ECONOMIC DEVELOPMENTS IN MAINLAND CHINA

WEDNESDAY, JUNE 14, 1972

CONGRESS OF THE UNITED STATES,
JOINT ECONOMIC COMMITTEE,

Washington, D.C. The committee met, pursuant to recess, at 10:05 a.m., in room S-407, the Capitol Building, Hon. William Proxmire (chairman of the committee) presiding.

Present: Senators Proxmire, Fulbright, and Javits; and Representative Boggs.

Also present: John R. Stark, executive director; Loughlin F. McHugh, senior economist; John R. Karlik and Courtenay M. Slater, economists; Lucy A. Falcone, research economist; George D. Krumbhaar, Jr., and Walter B. Laessig, minority counsels; and Leslie J. Bander, minority economist.

OPENING STATEMENT OF CHAIRMAN PROXMIRE

Chairman PROXMIRE. The committee will come to order.

Our first day of hearings on China was a most productive one. Led off by Senator Mansfield, the majority leader, and Senator Scott, the minority leader, there were a number of points of agreement and some differences in judgment.

Points of agreement were: (1) Although China may continue to bear a heavy defense burden, it will use its capabilities primarily on its own borders. Thus, if we withdraw from Indochina, we may expect little danger of military threat from the People's Republic of China; (2) the major shortrun problem is Vietnam; Taiwan is a longrun problem; (3) trade and exchanges may be modest but are of value; (4) China's major external concern is with the Soviet Union.

Points of disagreement are: (1) Is China strong, unified, and dynamic? (2) Is the present Chinese regime stable? Will the stability continue? If not, why not? (3) Can we assess China's economic performance? Are they doing better outside the defense area? (4) How is China ruled-by coercion or consent?

We feel that not only are United States-Chinese relations changing-which is long overdue-but China itself is changing.

During the course of our study, and increasingly as the hearings progress, we are struck by the need for a thoroughgoing reassessment of China. We are aware that many of the larger questions cannot be definitively answered. But we are making progress. Our new relations with China will help us make more progress.

For those of you who received the hearings announcement, I am pleased to add the name of Col. Angus Fraser, USMC (retired), a distinguished military analyst, to our third day of hearings.

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Today we turn first to Prof. Owen Lattimore. We are especially honored to hear from Prof. Owen Lattimore, one of the world's leading specialists on Chinese, Mongolian, and Asian affairs in general. Mr. Lattimore has flown over here from England where he has been instrumental in developing a fine program of Chinese studies at his center in Leeds College.

Once we could call Professor Lattimore our own. Because of the terrible attacks of my predecessor, Senator Joseph McCarthy, in hounding Professor Lattimore unmercifully for views which today are recognized as facts of life, he decided to emigrate to another land. Professor Lattimore, as Senator from Wisconsin, I want to take this occasion to apologize to you for the indignities you suffered in the ordeal of the early 1950's. I hope it will never again happen to any man. I think it is time, certainly, that we should recognize that whether we agree or disagree on foreign policy matters, we should not question the patriotism and devotion to the fundamental principles of our country of a man who just happens to disagree with us. If there is one fundamental tenet in our democracy, it is the notion that people can express themselves according to their own conscience, no matter how that may disagree with somebody who happens to hold office and to hold power, whether it is senatorial power or executive power.

Despite your protestations of lack of familiarity with the current China scene, we know you are one of the most knowledgeable experts in this field, and we shall gain lasting insights from your testimony today. Go right ahead, sir.

STATEMENT OF OWEN LATTIMORE, PROFESSOR AND DIRECTOR, DEPARTMENT OF CHINESE STUDIES, LEEDS UNIVERSITY, UNITED KINGDOM

Mr. LATTIMORE. Thank you, Senator.

Chairman PROXMIRE. I should say-and I want to apologize again; this is most embarrassing to me with these distinguished witnesseswe did this to the majority and minority leaders yesterday. We have a timer here, and we try to limit your testimony to 10 minutes and then after that go into questions so we can have more time for questions.

Mr. LATTIMORE. Thank you, Senator. Before the timer goes on, may I make just one correction. I was not hounded out of this country. I was engaged in teaching very successfully at Johns Hopkins University and suddenly, quite unexpectedly, from a university which I had never even visited, I received an invitation to go there and found a new department, which toward the end of a man's career is a wonderful opportunity to start something new based on a lifetime of experience and to be allowed to do it your own way. It is a very, very great compliment.

Chairman PROXMIRE. I appreciate that correction. Thank you, sir. Mr. LATTIMORE. Mr. Chairman and gentlemen, it is an honor to be asked to testify before this committee, but I should point out, before somebody else does, that my qualifications for the honor are limited. Although I spent some 25 years in China, my last visit was 27 years ago and lasted for only about 10 days, including Christmas 1945 and New Year's Day 1946. Unlike a number of other so-called American experts on China-none of us is really an expert-I was not there

during the years of the civil war which ended in the liberation of China by the Communists in 1949.

I have been asked to address myself in the first instance to the "People's Republic of China: An Economic Assessment" prepared by the able staff of this committee, but here again I must be careful not to pose as an authority.

Economics is a branch of mythology which I have never studied. All I can say is that I spent about 6 years as an employee of a business firm in China, rising to be manager of their Peking office. This was the office in which we kept a supply of grease for the palms of Government officials. In those years, which were years of chronic civil war, I also traveled frequently in the interior trying to negotiate passage for goods which had been held up either by corrupt officials or by warring armies. I therefore know something about the economics of corruption, and I can also say that I was a participant in the economics of imperialism in the years when it was breaking down.

While I doubt whether economics exists as a science, the world is full of economic facts and in my opinion the contributors to this "People's Republic of China: An Economic Assessment" have provided us with an admirable collection of facts, useful for a better American understanding of China. They have achieved a higher standard than most American academic studies of China; but then one must remember that the standard of academic studies of China is distinctly lower in America than it is in countries like England, or France, or Russia or Japan.

The merits of this study speak for themselves and will doubtless be made even more clear by questions asked by members of this committee. I shall, therefore, proceed directly to a few points on which, right or wrong, I have strong opinions.

To begin with, I think an historical introduction is desirable. China had what may be called a prerevolution lasting much longer than that in Russia. From 1911 there was always civil war in some part of the country. From 1931 there was a foreign invasion which occupied the richest parts of China. From 1945 there was renewed civil war, made worse by lavish American aid to the losing side. The mere cessation of fighting in 1949, therefore, and the installation of a government that really ruled the whole of China for the first time in nearly 40 years, was a genuine liberation and equivalent to the most massive relief program in China's history.

One should next proceed directly to what may be called the American factor in Chinese politics.

Since President Truman and the beginning of the cold war, it has been a Washington shibboleth that you can't, you mustn't negotiate with Communists except from a position of strength. Yet the stark, staring, naked truth is that today, under President Nixon, America is for the first time trying to deal with both China and Russia from a position of weakness. Only the agile histrionics of the President and Mr. Kissinger distract attention from the fact that the emperor has no clothes.

It is America's growing weakness, and especially defeat in Vietnam, that marks the difference between the great cultural revolution period and the present period in China. The years of the cultural revolution were the years in which Chinese statesmen had to face a real danger that American bombing might be escalated all the way into China,

because of Washington's inability to understand the difference between violence and strength.

The Chinese had to make their choice between major alternativescentralization or decentralization, large industrial units, making good bombing targets or smaller, dispersed units; reconciliation with Russia and dependence on Russia for heavy equipment, or self-reliance and a more lightly equipped army. That was part of what the cultural revolution was all about.

Today the situation is quite different. Not even President Nixon and Mr. Kissinger are now likely to escalate the Vietnam war into China. The Chinese are now in full command of both the economic and the political factors that shape their destiny and sooner or later we are going to have to deal with Peking on that basis. Our kind of carrot is not needed in China's diet, and our kind of stick will raise blisters on the hand that wields it before it breaks China's bones.

If we consider the American factor in the Chinese equation, we must also take the Soviet factor into account. In so doing there is a danger, it seems to me, of being misled by modes of thinking that have become habitual during the cold war. In frequent visits during the last 10 years to such countries as Mongolia, the Soviet Union, Czechoslovakia, Hungary, Bulgaria and the German Democratic Republic, and in many conversations with professional colleagues in those countries, I seem to have become aware of a certain pattern in Marxist thinking. I say, deliberately, "seem to have become aware," because not being an expert on communism as such, nor on Marxism in general, it is quite possible that I have gotten off on a false track. I am going to spend a couple of months in China this summer and I shall do my best to check my ideas there.

For what it is worth, the impression I have is that in all these countries, for periods ranging from nearly 30 to more than 50 years, marxism has been the only respectable way of thinking. Some people are considered more expert, more professional in their marxism, but just about everybody counts himself a Marxist. When, therefore, there are disputes about either domestic or foreign policy, these are disputes among Marxists, over differing Marxist interpretations of facts and phenomena which everybody concerned thinks he is judging by Marxist standards. They are not disputes between proponents of rival ideologies.

That being so, when a man is accused of having gone wrong, the thrust of the accusation is that he is judged, by other Marxists, to have gone wrong as a Marxist; and the ultimate court of judgment is the whole body of the Marxists of that country.

I am very much impressed by the fact that in controversies in these countries it is only the leadership of each side that is attacked, and when the Chinese and the Russians quarrel they also attack each other's leadership, never the whole Russian people or the whole Chinese people.

I stress this point because, if I have managed to state the matter correctly, there must be an underlying assumption that below the mistaken or corrupt Marxist leadership there exists a mass following whose natural tendency is toward rational, scientific thinking, since marxism is, by the definition of its adherents, the only scientific method of political and economic thinking.

That being so, the assumption would continue; the Marxist logic revealed by unfolding events will reveal to Marxist minds the difference between erroneous and correct Marxist interpretations, and the misguided Marxist leadership will be thrown out. The conclusion can only be, if one thinks in this way, that neither the Soviet society nor that of China accepts as inevitable what used to be called the "arbitrament of war."

If a society saturated with Marxist thought has a built-in capability to correct its own errors, then why resort to preemptive strikes or massive confrontations? In short, I do not accept the legacy of cold war cliches. I do not believe that Russia and China can be counted on to save world capitalism by going to war with each other for the benefit of the United States.

Nor can I see that either country contemplates, even in its longrange thinking, any policy that directly menaces the United States. Why should they? Both countries have made their mistakes but neither has had to pay the full price for its mistakes because they have been showered with unearned profits from America's mistakes, particularly in Vietnam, from President Truman to President Eisenhower to President Kennedy to President Johnson to President Nixon. As both the Peking and the Moscow summits have shown, neither China nor Russia needs to sell out Vietnam; nor do they need to fight each other. With Washington recruiting Communists and Communist sympathizers faster than it can bomb them to bits or burn them up with napalm, what Communist government could ask for a more valuable enemy?

Thank you.

Chairman PROXMIRE. Thank you very, very much, Professor Lattimore.

You say you plan to travel to China this summer?

Mr. LATTIMORE. Yes; I expect to spend August and September there.

Chairman PROXMIRE. In which you are going to have an opportunity to bring up to date some of the conclusions you give us this morning. If you could give us-send us a memorandum, a letter, on your trip, we would treasure it; it would be very helpful to us. Mr. LATTIMORE. Thank you, sir. I will do that.

Chairman PROXMIRE. Fine.

You seem to feel that the prospect of Marxist revolution by force and violence, if necessary, is not coming off because it is not necessary. Our mistakes are so great in Vietnam and elsewhere, as you say, you feel, apparently, we are making a revolution possible by our mistakes; is that correct, a Communist revolution?

Mr. LATTIMORE. I think so, sir.

Chairman PROXMIRE. Well, can you give us a little more thought on how you would document this? Many of us are very deeply and strongly opposed to the Vietnam war. Some of us who supported it earlier changed our position. I am one of those; others have had a continuous opposition to it and think it is a tragic mistake; and I think there may be some effect in helping Communist recruiting.

But I wonder if in countries like Indonesia and others, if there is any real evidence of a turn toward Communism or if there isn't contrary evidence?