Today, Comrade Jintao went to the Xiaogang Village in Anhui Province, where he confirmed the historical contribution of Xiaogang Village, in which villagers "searching for a way to feed and clothe themselves” "distributed the land to work individually.” But he didn't say anything about the village "returning to the path of cooperation” since last year in order to "pursue a better living.” How is it that people around the country know that Xiaogang Village has "returned to the path of cooperation,” but Comrade Jintao did not know? How is it that the comrades in Anhui and the comrades who accompanied Jintao do not know?
In our party's upcoming Third Plenary in October, the delegates will again discuss rural reform, and from Comrade Jintao's speech in the Xiaogang village, we can see the future direction of rural reform—to promote "permanent responsibility system,” to increase the circulation of land, to facilitate the flow of capital to the countryside, and to promote the development of modern agriculture by combining "companies + rural households.”
Modern agriculture based on "companies + rural households” cannot increase peasant income
In recent years, several key party documents have identified "increasing peasant income” as a central objective. How can we increase peasant income? According to these documents, the key measure is to develop modern agriculture. What is modern agriculture? The documents define it as combining "companies + rural households.” That is, they propose to develop modern agriculture by "transferring” peasants' land to companies, so that the peasants become agricultural workers or "shareholders.”
It is true that the development of a modern agriculture based on "companies + rural households” can increase the income of the peasants? Theory and practice have proved that it is impossible! In theory, the result of "company + rural households,” is that peasants are forced to withdraw from the fields of processing, transport, distribution, storage, production and marketing of the means of production, rural finance, and transferring land from agricultural to non-agricultural purposes, in order to give way to capitalists in these fields. Peasants can only engage in farming and aquaculture, and even in aquaculture, as in pig raising and dairy farming, they will be gradually replaced by agribusiness. With this kind of modernization of agriculture, peasants will only be able to get income from farming and a small amount of aquaculture. With this kind of so-called modernization the income of the peasants will decline. In practice, in recent years the increasing part of peasants' income is mainly income from labor. If we exclude the income from "migrant peasant workers,” the income of the peasants is declining, as is shown authoritatively by data from the National Bureau of Statistics. Strictly speaking, "migrant peasant workers” are industrial workers, whose income should not be included in the statistics of peasants' income. That is to say, efforts to increase peasant income in recent years by promoting central policies of agricultural modernization based on "companies + rural households” have been a total failure!
Since 2003, our party has been committed to "narrowing the income gap between urban and rural residents,” but the income gap between urban and rural residents continues to grow. This is further evidence that the central authorities' policies designed to increase peasants' income have been ineffective.
Although the "companies + rural households” agricultural modernization model has not achieved the goal of increasing peasant income, not to mention its other defects, they believe the problem is that land transfers are not free enough under this model, slowing down the movement of capital to the countryside. Therefore, in the upcoming Third Plenary in October, our party is preparing to open the way for "capital to move to the countryside.” This idea is the same as that implemented in the Philippines in the 1930s.
The decline of the Philippines and the rise of Japan, South Korea, and Taiwan
Starting in the 1930s, the Philippines experienced 30 years of rapid development; it was called an "Asian model” by the West, and its level of modernization was only a little behind Japan. During this period of rapid development, the Philippines attracted workers from Hong Kong, Taiwan, South Korea and North Korea.
Starting in the mid-1960s, however, the Philippines was beset by economic recession, social unrest, and political instability, and people's lives became increasingly difficult. In the Philippines today, 30% of the people live below the poverty line, one out of ten Filipinos works away from their homes, and about eight million people work overseas. In Hong Kong alone, there are 700,000 college-educated Filipina maids. With the decline of the Philippines, Taiwan, Japan, South Korea, and China have developed rapidly, becoming Asia's new models.
The reasons for the decline of the Philippines and the rapid rise of Japan, South Korea and Taiwan, are complex, but one problem is very crucial: how to deal with peasants, rural areas, and agriculture in the process of modernization. In academic circles, many people are concerned about the possibility of China "becoming Latin Americanized,” but very few people carry out comparative study about the Philippines, Japan, South Korea, Taiwan, and China, to shed light on the best way to modernize China.
What kind of road should we take to achieve modernization in countries that are densely populated, in which the majority of population are peasants, and per capita resources are limited? Should China follow the example of Europe, the United States, Japan, or the Philippines? This is an important topic to be discussed.
Philippines, Japan and South Korea and Taiwan: Different paths of agricultural modernization with different outcomes
In 1898, the United States took over Philippines from Spain. Under American influence, the Philippines followed the example of the United States in choosing the road for modernizing agriculture and rural areas. The elite firmly held the view that the modernization of agriculture and rural areas had to rely on the strength of capital to transform the small farmers and villages.
With the support of the Philippines government and the intellectual elite, Western multinational corporations and national agricultural capitalists gained control of many fields of Philippine agriculture, including rural finance and insurance, land transactions, agricultural products processing, circulation, storage, production and marketing of the means of production, technology services, and infrastructure. Peasants were only able to engage in farming and aquaculture, and a large number of peasants and sharecroppers went bankrupt. Under pressure from big companies, peasants lost their land and were forced to become agricultural workers for the capitalists. With technological advances, however, agricultural landowners and capitalists needed fewer and fewer farm workers, and so a large number of unemployed and landless peasants went to cities.
In the wake of the end of the Korean War and the slowing of the Cold War, job growth in the cities declined, many "migrant workers” in the city couldn't find work, the unemployment problem turned into a social and political problem, the military entered the political stage, and political instability, social unrest, and economic recession in turn exacerbated unemployment, resulting in a vicious circle. A steady stream of Filipino labor power flowed to Japan, Korea, Taiwan, Hong Kong, and around the world, and Filipina maids became the "calling card” of the country. It was certainly 30 years on the east side of river, and another 30 years on the west side of river!
Philippines' agricultural and rural modernization led to a rapid transformation in five aspects: rural problems rapidly became urban problems, peasants' problems rapidly became workers' problems, the unemployment problem rapidly became a social problem, economic and social problems rapidly became political problems, and domestic conflicts between urban and rural areas rapidly become international trade conflicts.
It should be said that the five above-mentioned changes in the Philippines led to serious social polarization and conflict, serious political corruption and clashes, and the economy became completely controlled by foreign countries. Based on the above situation, a number of studies of the Philippines have come to the conclusion that one of the main reasons the Philippines went from being an "Asian model” to being the "sick man of Asia” was that it took the wrong road of modernizing agriculture and rural areas
The Philippines, after experiencing half a century's twists and turns, has become aware that it made mistakes it made on the road to modernization. Starting in the mid-1960s, it began to follow the example of Japan, South Korea and our own Taiwan, buying land from capitalists and allocating land to landless peasants and migrants, a reform that continues to this day. But what a big detour it took! While the Philippines has gone downhill, Japan, South Korea, and Taiwan have risen rapidly. All of these countries faced situations similar to the Philippines: they had large populations relative to their land, and they were all under the influence of the United States. Of course, the reasons for the decline of the Philippines and the rise of Japan, South Korea, and Taiwan were complex. But the fact that Japan, South Korea and Taiwan, chose an entirely different agricultural and rural modernization road—the "Japan model”—was certainly an important reason.
Instead of relying on capitalist transformation and the eradication of small peasants, the "Japan model” was based on land reform, restrictions on large capital in the countryside, and simultaneous support for small peasants to organize themselves. The model transformed traditional small farmers into modern organized small farmers by establishing financial cooperation as the core of comprehensive peasants' associations, which included finance and insurance and led rural economic development. Peasants not only shared income from farming and animal husbandry, but also shared the proceeds of land transfer to non-agricultural uses, and the benefits of rural finance and insurance, processing, distribution and storage, information about production and markets, technology services, supermarkets for rural merchandise, and many other aspects.
Japan, South Korea, and Taiwan put restrictions on large capital in the countryside for several decades, even up to a century. They allowed large capital in the countryside, still under restricted conditions, only after agricultural and rural modernization was completed and "modern organized small farmers” had come into existence.
In the model of agricultural and rural modernization followed in Japan, South Korea, and Taiwan, the transfer of agricultural land was only allowed between peasants, and the phenomena of widespread bankruptcy among small farmers and forced migration of rural labor never existed; peasants enjoyed the same citizenship benefits as the urban residents, and the income of peasants and urban residents was roughly the same.
In the modernization process in Japan, South Korea, and Taiwan, the number of peasants was reduced gradually, and migrant workers never became an issue; the rural portion of the economy gradual declined, and poverty among the peasants never became a problem; there was rapid urbanization, and industrialization, but basically no problems with pollution and social polarization. During the process of development, Japan, South Korea and Taiwan, maintained economic prosperity, social harmony, and political stability.
Comparing the roads of agricultural and rural modernization followed by the Philippines, Japan, South Korea, and Taiwan, we can draw a basic conclusion: The road followed by Japan, South Korea, and Taiwan was effective. And we can reach a consensus: First, for agricultural countries with great population density, the methods chosen for agricultural and rural modernization is of decisive importance to the overall situation. If a country chooses the road of using capital to eradicate small peasants, the peasants will be forced to be non-agricultural, and the cost of labor will be very low. Although this is beneficial for "attracting foreign investment,” it seriously limits domestic demand, weakens the country's economic independence, and leads to many social and environmental problems. The risks are very high. If a country chooses the road of organized small peasant cooperation, peasants will leave agriculture at their own discretion, peasants and workers' wages will increase at the same pace, domestic demand will expand with development, there will be stronger economic autonomy, and a variety of risks can be controlled.
Second, where there is a huge rural population, reducing this population is a long-term process, and where the rural economy is the main source of income for peasants, it is necessary to protect the peasants' share the benefits of the rural economy (including from finance and insurance, processing of agricultural products, storage and distribution, production and supply of the means of production, technical services, and proceeds from land transfer to non-agricultural uses), rather than—in the name of modernization—robbing the peasants' rice bowl. Otherwise, we will end up with the Philippines-style "five transformations.”
Third, the main force to carry out the modernization of agriculture and rural areas should be peasants, rather than non-peasants. The crucial thing is to enhance peasants' abilities, to protect peasants, to organize peasants, to develop peasants' mental fighting skills, and to augment peasants' economic power, rather than to rely on capitalists to save peasants or lead peasants. To expect capitalists to save small peasants is unreliable.
Fourth, finance has a central role in modern economic development. Without "agricultural credit departments,” the comprehensive agricultural associations in Japan, South Korea, and Taiwan would have had no vitality. Peasants' financial autonomy is also the foundation for the realization and protection of peasants' land property rights. In order to protect peasants, you must first protect their financial autonomy. In Japan, South Korea, and Taiwan, peasants' financial co-operation was protected and private capital and banking in the countryside was restricted for decades, or even a century. In Taiwan, for instance, private banks have emerged in the village only in the past 10 years or so.
What path should China's agriculture and villages follow?
Asia's developing countries have the same characteristics—a large population base and fewer resources per capita. To rely on capital to transform small peasants and villages, is a difficult path to follow. The mainstream discourse in China has been developed by those who have studied abroad in Europe and America. It is similar to the discourse in the Philippines during 1930s and 1940s; this discourse also appeared in Taiwan in the 1950s and 60s, but Taiwan identified the problems in time, so it was able to prevent and correct their policies and choose the "Japan model.”
The author believes China's mistaken agriculture and rural modernization policies have resulted in serious consequences:
The first consequence is that the family-run small-peasant economy depends on the wages of migrant peasant workers. If this continues in long term, it will be impossible for migrant workers to settle down in the cities, it will be impossible to reduce the number of peasants, and urbanization will be a total failure. Without migrant workers to maintain family-run small-scale peasant economy, huge numbers of small peasants would go bankrupt and the "five transformations” would be inevitable. Although China has developed rapidly for 30 years, the number of peasants has not been reduced, there has been no modernization of small peasants, there has been no modernization of rural areas. If this continues, it will be impossible to realize China's modernization.
The second consequence is that China's rural economy, accounting for only 12% of the country's total GDP, of which farming and aquaculture account for about 5%. Only this 5% is for peasants and the rest has been taken over by non-peasants. It is impossible to feed 60% of the population with 5% of GDP. Polarization is inevitable, and general well-being is impossible.
The third consequence is that Chinese peasants are losing "two markets”—at home and abroad. The domestic market for land-intensive agricultural products market is gradually being taken over by transnational agribusiness. The foreign markets for labor-intensive agricultural products are being seized by Japanese, South Korean, and other "high-tech agricultural parks” that are being established in China. It is foreseeable that protection of markets and the struggle to seize market will become very intense, trade friction will increase, and in that way it is inevitable that domestic problems will be transformed into international problems.
China must certainly learn from Japan, South Korea, and Taiwan's agricultural and rural modernization, and avoid the failure of the Philippines. We must, therefore, correct the mistakes of a series of agricultural policies:
We must immediately correct the mistaken policy of supporting "leading enterprises to lead small peasants,” and strongly support peasants' economic cooperation and collective economic development.
We must immediately correct the mistaken policy of the supporting the movement of private capital into the countryside to do banking services for small peasants, return to peasants the right to develop financing, and give priority to the development of peasants' financial cooperation.
We must immediately correct mistaken policy that allows Japanese and South Korean agribusinesses to build "agricultural parks,” which utilize cheap Chinese labor and land to take over traditional markets for Chinese agricultural products, and strongly support Chinese peasants' organizations and companies, so that they can expand their share of markets for labor-intensive agricultural products in Japan, South Korea, and Europe.
We must immediately correct mistaken policies that encourage transnational corporations to acquire Chinese agricultural products processing enterprises, as these mergers help foreign agriculture products take over the Chinese market. We must strongly help peasants' cooperative and collective economic organizations become the main force in processing agricultural products. We must support the acquisition of foreign agricultural products processing enterprises by Chinese enterprises in order to help China's labor-intensive agricultural products seize foreign markets, and to ensure our right to participate in setting the prices of major agricultural products.
We must immediately abolish the current land requisition system and, on the basis of implementing the Constitutional provision for "collective land ownership by the peasants,” secure the peasants' status as land owners, so they make use of the capital benefits of land transfer to non-agricultural uses.