the World Trade Organisation (WTO).

A refusal to bow down to American imperialism is one of the strongest of Mao's legacies, and that is something the Chinese continue to expect from their government. And it is one position of which China, as a self-proclaimed developing country, can be very proud of before the South. For China, almost alone in the world, still has the political and economic clout to stand up to and defy Western hegemony.

But this refusal to bow down to external bullying is one of the few surviving souvenirs of the Maoist heritage. Today, a People's Republic of China governed by the dictatorship of the working class, and based on the alliance of the proletariat and the peasantry, is at best a distant dream. The Chinese people have certainly stood up, as Mao declared 50 years ago. But the road they are presently marching down seems to be leading them anywhere but to communism.

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