June 12, 2009

The Roots of Tiananmen

[Tiananmen? I know that the 20th anniversary of the massacre was almost a week ago, and that in Internet time that might as well be a year. But 20 years ago today, students and workers in Shanghai and elsewhere throughout the country were still protesting the killings, thousands were imprisoned or missing--or dead--and heroic Chinese citizens were risking their lives to hide wanted leaders in anticipation of developing routes to get them out of the country. So FotM is going to republish one more article from the same September 1989 issue of Forward Motion magazine that carried the in-depth analysis of the implications of the massacre republished below.

This piece is a grassroots eye view of China and the unfolding contradictions in Deng Xiaoping's capitalist road "market reforms" the year before the massacre. It was written by a former Red Guard who had left China for the US in the 1970s but kept in touch with old friends and workmates. His take on how the reforms, privilege, selfishness and especially corruption were poisoning daily life and socialism itself helped inform the decision taken by the Freedom Road Socialist Organization to condemn the massacre as a "tremendous stain on the banner of international socialism."

Economic Backdrop to the Crisis
Impressions from China April, 1989

Ping Yong

Ping Yong was born and grew up in China. He now lives and works in the U.S.

Alter being away from China for almost fifteen years, I had an opportunity to work on a state-run farm north of Beijing during 1987 and '88. The changes in China have been so drastic that I often wondered if it was the same country in which was born and raised. The changes can be seen everywhere: in the living standards of the people, in the physical landscape, in the culture and ideology, and in the economics and politics.

New Beijing

The most noticeable changes in Beijing, when one drives through the city, are in its buildings and highways that have sprung up in the last fifteen years. The urban part of Beijing has doubled in size as a consequence of the new high rises surrounding the old city. The growth of Beijing can be seen also in the ever increasing congestion of the city's streets. The time it takes to travel from the north end of Beijing to the south, for example, is often much longer now by car than by bicycle. Every day during the rush hour, both beltways of the city turn into large parking lots. The grid locked traffic takes hours to clear. Most of the increase in traffic is due to the tremendous increase in trucks a healthy sign for development. Trucks have all but replaced horse carts, at least around Beijing. Bicycles are still the main form of transportation for the majority of the people, although there is an increasing population of motorcycles competing for room on the road. The city's statistics supposedly show that of all the people who bought a motorcycle in 1980, none have survived by 1988, due to the high accident rate in Beijing.Although trucks have all but replaced horse carts, they do not replace all transport of goods by bicycle. On the highways of Beijing, one often sees a group of men riding bicycles that are loaded with bales of cotton, stacks of brooms, or buckets of eggs. They are peddlers. They get the goods from somewhere where they were cheap and sell them to somewhere else where they can get a better price. Sometimes the bicycle trips take them more than a week. At other times, they try to negotiate rides from empty trucks going their way.


Besides the road congestion, Beijing has become one of the most polluted cities in the world. Gone is the clean and crisp Beijing air; without wind, living in the city is practically like living in a gas chamber. The pitch black smoke from the coal furnaces in apartment buildings, the fumes from cars that truly need tune ups, and the burning of corn stalks by nearby farmers in the countryside to clear the fields for plowing, as well as all the smoke from the industrial pollution have made the air in Beijing unlivable. And yet most of the people who live outside of Beijing are looking for any chance to move into the city. They want the better stocked stores, the better transportation services, arid the less demanding jobs in the city.

To move into the city, however, one must have his resident permit changed. Without it, one cannot buy the subsidized and rationed food in the state run stores, or any other rationed consumer goods. This is one means the government uses to control the size of the urban population. But it seems that any form of control inevitably leads to some form of corruption in today's China. The permission to move into the city and change resident status becomes a powerful form of backdoor favor for which government officials in charge will he handsomely rewarded.

Cultural change

The change in culture has been quite extraordinary since I left China fifteen years ago. Western culture has flooded China in the form of movies, TV, books, and magazines. Most stores in the commercial district of Beijing have decorated themselves in Western style. Many clothes in clothing stores are modeled after Western fashions. The free markets have taken over many districts of Beijing. Foreigners are bombarded with requests for money exchange. Gambling has become quite pervasive. Some hotels even try to attract customers by sponsoring gambling. Young people set up pool tables under street lights and often gamble past midnight.

Traditional Chinese songs and plays are all but drowned out by Hong Kong pop music and disco tunes.

Pornography has emerged as a real challenge to traditional morality. Hot items in book stores are often posters of pretty girls. Many homes and offices have posters on the walls with scantily dressed Western models. The biggest sellers on calendar posters are not scenes of nature, but women's bodies. Sex novels and magazines are sold on the street corners of Beijing. Beauty contests of young women dressed in two piece swim suits were shown on national TV, attracting millions of viewers. VCR's are getting more and more common, even in the countryside. X rated Hong Kong tapes are being copied and passed along among the villagers. There have been cases of 7th graders getting pregnant.

Besides the appeal of blatant sex, some people in China have learned many other gimmicks from the West. For example, the local post office in Beijing had a drawing that offered four money prizes worth 5,000 yuan each to city residents who bought a postal saving certificate. The certificate paid only 2% interest, while the official rate of inflation was over 8%, and the interest rate for savings deposit was 6%. It is similar to the lottery in the IJ.S. Poor people are encouraged to pin their hopes of getting rich on these few chances of striking gold.

Even the local newspapers have learned to make money other than by soliciting advertisements. For example, some will charge a handsome price to do a full page write up of a factory and its product as a news item. It requires some skills to distinguish between the commercialized news and the regular news.

Racism and Reaganism

The influence of Western culture has not only changed the behavior of the Chinese toward themselves, but their attitude towards foreigners has also drastically changed. A large body of the population worship everything from the West. Many officials will do everything they can to send their children to study overseas.

This Westward orientation is accompanied by a Western originated ideology of racism. An older woman I met in a book store was a case in point. She was proud to tell me that she had a son studying in the U.S. She thought it was good to have interracial marriages and wondered if I had a Chinese parent. I said it was lucky in some ways that I didn't, for it was hard enough to be a foreign looking child growing up in China; I knew that mixed blood children had an even harder time. They were called "cross bred,'' a term reserved for animals in Chinese. She assured me that those ideas were wrong. Because she's a medical teacher, she knows the superiority of mixed blood, she said. 1 lien she thought a bout it for a while and added: ''But I don't want my son to marry a Black girl." I was somewhat surprised and asked why. She told me that Blacks were dirty and uneducated. She said that she was not a racist, really, just that Blacks were lazy and uncivilized. I tried in vain to point out the contradiction in her logic, but it was like talking to a wall. Unfortunately, I found this kind of attitude to be quite common among Chinese intellectuals. Many Chinese scholars in the U.S. feel the same. They used to call all Westerners 'devils,'' jokingly or not, but now they reserve the term for Blacks.

Not only has racism become more open in China, but so has support for U.S. imperialism among the Chinese Population. I was stunned to find that so many of my old friends supported the U.S. bombing of Libya. One finds a surprisingly large body of intellectuals in China who like Reagan, like Reaganomics, and like his stand in international affairs. I was told by one that a strong U.S. was good for world peace. He was sure that we should all vote for Bush, for it was Reagan that had made the U.S. strong. Shocking as it might be from a Chinese perspective, it truly reflects the ideological vacuum created by the Chinese leadership's effort to discredit Mao. Many of these intellectuals have lost their political bearings. They are either apolitical or worshippers of the West. They often forget they are still Chinese.


The spirit of the people has changed a great deal since the reforms. There are many reports in the newspaper of apathy among the population. Nobody dares to stop a clinic in progress. Few will step in when a woman gets molested in daylight. Old ladies cannot rely on bystanders for help when they get robbed. Everyone learns to mind his own business. Even the newspapers cry out: "What happened to the spirit of the Chinese people?''

Riding on a crowded bus one day, I saw two women fighting. They were pulling each other's hair and cursing. No one tried to stop them. People seem to be numbed by the violence on TV, and the fierce fighting of those two women was almost as exciting as the TV shows at home. The rising crime rate has become a real social problem in today's China.

Bus drivers and Students

Given all the talk of improved living standards in Beijing, I was surprised to find so many people who are unhappy with their lives. Living, it seems, is not hard but rather irritating. They have to quarrel with grumpy salespeople in state run stores when they go and buy even the simplest items. They have to fight crowds to get on buses to go to work every day.

The bus drivers are not happy about their jobs either. They make no secret of that. To keep the drivers from striking, the city government gave them a raise a few years back, and adds an incremental raise every now and then. Since a driver can make a lot more money somewhere else -driving a taxi for example- the bus company cannot find any replacements. The present drivers have to work six days a week. To preserve the work force, the drivers are prevented from transferring to other jobs. One bus driver told me that the city government threatens to fine any state run enterprises that hire them.

Under such pressure, the drivers then take out their grievances on the passengers. They will not stop the bus if too many people are waiting. They close the door before people have a chance to get on. Some even tease the passengers who have waited patiently for long periods in designated lines in bus terminals by picking up the crowd that is not in fine. The workers that take buses to work vent their grievance in turn by slowing down on their job.

One day, after waiting at a bus stop for over an hour, frustrated by four or five buses that passed without stopping, would be passengers began commenting about the bus drivers. "The problem is that the drivers are not happy with their jobs, and they are taking it out on us," said one worker to another. "Of course they are not! But they are not the only ones," said the other. "Look at the students, they're always stirring up trouble. But the problem with the students is that they care only about their own fate," he continued. "If they raised slogans that concerned the workers in the city, high inflation for instance, the students would have much more influence and following.'' Another thought about it a little and said: ''Don't worry, there will be someone to rise to the top and clean up this mess in China. Mao did before. Someone will after Deng." The first one said then: "As for now, as long as we can get by, we're not too concerned with either the students or the government.'' I was surprised to hear such open expression of discontent among the people.


Inflation has been the hot topic for the politicians in China. The cost of living has risen quite high in the last few years. Many items have risen more than ten times in price. The real inflation rate was two to three times as high as claimed by the government, many in Beijing would say. Once I was talking to a few managers about this. When I said that the living standard had risen in the last few years, especially since I left China, they all ganged up on me. They saw inflation wiping out all the improvements of the last few years.

One manager, who worked in a wool factory, told me how he had been chasing the same wool blanket all his life. During the fifties and sixties, it cost eighty odd yuan while his wage was only a little over seventy yuan. Now that his wage is a little over 200 yuan, the same wool blanket cost over 250 yuan. (The official exchange rate is $1 = 3.71 yuan but the free market rate is more like $1 = 7 yuan.) In all these years he had never been able to buy the blanket with one month's wage.

Another manager told me how the price of fish had gone up more than ten times. Given this situation, another price hike might bring people to Tiananmen Square. The fact that the general population had not experienced inflation for almost thirty years made the current rapid rise in prices harder to adjust to.

On what basis did the government in China set prices? With sarcasm, people in Beijing believe that it did it by gauging the reaction from the people. If there are not many complaints from the people after a price hike, then the price hike was too mild. If everyone complained about the price, and stopped buying, then it was set too high. If people kept on buying while they were complaining, then the price was set just right.

After advocating a free market economy for many years, the government is now forced to resort to rationing again. Besides food, other industrial goods are faced with rationing imported cars, TVs and refrigerators, for instance. A few years back, Hu, the general secretary of the CPC, was advocating growth through consumerism. Now the pressure is unbearable on consumer durables. To discourage consumption of those luxury goods, prices for them have been raised quite a bit. The strategy is not working, however. The people who buy these luxury goods usually don't have to take the money out of their own pockets. The luxury goods are often given to Party or government officials as gifts in return for some favor. It is the public money they are spending. High prices will not stop it.

In addition to price hikes, interest rates have increased. This is to attract savings. With high inflation, however, people prefer to buy now rather than save for later. Because of this, the financial press in China is really worried that the huge savings fund among the population might just be dumped on to the market in panic buying of luxury goods, forcing lip inflation even more. The gap between total savings and total goods on the market is too big to manage. (They found out later, though, that the alarmingly large savings fund was not all from individual depositors. A large share of the deposits were made by enterprises under individual names to evade state regulations.) For the first time since the revolution, there have been reports of runs on banks.

Agricultural Reform and Rationing

Agriculture has been one of the hardest hit sectors under the current inflation. Rising prices made agriculture one of the least profitable industries. The government doesn't dare raise agricultural prices any more. With each round of price hikes for agricultural products, it takes less and less time for inflation to come back and wipe out the intended incentive for farmers.

It looks like a struggle between city and countryside, and the city is winning the battle. While industrial prices are going up and up, government controlled prices for agricultural goods cannot keep pace. Peasants are disorganized after decollectivization. They do not have the kind of influence that city dwellers have in modifying government policies.

Peasants might lose the battle over prices, but it is the cities that will lose the war if agriculture in China collapses. It is widely believed inside the Party that grain production figures have been exaggerated by over 20% in the last few years. Shortages of food stuffs have sometimes pushed the free market price of grain twice as high as the official price. Pork supplies have almost disappeared. Eggs are hard to come by. Most cities have resorted to rationing again. While I was in Beijing, residents were allowed to buy only one kg of meat and 2.5kg of eggs from state subsidized stores. If anyone wants to eat more meat, he or she has to pay a much higher price in the free market and sometimes risks food poisoning.

Under the circumstances, officials have all but stopped bragging about the great success of the reform in agriculture. Instead, the press began to publish shocking statistics about the low level of capital invest¬ment in the agricultural infrastructure in recent years. The country as a whole spent more money for imported cars in the last few years than it did for agricultural improvements. The low level of capital investment in agriculture was seen as the source of the problem on the farm front. The government's solution was to privatize land use rights.

Officials seemed to think that once peasants could own the land use rights, they would have an incentive to invest in land improvement. They had apparently learned little from the history of more than a thousand years of private farming in China. Why should the peasants invest in land improvements when ultimately they do not own it? The current setup is like a cross between sharecropping and tenant farming. At a time when agriculture was becoming increasingly non¬profitable, the breaking up of the collectives made the situation worse. Unlike the collective farming experience, peasants on their own are too weak to invest in agriculture. The burden of investment in agriculture production has fallen on the shoulder of the government. However, the country as a whole is either too poor or not willing to make agriculture a more profitable pursuit.

With all the rosy reporting of agricultural production a few years back, the government thought that China was ready for higher protein levels in the people's diet. Many animal feed factories were set up based on the belief that there was a surplus of feed grains. All of a sudden, the surplus grain stored during the collective period was used up. The resulting shortage caused a drastic rise in the free market price of corn. Facing such price rises, many animal feed factories in the countryside went bankrupt, and had to close. The egg farmers faced a choice of either selling their eggs on the free market and buying expensive grain from the free market, or signing a contract with the state for a guaranteed price for eggs and a subsidized price for grain. The grain shortage has finally forced the government to reintroduce egg and meat rationing. Beijing was one of the last cities to begin rationing again. The city government waited until after the Party's congress adjourned to announce the rationing.

Corruption of the cops

Despite the high inflation in China, the living standard of the people has noticeably changed, especially for the urban and suburban populations. Color TVs, hi fis, washing machines, refrigerators arid a host of other consumer electronic and durable goods are available and can be see readily in most people's houses in Beijing. But the lives of the majority of the people have not improved as fast as the rapid rise in new buildings seems to indicate. While the high rises were popping up in Beijing, so have crimes in the street and corruption in government. Pollution and congestion can be understood as the growth pains of China striving to industrialize, but the epidemic of corruption is hard to justify.

It was frightening to see that even the cops are corrupt. One should not be too hard on the police officers, however. The old criminal elements are making a mint under the new policy. Those people know what it is like in the prisons, and figure it is worth the risk. They bribe a whole network of cadres and make a killing in their business dealings. They make the police officers mad. Many such criminals had been locked up before, and now they are the newly rich of China. The policemen found that the system rewards crooks and felt it to be truly unfair. They also face double digit inflation on a fixed salary. Since the party advocated letting a few get rich first, wily shouldn't they be among the rich few?

The police take revenge by issuing fines at random against the small peddlers on the street. They know these new entrepreneurs have money, especially the private truck drivers. They often stop these trucks for speeding and pocket the tine. They will also pocket fines levied on other "traffic violators." If the violator wants a receipt, then his fine will be doubled.

The cops have countless other ways to increase their monthly bonus. Since the accident and death rate are both high in Beijing, the police are given great latitude in their efforts to curb traffic violations. All drivers in Beijing are given four traffic violation allowance coupons a year. It is like a point system. If one loses them all, one loses his job as a driver of any motor vehicle. It is incredible to see a grown man acting like a sheep in front of a cop. Many drivers stock American brand cigarettes, expensive liquor, or stuffed envelopes to give to the cops if they ever get caught in a traffic violation. This bribery can sometimes be quite open. But more often, the cop will not say clearly what he wants from the driver. lie will turn to a ''volunteer'' another driver maybe, to "interpret" his need. If the alleged violator understands his message, he may simply receive a verbal warning.

Many private haulers, in turn, have learned to avoid hassles with the cops by renting army trucks for their trips. It is a great deal for both sides: extra income for the army unit to spend without supervision, and no insurance maintenance, or fines to pay for the haulers. So far, the cops are not ready to pick on the army.

Privatizing Housing

Corruption in the police force is peanuts compared with what government officials can do. It was amazing to see how much discontent among the general population is generated by official corruption. The polarization of Chinese society has begun to take shape. The contrast between the haves and the have nots is as striking as the contrast between the old Beijing and the new. People who have connections to people with influence live in modern high rises, while others are still crammed in old shacks.

The people in power give their children first preference in housing and reserve houses for their grand children, some of whom are not even born. There was a cartoon in the paper depicting an old man standing on a street corner in the night, pointing to a high rise in order to show his small grandson which apartment among the unlit apartments he had gotten for him. Housing inequalities have became a major point of contention, and a main source of friction between urban residents.

The housing policy in the past was for the government to provide low rent housing for all city residents. (Nearly 100% of the houses that were built since the fifties were built by the state.) The symbolic rent was so low that it often didn't even cover the maintenance cost.

In the last two decades, the government poured a lot of money into new high rises to relieve the chronic housing shortage. But the more they built, the worse the shortage. The new houses often do not go to the truly needy families. There are still cases of three generations living in one room. Instead, the new houses mostly go to the people in positions of power, either in factories, or in the government. There is a pecking order in housing distribution. The highest ranked get the first pick, then their children, friends, arid relatives. By the time the truly needy take their turn, there is little left. The housing subsidies subsidize the affluent, not the truly needy.

The uneven distribution of housing has caused great resentment and outcry among city residents. [he solution that the government has finally drawn up is for every one to buy their own house. Reform advocates in the government tell the people that once the officials in power have to pay for the extra housing they occupy, they will not want so much housing space.

The housing reform stipulated an average living space per capita in each city, and an average housing price for that per capita living space. Based on this calculation, each wage earner should get extra wages to pay for the true cost of their housing. The idea is to change the hidden subsidy to an open subsidy, and, in so doing, create a housing market.

The housing reform is a typical example of Deng's solution to a social or political problem. Instead of facing the corruption in housing head on, he turns to privatization for solution. As can be seen throughout the world, privatization of houses doesn't solve the inequality in housing; it exacerbates it.

No sooner did the central government issue the new policy concerning housing reform, than the people in power figured a way to get around it. There was a report in the paper about a manager of a state run factory who, in the name of housing reform, bought his house from his factory for only 10% of the cost. There was another mayor of a mid size town who claimed his living quarters were part of his office space, so he made the local government pay for it. What these incidents indicate is that people in power can give themselves ample free living space with or without housing reform. Self policing simply does not work.

Socialist Job Markets?

Deng's reform of a planned economy into a market economy inevitably leads to the creation of a labor market. Capitalism can't function without a job market, but what does it mean for a country that is supposedly socialist to have a job market?

Before the reform, there was hardly any labor mobility. One was either working in a state run enterprise with life long job security, or working in one's own village collective farm with no income security. It was extremely difficult to transfer one's job from one place to another. Now that the state no longer assigns jobs for students graduating from high schools or colleges, and factories have a greater freedom to hire or fire whomever they want, a labor market has emerged. Technicians dissatisfied with their d)s begin to look around; peasants who find their income too loss' working the land look for work in the cities.

The small rural industries around Beijing lack skilled workers arid technicians and are eager to attract them. Sometimes they get taken for a ride by some quacks. But more often, they hire retired workers from state run in¬dustries that are similar to theirs and give these retirees jobs as advisers. These retirees can more than double their income this way.

Once in a while a technician may come to the small rural industry for a chance to improve his life. lie Usually doesn't come empty handed. One that I know of came with an idea for making an electronic scale. He tried to convince a small village industry to invest in his product. Had the deal gone through, he would have been able to make much more money than he was making as a technician in a state run factory.

A technician or a retired skilled worker may have some bargaining power in a new job, but the peasants that come to Beijing with only muscle power to sell have to wait in a labor market to be hired. These markets are often simply gatherings of unemployed people in a highway intersection. The market that I often passed had fifty or so people every day. Their age ranged from the late twenties to the early fifties. Most of them were from Henan province. One of them claimed that this was really a slave market. His words offended a few others there. But most people didn't give a damn if a 'stranger" heard this. They told me that there were quite a few similar labor markets in and around the city.

People from all over the country come and seek better jobs in the big cities, for it is the cities that are being developed under Deng. They told me that they were looking for only room and board plus six yuan a day for their labor. They were mostly unskilled laborers working on construction jobs.

It is very common these clays for a construction firm to sign a contract for a job. Then they turn around and subcontract the work to a peasant team. Sometimes these peasant teams in turn subcontract some of their work as well. By the time these day laborers get hired, the job has been subcontracted many times.

A prospective employer generally walks through the crowd there and seeks out the natural leaders among the laborers. He will ask for "help." He will often say that he's willing to pay anyone a fair wage which was not too high and not too low. After some bargaining back and forth, it will often turn out that he is only willing to pay five yuan a day with no room and board.

These men are often private businessmen. They can't get any local people for so little money so they look for cheap labor from this kind of labor pool. Given the increasingly higher cost of living in cities like Beijing, one needs two to three yuan a day just for food. These day laborers are not interested in just surviving; they have their families to feed at home.

The hiring method reminded me of the old shape up system for dock workers in the U.S. There is a high turn over rate on the market. Peasants come here for a few days, looking for the highest paid jobs. But as time passes by, they get hungrier, and their demands get lower. Finally they take a less than ideal offer and get to work.

Emerging Entrepreneurial Class

Labor mobility means different things for different people. This is true in all societies with labor markets. The people who benefit the most under Deng's reform are not the peasants who come to Beijing to work on some construction projects, the technicians who can hunt for a better job, or the retired skilled workers. They are not even the cops. The true beneficiaries are the party and government officials turned entrepreneurs. Many of them are former leading party cadres. They have the most connections in the government.

For instance, a brother of a government official that I know decided to get into business for himself. He took leave from his government post, and got a loan from the bank (through some connections, of course). He got 40,000 yuan from the bank, borrowed 8,000 yuan from friends, and then issued stock to make up the other 12,000 yuan. He then started his own shop. He hires workers to make aluminum instruments for the educational market. He pays his workers fifty yuan a month when there is no work and then piece work when they are busy.

To get the work orders and the raw materials for his factory, he has to wine and dine a lot of people. Since his is a private business, he can spend whatever he wants and follows no accounting rules. He makes 20,000 yuan a year clear, he says. With that kind of income, he can afford to bribe. He keeps his state job open by paying his old office forty yuan a month. In case the policy ever changes or he can no longer run his business, he will still have a place to go.

For most of the managers in the present state run enterprises, however, striking out on their own is not the only way to enrich themselves under the new policy. The current reform in industry provides them with an alternative opportunity. After the central government broke up collective ownership in the countryside, it began to do the same in the cities. The plan is to franchise out the state owned industries to their managers. If they manage them well, their income could increase substan¬tially.

The government is doing this because it believes the problems in the economy are caused by non¬caring managers. If managers are given a stake in their enterprise, the government hopes, they might run it with all the vigor of an entrepreneur. To achieve this, the leadership sees the development of a managerial class in China as a must. According to the reformers, the rights and privileges of these people must be protected, or else the whole economy suffers. They must be allowed to get rich first. As the economy develops, everyone will gain. This is Deng's version of "trickle down" theory.

Economic Reform in the Factories

One problem with the trickle down strategy of the reforms, however, is that the workers in China are not used to seeing their managers making money like a capitalist. The government has to build support and understanding among the population for the high income of the managerial class.

One example of this was a debate in the press over a manager's pay. Under a flawed contract, the manager of a factory in the Northeast got a 45,000 yuan bonus. Should he take it? Apparently there was great dissatisfaction among the workers over the manager getting that much money¬twenty times what they would get in a year. Thousands of letters poured in to join the debate. The paper selected many views in support of the high pay and some that showed anger. But regardless of what people said, the manager got his bonus in full at the end. To pacify the workers, he promised to donate 5,000 yuan to a welfare foundation.

The commentary in the press was not concerned that this might violate the socialist principle of "to each according to his work''- which the commentators think should be changed to "to each according to his contribution'' -but that the people's tolerance for this kind of income gap was still too low in China. People are still too much influenced by the egalitarian idealism of the past, and the government fears that this kind of income gap might bring social unrest. This is why some call Deng a pragmatist. He subscribes to the dichotomy posed by Western economists and political theoreticians: to have efficiency, one must compromise equality and fairness, and vice versa. One editorial claimed that China needed both, because without fairness, there will not be social tranquility, and without efficiency, there will not be development. So, the main challenge for the reform is to achieve "efficiency" without angering the masses.

The reform in industry began by instituting a two track pricing system: one set by the state, and one by the market. All the production that was under the state plan was supposed to get its raw material and its finished goods at the state set prices. Any product that was produced outside the plan could be sold at the market price. Since state prices do not keep pace with the rise in inflation, market prices are often much higher than the state set prices. Thus, there is a great incentive for these industries to get their raw materials (e.g., steel and coal) at state set prices and sell their products at market price.

Now rural industries were not a part of the state planning mechanism, so they do not normally get their materials at the state set prices, unless, of course, the sales officer of the material manufacturer is open to bribery. Because the state set quota was supposed to decrease every year so as to gradually transform China to a market economy, those factories producing low¬priced materials in short supply can choose their buyers. This is again a slippery road to corruption.

Moral reasons aside, corruption causes inefficiency in the economy. Besides the waste in gifts and bribes, the most efficient enterprises are not necessarily the ones doing the work. A guy who worked in a brick kiln told me that they often sell their best bricks to the collective transport team, while the defective ones are bought up by the private haulers. But it often happens that the private hauler's bricks are accepted in state financed construction sites, rather than those from the collective. The reason given by the receivers on the sites is that the private hauler has the better quality bricks. Obviously something fishy is going on.

Many of the small industries in the suburbs of Beijing have learned to prosper by having good personal ties to the managers of larger factories that either supply them with the raw materials they need, or buy their finished product. Since the accounting regulations restrict the state run factories from using luxury hotels for meetings, or spending money wining and dining their guests, the other industries help them get around this. They provide meeting places in luxury hotels for them. They also get the best cigarettes and liquor for the managers of the state run industries. These good well gestures are worth a lot; most industries which are not state run rely on them to survive. Someone even called this ''the life line of rural industry'' during the National People's Congress and was attacked for saying it.

One small chemical factory in particular spent thou¬sands of yuan to sponsor a quality control meeting for one of its key suppliers in Beijing. In return, this supplier gave the factory a few tons of a valuable chemical each month for many months. Although the distribution of this chronically short product was strictly controlled by the central government, the factory that produced it could easily spare a few tons as "defective" or "left over material.'' Since the chemical was in great demand, the small chemical factory resold it for more than twice what they had paid. This one deal made more profit for them than all the hard work of the last few years.

Awarding state financed construction contracts can also provide a great opportunity for individual enrichment. The bureaucrats involved are offered houses of their own imported color TVs, or simply under the table cash, not counting endless other small goodies thrown in during each stage of the contract negotiations. Needless to say, whoever provides the best deal for the person in charge of the Construction project gets the contract.

Shortages bleed corruption under the new policy. When the shortage is widespread, so is corruption. Even the control of electric supply becomes a source of corruption. Electricity is probably one of the scarcest commodities in Beijing. Most people there are used to living without electricity three to four clays a week. Factories have rotating days without electricity. With the rapid development of small industries in the countryside, securing electricity becomes a main concern. Most are forced to buy expensive generators. One cannot afford to be on the wrong side of the power company.

The shortage of electricity becomes another avenue for self enrichment. One day a man from the power company came and told a very profitable factory in the suburb of Beijing that they had to change their trains former and install a new service line. It would be very costly. After enjoying a nice dinner and a few bags of top quality rice, he left them alone. But to secure a priority in electric supply to the whole northern suburb of Beijing, the farmers there had to guarantee in return a supply of fish and eggs at below market price to the power company.

Leading in Modernization

Given the degree of corrupt behavior that is necessary to run any enterprise in today's China, the least restricted in spending money is the most likely winner in a competition. State run enterprises cannot compete with small rural industries because of the accounting regulations. In turn, the small collective run enterprise cannot compete with private business because of the greater freedom the latter has in bribing.

State run woolen mills, for example, with their highly advanced machinery cannot get enough wool to run even a single shift in many cities. On the other hand, many small woolen mills in the countryside are running full steam with their primitive machines. The reason is partly due to the ability of these small collective or private mills to secure a supply of wool by bribing the officials in the sheep growing regions.

Private truckers are another example of people who can make out like bandits, and not all from hard work. One might make a deal with the record keeper of a construction site, for example, to split the profit between the two. The record keeper will then record a seven ton shipment when in fact it was only five. Sometimes the driver will unload only partially, then he'll get out and turn around and get credit for a second load. A four ton truck can make as much money as a ten ton truck on one trip this way. Most people in state owned industries don't give much thought to whether these things are right, and the private entrepreneurs can really take advantage.

The more the state tries to stop the corruption, the bigger it gets. People say that for every policy the government sets against corruption, there is a counter strategy among the bureaucrats. The same is true for the people. They have learned to circumvent governmental policies, too. The whole country is turning into a commodity oriented society. It certainly feels like everything has a price, and everybody is looking for a chance to make a fast buck.

The Chinese official class leads in ''modernization." From the central government on clown, officials from every level are looking for the most modern and the most expensive imported cars or TV's. The lower levels follow their leaders. If the high officials upgrade their guest houses and cars, then the lower levels will follow suit. Sometimes they might even move a step or so ahead. No high officials ride in Chinese made cars any more. Only imported luxury cars suit their taste. To prevent every government official from riding in a Mercedes Benz, the central government had to issue regulations that stipulated which rank of official could ride in which class of luxury car.

The forces of corruption take advantage of the transi¬tional period in China during which the old socialist planned economy is being broken down and the new commodity market relation has yet to be totally established. Because of this, corruption takes a somewhat different form than it does in a capitalist society. For example, one needs no permission to live in big cities in the U.S.; all one needs is money. Shortage here does not breed corruption necessarily; it brings higher prices. In China, the prices are mostly set by the state. They are not responsive to the changes in supply or demand. Despite this, in real terms shortages still bring higher prices in China. The difference is that it takes the form of bribery to someone in charge. The official prices might be low, but they are often meaningless. There are often no goods to back them up.

Corruption Basic to the Reforms

Most people would condemn the act of bribing someone in order to get a commodity that is in short supply at state set prices. On the other hand, paying higher than state set prices for the same commodity on a free market is considered a legitimate transaction. Because of this difference in perception, some believe that the quickest way to eliminate corruption is to privatize the whole economy. As an old revolutionary said to me once, this is as effective as declaring all thievery legal in order to reduce the crime rate. The real problem, it seems, is not corruption per se, but the system and ideology that lead to corrupt behavior. Privatization only le¬gitimizes what used to be considered a crime. Moreover, privatization obviously will not stop corruption.

Since most Chinese managers and government officials can't make the kind of money their counterparts make in the West, they compensate by having countless fringe benefits tied to their jobs. They wine and dine each other and build personal ties at the public's expense. They find every excuse to travel or to hold meetings or conferences in the best hotels. Given the fact that food costs over half of most people's household budgets and housing is in chronic short supply, these benefits represent a true luxury in China.

More to the point, the real reason corruption in China takes the form it takes is that while the ideology of the officials in China have changed from serving the people to an ideology of self-¬aggrandizement, the economy has not changed totally to one regulated by the market. In China, the economy is still mainly controlled by the government. It is thus an open field for corruption, for it is the only "rational" response of a profit minded person in a non market economy. Corruption is as intrinsic to Deng's economic policy as profit is to capitalism.

Of all the changes in China that I have found, this is probably the most striking one, and the most unsettling. It is a basic thread running through the problems of the reforms which I have tried to present here and focuses serious questions for socialists to grapple with today.

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