Be Cautious When Talking about Land Privatization
LI CHANGPING
Source: China Left Review, no. 1. Translation by CSG of an article originally published in Dushu, 2003, no. 6
Many local officials are in favor of land privatization. So are a good number of experts and scholars. Many even argue that land privatization is the only way to get out of the dismal situation in which the rural China finds itself because the root cause of the problem is the public ownership of land; when the land is privatized, the peasants would then have the property right and on that basis, would enjoy human rights and all the other good things, and the entire country would be energized. Thus, ushering in a much better world.
I have on various occasions before expressed my concern about the privatization of rural land and for this reason have been at the receiving end of much well intentioned criticism. I wish to state here in unequivocal terms: I’m firmly opposed to land privatization. Reasons for my concern and opposition are as follows:
1. An overwhelming majority of peasants are not calling for land privatization.
I have visited a large number of villages and townships in rural China, and during my frequent contact with peasants, I never heard or witnessed expression for land privatization. In my view, whether the rural land should be owned publicly or whether the current household responsibility system should be continued or other forms of management/ownership such as equity cooperative system should be introduced, this should be a question for the peasants to decide. It should be up to their voluntary choice. As practice has demonstrated, the voluntary choice made by the peasants themselves often are much better than those made by experts and leaders in their name.
The existing land-owning system does not affect the circulation and alienation of the right to use the land. Some say that without land privatization, land cannot be put on the market for circulation and there is no way to realize economics of scale. Peasants would tell them right away: if farming can be made profitable under the existing system, then the right to use the land would automatically be put into circulation by market. Peasants in the Da Xing An area in Inner Mongolia told me, they have found a very good way for the land to be circulated by some kind of market: those peasants who choose to migrate to the cities for employment can use the land as collateral to obtain interest free loans from other individuals. Normally, for a period of ten years and for the amount of five thousand yuan per acre, the village head acts as a guarantor/witness for such a transaction. For the ten year period, persons who provide the loans are entitled to use the land and reap the proceeds there from, and the peasants who mortgage out their land will repay the loans, interest free. This, in effect, is a way to lease the land out with the rent amounting to the interest money the loan would have normally obtained, and the ten year lease is also subject to renewal. In the course of such transactions, a mediation organization, namely land credit co-op,has emerged; those peasants who left their villages for good their right to contract the land as provided for in the current system will be surrendered to the village as a collective. Why in the villages has there emerged such a mode for land circulation? Because the tax and other assessments are relatively low, amounting to some twenty yuan per mu. The right to use the land brings relatively higher return and so a market has emerged for transactions based on the right to use the land. In contrast, in central China, the tax burden for rural land is much heavier. Farming the land often entails net losses and therefore no market for voluntary transaction could have emerged. This shows clearly it is not the existing land system which has prevented circulation of land rights. It is the tax policies and the heavy financial burden associated with land that has stymied the emergence of land rights market.
2. Does rural China have to follow the agriculture of foreign countries that is based on large-scale farms? Does large-scale based rural development necessarily imply higher yields and greater effectiveness? In today’s China, the population increases by around eleven million people every year. Assume the continued economic growth averaging eight percent per year. Every year jobs will be created in the cities to accommodate eight million people who migrate from the countryside to seek employment. That means, in forty years time there will still be about eight hundred million people left in rural China, which in turn means the per capita acreage of arable land will be less than even it is today; consequently, agriculture based on small holding family farms is the only realistic option for rural China. In the next forty years, the rural labor power in China will remain above the level of four hundred million people. And demand for rural labor can be fully met by one hundred twenty million people. Consequently, progress in labor-saving technology will not necessarily be translated into lower costs and higher yield per unit of land. On the contrary, according to findings from research I have conducted, the family farm of the size of five hundred mu yields fifteen percent less per unit of land than the family farm of the size of five mu. Intensive farming is actually an advantage of Chinese agriculture which must be preserved. What is then the basis for privatization and large-scale agriculture?
3. The establishment of any sustainable system requires a favorable environment. In the prevailing social environment of rural China, marked by powerful bureaucracies, erosion of the public-mindedness, and prevalence of self-speaking behavior, is it possible to promote land privatization in a fair and equitable manner? Just look at the process of so-called “clarification of property rights of state-owned enterprises.” The answer to our question is very clear. A great many facts have demonstrated that only a small number of people in position of power have become rich while most of the workers have lost their jobs. The Chinese working class is much more organized than the peasants, but the workers nonetheless have been dispossessed at the hands of conspiring power and capital. Disassociated and disorganized peasants would definitely fare far worse in a similar scheme of privatization. What is more critical is the fact that the rural community in China today collectively are heavily in debt totaling several hundred billion yuans. The creditors who make loans to individual peasants or local governments are primarily members of the officialdom and their relatives or friends. If land privatization is carried out nationwide, then much of the land will be surrendered to pay for the loans they have made. What will be left then for the peasants’ families? I have always maintained that rural indebtedness, and in particular the practice by many cadres to make high-interest loans to rural communities, is a very serious economic issue that must be addressed. This is why I have concluded a comprehensive analysis of the problem of rural communities becoming heavily indebted, its structural causes and harmful effects, in my book, I Told Truth to The Premier, in the hope of enabling a more clear-headed understanding of the acute contradictions that exist between different social strata. As manifested in rural indebtedness, which I hope will help us make a rational choice, as regards the direction of social transformation. Regrettably, more and more people seem to have joined in supporting the call for land privatization. The argument I present in the book seems to have fallen on deaf ears. If the state should adopt a policy allowing privatization of land, many cadres will become big landlords overnight whereas many peasants will soon be rendered landless. Why must we return rural China to the state that prevailed in the 1930s? At that time, there were only about three hundred million landless peasants. If today, a policy should be adopted to permit a family to own thirty mu of land, namely, to allow a family to purchase the land of three other families, more than six hundred million peasants would become landless, a staggering number equal to one ninth of the world total population. What kind of society would China turn into with such a large landless population? On the other hand, in many places where the land tax burden is very heavy, agricultural income very low, and most peasants are extremely poor, the market price for the land would be so low that it would be difficult for a peasant family to get enough money by selling its land to cover the college tuition of one single child, or the hospital expenses for a peasant woman experiencing prenatal difficulty. When a poor peasant has a kid about to go to college or a member of the family requires hospitalization, what options does he have, except to sell the family land “voluntarily” at a very low price. The writer, Mr. Wu Shi, recorded his conversation with a group of peasants: when asked whether peasants would support privatization of land which will allow it to be purchased or sold in the marketplace, the answer from the peasants is that there should be no privatization of land and the sale and purchase of land should not be permitted because, as the peasant explained, “if the father likes gambling, smoking cigarettes, or drinks a lot, he might very likely sell his land to indulge in his bad habits. What will his children do?” “If the land is allowed to be put on the market, most certainly a small number of people will become landlords while the majority will become landless peasants. What will all these peasants do to make a living? Are they going to once again grab the land from the landlords? Just like what happened years ago. During my field investigation in the countryside, I paid particular attention to the question of how land price should be set. In northeastern China where there is a lot of land in relation to a smaller population, the tax and other financial assessments combined amounts to about fifty yuan per mu where one mu of land yields an average of two hundred to three hundred yuan. The reasonable price of one mu of land is widely considered by peasants there as around four thousand yuan. In central China, however, the financial burden incurred by the peasants there is heavier; where the annual income is less than one hundred yuan per mu., the peasants there would price their land at about between two thousand and three thousand yuan per mu. In some places where the tax burden is so unbearable that the net income generated by one mu of land is close to zero or even negative, there the peasants have really mixed feelings about the land. A minority considered the land as worthless, they are willing to give it away except for a small piece left for the construction of housing, but the majority still considered the land as the basic means for livelihood. They would not get much money out of selling their land and they would rather lease the land to their offspring who will decide what to do with their land. And as for the land close to the cities, the peasants there would price the land more than ten times higher than far away areas.
4. Land is a special kind of cake; you cannot make it bigger and it will only become smaller. The cake analogy often alluded to by economists is not applicable as far as land is concerned. This special nature of the land means that the land cannot be dealt with like any other commodity or means of production. Mr. Wen Tie Jun expressed the view that the basic function of rural land is to provide social security, which has been met by a good deal of criticism. The critics claim that a large number of landless peasants can be protected by a modern system of social security. But it is difficult for me to imagine how it is possible to establish a modern social security system adequately covering eight hundred million peasants in a country like China whose per capita income is less than one thousand US dollars per year. Not only in China this cannot be done, but even a rich country like the United States is likely to have the financial means to set up such a huge social security system. Let’s see how United States would react, if we propose to transfer six hundred million Chinese peasants there. If indeed land is the basic means of subsistence for eight hundred million peasants and their social security, how can we allow this to be traded away? If land is allowed to be sold, does that mean the social security entitlement of the city dwellers can also be freely traded in the marketplace.
5. In order to establish a sustainable system, its benefit must exceed its cost. The household contract system, based on the dismantling of the commune and the distributing of land to the families of the peasants, which was launched in the early 1990s, have been successfully established precisely because it increases the motivation of the laborer and raised the grain yield by 150 kilos per mu ; despite the fact that there is a cost involved moving from the collective ownership/management system of the commune to the individual family responsibility system- primarily the management cost has increased- but the increased benefit has outweighed the cost. This is the fundamental reason that the new system has proved sustainable. One might ask, however, among those who advocate for privatization of agricultural land right away, who has clearly offered a convincing argument that the benefit would outweigh the cost? Who has advanced a clear analysis of the costs and benefits involved? If the climate and the land remain the same, given the same people and the same mode of production, how can a mere change from a household contract system to private ownership resolve the serious problem faced by the rural community, the peasants and their agriculture? If the system of private ownership is so wonderful, why, then, the peasants suffered so much from unending wars, poverty, and famine in the thousands of years of feudal, private ownership system?
6. From the perspective of more than five thousand years of Chinese history, the greatest contribution made by Mao Zedong and the Chinese Communist Party to the Chinese nation is the fact that they had successfully led a long revolution waged by the peasants. And the core of this revolution is the revolution of the land ownership. While previous peasants revolution in Chinese history often set as its’ goal re-appropriation of the land, Mao Zedong did not stop after taking the land from the landlords and redistributing it to the peasants; the Communist Party proceeded to establish the system of collective ownership of land, which represents the final completion of the task of rural revolution. Towards the latter part of 20th century, rural China began to witness frequent peasant protests at various localities but such struggle is merely local in nature, a kind of limited revolution, directed against official corruption and calling for reduction of cash burden. Such limited revolution will come to an end as soon as the corrupt officials in townships and villages are removed. If, however, the system of private ownership of land as had prevailed in the 1930s were to be restored, an inevitable consequence would be the emergence of large number of people who would try to survive outside of the law, ushering in a prolonged period of society-wide instability, which eventually would lead to a revolutionary movement of the landless peasants. Consequently, it is very important to preserve and improve upon the present system of public ownership.
7. The most fundamental reason for the belated emergence of capitalism and its’ characteristic mode of production is the periodical peasants’ revolutions throughout Chinese history. Every revolutionary movement of the peasants was essentially a redistribution of wealth, primarily consisting of ownership of land; every such redistribution would devastate rural economy, leaving no room for the emergence of incipient capitalism based on agriculture and rural markets. If China were to undergo once again a period of violent peasants’ revolution with the re-appropriation of privatized land as its goal, agriculture and rural economy would once again be ruined. The dire consequences of such a scenario needs no elaboration; moreover, this would also deal a devastating blow at urban China, whose economy is founded on rural economy and rural market. Above all, countless city dwellers would die of starvation.
The main social contradictions in today’s China are not very different from what existed previously. It is still marked by the proverbial “mountains”. The only difference is the existence of public land ownership. If the rich people today are still trying to take over the land of the poor peasants, China would never be able to put an end to the history of revolutions. Many people are of the view that, among the five major industrial sectors, food, clothing, appliances, transportation, and real estate, those who have succeeded doing businesses in the first four categories deserve respect but not those who have got rich making deals in real estate because the former four sectors are marked by entrepreneurial competition, whereas huge profit in the real estate sector is possible only by way of bribery and powerful connections for it is a sector where appropriation of proceeds from increased land value is monopolized by political power. Buried under the foundation of every skyscraper is th blood, sweat, and corpses of workers from rural China. Such an observation, cynical as it may be, does in certain sense reflect a deeper truth. Some people claim that the privatization is the best medicine because when land is privatized and subjected to market forces, there will be no need for bribing the corrupt officials in order to take possession of the land, as land will be traded freely by private bargaining parties without the mediation of the state. But please think more carefully: how can peasants best safeguard their interests in the course of land transaction? Would peasants have greater bargaining power when land is owned by one person, or when land is owned by ten persons collectively? Another issue involved in the distribution of the proceeds arising from increased value of land deserves serious discussion: some believe that the proceeds from increased value of land should be entirely returned to the peasants who used or own the land, when the land is expropriated by the state. Is it reasonable to turn over the proceeds to a small number of people when the increase in the land value is the result of urban development to which all the people have contributed? In the process of urbanization and modernization, the increased value arising from expropriating agricultural land for developmental purposes would generate huge profit, amounting to tens of billions of yuans every year. Legislation should be enacted to guarantee large portions of such proceeds be used to provide social protection for peasants who come to the cities to earn a living.
The most effective way to prevent land proceeds that rightfully belong to peasants from being seized by powerful vested interests is by a two-pronged approach: on the one hand, to enact laws to protect peasants and on the other hand, to promote peasants’ democratic rights by empowering the peasants to get more organized and better able to protect themselves. In the absence of such a two-pronged policy, land privatization can only make the peasants more vulnerable. If such a two-pronged policy could be effectively implemented, why is there still much need for land privatization?
