How to make China even richer: Let the peasants own their land

The Economist

Mar 23rd 2006
Copyright The Economist
IN 1940, nine years before his Communist Party seized power, Mao Zedong
set out his plans for a “new China”. The republic would, he said,
take “certain necessary steps”ù to confiscate land from rural landlords. Under the
principle of ‚Äúland to the tiller‚Äù, it would then “turn the land
over to the private ownership of the peasants.”ù If only things had turned out
this way.
The “necessary steps”ù involved widespread slaughter. Hundreds of
thousands,maybe millions, of landowning rural residents and their families were
executed or beaten to death by fellow villagers. The peasants got their
small parcels of land, but not for long. By the late 1950s, private
land ownership had been eliminated and peasants had become property-less
members of “People’s Communes”ù. It was an upheaval that, along with bad
weather and a frenzied attempt to catch up with American levels of industrial
production, contributed to millions more deaths in a nationwide famine.
As our survey describes, China has yet to undo the damage. A few years
after Mao’s death in 1976, the People’s Communes were dismantled. Under Deng
Xiaoping, agricultural production soared as for the first time in 30
years peasants were allocated (but not given full ownership of) plots of land
to farm independently. This marked the start of the economic transformation
that today holds the world spellbound. But it is the prosperity of
urban
China that mesmerises foreign businesses. Since its boom in the early
1980s,
the countryside has lagged ever further behind.
This time, a genuine great leap forward
Deng kept in place two pillars of the Maoist rural order: collective
land
ownership and an apartheid system that barred rural residents from
moving
to
the cities. The latter has begun to erode, due to the need for cheap
labour
to sustain a manufacturing boom. But the former remains firmly in
place.
Now is the time to revive Mao’s vision of a new landowning order. This
would
ease rural strife, fuel growth and help develop the genuine market
economy
the leadership claims to want. Giving peasants marketable ownership
rights,
and developing a legal system to protect them, would bring huge
economic
benefits. If peasants could mortgage their land, they could raise money
to
boost its productivity. Ownership would give them an incentive to do
so.
And
if peasants could sell their land, they could acquire sufficient
capital to
start life anew in urban areas. This would boost urban consumption and
encourage the migration of unproductive rural labour into the cities.
For
China to sustain its impressive growth rate and reduce inequalities,
getting
the many tens of millions of underemployed peasants off the land and
into
wealth-creating jobs is essential. The exodus would help those left
behind
to expand their land holdings and use them more efficiently.
No government, least of all the control freaks who run China, would
embark
on such a momentous exercise lightly. Communist Party ideologues are
all
too
aware that a failure to handle rural issues properly can be
destabilising.
They worry that allowing peasants to sell their land could restore a
rural
landowning class, and that peasants would sell up in huge numbers and
descend upon ill-prepared cities, throwing up shanty towns and pushing
up
crime.
Some officials also see collective ownership of rural land as one of
the
few
remaining badges of China’s professed ‚Äúsocialism‚Äù, and fear the
explosion
of
divisive political debate if this bit of constitutional dogma is
changed.
In
China’s case, however, it is the absence of reform that is proving
destabilising, as peasants protest violently against land seizures by
local
governments keen to exploit the land themselves. Though materially
better
off than they were in 1949, many peasants say that local bureaucrats
have
in
effect become the landlords, sometimes using mafia-type gangs to push
them
off their fields.
A few opponents of land reform in the countryside say they are acting
in
the
rural population’s own interests. They point to the lack of
social-security
provisions for peasants. Though peasants have limited control over the
land
they farm, in most cases it can at least help to feed them.
The weakness of this argument is that forced appropriations by local
governments have already deprived as many as 40m peasants of some or
all of
their land since the early 1990s, with little or no compensation.
Besides,
the best way to secure the welfare of the peasants is not to keep them
trapped on underworked land but to spend more directly on services for
the
poor. With strong revenue growth, a low budget deficit and a booming
economy, China can afford this. Compensating peasants for appropriated
land
on the basis of market values, not just minimal agricultural ones,
would
help too. And introducing a value-based property tax would persuade
local
governments to worry less about losing the one-off revenues they now
enjoy
from the sale of land rights.
It would be disingenuous to deny that land reform will loosen party
control
in the long run. A decade ago almost all urban housing was owned by the
state. In one of the most dramatically successful economic reforms of
the
past quarter century in China, most is now privately owned. This has
fostered the growth of a middle class that wants guarantees that its
new
assets are safe from the party’s whims. Property owners are electing
their
own landlord committees—independent of the party—to protect their
rights. A
new breed of lawyers, not party stooges as most once were, is emerging
to
defend those whose properties are threatened by the state. Property
owners
want a clean environment around their homes. Green activism, which
hardly
existed in China a decade ago, is spurring the development of a civil
society.
Even so, China’s Communist Party has shown that it will take big risks
if
economic development demands them. Hence the widespread closure and
privatisation of state-owned enterprises in the past decade, with the
loss
of millions of jobs. The leadership knows that China’s history has been
one
of recurring bloody upheavals by landless peasants; it is caught
between
wanting to retain control and wanting to avoid another upheaval. This
is
the
moment to complete the unfinished business of rural reform.
Copyright © 2006 The Economist Newspaper and The Economist Group. All
rights
reserved.




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