To defuse the unrest, the Chinese Communist Party leadership has vowed to
root out corrupt local officials and to provide more compensation to those
expropriated. The Economist wants it to go farther and grant title to the
peasants, which would encourage them to mortgage and improve their property
or sell it and move to the cities. The concern of the Chinese leadership,
apart from those alluded to in the article, is that there are already not
enough jobs to accommodate the massive transfer of the rural population
which is currently underway, and that increased pressure on the cities would
be accompanied by a parallel transfer of social conflict from the rural to
the urban areas.
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How to make China even richer
Mar 23rd 2006
>From The Economist print edition
Let the peasants own their land
ROPIIN 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" to confiscate land from rural landlords. Under the principle of "land to the tiller", it would then "turn the land over to the private ownership of the peasants." If only things had turned out this way.
The "necessary steps" 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". 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 "socialism", 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.