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moment, let me just say there is a possibility, isn't there, they might be shifting to higher quality foods, less emphasis on rice and more emphasis on fish, meat, vegetables, and so on, as occurs in developing countries generally?

Mr. Liv. I would agree with the experts who prepared this volume that supplementary food on the Cinense mainland averaged about 15 percent of their total diet.

Now, it is true that, you know, if you eat too much starch you gain weight and it is dangerous; but if the calories you draw from grain would be only around 1,800, there is no danger of a heart attack, and the 15-percent supplementary food would not make it up to sort of really giving you a healthy diet.

Chairman PROXMIRE. Well, let me shift now into another area. Professor Schwartz, China appears to very the expansionist character of its foreign policy. Would you say that economic crises or economic success would be more conducive to an expansionist policy?

Mr. SCHWARTZ. It seems to me that there have been many crises, internal crises in China, not wholly economic in nature I would call them economic-political crises. The relationship between these internal crises and the shape of foreign policy is not always easy to define. On the whole, I think, in spite of all these crises, under the present leadership there has been a relatively consistent caution in foreign policy-on the day-to-day foreign policy level-a tendency to deal with concrete situations in terms of what we would call real factors. I would differentiate this day-to-day policy from what might be called the long-term dream of a civilized world.

There was one period during the cultural revolution which was marked by an erratic foreign policy. It is now claimed by Chou En-lai and even by Mao Tse-tung that during this period the Foreign Office had come under the control of extreme radical cultural revolutionaries. You will recall that period when they seemed to be flouting even the ordinary conventional rules of international relations. Personnel of embassies did not seem to be immune from physical attack; foreign embassies were being attacked; people in Chinese embassies abroad were behaving in strange ways. This one small period was more or less of aberration on the whole, I would say, where others can generally explain the day-to-day policies of the People's Republic-in spite of all fluctuations—in rather realistic, cautious terms.

Chairman PROXMIRE. Let me be more specific about this: How would you appraise the priorities for Chinese military programs among the following: (1) Secure the Soviet border; (2) resolve the Taiwan question; (3) extend Chinese leadership over Southeast Asia; and (4) extend Chinese influence over Asia from Indochina to Japan?

Mr. SCHWARTZ. I would say to my mind, No. 1 at the moment has clear priority:

Chairman PROXMIRE. Securing the Soviet border?

Mr. SCHWARTZ. Yes. I think there is a genuine fear-perhaps an unjustified fear—but a genuine fear of Soviet intentions.

On the Taiwan issue, I believe, as Senator Scott and Senator Mansfield have both stated, they are now prepared to let this ride. I think it is a very vital issue to them. They regard Taiwan as part of sovereign China but I think they are not prepared in the discernable future to take military measures to recapture Taiwan.

Now, on Southeast Asia, unquestionably, they want to have a major say in the disposition of affairs in Southeast Asia. I would question whether under the present leadership this would take the form of a direct military intervention. I think they will try to influence policies of various governments in that they will use their massive presence to try to influence policies in Southeast Asia. As for Asia as a whole, one has to look to their long-range dreams. They hope that their revolution will provide a source of revolutionary inspiration to various forces within the countries of Asia; that it will lead to Chinese type of revolutions.

This is, as I say, an article of faith. I am not sure that it is a justified article of faith. It seems to me that the conditions of all these countries are sufficiently different from the conditions of China at the time of its revolution that any notion of a mechanical repetition of the Chinese experience seems to me quite unlikely.

The notion that Peking can simply press a button and create a revolution in India seems to me to be a rather far-fetched notion.

Chairman PROXMIRE. Then you would say their priorities are defensive?

Mr. SCHWARTZ. At the moment.

Chairman PROXMIRE. (1) They are concerned about the SovietChinese border; that (2) perhaps their relationship with Southeast Asia; then they have a much vaguer and more general notion about influencing the rest of Asia and, finally, the Formosan question is one that has been postponed at least for the time being and has a lower priority; is that right?

Mr. SCHWARTZ. Yes, I think they hope to prevail in the end on the Taiwan question.

Chairman PROXMIRE. But without a navy and facing what they face, they cannot take Quemoy and Matsu; Formosa is 100 miles away with a formidable military force and with the U.S. 7th Fleet prospects are impossible?

Mr. SCHWARTZ. Yes, given the present leadership I would guess that no attempt will be made to do so. Of course, the question of leadership is the big sleeper. What we have not discussed so far is the fact that in spite of the tremendous appearance of cohesiveness that many travelers have seen, at the very center of power there is a curious instability.

Chairman PROXMIRE. That is very interesting. Mr. Mao is an old man and the rest of the leadership is old. It could change dramatically within a matter of months, certainly a few years. At the same time, what is the potential here? The potential, it seems to me, for military action is limited. If you look at this study which is what this committee is responsible for, and I just don't see that they have the industrial power, the internal transportation system, let alone the military power; they do have rudimentary nuclear weapons but they are dwarféd, just overwhelmingly dwarfed by the Soviet Union and by the United States.

Mr. SCHWARTZ. Yet, I, like you, would emphasize that factor; that is, the severe limits placed on any leadership by their economic potentialities, and also placed on them by the nature of the disposition of power on the world scene.

Chairman PROXMIRE. Professor Liu.

Mr. Liv. Yes. Well, not being a military scientist or a political scientist, I really cannot comment on your question about the priorities, but because of the political instability that has existed in Peking, it would be difficult for me to think that anybody knows the answer.

For instance, if Liu Shao-chi were in power today the situation would be very different. Now, if Lin Piao were in power today, who was called the most beloved comrade next to Mao, if he were in power today then I think the policy would be totally different.

Chairman ProXMIRE. Totally different? What does that mean though in terms of military aggression or in terms of the effect on this country's foreign policy?

Mr. Liv. I must confess that I cannot-I don't really know the answer. All I am trying to point out is there is no political stability to guarantee any kind of reasonable projection of policy.

Chairman PROXMIRE. I see.
Let me ask Professor Schwartz,

in the New York Times this morning there is an article headlined: “China Calls Raid Threat to Border." And the following statement was issued by the Chinese Foreign Minister. They expressed support for Hanoi and said the raids were acts of aggression against the Vietnamese people and grave provocations against the Chinese people.

This is nothing different from the kind of thing they have been saying right along. Does it signify something at all different to you? We are much closer to the Chinese border in our raids. We are in a position that I can see why they could call them provocative. Does this suggest there might be some counteraction on their part?

Mr. SCHWARTZ. I agree with you there is nothing surprising in the statement. We Americans have a weakness, I think, for involving ourselves emotionally in the fluctuations of international affairs; that is, of oscillating between sentimentality or total hostility. The rapprochement between the United States and China is still fundamentally a cool affair on both sides—cool and calculated—The strongest motive on the Chinese side is the desire to have the United States as a bargaining lever vis-a-vis the Soviet Union: it by no means signifies a shift toward a complete trust of the U.S.A. They have made it quite clear that they are uncomfortable with United States military power close to their borders as they have ever been. They still want us out of Indochina. There never has been any change in their view on this matter.

Chairman PROXMIRE. But this does not indicate any likelihood of action on their part, in your view?

Mr. SCHWARTZ. Well, by carrying out bombing raids close to the Chinese border, we may be approaching the tolerable limits. If there should be to many accidents of U.S. planes going over the border, then perhaps we may go beyond this limit; I think that this statement is a signal on their part, that we are getting dangerously close to the border. There is nothing surprising in it, nothing that has not been said in the past.

Chairman PROXMIRE. Nevertheless, you do regard it as a signal. It is interesting and significant?

Mr. Schwartz. I regard it as a signal, yes.

Chairman PROXMIRE. Professor Liu, you note that economic growth on mainland China has not been as impressive as other countries such as Japan. Japan has surged way ahead of the rest of the world; it is a pre-eminent example. I think Mr. Reischauer told us a couple of years ago if Japan keeps up its present rate of growth through the rest of this century until the year 2000, it will have a gross national product of $6 trillion, in other words, six times the present U.S. GNP. Nobody expects it to continue at that pace, but it is an indication of how extraordinary that immense growth has been.

Nevertheless, if China were entering a period of stability-let's make that assumption—it may be a very far out assumption or it may not be—and there is no more great leap forward or backward, is it possible that they could show a comparable rate of growth to the Japanese or that they could improve greatly their rate of growth, in your view, or is there something endemic that will slow them down?

Mr. Liv. Being trained as an econometrician, we are trained never to make a forecast more than a couple of years ahead of time.

Now, if in a few score years Japan would grow that rapidly then I think the air in Tokyo would be so polluted that everybody there would be dead. I hope not.

So I would not really like to

Chairman PROXMIRE. Unless you crank into the gross national product statistics the amount they spend on preventing pollution.

Mr. Liv. Well, this is being paid attention but if that is the case, the growth of GNP as conventionally measured will be slowed down.

Chairman PROXMIRE. Yes.
Mr. Liv. Because that would be a negative entry.
Now, we can only speak from our experience and past history.

Now, in making any forecast, if you will make a pure guess then I think there is absolutely no empirical basis.

If you base your guess on the performance of the Chinese economy during the past decade or so, it had more fluctuations; it had more drastic drops than any nation in the world.

Chairman PROXMIRE. Exactly; now I am saying if you could eliminate those drops, let's make some favorable assumptions and see what the potentiality is at least; it may not be a very realistic potentiality, but what the potentiality of growth is, if we can eliminate that erratic quality which, as I understand it, is in part at least connected with political turmoil, that might conceivably level off. Under those circumstances, would it be possible, in your estimation, as a professional economist, for them to grow rapidly?

Mr. Liv. I don't think, Mr. Senator, that would be enough, because you would be willing to invest in the kind of capital equipment that would be producing consumer goods.

Now if you accumulate the capital which would be only for military and other purposes, then GNP would still not be growing.

As I tried to present to you the view that the Chinese Communists have been investing in the field of military areas, they have done so, and there is no evidence that they will stop that and shift investment to more civilian uses in any significant manner.

Chairman PROXMIRE. Is the superior economic performance of the Japanese economy in any significant part in their not having to spend anything to speak of in defense?

Mr. Liu. That certainly helped.

Chairman PROXMIRE. The Chinese spend, I understand, about 10 percent of the gross national product for defense, which is a very heavy burden. The United States and Russia spent 7 or 8 percent.

The Japanese, of course, spent, what is it—1 percent or something of that kind; it is a very, very small fraction.

Mr. Liv. The Chinese Communists may have spent more than 10 percent.

Chairman PROXMIRE. Well, then, that would certainly be a drag on their economy.

Mr. Liu. Very much so.

Chairman PROXMIRE. And I don't see any realistic likelihood they are going to spend less, do you

Mr. Liu. This I just do not know.

Chairman PROXMIRE. If they feel they are surrounded by enemies, as was indicated—I think Professor Schwartz pointed out they have Japan as a potential enemy at least; they have the Soviet Union; they have our action in South Vietnam or in Vietnam; they have at least the possibility of concern about India, so in all areas it would seem they are likely to have a very, very big, heavy defense burden for the foreseeable future.

Mr. Liv. It seems unlikely that they will reduce their military spending

Mr. SCHWARTZ, Senator Proxmire-
Chairman PROXMIRE. Yes, sir; I wish you would comment.

Mr. SCHWARTZ (continuing). If I may comment, I am neither an economist nor a demographer, so I am very vulnerable on everything that I will now say. Leaving aside the question of ideology entirely, it seems to me that Japan began its development at a different point in history, and under quite different conditions. One of the main facts about China is the size of its population and the fact that most of this population remains agrarian. The only other country comparable to China in this regard is perhaps India. This fact, probably makes it impossible to think of economic development in these countries in the conventional terms—to put the matter concretely, it is hard for me to think of any time in the very near future when every peasant in India and China can dream of having a Volkswagen, regardless of whatever the ideology prevails.

Chairman PROXMIRE. Professor Schwartz, just think of this element though—I think you raise a very good point. Growth, economic growth, really depends to a considerable extent on where you start.

You are right; the Japanese started from a devastation at the end of World War II. At the same time the Chinese start from a point in which 80 percent of their population is in agriculture; 6 percent of our population is in agriculture. Now, if they develop their agricultural potential to anything like the way we do, say they get it down to 20 percent, then they have this enormous manpower reserve which is a fundamental, ultimate economic resource anyway, available for other production, for industrial production and commercial trade, and so forth. So doesn't this suggest that there is perhaps an immense potential here just because they do have so many peasants now who can follow the course of almost all developing countries, of far more efficient agriculture, and a much larger industrial base?

Mr. SCHWARTZ. Yes, although the large population for nonagricultural does indeed suggest labor intensivity to the extent that various projects can be carried on by labor intensive methods, this may be an advantage. If one turns here to the question of automation and the decline in the need for labor in certain branches of very highly developed modern industry, I am not sure that this vast reservoir of

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