In July, the Chinese government announced an initiative to move 250 million (not a misprint!) people from rural areas to cities over the next two decades. The relocation project has the ham-handed appearance associated with other grand social-engineering projects of China’s past, such as the disastrous “Great Leap Forward.”
It seems obvious that Chinese authorities have not made any effort to generate sufficient jobs for those they want to move. The country is already bedeviled by tens of millions of unemployed, constantly seeking temporary work. Stated reasons for relocation include a need to boost Chinese development by generating internal demand, which is supposedly greater in cities. The project is likely to create enormous stresses on the population. This in turn may either concentrate Chinese attention on internal security, or else generate nationalist aggressiveness as a way of overcoming that stress. If it is the first, then resources that might otherwise go to naval expansion may be more urgently needed by the army and the dedicated security apparatus.
Town and Country
Throughout the developing world, people migrate from the countryside to cities in search of jobs and a better life. At full flow it creates serious social problems. Moving from rural to urban living entails drastic changes in lifestyle. Many countries, including China in the past, have tried to limit the flow (e.g., by using internal passports) because they wanted to limit the effects on cities flooded with immigrants from the countryside.
The countryside has a special place in Chinese culture. Ethnic Chinese living overseas generally identify with a particular ancestral village. It seems unlikely that forced abandonment of those thousands of villages will be acceptable either inside or outside China. Apparently Chinese microblogs are already alive with anger over the resettlement project. It is difficult to see how concentrating large numbers of angry unemployed people (i.e., people with time on their hands) in cities will gain the current government new adherents.
The Chinese Communist Party is already aware of widespread fury over extensive corruption. This is a particularly dangerous problem, because the history taught by the party shows it triumphing over the Nationalists who previously ran the country because the Communists were so honest compared to them. Corruption, moreover, may be inescapable because in the wake of the Tienanmen Square massacre in 1989 (and the separate turn toward capitalism) few Chinese retained much faith in the ideology that otherwise justified Communist Party rule. After that event it was widely reported that people joined the party only for careerist reasons, which included enriching themselves.
There could even be a strong feeling that going back to a more ideological basis for power risks returning to the evils of Mao Zedong’s Cultural Revolution of the late 1960s, the consequences of which are still being felt. The basic charge against Bo Xilai, the fallen party chief of Chonqing, is that he was trying to resurrect the Cultural Revolution, playing its songs to drum up support. Anyone who survived the Cultural Revolution must fear a replay. That fear in turn justifies accumulating as much portable cash as possible as insurance against such an occurrence.
Now go back to the new initiative. Every year the Chinese government reports more than 100,000 protest demonstrations. Most of them happen in the countryside, where official corruption is easy to see in actions like land seizures and shoddy buildings. It must be an attractive idea to sweep all the malcontents off the land and concentrate them in cities, where (in theory) they can be more readily policed. Someone working long hours in a city factory has far less free time during which to demonstrate. Farmers work very hard, but their hours are irregular, and during some seasons they have considerable time to themselves.
Farmers transplanted to cities are already complaining that they have no jobs, and therefore no cash to buy what they need, including such luxuries as electricity. The problem may be a mismatch between the way the Chinese Communist Party still thinks and the reality of the largely capitalist system the country has developed since the 1980s. Such a system runs on individual initiatives. The results are messy but very real. For example, jobs are created largely by companies brought into existence (and grown) by entrepreneurs. They set up shop where they want to, and the number will vary radically from place to place. Government affects the scale of job creation, but only indirectly. Chinese entrepreneurs have been good at creating jobs, but not good enough to absorb the number of potential workers available. Ordering large masses of people to move into empty apartment buildings does nothing to create the jobs they need if they are to afford to live in those buildings.
Command Performance
The Party was built to command from above, without regard for any push from below. That worked reasonably well when the commands included setting up massive government-owned companies, many in sectors such as aerospace. Command also applied to putting up impressive buildings as symbols of government (party) power and success. Often occupancy rates are rather low, because the buildings were intended as prestige symbols, not as a way of meeting demand. Relocation almost seems to be an attempt to retroactively justify the party’s logic by filling up the empty buildings and cities it foolishly built without giving those moving in any particular reason to do so.
Senior party leaders have attended Western universities and taken advanced courses in economics, but those courses surely do not address the most basic point, that capitalism is voluntaristic. In the West, government initiatives are generally designed to convince people to do something the government cannot order them to do (there are obvious exceptions). The “rule of unintended consequences” applies again and again when the initiatives do not have their expected results. Will raising the minimum wage enrich the population, or will it discourage hiring? Will better medical insurance reduce catastrophic medical problems? A party accustomed to command does not understand that such questions inevitably arise. Learning about discount rates on the stock exchange does not teach anyone about the underlying reality that people follow their own desires rather than the party’s dictates.
It is possible that the Chinese initiative has a more benign origin. Some years ago a Chinese officer remarked that his country could do nothing until it solved the problem of modernizing the countryside—all the glitz of the cities was meaningless until that was accomplished. The current plan may be an inept attempt to rush that modernization, on the theory that the usual developing-world migration off the farms is not moving fast enough. Only a party accustomed to ruling by command could imagine that it could do social engineering on such a scale.
This particular piece of social engineering has clearly touched a nerve. The corruption now so evident makes it difficult or impossible for the party to reconcile those uprooted from their villages, however rational or benign the motive may be. Farmers leaving their villages will likely think that their ancestral land is being stolen to make way for agribusiness. Local party cadres have seized and stolen rural land with relative impunity, because there cannot be a rule of law as long as the party is its own law (Westerners doing business in China frequently discover that this is not an abstract issue). Ultimately the party is backed by the Chinese military, which is why Chinese officers and enlisted all swear fealty to the party and not to China itself, or its constitution.
The real issue in China is the source of the party’s legitimacy. There are currently two of them. One is that the party has made China strong enough that the humiliations of the past are unlikely to recur. That means boosting Chinese nationalism, often by reference to the crimes Japan committed against China during World War II. The party is increasingly aware that individual Chinese citizens can use the logic of nationalism to attack any attempt at reconciliation with Japan for political or economic reasons. In effect using nationalism risks admitting that individual Chinese should have a say in what happens in the country.
A second source of legitimacy is the argument that the party has made the country, and particularly its entrepreneurial class, prosperous in an unprecedented way. That makes any economic hiccup dangerous. The immense cost of keeping the uprooted alive may turn out to be a severe drag on the Chinese economy. Moreover, anyone benefitting from prosperity must be uncomfortably aware that gross corruption is in effect an unequal tax. Every so often the sheer scale of corruption becomes evident, as in the aftermath of a fatal crash of a high-speed train, when it became known how the man in charge of Chinese railroads had enriched himself. Sometimes the scale of senior party officials’ wealth leaks out, with unpleasant consequences. Malefactors are jailed and even shot from time to time, but the lesson drawn by the population is probably that these are sacrifices to protect the higher princes of the party.
Whether all of this adds up to a reason for increased aggressiveness depends on the extent to which the Chinese leadership understands how fundamentally weak it is, and what a risk going to war might be. Past leaders were uncomfortably aware of Chinese military failure, for example against Vietnam in 1978-9, but those memories are now more or less buried. The South China Sea may become a place in which the Chinese leadership feels that it can boost the nationalist sentiment that keeps it in power.