A V Rajwade: Socialism with Chinese characteristics

WORLD MONEY

As we start the Employment Guarantee Scheme, it should be interesting to see how the Chinese tackle income disparities and rural unemployment.

Last month's National People's Congress' (NPC) annual session in Beijing gave ample evidence that the Communist Party's main concerns lie with problems in rural China. The NPC met in the background of rural unrest, of protests over land seizures for industrial plants, of allegations of corruption. Farmers, rather than laid-off workers, seem to be in the forefront of the 87,000 "public order disturbances" officially recorded last year "" up from barely 10,000 a decade back. Clearly, the growing urban:rural income inequalities are putting strains on the social fabric "" the ratio of per capita incomes is 3.3, one of the highest in the world! The NPC session authorised a huge increase in spending on rural education, healthcare, infrastructure and so on "" apparently not on employment guarantees or "make work" programmes "" for "building a new socialist countryside", and a "harmonious society". It also increased taxes on luxury goods and cars. (We reduced car excise in the past Budget.) Is manufacturing/industrial growth ceding place to improving living conditions in rural China "" environment, healthcare, drinking water, education and so on?

Interestingly, Karl Marx had thought that socialism would first come in industrially advanced countries. (One has not, however, come across any explicit statement from him about whether he considered socialism unsuitable for poor, backward economies). He was proved wrong, when the agrarian Russian empire, not industrially advanced Germany or Britain, became the first proclaimed Marxist/socialist economy in 1917 "" the Union of Soviet Socialist Republics. The second major country to voluntarily become socialist was China in 1949, when it was probably even more backward than Russia in 1917. In both cases, much of the revolutionary leadership came from the middle class "" as has the Leftist leadership in India, from Dange to Kolkata's bhadralok "" but in China the peasantry was much more closely involved in the revolution. Indeed, Stalin considered Mao's attempts to base the revolution on organising peasants as unrealistic, if not heretic, and rarely supported Mao!

But to come back to Karl Marx, should state ownership of assets and distributive justice, the essence of socialism, follow or replace capitalistic growth? My friend and union colleague Rajib Roy (CPI) was very clear on the issue. On the night of the famous post-emergency election results in 1977, Rajib and I happened to be sitting in a bar in Kolkata listening to the surprise defeat after defeat for Indira Gandhi's party. Rajib's comment was that he hoped the new government will understand the limitations of the politics of distribution as practiced by Gandhi, and focus on the politics of production. Ironically, his hopes started getting fulfilled, not in 1977, but when Gandhi came back to power! It took another 10 years before Rao was forced, by a BoP crisis, to change the direction of the political economy more decisively. In the process the growth rate has gone up from the "Hindu" rate of 3.5 per cent to 8 per cent now.

The Chinese were ahead of us. In 1979, Deng Xiaoping consciously chose the capitalistic growth model calling it "socialism with Chinese characteristics"; bluntly talking about the irrelevance of the colour of the cat so long as it catches mice; acknowledging that some people will get rich before others. His economic reforms started with the peasantry "" but their spectacular success has benefited the urban population far more than the rural segment. And, this issue was in the forefront at the NPC session last month.

In the effort to bridge the gap, Beijing is handicapped by the decentralisation of power to provinces, to autonomous special economic zones, to municipalities. Adding to the difficulties in making its writ run in the countryside, responsibility for many social services like health care and education, for instance, rests with local authorities who, very often, spend too much money on overstaffed bureaucracies "" leaving little for investment. There are an estimated 200 million rural unemployed "" despite the huge migration to the cities and coastland in recent decades. The NPC delegates have reignited the ideological intra-party debate between socialism and capitalism "" so much so that a planned reform of property laws has had to be postponed.

As we start our massive Employment Guarantee Scheme, it should be interesting to see how the Chinese tackle income disparities and rural unemployment. Will distributive justice get priority over growth? It is a difficult choice in the best of circumstances "" and even more so for a democracy. Too often, the temptation is to cater to the short term, take populist measures to pacify agitations "" even when the resources could be better utilised on long-term objectives. Proverbially, it is better to teach a man to catch fish, rather than giving him a meal. But, in reality the latter often gets priority.

Email: avrco@vsnl.com