FINDING A SOLUTION TO FURTHER AGRARIAN SYSTEM REFORM

What are the possible solutions to the nominal collective ownership of farmland? Some scholars and policymakers advocate for returning to the system of the People’s Commune. They argue that the family-contracted responsibility system was a sudden return to a backward precapitalist mode of small-scale production and that the autonomous small farmers no longer have value in the economic system. Obviously, this point of view does not correspond with the reality of great changes both in agriculture and in rural areas over the three decades since the abolishment of the People’s Commune, during which the gross output of agricultural production grew rapidly and a large sum of concealed surplus labor left the villages for other jobs. According to the data released by the National Bureau of Statistics, by early 2006, China’s rural population amounted to 940 million, and actual permanent rural residents numbered around 750 million.20 It is unknown whether the rural population of 750 million people includes the large number of peasant workers employed by the village and township enterprises. However, it is, by any means, a miracle that in less than three decades nearly 200 million people have flowed from the countryside into urban areas.

Three decades after the rural reform, a number of villages in China have achieved remarkable economic success since they adhered to or resumed the collective management and administration system. Some villages have become famous worldwide, such as the Nanjie Village in Henan province. In the context of urban and rural institutions being separate from each other, these villages serve as the models of rural industrialization. They are indeed another model of industrialization and urbanization with Chinese characteristics, and their lessons deserve careful investigation. The grand agenda of China’s economy and society is to strive out of the traditional agricultural pattern. In this sense, it would be better if there are hundreds of towns like Huaxi Village, Daqiu Zhuang, and Nanjie Village continuously emerging from everywhere in China. Nevertheless, it would be hardly realistic if most villages in Henan, the nation’s premier food production province, follow the steps of Nanjie to achieve rural industrialization. As a matter of fact, without the family-contracted rural reform or the extensive traditional agricultural economy in surrounding areas, there would not be such a huge supply of raw materials, food, cheap labor, and market, as required by the agricultural processing industries in Nanjie. For the sake of rural economic diversification, the traditional and the industrial development patterns complement each other. However, to promote industry is not equal to running diversified agricultural economy. In addition, with regard to legal issues, the ownership entities of these collective industrialized villages like Nanjie are still unclear, and many villages have already divided their assets into shares distributed among villagers. Given the facts above, it is unconvincing and unsound to use Nanjie Village’s industrialization as a case to argue that the rural family-contracted land reform is inferior to collective management and administration. However, at any rate, the emergence of these industrialized villages and towns demonstrates that nongcun (“rural areas”) in the “three-nong” problem does not imply “villages” that are engaged in traditional agriculture. Instead, these “villages,” where the overwhelming majority of villagers are not peasants anymore, have developed into large-scale industrial and trading corporations, with a number of small towns becoming new industrial centers. In making overall plans for urban and rural development, the state should encourage and support the construction and development of these new industrial villages and vigorously create better conditions to urbanize them. Once urbanization is achieved, the former rural villagers will become urban residents. And through legitimate economic compensation, what was originally farmland can be changed into urban land. Only under these circumstances can migrant workers from other areas enjoy the same legitimate residential and working status as the local villagers do.

While some others endorse farmland privatization, Wen Tiejun holds that China is not prepared for farmland privatization, because it is impossible for Chinese government to provide 900 million rural people with social security. In fact, the limited farmland in the countryside undertakes the responsibility for providing peasants with the basic livelihood. I agree with Wen’s conclusion. While Wen may worry about the bankrupt peasants’ livelihood after farmland privatization, here I will discuss the impracticability of privatization from two different perspectives.

First, as the land per capita in rural China is less than 0.15 hectare, land privatization will result in smaller-scale and even more fragmented management of land for a long time. Many people are concerned that land annexation and social polarization, which appeared repeatedly during the preindustrial period, will lead to social instability. In my opinion, things will go the opposite way. As urbanization and industrialization are rapidly expanding and the total amount of farmland is continuously decreasing in China, the land price will continuously go up. In this case, most farmers will firmly hold their small private lands and will not easily sell them. Hence, land privatization will only make business expansion more difficult. Japan, South Korea, and Taiwan have all been facing this dilemma after decades of “land to the tiller” reform.

China’s household contract responsibility system is similar to the so-called unimodal strategy, which is carried out in some countries in east Asia. The singular difference between them lies in the land ownership system. For example, after land reform in Japan, private landowners reached 90 percent of the total number of owners, while sharecroppers reached 88 percent. Japan implemented the Agricultural Basic Law in 1961, trying to expand the operation scale, promote management cooperation, improve the efficiency of family agriculture, and increase the income level of farmers. Then, the government repeatedly amended the law, promoting land circulation by loosening restrictions on the maximum area of land ownership. But by 1980, 71 percent of the peasants still had land with area size below 1.0 hectare and three-fifths of these peasants had land with area below 0.5 hectare. In 1999, the Japanese government replaced the Basic Agricultural Law with the Basic Law of Food, Agriculture and Village for the same purpose. In 2001, it implemented the Agricultural Land Law Amendment to promote the establishment of corporate systems of agricultural production and further weaken the state control over agricultural land. These policies made it very difficult to transfer land by purchase, because according to this amendment, it is illegal to buy land and force peasants to leave that land. The increase of land prices and recessions occurring in the agricultural economy made land transfer even less frequent. To promote land transfer, Japan replaced purchase with tenancy. In doing so, the government set up a variety of exceptions to the restrictions on tenancy. Similar to the “entrusted to manage” provision in Taiwan, Japanese law allows peasants in peasants’ associations to commission land to other members. Even so, the total area involved in the circulation of ownership and use rights is only about ten thousand hectares.21

Second, another argument in favor of farmland privatization maintains that privatization helps capital enter agriculture and thus can promote land transfer as well as expand the scale of land management. In doing so, privatization can accelerate capital-intensive agricultural development and thus further the marketization of the rural economy. However, what really takes place might be quite the opposite. After privatization, part of the land will probably be concentrated in the hands of powerful corporations. These pieces of land might not be utilized for farming but for house building, hotel construction for tourism, or even be hoarded for higher prices. Some private capitalists may invest in some economic planting, such as cocoa, coffee, and rubber trees, but are less likely to invest in grain planting. Such a situation is caused by the biological nature of grain planting and consequently by the rate of return on capital, which is much lower than those in nonagricultural industries (including agricultural production supplies and agricultural product processing industry). The international agricultural academia has already had many discussions on this point and the international experience of agricultural development can also support this observation.

Du Runsheng, one of the pioneers of China’s rural reform, has already noticed that family management and agricultural modernization can be compatible. The United States, Germany, Japan, and other developed countries are examples.22 Nowadays, family farms rather than large capitalist farms are more prevalent in the world. The reason is as follows. First, capital entering agriculture is influenced by the ecological characteristics of agricultural production, for example, drought and flood disasters, restrictions of sunshine and irrigation, long production cycle, and lack of continuity. Therefore, it is strategically better for the capitalist to control agricultural products and the production of farm tools than to take part in the agricultural production process directly. Second, family farmers share the good tradition of working hard from dawn to night. Meanwhile, education and technical training as well as those “scale-neutral” supplies (such as small- and medium-sized farm machinery, irrigation facilities, fertilizers, pesticides, and new varieties of crops or livestock and so on) could improve the efficiency of family farming more than they can large-scale land management. Third, the low level of industrialization has led to limited nonagricultural employment and small-scale land per capita. That is the reason why the average scale of land for agricultural management is so small in many developing countries. When the Industrial Revolution took place, the agricultural population in western Europe had dropped considerably, to about 50 percent of the total population. However, agricultural population still occupied 70—80 percent of the total population when industrialization started in developing countries. Thus it will be a very long process to transfer agricultural population to the urban space.23

Given the dilemma that the peasants’ right to farmland management must be protected, while the ownership of farmland could not be privatized, it cannot be considered a bad choice to “be unswerving in sticking constantly to the land policy that is based on the ‘family contracted responsibility system.’” In the long run, the sole way out may be to reduce the agricultural population gradually while making the remaining peasants expand their managing scale step by step. Following this, capital investments need to be expanded and agricultural technology innovation needs to be fostered to improve productivity and accelerate the process of rural modernization. As small-scale family farms are still prevalent in China and other eastern Asia countries now, this change will be a long and gradual process.

Yang Yao argues that the possibility of diversification of the current farmland system has resulted from the instability of farmland ownership and nonintegrity of family farmers’ usufruct of their farmland. He stresses the importance of balancing efficiency, equity, and social stability. He also emphasizes the sharp regional difference within the existing farmland system, considering the degree of individualization in land ownership as the crux. He points out that it is necessary to take comprehensive considerations on three aspects, as follows. First, the stability of the agricultural land system complements the allocation of resources. Stable land ownership could attract investment and more rights over the disposal of land could elevate the efficiency of resource allocation. Second, social security and unemployment insurance are important to the agricultural land system. Although a more “highly individualized” farmland system may reduce the efficiency of agricultural production, this loss may be compensated by its functions as social security and unemployment insurance. These two functions, far beyond the role of agriculture itself, will have a far-reaching impact on the entire national economy and national stability. The last point is about the equality of rights. The collective ownership system gives every legitimate member of the village an equal right to use the land. The pursuit of equality will consequently lead to land adjustments. Yao points out that any state interference with the collective ownership of land runs counter to the constitutional principle that prescribes rural land to be owned by collectives. The government should not interfere with farmers’ self-management but should only give them economic and administrative guidance. In addition, to prevent village cadres from abusing their power, the state must take responsibility to have them supervised.24

Yao’s analysis is convincing and crucial, although the “inductive system innovation” that he discusses does not break away from the current framework of the nominal collective ownership. Is there any alternative to the existing system? In my opinion, to protect farmers’ rights firmly, it may be feasible to confer peasant families’ complete permanent usufruct as prescribed by the constitution. Meanwhile, state policymakers should abandon the rigid and merely nominal collective ownership and instead support farmers’ cooperatives organized on a voluntary basis. Such an organization should be autonomous, owned by farmers, and used for them only. This is a “supply and marketing cooperation,” too. What we want to achieve is the initiation of a new pattern of “small government (to streamline the township government) and big society (varieties of farmers’ economic cooperatives and communal self-government organizations).” For this purpose, a wide range of legislation is necessary and three actions should be taken immediately.

First, it is urgent to formulate a new law to protect agricultural land and basic agricultural law. Any illegal arrogation on land ownership must be forbidden. Meanwhile, to expand the operation scale, we must encourage the circulation of farmland in agricultural use and prohibit behaviors such as “deserting and segmenting agricultural land, or converting it into construction land.” The government should be only responsible for examining and approving plans of land expropriation and levying land tax and value-added tax. In short, the government should just take the role as an arbiter or as a supervisor. Developers must bargain with farmers directly, expropriating land at reasonable prices.

Second, we must initiate the law of agricultural cooperation and then help farmers establish their own economic cooperatives and autonomous communal organization, which has similar “self-management, self-education, and self-service” as the village committee has. Meanwhile, it is necessary to strengthen the state’s functions in law enforcement and supervision and to reduce the administrative functions of grassroots government.

Third, we should initiate a series of laws, including agricultural credit, agricultural insurance, agricultural disaster compensation, and the rural social security laws. It is the government’s duty to help farmers resolve the difficulty of agricultural loans and small-scale loans through dedicated national financial institutions and to strictly limit loan sharking. The government should also implement antimonopoly laws in the production and marketing of farm tools, as well as in the processing of agricultural products, to encourage peasants to sell their products directly. Only in this way can farmers withstand natural and manmade disasters.

Moreover, we must also initiate an agricultural technology promotion act, which will help farmers manage their land with the latest technology and science, thus increasing agricultural productivity. The research and development sector for agriculture should be invested in mainly by the government.

“Ownership” means that property is at the legal owner’s disposal completely. By this definition, farmers today do not have complete rights of free disposal. To protect farmers’ rights effectively, it is plausible to extend the term of land use (usually thirty or fifty years) indefinitely and to make the permanent usufructs from a commonsense right to a constitutional one. The distinction between this proposed policy and the privatization policy is clear, since in the latter, the peasants’ rights and interests over land are protected but also restricted by law. There are many differences between the farmers’ economic cooperation that I described above and the People’s Commune system. In economic cooperation, there is an exit mechanism, and members will not be punished for their exits. Even production cooperation, which should be formed voluntarily, is likely to appear in villagers’ groups but may also appear as an intergroup or even intervillage organization. Thus the scale of organization may continue to expand, or shrink because of the withdrawal of farmers.

The law is a manifestation of the will of the state. Implemented in 2007, the PRC Property Law regulates that the property owner has the right to establish usufructuary right in regard to real or movable property. According to this law, once peasant households have obtained the permanent utilization rights of a piece of land, they are entitled to the usufructuary rights of this land. Here, although the phrase “usufructuary rights” does not refer to the full right to possess the land, it includes rights to occupy, utilize, and profit from the land, to request compensation if the land is damaged by others, and to transfer the above rights. The new system of land ownership I discussed above can be regarded as a new type of state ownership, the essence of which is to split agricultural land ownership between the state and the farmers. It is different from the concepts of local state-owned and cadres economy. Some scholars have demonstrated the necessity of land nationalization from the perspective of China’s socialist nature. Actually, nationalization has nothing to do with socialism. There have been varieties of advocacy of state ownership in history. Henry George in America held the singletax theory of land in nineteenth century. Lenin, following Marx, also proposed to establish “a truly free economy of farmers,” which would guarantee the free exchange of land, freedom of moving and of expanding section, thus replacing the outdated mir (a tax paying unit) with new free collaborations.25 Just as the collective economy in the People’s Commune period eventually became a cadres’ economy, the collective ownership has been a system controlled by the local government from the very beginning (especially since the dissolution of the People’s Commune) to the extent that this collective ownership could be described as local or semistate ownership. The most urgent task is to establish the principle of rule of law. Nowadays, as political power allies itself with capital to occupy large-scale land in the pretense of public interest, it is time to fix the related areas in the legal system.

There is no need to consider the concept of state ownership as a taboo. The crux of the problem is strong administrative interference. The most important issue is that farmers’ rights should be protected firmly. As for the ownership, it is just a facade and means nothing without real interests. In order to protect farmers’ rights, every level of the government must abide by laws and regulations. To my understanding, such a new system of land ownership should be qualified as follows: The land ownership is shared by farmers and the state under the rule of law. The policy that farmland should be used by farmers must be maintained, and farmers’ rights must not be violated. Today, as the representatives of the collective owners, many cadres are encroaching farmers’ rights. I hold the opinion that fighting against the alliance of political power and capital should be prioritized.

To protect farmers’ rights as well as farmland, we should not only legislate strictly but also timely punish those offenders. Reconstruction of the legal system is urgent and important today. As Du Runsheng points out, “the rule of law, but not the rule of man, is the most exigent.”26 It may be predicted that in the long run, with the change of the labor-land ratio, the scale of agricultural units will expand, the farmers’ economic strength will be enhanced, the situation of peasant cooperatives in the market will improve, and state intervention will be limited. Right now, it is the responsibility of the state to formulate laws to protect farmers’ rights and to nurture the agricultural industry.

 
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