Revolution. The focus throughout this chapter will be on this particular post-Cultural Revolution phase of China's development, recognizing that it too is bound to change in the future under the impact of leadership and policy shifts on the one hand and economic transformations generated by the very process of economic growth and structural change on the other.

This exploration of the currently prevailing model will proceed in steps. The goals and objectives of the post-Cultural Revolution regime will be examined first. This will be followed by an analysis of (1) the country's factor endowments and how these have conditioned the strategy adopted, (2) the incentives and institutional mechanisms used to mobilize and allocate resources consistent with the goals and the strategy adopted, (3) the economic performance generated by the interplay of objectives, strategies, and factor endowments, (4) the extent to which one can speak of a distinct Chinese development model and its applicability to other less developed countries, and (5) the dilemmas posed by the development approach adopted in the 1970's. OBJECTIVES

The late Premier Chou's statement to the National People's Congress in January 1975 that China wants to build a powerful modern socialist country by the end of this century probably encapsulates Chinese Communist objectives in their clearest and most succinct form. The pursuit of power requires rapid growth of the economy as a whole; more specifically it requires rapid industrialization, with particular emphasis not only on military goods but also on those branches of industry that serve as inputs for defense production such as steel, fuel, and machinery.

However, rapid industrialization carries with it certain implications for agricultural development. An expanding population and labor force must be fed, a growing industry must be supplied with agricultural raw materials, and imports of machinery and other types of industrial equipment must be financed through exports. A developing country such as China could, if it wished, follow a quite open foreign trade orientation based on the principle of comparative advantage. That is, it could specialize in the production of certain types of farm products for which growing conditions are particularly favorable, use these both for home consumption and exports, and rely on imports to meet a significant share of food-supply requirements. While the Chinese import some foodstuffs, as shown in chapter 7, these are marginal. Major reliance on imported farm products would violate the principle of self-reliance enunciated on many occasions as a major objective in addition to those mentioned by Chou. In the Chinese view, a foreign trade oriented farm policy would expose the country to the risk of sudden supply embargoes, rendering it thereby vulnerable to foreign pressures.

All of this means that agricultural development cannot be neglected lest it hamper and retard industrial growth. For essentially the same reasons consumer-goods production cannot be neglected either, even though it may be assigned a lower priority than expansion of producer-goods output. Increases in the output of textiles, daily necessities, other wage goods, and even some semi-luxuries (for example radios, watches, bicycles) are called for in part to keep pace with

population growth and in part to permit at least a modest rise in the standard of living. Such increases are necessary as incentive measures for the labor force and as a means of sharing the fruits of development with the population at large.

The meaning of "modern" as used by Chou En-lai in his report to the National People's Congress is far from clear. This is not too surprising. Industrialization automatically implies a certain measure of modernization. At the minimum it implies a gradual spread of modern technology in industry and transport and also, although at a slower pace, in agriculture. It also means the rise of an army based on modern weapons, the spread of literacy, better health care, and the spread of modern science and its application to agriculture and industry.

However, the application of this concept to the process of production raises a number of dilemmas that have plagued Chinese policy makers throughout the history of the People's Republic. They also plagued Chinese statesmen and modernizers in the nineteenth and twentieth centuries. In the contemporary Chinese context the commitment to modern technology has to be reconciled with simultaneous commitments to "walking on two legs" and to the relative importance of being "red" versus "expert."

A key programmatic slogan of the early modernizers was: "Chinese learning for its fundamental principles (or its fundamental value) and Western learning for its practical use (or practical application). In a basic sense one could similarly sum up Mao's value orientation and that of most of his associates as a counterpart of this. One could perhaps paraphrase it as "Marxist-Leninist-Maoist learning (or ideology) for its fundamental principles and modern technology for its practical application."

The dilemmas thus posed are clearly reflected in the meanings and connotations associated with the Chinese word yang which can be interpreted as "modern, developed, strong," and as such it is a goal to be achieved. But it also suggests "foreign, alien, westernized" and as such may be associated with the restoration of capitalism, revisionism, and a feeling of inferiority as compared to technologically more developed economies and societies.

In contrast, t'u is or can be translated as "native, indigenous" and as such is identified with the common people of China, with the masses, and thus represents a positive value. But it can also mean "backward, primitive" and as such is a phenomenon to be overcome, to be conquered.

Perceived from this vantage point "experts" are to be prized; but this is coupled with a lingering suspicion that they are expert in "modern" and therefore "foreign" technology. They are divorced from the masses and tend to look down upon the cruder, more backward, and primitive methods used by them. Therefore, in Chinese Communist perceptions there may be some association between "red" and "native" on the one hand and "expert" and "foreign" on the other.1

Regardless of how interpreted, the pursuits of power and modernity are, of course, not unique to China; these objectives are shared by many other developing countries imbued with a strong sense of nationalism.

1 This juxtaposition of yang and t'u and its possible meanings, connotations, and significance is based on a seminal paper by Lyman P. Van Slyke, "Culture and Technology," prepared for a conference on Sino-American Relations in Historical and Global Perspective (mimeo), Wingspread, Wis., March 1976.

However, the combination of power and modernity with a strong commitment to socialist values and to the spirit of self-reliance lends China its peculiar distinctiveness as a development model.

From the standpoint of the Chinese Communist leadership one of the most crucial aspects of socialism is the striving toward egalitarianism. There has been no pretension that egalitarianism has already been attained, but there was a determination by Mao and some other leaders as well, especially after the Cultural Revolution, to avoid programs and methods that lead away from rather than toward this ideal. Therefore, measures that may speed industrialization and modernization but contribute to a widening of income differentials encountered resistance. Similarly, the pursuit of socialism without regard of its impact on economic growth was also likely to be opposed. At any one time and in a specific situation there may be definite trade-offs between these two sets of objectives. Some leadership figures and cadres may be expected to assign a higher priority to growth and modernization in a particular situation than to egalitarianism and/or self-reliance. This leads to periodic shifts in policy as leaders are realigned and their power and influence either waxes or wanes. Such shifts may also occur as perceptions of key policy makers change over time and in response to changing conditions.

At least on Mao's part, the pursuit of egalitarianism involved a constant struggle against the rise and crystallization of a "New Class." However, many elements of the bureaucracy are anxious to protect their power and privileged position. Moreover given Mao's adherence to the principle of "democratic centralism," reduction of status differences did not mean a dispersion of political power, even in his own mind. This has led to ambiguities and a series of built-in contradictions, which have become the source of a multi-dimensional struggle. In the course of this struggle, some elements emphasize the "democratic" aspects involving mass participation and the reduction of status differences, while others stress "centralism," that is, the need to concentrate power.

This continuing struggle is also reflected in periodic drives to compress the wage structure and to narrow wage and salary differentials. The 1975 campaign against "bourgeois rights" was in part directed at these income differentials both in industry and agriculture. In agriculture this is to be accompanied by reducing and eventually abolishing the private plots, by gradually substituting the brigade for the team as the basic unit of accounting and income distribution in the commune, and by developing the backward areas.2

It is far from clear to what extent such compressions in income. differentials narrow the scope of material incentives and thereby undermine work effort and the pursuit of higher skills and labor productivity. In the absence of firm evidence to the contrary, it could be argued that even if differentials were narrowed but not eliminated they could still serve as incentives, particularly if material rewards are supplemented by psychic appeals. Therefore, the narrowing of income differentials-depending on how far it goes in the direction of leveling-need not in and of itself retard industrialization and modernization.

2 This was clearly brought out in Vice-Premier Hua Kuo-feng, "Summing-up Report at the National Conference on Learning from Tachai in Agriculture," Peking Review, vol. 18, No. 44, Oct. 31, 1975, pp. 7-10, 18. This was a high-level conference concerned with agricultural policy and agricultural development strategy convened for a whole month in September-October 1975.

As noted above, even Mao and his closest allies recognized that "democratic centralism" requires concentration of political power at the top. However, they wanted to prevent differentiation in power, role, function, and income from becoming frozen into status and class differentials. In spite of the Cultural Revolution, this objective does not seem to have been realized thus far. On the contrary, as one travels around China and meets peasants, workers, cadres, and high ranking government officials, status differences are clearly apparent in many subtle ways, such as dress, bearing, deference by others, and many other privileges that surround power positions in all societies. These are among the considerations that have prompted periodic campaigns to break down the barriers between mental and manual labor on the one hand and urban and rural areas on the other. These campaigns and measures have contributed to a development approach that might be considered characteristic of a Chinese model. This concern with status differences was also one of the reasons for abolishing all insignia of rank in the army and for discouraging too explicit identifications of roles and titles since the Cultural Revolution. These considerations also play a role in the periodic attacks on the technocratic approach to economic, military, and administrative management, on professionalism and expertise in contrast to "redness." They also must have influenced the drive for the expansion of rural smallscale industries. While this is prompted by many other considerations (to be brought out in the next section), it serves to narrow the social and cultural distance as well as the technological and the "modernity" gap between factories and farms, city and country.

These concerns are also reflected in the hsia fang (down to the country)—the rustication-movement, which leads to the mass migration of youth from the city to the country. This more or less involuntary movement transfers a relatively well-educated manpower pool to the countryside and thus provides a resource for developing leadership and skill and for raising the educational levels of the peasantry. At the same time it deprives the city of a potential pool of talent and creates on the part of some of this youth a sense of frustration and alienation, brought about by difficulties of adjustment to an unfamiliar and harsh physical and cultural environment.3

Perhaps the most significant aspect of the rustication movement is that it reverses the flow of migration normally associated with the process of economic development. Large-scale rural-urban migration under the impact of rapid industrialization caused a great deal of concern in China in the 1950's. The press and official statements were replete with complaints concerning the "blind migration to the cities." More remarkable, and probably unprecedented in contemporary development experience, is the fact that an estimated 12 million young people have been "sent down" to the country from the city since 1968.*

However, this movement was not only prompted by a desire to break down barriers between city and country. Chinese planners and policy makers have for some time wanted to check the further growth of their largest cities for a number of reasons. They recognize that urban growth requires large-scale investments in social overhead

These frustrations and difficulties of adjustment occasionally surface in the Chinese press. They are buttressed by accounts of Overseas Chinese who have an opportunity to visit their native village and by the high incidence of this youth among the Chinese migrants to Hong Kong.

Peking Review, vol. 19, No. 2, Jan. 9, 1976.

capital such as schools, hospitals, new housing, and other facilities, none of which are directly or immediately productive. For instance, one of the vice-chairman of the Shanghai Revolutionary Committee told the author in December 1972 that the population of Shanghai city has decreased in recent years; as of that time the population of the city proper was 5.7 million, that is, it was reduced to the 1953 level. He then went on to point out that administering a large city like Shanghai is an enormous and complex task. In his view it would be desirable, but unfortunately not possible, to reduce Shanghai to a city of 2 to 3 million.

At the same time, there are a number of indications that while the largest cities have stopped growing, intermediate and smaller cities are continuing to expand. In this way there is a continuum of cities in terms of size, a hierarchy of national, regional, provincial, district, and local centers. This hierarchy facilitates the communication and diffusion of new ideas and influences from above and needs, aspirations, and demands from below. In effect it also serves to narrow the distance between the largest centers and the masses.

The reduction of barriers between mental and manual labor is also fostered by the periodic tours of duty of urban cadres in communes. These tours may range from one to several months of farm work. However, since the end of the Cultural Revolution they have become more routinized and ritualistic, typically involving temporary duty of at most a few months. They are paralleled by the sending down of agricultural and other scientists to factories and farms to carry on either highly applied research specific to the locality or to adapt research findings to local conditions. Agricultural scientists are thus sent down to the countryside to perform what in effect amounts to farm extension tasks. Similar considerations may lead to the assignment of physical scientists to factories. In the same spirit, as a general rule, students are not admitted to universities unless they have had at least 2 years of experience on farms, in factories, or in the army. Moreover, while studying at universities they are once more assigned to factories for periodic tours of duty. At the same time, so-called workers' universities have been established in a certain number of advanced factories to raise the technical and educational level of the workers.

These measures clearly entail both benefits and costs. They undoubtedly contribute to the more rapid diffusion of advanced methods in factories and on farms. They may also reduce the psychological and attitudinal barriers between manual and mental workers. However, this has almost certainly led to a watering down in the academic and scientific quality of university training since the Cultural Revolution. Available evidence suggests that at least in some fields scientific research has also suffered.

It could be argued that an optimal strategy for an underdeveloped country would be to let industrially advanced countries bear the full cost of advancement in fundamental science and then merely borrow the findings and apply them to local circumstances. While this approach makes a lot of sense, it must be applied judiciously in a large country which is in the pursuit of increasing its power. Thus not all scientific findings travel freely across boundaries. Some have sensitive security implications and therefore may need to be developed by a country such as China more or less independently. But perhaps more importantly the adaptation of scientific findings to local conditions.