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Rural industrialization and administrative decentralization in China, 1958-1978 Dolan, Margaret Elizabeth 1978

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•RURAL INDUSTRIALIZATION AND ADMNISTJmTTVE DECENTRALIZATION IN CHINA, 1958-1978 by MARGARET ELIZABETH DOLAN B.A. University of Briti s h Columbia, 1976 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS in THE FACULTY OF GRADUATE STUDIES . -Department of P o l i t i c a l Science, University of Bri t i s h Columbia We accept this thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA November, 1978 @ Margaret Elizabeth Dolan, 1978 In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of British Columbia, I agree that the Library shall make it freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the Head of my Department or by his representatives. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. Department of PQU-VUOV ^V^o The University of. British Columbia 2075 Wesbrook Place Vancouver, Canada V6T 1 W 5 Date Q̂0K̂ VY\WV- n y V.-91-6. (Ii) Abstract The failure of the highly centralized Soviet model of administration to provide a satisfactory solution to China's rural developmental needs led the Chinese leadership in 1956 to search for an administrative strategy which would offer both the central control and local i n i t i a t i v e , unity and diversity i n planning believed necessary for the realization of their ambitious develop- mental goals. This study examines the process of administrative development i n China i n the context of the rural industrialization strategy which has consti- tuted a fundamental part of the Chinese developmental experience since 1958. It i s an attempt to discern what, i f any, pattern has been established with respect to administrative development, what has affected changes i n the rela- tive distribution of power between the economic actors i n the system and f l - r . l nally, what i s the nature of the administrative system guiding the rural indus- t r i a l development program i n the closing years of the 1970s. The study compares administrative developments i n China with the concept of linear decentralization explored by a number of Western writers concerned with problems of development i n general and administrative development i n par- ticular. The evidence presented here suggests that the process of administra- tive decentralization i n the developing state i s l i k e l y to be far more complex than implied by the concept of a gradual progressive shift of power from the central to the local authorities,in relation to developmental projects of a locally relevant nature. Administrative decentralization i n China has been characterized by the continual expansion and contraction i n the number of centres of authority with respect to rural industrial development and by constant shifts in the responsibilities afforded to any particular level at a given period of time. I t i s also the case that a movement of power out of the Centre has not necessarily resulted i n a similar:' response at other levels of ( i i i ) the administrative apparatus and, i n fact, a reverse process may be occurring at particular levels outside of the centre. In general, a functional division of responsibilities based primarily upon resource availability relating to rural industrial development has evolved between the t e r r i t o r i a l administrative units. This functional division of labor between the various actors i n the economic system has shifted over time to ac- commodate - not only changes i n socio-economic variables but also changes i n t " • the goals and p r i o r i t i e s established by the leadership. The Chinese case i n d i - cates that the strategy of rural industrial development chosen along with", changes i n leadership preferences with respect to the incentive system adopted, the technology employed, the nature of the enterprise and of the industrial system pursued, have been the most important variables i n determining the dis- tribution of authority in the system. It i s also a finding of this study that the terminological distinctions made between the deconcentration and the devolution of administrative authority have been extremely useful'tools i n enabling a more detailed breakdown of the administrative process i n China. These distinctions offer the possibility of more specific cross-national comparisons of the administrative functions per- formed by different actors i n countries which do not necessarily share similar formal administrative structures. (iv) TABLE OF CONTENTS Introduction 1 1. The Relationship Between Local Government and Rural Development 4 2. The Rural Industrialization Program to 1972: Administrative Consequences 16 The Great Leap Forward, 1958-1961 16 Tightening of Aclministrative Control, I96I-I965 22 The Second Leap Forward, 1968-1972 28 Summary 35 3. Rural Industrial Development i n the 1970s: A New Strategy? 37 Centralization of Planning Authority After 1972 4l The Decline i n Basic-level Production and Financial Management After 1972. 53 Summary 67 Conclusion 71.. Notes To The Text 7'$ Bibliographical References 8|t - 1 - Int-roduction: The goal of rural industrialization has, since 1958, been one of the most significant developmental aspects i n the modernization of the People's Republic of China (PRC). Since 19^9, the PRC has provided the world with an on-going experiment i n p o l i t i c a l , social and economic development, the ob- jective of which has been to construct, within a relatively short span of time, a modern, Industrialized communist state from a predominately peasant- based, economically backward agrarian society. Rural industrialization has been a major force i n the campaign to modernize the Chinese Mainland. The program i t s e l f and the organizational framework through which i t i s imple- mented are of concern to other countries which share many'of the developmental problems which confront the PRC. They are also of immediate interest to those who seek to understand better the developmental process i n i t s specific as well as i t s general implications for the society and the polity as a whole. Rural industrialization i n the PRC must be seen i n terms much broader than the narrow economic sense. To the Chinese leadership, the program of rural industrial development represents a complete rural strategy for modern- ization of which the economic repercussions constitute a major but not a total part. Prom i t s beginnings the program has been seen as an instrument through which the PRC can solve many of the problems which confront a predominately rural society which is. attempting to modernize. Briefly, by turning the peasants into part-time industrial workers, by encouraging the growth of a technical force i n the countryside, and by pro- viding the rural areas with the means to transform agricultural production into a modern mechanized process the program i s aimed at the fulfillment of the ideological goals of reducing the gap between peasants and workers, be- . • tween mental and manual labor, and between the city and the countryside. At -2- the same time, and i n a more narrow economic sense, the policy of self- reliance i n achieving local industrialization reduces the demand on the centre for scarce resources such as raw material and capital inputs, permits the supply of the necessary industrial products to service agriculture without placing too heavy a demand on an, as yet, inadequate transportation system, and encourages an efficiency i n coordinating rural supply and demand which for a centrally planned economy, especially one as large and diverse i n terms of i t s natural resources as the PRC, remains a serious administrative problem. It can be seen then that the rural industrialization program i s far broader i n i t s implications than i t s obvious economic aspects would suggest. The choice of i-means used to achieve i t w i l l have major socio-economic rami- fications as well. Indeed, i t i s this aspect of the program which has been the source of much of the controversy which has divided the party leadership since 1958. The present essay i s an attempt to probe i n some detail one aspect of the modernization process i n the PRC which has been a dominant theme of the Chinese p o l i t i c a l scene for two decades. This i s the interaction of the goal of rural industrialization;and':the;"admlnistrative:\organization-used to achieve i t . What has been the relationship between the program advanced i n order to realize the goal of rural industrial development and the d i s t r i - bution of power i n the system administering i t ? How i s decision-making author- i t y distributed between Party,"State and local enterprise? Is a division of labor with respect to rural industrialization evident between various admini- strative levels? Where does control for the program l i e i n the 1970s? In this respect the essay w i l l be much more exploratory than explana- tory i n i t s focus. After briefly surveying the historical progression of the rural industrialization program beginning i n 1958, the paper w i l l turn to developments which have come tol l i g h t i n more recent years and particularly -3- since early 1976. Although i t i s s t i l l too early to~> assess with any degree of accuracy the f u l l impact of these recent policy changes on the distribution of power within the p o l i t i c a l system, there are definite indications that a new rural strategy i s presently under way which w i l l result i n a reversal of many of the decentralizing tendencies which were observed during the euphoria of the Cultural Revolution. Before examining these trends i t may be f r u i t f u l to provide a discussion of some of the'.conceptual' underpinnings offered by both Western and non-West-, ern writings,including the organizational concepts used by the Chinese them- selves, which deal with the questions of rural government and development. It i s of interest to note to what extent the rural industrialization program i n the PRC has lent . i t s support to either of these conceptual frameworks. Chapter One The Relationship Between Local Government and Rural Development: The developmental problems confronting the newly emerging nation-state of today are enormous. The demands upon the nation's p o l i t i c a l leaders to meet the needs of social, economic and p o l i t i c a l developmentrat times appear almost insurmountable. Modernizing governments are called upon to plan, direct and implement developmental programs today which, during the early phases of development of the states of Western Europe and North America were for the most part l e f t to private i n i t i a t i v e . As a result, the modernization process has placed tremendous burdens upon the leadership of the developing states. Not surprisingly, the central governments of these states have found themselves i n - undated with demands and functional requirements which have been beyond their capacity to f u l f i l l . A l l too often the net effect of this concentration1, of ad- ministrative power and authority at the centre of government has been a'serious neglect of the developmental needs of those areas lying beyond the reaches of t the p o l i t i c a l , social and economic centres of activity. While recognizing the need for firm central control over the moderniza- tion process, the majority of administrators and students of development reject the long-term continuation of excessive central dominance of national programs and policies.. Even where the hinterland i s recognized as constituting an inte- 5 gral part of national development schemes, advocates of administrative decent .v. tralization charge that the concentration of administrative power and authority at the centre has had a negative impact on the development process over tlme'.n • In addition to creating excessive demands on the central governments of develop- ing states, overcentralization, i t i s argued, has been a major obstacle to developing the f u l l potential of local i n i t i a t i v e i n accelerating national de^v velopment. As a result, local conditions have been neglected i n setting out - 5 - national objectives, undue delays have been created i n meeting local needs, and inefficiency has been encouraged through the concentration of scarce adminis-' trative talent at the centre of the p o l i t i c a l arena(Cento Symposium, 1965, 35-38; Maddick, 1963, 35; Humes and Martin, 1961,7). The development of local representative institutions Having some power and authority over the direction of change i n areas of immediate concern to the local population has been proposed as a necessary ingredient for successful national development. Most important among the positive benefits to be achieved from some form of administrative decentralization are, according to Maddick, the effects of local participation i n augmenting national efforts toward deve- lopment : To acrjleve;:sociaIechahge:.:and-:general economic-'o' :"_ growth requires .a spreading :of effort so that local communities and Individuals can p a r t i - cipate, to bring under ideal conditions,energy, enthusiasm, and most Important of a l l , local i n i t i a t i v e to the working out of local deve- lopmental a c t i v i t i e s . (Maddick, 1963, 24). Similarly', the authors of the . report • .'. The 1965 Cento Symposium On The Role of Local Government i n National Development concluded that "the participation of the people i s essential for national development and...can only be assured through institutional forms of local governmenti"[augmented by] informal group organizations and activities i n community development." (1965 377). The process of administrative decentralization outlined i n these stu- dies i s seen not only as a means of enhancing national developmental .^objectives but also as an indication that p o l i t i c a l development i t s e l f has occurred. There i s here the perception of a positive linear development i n moving from a concentration of administrative power at the centre toward a deconcentration of central authority to i t s agents operating i n the f i e l d followed by an .eventual - 6 - devolution of the authority. :andmeans to i n i t i a t e and implement local deve- lopment strategies to the local governments themselves'(Maddick, 1963, 225;- Leemans, 1970, 60-61; Cento Symposium, 1967, 7 7 ) . 1 The process i s viewed ̂ as a gradual one with the period of delegated authority to central f i e l d agencies dominating the early and middle stages of development (Maddick, 1963, 226) . Once the decision to decentralize administrative powers and functions has been made, questions regarding the timing,degree and form which the de- centralization w i l l take remain important issues to be decided by the central authorities. These decisions w i l l be affected hot only by the objective socio- economic, p o l i t i c a l , geographic or demographic characteristics of a given f t state but also by the objectives and/or policy preferences of the leaders themselves. Whether the concern Is for democracy or freedom, or for socio- economic development or administrative efficiency, i t i s the pri o r i t i e s of these objectives which w i l l have a major impact upon the pattern of local government adopted (Leemans, 1970, 17-24). In the majority of developing states i t i s the u t i l i t a r i a n aspects of decentralization which appear to dominate policy-makers'concerns. It i s these states i n particular, where central planning i s frequently the primary stimulus i n the economy (whether by choice .or necessity), which rely on the efficient economic performance of local levels i n meeting economic goals. In these states where socio-economic c r i t e r i a dominate, Leemans. suggests that some combination of deconcentration and devolution of powers be adopted which w i l l provide for the gradual inclusion of popular, representative i n s t i t u - tions:".in the policy-making process (Leemans, 1970, 6 0 ) . The objective i s to create an institutional arrangement which w i l l encourage the mobilization of local talents and resources to meet the demands of modernization while con- tinuing to provide the central government with the means to coordinate the -7- development process on a national scale. The nature of the function to be performed and the size of the area to be serviced w i l l also affect the extent to which administrative authority w i l l be decentralized (Leemans, 1970, 46). I f the function i s primarily of a local character and one that community resources are able, to support (such as minor construction projects, primary education and simple health care f a c i l i t i e s ) , the locality would be the major locus of control. Tasks which require greater resources or which are geared to service several l o c a l i t i e s such as rural electrification projects demand a higher level of control and coordination of effort. I t i s also the case that the t e r r i t o r i a l basis of the function may change over time. As community resources are expanded through the avai l a b i l i t y of education, the acquisition of new s k i l l s and increased economic well-being, the locality may find i t s e l f i n the position to take on larger and more complex projects. However, i t should also be apparent that the process of moderniza- tion i t s e l f can create demands for resources which may not be available to the locality. Therefore, the demand for more refined equipment, for scientific research; for large water control projects for example, may require a larger t e r r i t o r i a l and resource base and higher administrative control. Prom the preceding discussion several points can now be summarized which appear to be f a i r l y consistent i n Western concepts of local government and development. The f i r s t general proposition i s that local participation i s perceived as a necessary concomitant;:, of rural development and thereby of national development schemes. Secondly, there i s the implicit assumption of an evolutionary process of administrative development i n moving from central con- t r o l to .field agents having variable degrees of delegated authority, to local government as the major focus of i n i t i a t i v e i n planning for local development. Thus Maddick proposes that with maturity "successful local authorities w i l l -8- prove to be centres of In i t i a t i v e . " (1963, 225). A third point to be noted i s that the areal division of powers w i l l be subjected to pressures to change arising from the process of modernization i t - self. Most frequently cited i s the trend toward larger units of local govern- ment as the need for greater resources and technical expertise expands beyond the limits of the locality. At the same time, however, the resources of the locality are also expected to increase rendering the local government more capable of administering to other needs of a local character. Some form of functionally determined basis for cooperation between units of local govern- ment may provide a viable alternative to larger units while at the same time guaranteeing greater possibilities for continued popular participation i n the decision-making process. Therefore, i n spite of the perception of a linear development from central to local control over certain programs of action, there i s also the implied need for f l e x i b i l i t y which w i l l permit change in':, the administrative division of power as i t i s warranted. Finally, i t should be stressed that the demand for the eventual devo- lution of authority to the local government units does not constitute a demand for local autonomy. I t i s rather the participation of the local population i n the formulation of developmental programs of a local character which i s the goal of advocates of administrative decentralization. Central control continues to be regarded as a necessary component of national development, providing the broader perspective which i s essential to coordinated development. The i n - sistence on local autonomy i n the absence of the necessary resources to pro- mote local development w i l l simply contribute to the continued weakness of the local authorities. The key to national development rests on the capacity ofr t leaders to create an administrative framework which rests on a symmetry or balance between the requirements of control and coordination and f l e x i b i l i t y and local i n i t i a t i v e (Maddick, 1 9 6 3 , 227-230). In the context of the rural development strategy of the PRC a l l of the considerations noted above have figured prominently i n the on-going debate among the leadership over.;, the dangers of overcentralization and the negative consequences of excessive local determination of the direction of economic " . development.. While a command economy controlled by a highly centralized admini- strative structure may provide the institutional framework through which com- munications and plans are passed down to the lower levels, this type of admini- stration i s deemed to be both inefficient In';terms of resource allocation and costly i n terms of the need to police lower levels. On the other hand, i t i s the nature of a centrally planned economy that i t relies on the fulfillment of the national plan i n order to meet i t s overall developmental objectives. What the Chinese Communist Party (CCP) has attempted to do i s to determine the proper distribution between central and local authority i n economic decision- making (broadly defined as i n the Introduction) such that the perceived advan- tages of both central control and local i n i t i a t i v e are maximized. To achieve these ends the Chinese have attempted hot only to simplify the bureaucratic apparatus of^government but also to create additional institutions through which local participation may be enhanced. In terms of constitutionally-provided powers, the administrative system- of.'the PRC i s a highly centralized one i n which the organs of local government are identified as the local instruments of State authority whose decisions and actions are subject to control and supervision by higher levels of authority i n the ^administrative apparatus.. The local revolutionary committees which are the executive organs of the local people's congresses(the elected representa-:. tive body) are responsible not only to the elected body at their own level but also to the organ of state administration at the next highest level which i s - 1 0 - empowered to suspend or annul decisions taken by. the former. "Local revolu- tionary committees are also subject to the authority of the State Council :::':.L^ which i s ther.highest organ of state power i n the system (P:.R-°.',No'.ll, 17 March 1978, 1 2 ) . Dominating the administrative apparatus at the centre is. the CCP which constitutes the supreme policy-making authority i n the state. Having i t s e l f a highly centralized nature and at each level providing the basis from which legitimate p o l i t i c a l power and authority emanate, the CCP reinforces the common perception of the totalitarian nature of the Chinese governmental system. The coincidence of membership i n the leading organs of Party and State lend support to this?.contention: In.fact,'";however.,:.the:'.leadership of the PRC, li k e the.'.l?,"^ e.lites."bf many other developing countries has been persistent i n i t s opposi- tion to the bureaucratization of the administrative apparatus. As guides to the determination of the distribution of power and authority within the Party and State bureaucracies, Chinese communist ideology has pro- vided i t s leaders with two organizational principles which, theoretically, pro- vide the basis through which both central control and local f l e x i b i l i t y can be achieved. The f i r s t of these i s the Marxist-Leninist principle of demo- cratic-centralism. The concept defines a system of organization i n which the rninority i s subordinate to the majority, the lower level to the higher level, the part to the whole. It i s , as Johnson suggests, in. theory at least,... an effective chain of command...which rests on a fine balance between par t i - cipation and obedience." (Johnson, 1965, 95)..7 Applied to the state and party apparatus the concept implies a freedom of consultation and discussion of policies and actions by a l l levels of the party and state hierarchy while rein- forcing the binding nature on a l l lower echelons of decisions taken at the top..7 -11- The second organizational principle which i s of relevance to the con- cern for the maintenance of a responsive administrative apparatus i s the Maoist concept of the 'mass line ' . The concept calls for the direct p a r t i - cipation of the leadership i n the daily lives and work of the masses. Through this linking of leaders and led, the ideas of the masses are communicated to the leadership where they are then systematized and returned to the masses as concrete policies to be put into practice. In this way an effective two- way communication network i s to be established between the administration and the people, the psychological gap between leaders and led narrowed, and the i n i t i a t i v e of the masses In formulating policies realized (Seldon, 1969, 148- 151). In the now famous document On The Ten Major Relationships formulated i n April 1956, Mao l a i d out the general policy guidelines which were f u r t h e r to clarify the two concepts of democratic-centralism and the 'mass line' i n their application to Chinese reality. In the relationship between the state and the producing units, he argued: It's not right to place everything i n the hands of the central...provincial and municipal authorities without leaving the factories any power of their own, any room for independent action, any benefits...In principle, centralization and independence forming a true unity of opposites, there should be both centra- li z a t i o n and independence.. .Every unit.of production \ must enjoy independence as the correlative of centra- l i z a t i o n i f i t i s to develop more vigorously. (P.R.,No.r*l January 1977, 14). This applied to the agricultural production units as well and was, as the f o l - lowing study w i l l show, meant to provide the local communities with both the material meanss and freedom of action which, i t was f e l t , were necessary for the promotion of the rural industrialization program. I t did not constitute a signal for the complete overthrow of central control In achieving rural Indus- -12- trialidevelopment. Mao was concerned with the overall balance of power i n the central- local relationship. In encouraging local i n i t i a t i v e , he insisted that i t be of a type which would reinforce not reduce national unity: To build a powerful socialist country i t i s impera- tive to have strong and unified central.leader ship and unified planning and discipline throughout the country...At the same time i t i s essential to bring the i n i t i a t i v e of the local authorities into f u l l play and let each locality enjoy the particularity suited to i t s local conditions. (ibid, 17). This principle was to apply not only to relations between the central and local governments but to those between the lower levels as well. The ideal was a system i n which central planning and local i n i t i a t i v e and f l e x i b i l i t y i n 1 plan implementation would be exercised simultaneously. In practice the principles of democratic-centralism and the 'mass line' have been subjected to broad generalizations and have met with variable " degrees of success i n opposing the excessive bureaucratization of both the state and party organizations. Both structures have come under heavy attack at one time' or another from external and internal c r i t i c s for their lack of responsiveness to the needs and demands of the people.The f l e x i b i l i t y with which both of the concepts can be interpreted has meant that, i n their appllca- cation, the policy preferences of the leadership have played a determining role i n deciding whether democracy or centralism, leaders or led w i l l dominate administrative relations. In addition to the desire to counteract the-negative effects of bureau- cratism, Chinese attempts at administrative decentralization have been moti- vated by the recognition of the need for local participation i n socio-economic -13- . development. This applies not only to the role of the local authorities i n promoting local development programs but also to the role of popular p a r t i c i - pation i n these projects. To this end the leadership has experimented with both a deconcentration and a devolution of administrative power to lower levels of the administration as well as promoting the usage of the mass campaign i n mobilizing popular support for higher level i n i t i a t i v e s . In contrast to the linear concept of decentralization expressed i n the Western literature, Chinese attempts to decentralize decision-making authority have been highly elastic i n nature. The contraction and expansion of admini- strative authority and responsibility at various levels of local government has occurred not only as a result of attempts by the leadership to resolve deve- lopmental-problems of a managerial nature but also as a consequence of the shifts i n the priorities which the various leaders have assigned to the di f - ferent socio-economic goals as well as the p o l i t i c a l preferences of the leader- ship as how best to meet them. The Chinese case i s further complicated by the.shifting of administra- tive authority between Party and. State made possible by the introduction of the system of dual rule under which local government branches are held responsible to their corresponding functional branch at the next1 highest level of admini- stration and also the the local party committee which exercises horizontal control over the local state administration.(Schurmann, 1968, 194). Introduced as an attempt to bring some measure of coordination to administrative a c t i v i - ties on a t e r r i t o r i a l basis, dual rule has encouraged the Party to become i n - volved i n the functions of government i t s e l f . The central planners have, there- fore, been reluctant to devolve decision-making powers to local governments fearing a subsequent loss of state control to the local party committee. Sur- prisingly, these state planners have been much more generous i n the delegation -14-.. of decision-making authority to the basic level production units than have the local party committees. Despite the rather tortuous path which administrative reform has follow- ed i n the PRC, there has been a. greater consistency to administrative decen- tralization than might appeartto be the case i n the foregoing discussion. Since the introduction of the commune system i n 1958 there have been few structural alterations made i n the formal administrative apparatus. At the same time, an examination of the rural industrial strategy since 1958 indicates that the leadership has attempted, albeit not without a significant amount of manoeu- vring, to bring a greater rationality to the administrative division of powers. The gradual development of the hsien as an important actor i n the growth of the rural industrial sector provides the best example of the attempt to bring into closer alignment administrative responsibility and local i n i t i a t i v e . At the same time, the Chinese case illustrates the problems inherent i n adapting administrative responsibilities to the area! requirements of ("the di f - ferent technological demands of rural development. Throughout the following pages i t w i l l become apparent that the leadership has yet to resolve the con- tinued tension between the administrative demands of agricultural development and rural industrialization as well as those contained within rural industrial development i t s e l f . Finally, the study of China's rural industrial strategy which follows suggests that the choice of technologies adopted by the leadership acts as a greater barrier to popular entry into the decision-making process than do the institutional constraints of the formal administrative division of powers. At times the leadership has indicated an acute awareness of this fact and has attempted to bring about institutional changes which would f a c i l i t a t e greater popular participation i n the determination of local development-decisions. At other times however, the leadership has tended to pay only l i p s e r v i c e to these issues. The c o n f l i c t among China's e l i t e s over the question of l o c a l "•<":-. control and i n i t i a t i v e has been closely related to t h i s issue of technologi- c a l choice. I t i s a further i n d i c a t i o n of the extent to which the personal choices of the leaderhip have played a v i t a l r o l e i n the determination of the d i s t r i b u t i o n of r e s p o n s i b i l i t y and authority within the system. -16- Chapter Two The Rural Industrialization Program to 1972: Administrative Consequences The Great Leap Forward,1958-1961: Rural industrialization as a program of action did:"not come into i t s own u n t i l 1958 at which time i t s theoretical and organizational basis was far from being firmly established. Prior to t h i s , the adoption of the Stalinist strategy of economic development stressing rapid economic growth, particularly i n the heavy industrial sector, capital-intensive technologies and a reliance on institutional transformation i n order to increase productivity i n agriculture and other sectors of the rural economy, had meant that rural industrial growth had suffered. Indicative of the relative neglect of rural industry and agricul- ture i n the Soviet model was the small share of manufactured goods produced to service agriculture which, i n 1957, amounted to only 16 percent of the total of provincial industrial investment projects (Riskin, 1971, 252). Of particular concern by 1957 was the low level of industrial activity below the level of the provinces which accounted for a mere 3 percent of the gross production value of a l l local industries (ibid, 253). By 1956, the major structural reorganization of the Chinese countryside envisioned by the Soviet model (that i s the formation of agricultural producer cooperatives) had been virtually completed. This had been achieved, however, i n the absence of any appreciable gain i n the agricultural surplus upon which the expansion of the modern industrial sector was so heavily dependent. In addition, the forced rural savings for central investment pri o r i t i e s secured through increased taxation and procurement quotas had acted as a disincentive to agricultural production and had threatened rural s t a b i l i t y i n encouraging peasant discontent with central policy. The model had also failed to increase -17- the food supply to the expanding urban sector and had instead encouraged rapid growth i n the urban population through rural-urban migration (Hofheinz, 1962, 148). By 19573 the need to reverse these trends had become a major concern of the central policy-makers. Improved a g r i c u l t u r a l performance required both increased f e r t i l i z e r application and better methods of water control. The leadership was divided;, moreover, i n the choice of means'.'to achieve these improvements. By emphasizing modern technology i n the form of chemical f e r t i l i z e r plants and mechanized i r r i g a t i o n techniques, the resources of the modern sector could be brought to bear upon the a g r i c u l t u r a l sector. This option would encourage continued cent- r a l control over the a l l o c a t i o n and d i s t r i b u t i o n of the needed inputs.^as i t was the central ministries or t h e i r branch agencies i n the provinces which administered the modern i n d u s t r i a l sector. A heavy reliance upon modern produc- t i o n techniques would also e f f e c t i v e l y l i m i t the role of l o c a l i n i t i a t i v e i n planning new developmental projects .-.There was the additional factor-.as w e l l of encouraging an .uneven pattern of economic growth between regions as the modern sector alone was incapable of supplying the necessary machinery and equipment to a l l r u r a l areas simultaneously. In contrast, the second option which was to.rely upon further s o c i a l r e - organization and large-scale production using t r a d i t i o n a l techniques demanded the active p a r t i c i p a t i o n of the l o c a l population i n the massive projects to transform the physical aspects of the countryside. The effectiveness of the program depended upon an intimate knowledge of the needs and resources a v a i l - able to the l o c a l i t i e s since, i n the main, i t rested upon a pol i c y of r u r a l s e l f - r e l i a n c e . The l o c a l areas themselves would provide, i n accordance with t h i s strategy, the greater share of the resources necesaary to meet the demand for improvementslhi both water control and f e r t i l i z e r application. There was, -18- therefore, the additional incentive that the centre would not be required to divert i t s scarce resources away from the higher p r i o r i t y modern sector. Given the general disillusionment with the impact upon r u r a l economic growth of the highly centralized administrative structure of the Soviet model, the majority of the Party leaders were largely i n favor of some form of admini- s t r a t i v e reform by 1957. E a r l i e r , at the Eighth Party Congress of 1956, i t had been decided that an expansion in! the area and degree of competence of l o c a l government levels was both a desirable and a necessary condition of r u r a l development (Gudoshnikov, 1957,305). However, questions concerning the extent to which economic decision-making power should be decentralized, how much con- t r o l l o c a l levels should have,:and over what areas of the economy, remained unresolved. Conservative opposition to the accelerated s o c i a l reorganization i n the countryside had increased following the economic dislocations created by the rapid a g r i c u l t u r a l c o l l e c t i v i z a t i o n drive of 1956 (Hofheinz, 1962, 149). A major concern of the State Planners was to avoid administrative confusion be- tween the enlarged economic units and e x i s t i n g l o c a l government units follow- ing the amalgamation of several smaller a g r i c u l t u r a l cooperatives. A shortage of s k i l l e d administrators i n conjunction with l i m i t e d production technology added to the management d i f f i c u l t i e s encountered i n the larger cooperatives. The solution proposed by the State Council was to keep the production units small allowing them a considerable degree of management autonomy while expand- ing the p a r t i c i p a t i o n of l o c a l government authorities i n the planning process i t s e l f (Hofheinz, 1962, 149). Decision-making authority over issues -related to production management was to devolve to the producing units with the market providing the main guide to action. At the same time, a deconcentration of administrative r e s p o n s i b i l i t y to l o c a l governments would not interfere with - 1 9 - continued central supervision of the local authorities through their respec- tive functional branches. The series of widespread natural disasters which struck the Chinese main- land i n early 1 9 5 7 combined with Party opposition to a heavy reliance on mater- i a l incentives to increase production performance to frustrate the successful implementation of the above administrative reforms. Over the protestations of the State Planners, Mao and his supporters fought to introduce administrative changes which would., they believed, enhance the powers of the local authori- ties to respond more effectively to the increasingly serious shortcomings of agricultural production."'" Once more the argument for a major devolution of administrative responsibilities i n conjunction with extensive social reorgani- p zation regained momentum. Arising out of the above debate was a strategy for rural development based upon the policy of 'walking on two legs' which has since been attributed to Mao Tse-tung. It called for the application of both modern and indigenous techniques to achieve the simultaneous development of industry and agriculture, of heavy and light industry, and of national and local industries (Sigurdson, 1 9 7 3 s 6 9 ) . By simplifying the bureaucratic apparatus, by leaving controloover'^ the profits from local enterprises i n local hands, and by calling local i n i t i a - tive and responsibility into play, the masses would, i t was argued, be encour- aged to foster growth i n the rural Industrial sector i n order to meet their most immediate needs: ...successful labor-intensive techniques were expect- ed quickly to produce a labor shortage and a demand for simple labor-saving machinery. At the same time., the increased income accruing to the cooperative from i t s use of surplus labor could provide the capital for such simple forms of semi-mechanization. This, i n turn would release labor for further construction but with greater mechanical help. Both the demand for the means r.".' :. -• j'—'-lL'.i-- iiof procuring new tools anoLmachines,would spi r a l ; . . . (Gray, 1 9 7 0 , 5 0 3 ) . - 2 0 - Under s t r i c t Party leadership, centralization over policy, p r i o r i t i e s would be assured while democracy i n plan implementation would be achieved through mass involvement i n the decision-making process. The transferring down of admini- strative cadres (as a result of administrative simplification), was to bring the 'mass line' into action. The form of aclministrative decentralization adopted by the Third Plenum of the CCP Central Committee i n October 1957 was not as; complete as that envir1 sioned above. Rather than being transferred to the producing units themselves, decision-making authority became concentrated i n the hands of the Party "at the local levels of administration (Schurmann, 1969, 206-209). As a consequence, the provincial party apparatus gained a considerable degree of control over previously state-operated, centrally controlled enterprises, over commerce and the transportation system,-and over the allocation of materials and per- sonnel. The system of revenue-sharing was also broadened giving the provinces a significant Increase i n financial power and, thereby, control over invest- ment decisions.(ibid, 208). A similiar pattern, albeit on a smaller scale, rci. occurred at the level of the commune (Ann, 1975, 641-645; Riskin, 1971, 260). The natural impulse to invest i n industrial projects guaranteeing a higher rate of return, led not to the expansion of enterprises producing goods to service agriculture but to the creation of provincial industrial systems which began to compete with the modern sector for scarce resources. Here,--as"T; well as at the commune level, agriculture was subordinated to concerns for more profitable undertakings. In conformity with the policy of self-reliance, agri- culture was squeezed to provide the necessary surplus for local investment pr i o r i t i e s which,tat the level of the commune i n particular, were, more often than not, uneconomical and exceedingly primitive operations. In their haste to -21- make the most of their new-found,- economic powers, provincial and commune party committees contributed to serious disruptions i n the rural economy. In the industrial sector, loss of central control led to declining product quality and output performance, to competition for scarce resources needed for the centrally controlled 'key industries', and to serious transportation bottlenecks,/ More important in'-.terms of the over-all strategy was the decline in agricultural performance brought about i n great part by the concentration of control over economic management decisions i n the hands of the commune party committee. In spite of the failure to realize an improvement i n agricultural per- formance, the 'walking on two legs' approach to rural development was not an irrational approach to China's rural developmental problems of the 1950s/ The shortage of trained administrators and lack of technical expertise, the inadequate transportation system which made the costs of transporting indus- t r i a l goods to-crural areas prohibitive, the scarcity of capital for invest- ment i n modern Industrial expansion to service local needs a l l point to the basic rationality of a program which envisioned a temporary dual strategy of economic development for the Mainland. These same conditions, however, made the adoption of a highly decentralized system of administration especially d i f f i c u l t to implement and control. The leadership had met with l i t t l e success i n their f i r s t attempt to come to terms with the complexities of creating an administrative system which would offer the opportunity to realize both local i n i t i a t i v e and central control. The Great Leap experience indicated to the leadership the d i f f i c u l t i e s inherent i n transferring downward a broad range of decision-making powers for which the requisite administrative talents at the local level were sadly lack- ing. At the same time, i t became apparent that once power had devolved from t' -22- the c'entre to the regional authorities i t became extremely d i f f i c u l t to control i t s subsequent application. As a result, what to the centre appeared to be a major devolution of administrative authority proved to be just the opposite where the individual producing unit was concerned. By 1961, the leadership was s t i l l confronted with the basic.question of how to distribute authority within the administrative system such that the negative consequences for planning and control, and ultimately for the economy, experienced during the Leap would not recur. Tightening of Administrative Control, I96I-I965: The administrative consequences of the Great Leap strategy had been a substantial curbing of the power and authority of the state planners, a marked increase i n the powers of the local party committees at the provincial and ~ commune levels of administration, and the p o l i t i c i z a t i o n of the entire economic system by:-placing authority for economic decisions firmly i n the hands of the Party from top to bottom of the administrative system.' The-role of the. CCP in economic planning decisions has remained a permanent feature of the .Chinese economic system (Howe, 1973, 236). In the realm of economic management, however, the influence of the Party has continued to be a source of contention among '>•' the central leadership. Between 1959 and 1962, decisions were taken by central party and state authorities which were to undo to a considerable extent many of the administra- tive changes associated with Mao's Great Leap strategy. By 1961, steps were taken to curb the excessive power of the provincial party committees by esta- blishing six regional Central Committee Bureaus which, as agents of the Sentre, were delegated the authority to directly supervise many of the major economic activ i t i e s of the provinces. These bureaus were given control over resource.'. allocation, the interprovincial transfer of material, and even over the use and distribution of local resources (Chang, 1975, 145). The State Planning Commission was enlarged inr.1962 and central control over financial management and the banking system re-established (ibid, 144). At the lower levels of ad- ministration, supervision; of much "of local enterprise expansion, education and rural health care, reverted to the state and party authorities at the level of the hsien (Ahn, 1975, 64l). Tax-collection and banking and credit f a c i l i t i e s were also returned to the hsien level of administration, and trade and procurement policies were henceforth to be regulated not by the communes but by the state-controlled supply and marketing agencies organized on a national basis (Ibid, 642-643). These administrative changes, the leadership argued, were necessary on both economic and p o l i t i c a l grounds. The economic dislocations caused by the excesses of poorly planned economic undertakings of the past few years had been worsened by. the presence of serious natural disasters (primarily caused by flooding) i n the 196O-I96I period. In addition, the withdrawal of Soviet technical and material assistance and the subsequent breakdown i n relations between the two countries meant that the PRC would now be forced to rely on i t s own efforts and resources i n i t s attempts to modernize i n a hostile p o l i - t i c a l environment. Given the major shortages of food at that time, China could 111 afford to divert i t s scarce resources into technically backward and eco-. nomically inefficient rural enterprises (Riskin, 1978a,79). In spite of these 'objective' rationalizations made by the leadership, Riskin notes that the excessive chopping-off of even economically efficient rural enterprises during this period suggests that the personal preferences of the leaders themselves were not without influence,(ibid, 83). Subsequent policy choices also indicate that the faction i n control at the centre envision- -24- ed a very different strategy for China's r u r a l i n d u s t r i a l i z a t i o n than that which had enjoyed a b r i e f period of implementation i n the 1958-1961 period. The majority of the h a s t i l y constructed commune and brigade-level enter- prises were shut';down i n the immediate post-leap period, and further expansion was discouraged i n the 1962 Revised Draft of the Regulations Concerning the Rural Communes (Ma Sen, 1977, 186; Ann, 1975, 641). Some small-scale process- ing plants did continue to operate as long as they met the c r i t e r i a of serving agriculture, of s e l f - r e l i a n c e and of not disturbing a g r i c u l t u r a l production through either the drafting of labor or other resources not authorized by the "Regulations'. The production of farm machinery,mainly tractors, remained concentrated i n the larger i n d u s t r i a l centres under p r o v i n c i a l and, i n ""some., cases, central control.(Ma;Sen, 1977, 275):- The.hsien became an important centre f o r the r u r a l tractor stations and w.a'ss primarily concerned with the servicing and renting out of . such equipment to the communes and brigades. Although e f f o r t s to e s t a b l i s h c e n t r a l l y operated trusts c o n t r o l l i n g the pro- duction and maintenance of tractors were interrupted by the Cultural Revolu- t i o n i n 1966, they indicate thetdirection i n which the leadership was headed during t h i s period of 're s t r a i n t ' . At the same time that economic policy-making was being reconcentrated i n the hands of the central au t h o r i t i e s , the factory management was being given greater authority over decisions concerning the d a i l y operations of the enterprise.(Eckstein, 1977, 90-94). The "Seventy A r t i c l e s " passed by the P o l i t - buro i n 1961 gave clear guidelines, for the regulation of industry. A l l non- profit-making • enterprises and a l l c a p i t a l construction outside of the central plan were to cease operations. Consumer goods and small machinery products serving agriculture were to receive p r i o r i t y , production was to be enoeor^ged through the use of material rewards, and r a t i o n a l management stressing e x p e r t -25- tise versus mass participation and quality versus quantity was to prevail (Chang, 1975, 135-136). In terms of planning authority two features of the shift i n policy en- couraged, the expansion of the role of the hsien i n the rural industrialization program. The f i r s t was a shift away from the emphasis on heavy machinery and steel production which encouraged higher level control i n i t s demand for i n - puts and resources, to concern for the establishment of local chemical f e r t i - l i z e r and small-scale agricultural machinery plants using modern technologies. The second was a de-emphasis on the role of human organization i n large-scale water control and irrigation a c t i v i t i e s , and an emphasis instead on the use of'water pumps and electrical power stations (Perkins, 1973, 59). The hsien, while i t did not yet have sufficient resources to produce these modern inputs on i t s own, became important as a coordinating body linking higher level pro- duction with lower level needs. Its resources did, however, lend themselves to serve as the focal point for the establishment of an agro-scientific network which these new industrial inputs were designed to complement. As the state planning unit for the communes, brigades and production teams, the hsien was also In the position to control the character and pace of further rural indus- t r i a l growth at these levels. The hsien was constrained i n i t s role as i n i t i a t o r of rural Industrial strategy by the planning and financial control which was retained by the pro- vinci a l level. The demand for agricultural machinery and alsoufor .̂ modern. teo&-- riologies . • tended to reinforce the provincial role i n rural industrial deve- lopment even though the hsien had assumed a more important role as a coordi- nating agency. There i s some evidence to suggest that the central leadership between 1961 and 1965 envisioned an expansion of the provincial role i n rural industry and that the 'small,' modern and complete' rural plant was to be a temporary phenomenon. The concluding report of the 1965 National Conference -26- held by the State Economic Commission suggests that a more integrated indus- t r i a l system was i n the offing. The report called for the gradual reorgani- zation of China's processing industries by:-; ...turning existing enterprises into specialized factories i n conformity with the needs of production and then organizing wide cooperation on the basis of specialized production... (SCMP 3^58, 12 May 1962, 16-17). These two features, specialization and cooperation, the report concluded, "were an objective law i n developing mass production and a path a l l industrial- ly advanced countries had to take." . The machine-building industry was held up as a case i n point of the uneconomical and unscientific practices presently characterizing China's industries. There i s l i t t l e doubt that the pursuit of such vertically integrated industrial systems would have effectively limited the role of local i n i t i a t i v e i n rural industrial planning. The necessary coordination of production plans which would accompany the vertical integration of industrial production would have (as w i l l be seen later) encouraged the centralization of planning deci- sions as well as management especially where product quality and standards of production were concerned. Implementation of the industrial systems approach was, however, effectively delayed by the intervention of the Maoist-led attack on the negative social and p o l i t i c a l consequences (as perceived by the opposi- tion) of a rural strategy which emphasized sectoral growth i n strategic areas and relied heavily ;.up6n material rewards and:-:the role-.of-."scientific" research i n promoting rural development. Opposition grew as well against a development strategy which encouraged the role of expertise, fostered inequality i n both the economic and social spheres and, according to; later charges, paved the way for spontaneous capitalism to flourish i n the countryside. In terms of administrative power-sharing arrangements, the period repre- - 2 7 - . sented the establishment of a two-track system of control. Much of the author- i t y for planning and control over financial and material allocations for indus- t r i a l expansion which had devolved to the provincial levels of administration during the Great Leap period now reverted to the central state apparatus or was deconcentrated to i t s branch agencies i n the regions and provinces while con%: t r o l of the day-to-day management of economic decisions devolved to the enter- prises and basic-level production units. At the same time, subprovincial levels of government began to assume an increasingly important role i n economic development activities as the admini- strative authority which had become concentrated i n the hands of the provincial party apparatus during the 1958-1961 period was deconcentrated to lower levels of administration. Within the state administrative system, the I 9 6 I - I 9 6 5 re-~a: forms witnessed power flowing i n many directions and into many hands at the r:\ same time with the result that a much more diffuse power-sharing arrangement had evolved by 1965. The role of the Party i n the daily affairs of the enterprise was effec- tively limited by the emphasis of the strategy on technical and managerial expertise and on material rewards. Industrial undertakings at the level of the commune and brigade were substantially curbed, and were limited to relatively minor processing industries which were more i n keeping with their resource capabilities. Also, we see the emergence of the hsien as an important locus for the coordination of an'Agriculture F i r s t ' strategy for rural development a i r r though the provinces retained their control over the financial and technolo- gical resources needed to i n i t i a t e policy. The overall! strategy relied less on local self-reliance which would have encouraged greater autonomy, at the subprovincial level and more on a nation-wide self-reliance which emphasized the development of 'key'industries especially indigenous sources of energy and 'key' educational institutions designed to create a modern scientific community to lead the development process. The Second Leap Forward, 1968-1972: I f the period of rural industrial development throughout the early years of the 1960s can be summarized as an attempt to revolutionize production tech- nology, the Cultural Revolution i s best characterized by i t s attempt to bring about a revolution i n production relations. In i t s emphasis on mass participa- tion, on Party leadership, on egalitarian idealism and normative appeals, the period reflects many of the aims and objectives of the Great Leap Forward. Yet, operating from a different (and more advanced))material base than that which existed i n 1958, the Cultural Revolution constituted a new phase of experimen- tation i n the development of a program designed to foster rural industrial growth. In 1958, the Great Leap strategy had been aimed at the mobilization of. indigenous methods of production (social reorganization of the rural handi- craft industry and of agricultural laborers) to serve the demands of the rural population for consumer.:- goods while the modern sector was to continue to pro- vide agriculture with i t s heavy industrial inputs. From 196I-I965, the strategy- had been to develop rural industry based on the use of modern technology, a sectoral strategy, and an 'Agriculture-First' policy. The Cultural Revolution period aimed at achieving all-round development u t i l i z i n g both modern and indigenous techniques to create self-reliant industrial systems i n the rural areas: All-round development of the local economy was part of a broad model which aimed at promoting Initiative >• for economic growth by giving the lo c a l i t i e s both responsibility and means for transforming their econo-"'.c mic, health, educational, and cultural conditions self- reliant ly . (Riskin, 1978a, 86). - 2 9 - . To achieve the obj ective of all-round development based on local i n i t i a - tive and self-reliance, the two-track system associated with the earlier strategy had to undergo a major transformation. This two-track system had, ironic a l l y , come under attack both for i t s encouragement of bureaucratic centralization and for fostering autarchy and localism among the producing units. The Cultural Revolution reforms were aimed at simplifying the higher levels of administration while reducing the autonomy of the enterprise by reconcentrating control i n the hands of the Party. Mass i n i t i a t i v e was, i n theory, to be institutionalized i n the newly created revolutionary committees (consisting of representatives of Party, Army and masses) which were, however, subordinated to the local party committee or tb the party committee of the enterprise(Bettleheim, 1973, 3 5 ) . ^ One of the most significant, i f only symbolic attempts to curb the bureaucracy at this time was the paring of central ministries and planning agencies whose numbers had been expanded during the 1960s, while expanding the scope and degree of administrative competence of the l o c a l i t i e s (under local party and revolutionary committee control) for overall! development. As Sigurdson argued i n 1973, the paring process may have been more a matter of form than content: Authority and power are l i k e l y to be shared among more people than previously, but the changes i n the central organization seem to be mainly a ques- tion of delegating less urgent matters to local governments while concentrating on those which are essential for promoting over-all economic develop- ment and rapid industrialization. (Sigurdson, 1973, 7 0 ) . In terms of economic management, a considerable degree of local autonomy did devolve to the local party apparatus at the lower levels of administration. Much of the evidence to support this claim stems from attacks on the Cultural Revolution policies which began to appear i n the media i n 1972. Charges of - 3 0 - declining grain output, competition for raw materials, excessive emphasis on sideline production, and tendencies toward localism (producing only for v . : • one's own advancement) were leveUed against local authorities, i n particular the commune and brigade-level management committees (SCMP 4985, 15 Sept. 1971> 118-132; SCMP 5158, 6 June 1972, 94-96). These attacks, beginning as they did as early as 1971, suggest that lower level autonomy, especially at the commune and brigade levels, was more a consequence of a loss of control and discipline than of any preconceived plan for increasing the administrative competence of these levels/ As indicated i n the introductory remarks to this section, the Cultural Revolution strategy for rural industrialization stressed-local i n i t i a t i v e , self- reliance, and the rapid development of small but. complete local industrial sys- tems. Given the emphasis on the development of an industrial base i n the coun- tryside, iron and steel production, electrical power and cement processing became important additions to the earlier expansion of local chemical f e r t i - l i z e r and small agricultural machinery plants. Now, however, under the renew- ed emphasis of the policy, of rural self-reliance, the proximity of decision- makers and planners to the sources of raw material and labor and capital inputs became an important element i n the overall!, strategy. There developed within this framework a division of competence for rural industrial development which corresponded closely with the service to be per- formed and the control over the necessary financial or technological resources essential to the fulfillment of a given function. For example, the planning and implementation of large water conservation schemes involving intercounty cooper- ation, major farmland capital construction projects requiring substantial state assistance, and large-scale agricultural machinery production requiring ad-/ .: c vanced technological inputs f e l l under the jurisdiction of the provincial level, -31- while on a limited scale, the hsien, commune, and brigade assumed^, leadership of these projects (FBIS, 18 June 1971, D 2 ; . 11 Dec. 1970, C4; 4 March 1974, B 1 3 ) . The focal point for the rural industrialization program and to a large extent for many of the social, p o l i t i c a l , and economic activities associated with the policy of rural self-reliance, became the hsien during this period. Hsien authorities established pr i o r i t i e s and quotas for commune and brigade undertakings, organized and mobilized local water conservation and land re- clamation projects:, led local rectification campaigns, operated training pro- grams for technicians i n hsien, commune and brigade-run enterprises, and esta- blished workshops i n the latter (FBIS, 7 Dec. 1970, C7; 28 May 1971, Dl; 22 June 1971 ,C2; SCMP 4855, 2 March 1971, 132-133). The hsien revolutionary cortmittee established p r i o r i t i e s , the direction and speed of development for commune and brigade industries as well as setting down over-all plans and uni- fied arrangements for local industrial development (SCMP 4985, 15 Sept. 1971, 118-132). Many of these activities remained,however, subject to provincial budgetary allocations and provincial plans for the construction of major hydro-electric projects upon which a number of county-led undertakings remain- ed heavily dependent. In this respect, the autonomy of the hsien i n economic decision-making can only be said to have increased relative to i t s position i n I965:..""; Beyond the scope of the state plan which tended to reinforce the control of the centre and the provinces over local industrial development was the rapid expansion of a large number of collectively-owned county, commune and ". :_ brigade enterprises which did enjoy considerable autonomy i n planning and management. In most cases, the planning authority for the industry, depended on i t s level of ownership. The output of state-owned enterprises at a l l levels was, therefore, included i n the state plan while that of collectively-owned -32- industries at and below the level of the hsien was not, with the exception of those producing components for a higher level plant or products for export (Sigurdson, 1977 37-38). Control over this unplanned sector devolved p r i - marily to the county-level planners (Eckstein, 1977,95). However, the communes and brigades also enjoyed a large amount of freedom i n operating these units. The emphasis on local self-reliance i n establishing rural industrial systems was. clearly a major factor i n promoting this autonomy i n planning, par- tic u l a r l y for the expansion of collectively-owned county, commune and brigade enterprises. Since local resources were to be exploited i n expanding rural industry, no higher level approval was necessary so long as the state quota for agricultural and sideline products was f u l f i l l e d , competition for scarce resources with the centrally-operated industries was avoided, and state subsi- dization was not needed (Riskin, 1978a, 88-89). In i t s practical application, the push to rapidly develop the material basis of the commune and brigade levels of ownership led not only to interfer- ence with agricultural production but also to violations of the conditions of their expansion noted above. Local party cadres, anxious to f u l f i l l higher level directives to promote basic-level industrial growth, began to press pro- duction teams to o v e r f u l f l l l targets and quotas and to expand sideline pro- duction to support the expansion of commune and brigade industry. Team laborers began to flock to the rural;:'towns seeking work i n the expanding industrial sector (SCMP 5306, 13 Jan. 1973, 87-88). At the same time, i n their efforts to reduce their dependence upon higher level inputs of agricultural machinery, communes and brigades began to expand their industrial concerns into areas re- served for the hsien, thereby creating conflict over the demands for similar' resource'inputs (SCMP 5158, 6 June 1972, 94-94). The administrative reform of the 1968-1972 period differed i n many areas - 3 3 - - from the reforms of the Great leap era. In comparison, the 1968 reform was more, sophisticated than i t s precursor. Rather than a wholesale devolution of power from the centre to the provincial and commune levels of administration such as occurred during the 1958-1961 period, the administrative changes made after I968 reflected i n part attempts to deal with the requirements of an economy which had become increasingly complex. The functional division of powers be- tween administrative levels with respect to economic responsibilities which had begun to appear i n the 1960s now was further elaborated upon. The competence e of the hsien was expanded i n connection with i t s new responsibilities for small scale rural industrial growth. Similarly,y\ more power devolved to the communes and production brigades to determine to a considerable extent the growth of their collectively-owned enterprises. At the same time, the provinces were . ?T given greater scope i n handling the larger industrial undertakings relating to rural industrialization. It would be naive to conclude from the above that the administrative reforms taken i n 1968 were simply the result of efforts to come to terms with the management requirements of an expanding economy.. The Cultural Revolution was aimed at bringing about significant changes i n a l l spheres of activity i n - cluding the social, p o l i t i c a l and economic. I t represented an attack against not only the excessive bureaucratism of the preceding years but also against an approach to development which fostered specialization and bureaucratic p r i - vilege, and encouraged productivity through material gain, a l l of which acted against the decentralization of administrative power. In terms of industrial development, the decentralizes of the Cultural Revolution era aimed at the creation of a 'horizontally integrated economic system' i n which the workshop, without undermining production efficiency, would become the basis for the edu- cation and socialization of the masses through the forces of technical modern!- -34- zation (Andors, 1974, 26-27). Relying heavily upon local inputs of s k i l l s and resources and men and material, local industries were to develop i n accordance with local needs, a condition of operation which required greater local participation i n the eco- nomic decision-making process. Providing immediate supervision over the deci- sion-making process as well as ideological guidance for the motivation of the decision-makers was the local party committee. And, as i n 1958, this proximity of local party cadres to the decision-making process carried over into the operational!zation of the decisions themselves once again contributing to a blurring of the functions between State and Party and between the Party and the management of the enterprise. As a result, party cadres became caught i n the dilemma of loyalty to the locality and to the enterprise or to the ideo- logical imperatives of the movement leaving them open to charges of localism from above and of commandism from below. In addition, the devolution of administrative•authority to the local levels led to a concentration of production management decision-making i n the hands of the commune and brigade party committees. Production team and enter- prise management were l e f t with l i t t l e latitude i n decision-making, a.situation, which led to serious disruptions for the overall economy.. In their attempts to devolve administrative power for local undertakings to the relevant local authorities, the leadership i n 1968 was faced with pro- blems similar., to those which confronted their counterparts i n 1958. The d i f - f i c u l t i e s of ensuring loyalty to the Party Gentre from the local party cadres remained unresolved. Constraints, on efficient administration also persisted i n the lack of administrative talent among local party cadres, i n part exacerba- ted by the p o l i t i c a l upheavals attending the Cultural Revolution i t s e l f . Added to these were the many problems inherent i n achieving both a rational as well as a more egalitarian distribution of resources working within a framework of a development policy which espoused rural self-reliance. By 1972, however, i t was the failure of the reforms to achieve positive results i n economic perfor- mance which led to the renewed debate among the leadership over the direction i n which the country was moving and over the distribution within the system of the power to determine that direction. It was a debate which was ultimately to explode into another major p o l i t i c a l confrontation at the top of the power hierarchy. Summary: In their attempts to develop a comprehensive program for China's rural industrial development, the leadership of the PRC between 1958 and 1972, had -•. adopted policies which were to have a widely varying impact upon the d i s t r i - bution of power and responsibility i n the system. Each strategy affected oh-.;:- changes i n the sphere of competence between a l l actors In the economys between levels of government, between State and Party, between "government and enter-: I prise, and f i n a l l y between a l l of these and the masses. Yet, after more than fourteen years" of experimentation, the leadership had s t i l l to resolve the contradictions which persisted between central planning and local i n i t i a t i v e within a planned economy. In simple terms of managing an economy as large and diverse as that of the PRC, the complexities are l i k e l y to be enormous. In the simultaneous pur- suit of rural industrial expansion and increased agricultural production these problems are simply magnified. Added to these managerial problems were the p o l i t i c a l implications of a strategy which, i n many instances, assumed an importance i n the on-going debate equal to that of the economic consequences. -36- During this period, the rural industrial base had, imfact, expanded sig- nificantly. From scattered rural handicraft production i n 1958, i t had, by 1972 developed into a f a i r l y comprehensive, although still,immature rural industrial system. The leadership also appears to have attempted to insure a division of competence between levels with respect to responsibility for deve- loping the expansion of local industry. By 1972, the provincial and municipal levels, as the traditional centres of heavy industry, continued to be the major suppliers and planning authority ofuheavy agricultural equipment and e l e c t r i c a l power to the countryside. The hsien for i t s part, provided the main focus for the small-scale rural industrial sector which included chemical f e r t i l i z e r , cement, water pumps and light agricultural machinery, as well as the agricul- tural machinery repair network. Communes and brigades remained primarily occu- pied with agricultural sideline a c t i v i t i e s , small processing industries, and farm machinery repairs (although, i n fact, these act i v i t i e s were increasingly slighted i n the later years of the Cultural Revolution era). Given conditions of plentiful resources or of stable slow growth this division of labor with respect to rural industrialization may have been opera- tive. This w i l l never be known, however, since the leadership adopted a goal of rapid development which encouraged each level to disregard the overall", s t r a ^ tegy i n looking out for i t s own interests. The result was the imbalances which had become f u l l y apparent by. 1971. Chapter Three Rural Industrial Development i n the 1970s: A New Strategy? Between 1972 and 1975, China's rural industrial program was subjected to the attempts of the leadership to reassert the .goals of order and s t a b i l i t y i n Chinese society. By late 1971, signs had begun to'appear i n the Chinese media that the mobilization phase associated with the Cultural Revolution was coming to a c l o s e and that a period of retrenchment and consolidation, similarr to that experienced i n the I96I-I965 period, had taken i t s place. In the economy questions of efficiency, quality control and unified planning,: of rational sys- tems of management and standards of production signaled that, for the time being at least, checks on rapid industrial expansion were being established. The apparent comparability of the 1972-1975 phase of China's rural indus- t r i a l strategy to that adopted i n the early 1960s tended to mask many Important changes which were occurring which were substantively different from the ear- l i e r period, changes which included greater:;, not less, State and Party inter- ference i n the management of the economy. The pattern which was evolving, how- ever, was being strongly resisted by the opposition on the ' l e f t ' , the so- called 'Gang of Pour' associated with the aging Mao. Not u n t i l early 1976, with the death of Mao and the 'gang' effectively silenced, did the new strategy for the mobilization of the Chinese rural economy become f u l l y apparent. Periods of economic mobilization i n the past have been associated with high levels of Party and State involvement, with an emphasis upon the trans- formation of the economy through a reliance on mass enthusiasm and mass cam- paigns reinforced by a high degree of moral suasion to realize rapid increases i n production. Redness or ideological correctness and practical work experience have taken precedence over expertise, collective willpower over technological -38- change, and lower level i n i t i a t i v e over bureaucratic control (Skinner and Winckler, 1969, 432-438). These are the characteristics which accompanied the Great Leap and the Cultural Revolution discussed i n the preceding chapter. In the present period of mobilization which has been evident since 1976, the Party leadership appears to have adopted a combination of techniques to achieve rapid economic growth which represents a significant departure from past mobilization phases. On the one hand, appeals for mass mobilization and collective willpower based upon ideological appeals have been institutionalized i n the National Campaign To Learn From Tachai i n Agriculture. Simultaneously, the leadership has resurrected the role of material incentives to a dominant position i n the campaign to promote rapid economic growth. Similarly, expert:', t i s e , scientific and technological advancement and technical s k i l l s have been given clear precedence over ideological purity or redness just as formal edu- cation has to a considerable extent replaced the highly valued experience of the workplace associated with past campaigns. The effect of the above strategy on the distribution of authority and responsibility i n the economic sphere has been substantial. In terms of rural Industrial development, much of the previously dispersed authority was to be- come concentrated f i r s t at the level of the hsien and later, i n the hands of the provincial party and state planning agencies. Below the level of the hsien the economic importance of commune industrial undertakings has been given precedence over that of the brigade although, since 1976, neither level.enjoys the autonomy which I t had experienced i n the 1968-1972 period. Even the degree of competence of the production team has been seriously compromised by Central policies i n spite of frequent exhortations to lower levels to respect team autonomy. Overall],; the effect of measures adopted by the central authorities i n recent years has been to place restrictions on local planning i n i t i a t i v e -39- with respect to rural industry both through administrative changes and through greater higher level control over resource allocations, to restrict the manage- ment autonomy of the enterprise through the establishment of vertical manager- i a l and industrial networks controlled by the provinces, and to bring the .1 entire rural economic system more f u l l y under the control of the unified plan and the Party. The information upon which the above interpretations are based stems p r i - marily from translations of Chinese press releases from 1970 to May 1978. As a result, the reader i s at the mercy of both the f i l t e r i n g processes involving t the translator and the selection process involved i n my own '^tudieis. The scope of the articles chosen was however f a i r l y broad being concerned with rural de- velopments i n general and with rural industrialization i n particular. These were, therefore, primarily of a local character concerned with the administra- tive levels, at and below the provinces. Unfortunately, the intermediate levels of government (the regions and districts) received l i t t l e coverage i n these materials making i t d i f f i c u l t to assess their areas of competence with respect to rural industrial policy. Their absence may indicate that they have not been considered to have played a .significant role i n rural industrial development although this line of argument remains necessarily weak."'' In examining the translated Chinese texts, the questions which have been asked are those outlined i n the opening pages of the essay which are concerned with the locus of economic planning and management authority with respect to the rural industrial program. Therefore, questions such as which levels are re- sponsible for what type of decisions, and what kind of activities the various administrative levels undertake have, provided the major focus of the examina- tion. In addition, directives passed down by the centre, or central policies outlined i n the o f f i c i a l Party Press, the People's Daily, have been relied - 4 0 - upon to a considerable extent as Indicators of the direction of change even though evidence of their application by lower levels i s not readily available. Judgements made with respect to the distribution of economic planning and management within the present system have been based upon the descriptive con- tent of the articles as well as upon the frequency with which certain levels of administration receive mention i n connection with rural industrialization. Por example, during the 1969-1973 period, reports on county-level involvement i n the rural industrialization program clearly reflected the importance of the hsien i n the over-all strategy for rural mechanization. The importance of the hsien as revealed i n these reports was supported by the observations of visitr- 2 ing experts to China during and immediately following this period. Slmlarly;;. press coverage of the brigade's role i n i n i t i a t i n g rural economic undertakings was likewise substantiated by first-hand observations. Since 1975, however, the rise i n provincial and commune levels of economic activity appears to have c r overshadowed the economic role of these other levels based upon the frequency and content of the reports dealing with activities undertaken at these levels. In enterprise management, the deployment of work teams to lower level production units, increased frequency of telephone conferences between higher and lower, levels, more emphasis on on-the-spot investigations.,, the establish- ment, of special bodies to monitor compliance with standards of quality and out- put performance have a l l been Interpreted as indications of greater central concern and higher level interference with management decisions. Attempts to establish universal accounting practices and financial management committees in conjunction with direct interference i n the areas of credit and loans, and income distribution procedures indicate a narrowing of the financial competence of the individual enterprises and production units. Using the above c r i t e r i a as the basis for an analysis of changes i n the distribution of economic decision-making authority at and below the provin- c i a l level since 1972, and particularly after 1975, the remainder of the chapter has been divided into the two areas of economic planning and product:' tion and financial management i n connection with the rural industrialization program. Following this a summary of the changes i n the distribution of au- thority and responsibility between administrative levels, especially as com- pared to the Cultural Revolution policies with respect to rural Industries, w i l l be given. Centralization of Planning Authority After 1972: The Chinese economy i s predominately a planned economy and as such, the 'unified plan' has. always, i n theory at least, received top priority. Not even the most 'radical' elements within the Party (while encouraging greater admini- strative decentralization) have openly advocated going against the central plan. In spite of this basic consensus over the central role of the unified plan i n the Chinese economy, we have already seen that a considerable lack of agreement at the Centre has existed over questions concerning which sectors the plan i s to include, how specific the plan should be i n handing down targets and assign- ments to the lower levels and primarily, over where the planning i n i t i a t i v e should l i e . Should preliminary plans be forwarded to the centre from the lower units of vice versa? How much f l e x i b i l i t y should be allowed i n the implementa- tion of the plan? Since 1959, the majority of the Party and State leaders have f u l l y re- jected the excessive centralization of planning associated with the Soviet model of the 1950s. Following thi s , however, there have been repeated attempts to determine the optimal distribution of planning authority within the economic system, one which would be both economically efficient and p o l i t i c a l l y accept- able. The Constitution of the PRC places authority for the national economic -42- plan and the state budget i n the hands of the State Council (P.R.,No. 11, 17 March 1978, 11). Local People's Congresses, which are the local organs of state power are empowered by the 1978 constitution to: ...ensure the implementation of the state plan; make plans for local economic and cultural deve- lopment and for public u t i l i t i e s ; examine and approve local economic plans, budgets and f i n a l accounts, (ibid, 12). In practice, the struggles over the desired locus of planning have involved not only a struggle between higher and lower levels of the administration, but also between Party and State at the same levels of the administration. Maintaining the separation of function between Party and State with respect to planning has proven to be an almost Impossible task. As Barnett's study of the state administrative levels i n the 1960s indicates, the over- lapping membership between Party and State cadres i s significant at a l l levels of the adminlstration.lt i s virtua l l y complete at and below the level of the hsien (Barnett, 1966, 430). He concluded from this that Party control over the decisions and functions at each level of government was assured,, a condition which threatened to create conflict within the Party i t s e l f over i t s proper role i n the modernization of the country. The questions which Barnett raised i n connection with the role of the Party i n administrative tasks were concerned with the issues of specialization versus general s k i l l s or redness versus expertise, which have long been a ••re- source of debate within the Party. There i s also another Issue which i s raised by the approximation of Party and State i n connection with a decision to decen- tralize administrative competence. In linking i t s interests to a particular level of administration, and i n actual fact,becoming a level of administration i t s e l f , the local party committee has tended to lose sight of the general pic- ture. The check oh localism which-the Party provides by virtue of i t s overall! -ItS- perspective i s thereby weakened. This became evident during the Great Leap when the party committees of the provinces began to develop independent eco- nomic systems at odds with the overall plan and resurfaced under the decentra- l i z i n g influence of the Cultural Revolution. During this period, the role of state planning was seriously downplayed. As a result of the narrow economic localism that characterized the period, growth i n certain sectors of the economy was impressive while the overall economic picture was far from satis- factory. In the five years between 1967 and 1972, China's grain production had increased by just over 4 percent while her population had grown at an estimated 2 percent per annum. On the whole, i t i s estimated that food production, inclu- ding animal and vegetable sources probably only just matched population growth while industrial crops fared l i t t l e better (Eckstein, 1977, 210 and 226; 211- 212). At the same time, small-scale industrial growth i n some areas at least had been impressive. The output of small-scale cement plants quadrupled reach- ing 50 percent of total national output. Small-scale production of tractors (15 horsepower garden units) increased eight-fold, machine tool production doubled while small-scale f e r t i l i z e r plants began to produce more than 50 per- cent of China's nitrogenous and 75 percent of i t s phosphate f e r t i l i z e r s . This upsurge i n rural Industrial growth was not achieved without nega- tive consequences especially i n the form of raw material shortages (coal and iron ore i n particular), and transportation bottlenecks similarr to those experienced during the Great Leap. Agricultural performance had failed to show any dramatic improvement while regional disparities i n economic growth had begun to assume strategic importance i n the future overall growth of the economy. Opposition to anarchy i n planning had, as Riskin suggests, become a -44- generally accepted position by 1972 (Riskin. 1978a, 98). In the rural indus^ t r i a l sector, i n addition to the raw material shortages, wide discrepancies i n product quality, neglect of machinery repairs, product duplication and waste, and localism (neglect of the unified plan) were widespread problems. Agricultural production suffered from an underinvestment of time, labor and capital, a l l as a direct consequence of the diverting of resources into the more lucrative industrial sector (PBIS, 18 June 1971, C8, D2; 10 June 1971, G2). Other problems Included the neglect of backward teams and brigades as county and commune planners naturally attempted to. channel their investments into the more productive areas guaranteeing higher returns. Two factors tend- ed to.: encourage this neglect. The f i r s t was the excessive emphasis on self- reliance which, given ahsunequal.distribution of resources, fostered uneven growth between regions. In addition, basing local government income primar?-.- l l y on local Industrial profits encouraged greater investments i n those regions where a higher agricultural surplus could guarantee a market for industrial goods. It also tended to foster expansion of the sideline production of indus- t r i a l crops at the expense of low-earning food crops frustrating the nation- wide goal of local self-sufficiency i n grain production (FBIS, 12 March 1973, D2). Such redistributive mechanisms as existed failed to offset the trend 5 toward greater inequality between rural units. The f i r s t steps taken by the centre to rectify the rural economic s i t u - ation were to re-establish the primacy of agricultural production i n the "„.:.J national development strategy which involved reasserting the autonomy of the production team with regard to questions of labor allocation and production management(SCMP 5209, 24 August 1972, 54-56). Commune and brigade management committees were subjected to hsien-led investigation and rectification for the i l l e g a l drafting of team labor to service their industrial concerns and for the encouragement of industrial crop and sideline production to the ne- glect of grain (SCMP.5196, 6 August 1972, 114-117). And, despite the increased polemics evident during the early 1970s with respect to advancing to a higher stage of socialist ownership, the 1975 Constitution reaffirmed the three levels of collective ownership with the production team as the basic unit of account (P.R., No.4, 24 January 1975, 14).^ With respect to independence i n economic planning, team autonomy has,in practice,been circumscribed by i t s prior obligations to the State i n terms of agricultural taxes and procurement quotas.for agricultural and sideline produc- tion. There are Indications, however, which suggest that, at least i n the early 1970s, the team was able to influence a revision of the plans when they were judged to be excessive i n their demands. Such was the case of a production team i n Pukien Province which was successful i n opposing county plans to expand the acreage of rice paddles (FBIS, 16 March 1973, CI). Bastid has also noted that during this same period the production team was free to reject advanced produc- tion experiences such as the Tachai model (Bastid, 1973, 178). In a more nega- tive l i g h t , the teams have simply failed to f u l f i l l the assignments handed down to them which have been deemed .unacceptable although this form of opposi- tion i s soundly discouraged (SCMP 5158, 6 June 1972, 94-96). Within the guidelines of the 'unified plan' the right of the team to de- termine i t s own seed selection, sowing times, land reclamation tasks and man- power allocation has been constantly reaffirmed i n directives from the centre and violations of these rights by commune and brigade management committees have received harsh criticism. In spite of these repeated attacks on trans- gressions of team rights, the situation remains unresolved. In some cases i t -46- appears to have worsened to the point ©f the misappropriation of team funds and materials (FBIS, 17 Feb. 1978, El6). The strategic role of the production team i n the push-""to mechanize agricultural production has to be seen as the primary instigation of this continuing conflict of interest i n the country- side. China's rural industrialization strategy i s heavily dependent upon agricultural output since i t i s agriculture which, i n the i n i t i a l stages, pro- vides the capital, raw materials and labor inputs necessary to generate indus- t r i a l growth. Its ownership of the major portion of the means of agricultural production makes the production team an important economic actor i n the rural industrial sector even though i t does not necessarily own or operate i t s own enterprises. Team income distribution plans which govern the allocation of funds for consumption and investment, i t s manpower allocation decisions, as well as the type of crops grown and the extent of team sideline activities are necessarily of immediate concern to hsien, commune and brigade enterprises which depend on these inputs from agriculture to sustain their growth. There i s , therefore, a constant pressure upon these levels to interfere with team plans, an activity which has to date tended to have a negative impact on agri- cultural performance. .-- t" As the pressure for rapid mechanization increases, as i t has'in recent years, the contradictions inherent i n the desirability of team autonomy and the dependence of rural industrial growth on agricultural output are l i k e l y to be exacerbated. This may encourage the adoption of even greater controlling mecha- nisms than those already exercised by the centre to prevent the undesirable violations of team autonomy. On the basis of present information, higher level interference i n the planning processes of the production teams already appears -47- to have begun. Since 1976, the centre has attempted to provide a degree of predictabil- i t y i n terms of the availability of team resources for the rural industrial program. Most of these 'reforms' have been concerned with questions of manage- ment and financial practices and w i l l be treated i n the following sections. A major change has, however, occurred with respect to the annual tê am plans which, u n t i l very recently, have i n the fashion of a l l other production units been formulated at the beginning of the year i n accordance with the targets and quotas established by the state plan, and further refined by the communes and brigades (Bastid, 1973 } 169). As of A p r i l 1978, productiontteams have been required to publish their production plans one year i n advance (FBIS, 13 A p r i l 1978, Gl). The objective i s to permit greater certainty i n formulating plans for investment i n rural enterprises since the amount to be shared between state, collective and individual are predetermined. Under the system of fixed produc- tion quotas i n which tasks, time limits and work points are'fixed, i t i s the production unit (and the individual peasant) which w i l l bear the burden should the plans remain unfulfilled at the end of the year (FBIS, 15 March 1978, H8). • M c To ensure local cooperation with this new policy large numbers of higher level cadres have been sent down to 'assist i n formulating' these advance plans. In this way, the leadership hopes to regain some control over the basic-level planning act i v i t i e s while retaining some measure of local f l e x i b i l i t y by decon- centrating authority to i t s work teams operating i n the f i e l d . It would appear from present trends that the production teams w i l l be closely supervised by the higher level cadres (from the hsien level and above) to ensure that the goal o of rapid agricultural mechanization w i l l not be sacrificed to the immediate consumption gains of the peasantry. The degree of competence enjoyed by the communes and brigades i n pro- moting the r u r a l i n d u s t r i a l strategy has also suffered a setback as a res u l t of the recent upsurge i n the pace of r u r a l i n d u s t r i a l i z a t i o n . During the 1968- 1972 period, t h i s largely unplanned sector of the economy had experienced per- haps as much autonomy i n planning as i t had during i t s i n i t i a l phase of expan- sion under the influence of the p o l i c i e s of the Great Leap. By 1972, signs of r e s t r a i n t had begun to appear which increasingly affected the a b i l i t y of these two levels to i n i t i a t e new projects. One of the e a r l i e s t indications of a curb- ing of a c t i v i t i e s was the cutback i n team labor which could be drafted by these industries to the 5 percent levels established i n 1962 (SCMP 5196, 6 Aug. 1972, 114-117). Given the labor-intensive nature of these enterprises, these cutbacks necessarily imposed severe r e s t r i c t i o n s on the expansion of e x i s t i n g undertak- ings/ As a r e s u l t , considerable vi o l a t i o n s of labor practices continued to 'rr. frustrate the central authorities (SCMP 5456, 4 Sept. 1973, 30). An i n d i c a t i o n of the seriousness of the labor question appeared as l a t e as November 1977 when directives issued from the centre demanded that commune and brigade enter- prises i n t e r f e r i n g ; with a g r i c u l t u r a l production "should be resolutely chopped o f f . " (FBIS, 9 Nov. 1977, H l l ) J Commune and brigade authorities also were under attack during t h i s period for t h e i r neglect of a g r i c u l t u r a l machinery repair services while pursuing the more luc r a t i v e interests which brought them into competition with hsien-level industries for resources (FBIS, 28 Feb. 1973, H7). Criticisms were also levied against the production of complete units rather than machinery parts which co 1 could be mass-produced and coordinated on an industry-wide basis. As a model for emulation (one of the most widely practiced means used to achieve uni- formity throughout the system) the centre c i t e d one region i n which seventy- -49- seven plants had cooperated to produce a single tractor (SCMP 5982, 13 Nov. 19753 76). This practice, the centre argued, permitted a reduction i n the num- ber roif new factories being b u i l t , limited the demand for labor by. taking ad- vantage of mass production and satisfied the demand for uniform-standards of production while reducing overall! costs. The actual impact of these attempts to reorient and restrain commune and brigade industrial practices remained frustrated throughout the 1972-1976 period by the increasing intensity of the power struggle between 'moderates' cr-and 'radicals' being waged at the centre. This struggle, which i n 1976 became an open conflict over the rights to succession, involved i n i t s broadest impli- cations the right to determine the direction which China's future development would take. In a more limited sense, the conflict revolved around the question of p r i o r i t i e s with respect to the role of social organization as.opposed to technological change i n promoting socialist development. The implications of the above conflict for the distribution of adminis-r trative power and responsibility within the system remain obscure.'; The Party (particularly the local party committee) stood to gain i n administrative i n f l u - ence from a policy relying on the mobilization of the masses primarily through the use of ideological exhortation,to expand the basis of collective ownership. In contrast, industrial development on the basis of technological change would encourage the introduction of systems and standards of production, foster the role of expertise and the use of material incentives to reward excellence In production performance ,and i n general, would enhance the role of specialized state industrial branches i n directing rural industrial development. The strategy preferred.by the 'radicals' was one of expanding the commune economy on the basis of rapid growth achieved through local i n i t i a t i v e and ~.'.oz -50- l o c a l planning r e s p o n s i b i l i t y . I t therefore envisioned a substantial devolu- t i o n of planning authority to the l o c a l i t y while the l o c a l party committee, through i d e o l o g i c a l education, would shoulder the r e s p o n s i b i l i t y of guiding l o c a l economic development along the l i n e s of national objectives. The l o c a l party committee was to act as a check on narrow economic localism. This approach, the moderates charged, had led to anarchy I n production planning and had encouraged the growth of c a p i t a l i s t tendencies among commune and brigade-run enterprises''(FBIS, 6 A p r i l 1978, E l l ) . To the moderate faction i t was precisely because of the increased economic importance of the commune and brigade-run enterprises i n the o v e r a l l economy that I t was deemed impera- t i v e that higher l e v e l control be exercised. The production i n e f f i c i e n c i e s , high costs and economic i n s t a b i l i t i e s of these b a s i c - l e v e l industries could no longer be tolerated i n a system i n which t h e i r economic r o l e had advanced to the point of threatening o v e r a l l economic s t a b i l i t y . "This state of a f f a i r s " the leadership argued, "must be changed rapidly. The development of commune- run and brigade-run enterprises including t h e i r production, supply and market- ing a c t i v i t i e s must be included i n the l o c a l plans at and above the county l e v e l . " (FBIS, 6 A p r i l 1978, E12; emphasis added). Witfththis decision, the authority which had devolved to the commune and brigade levels of industry (by virtue of t h e i r i n c l u s i o n i n the unplanned sector of the economy) ended. Of p a r t i c u l a r interest i n r e l a t i o n to the above decision was the universality with which i t was to be applied. Even those industries which were economically operated at the commune l e v e l were to be included under a higher l e v e l planning authority. In contrast to Maddick's proposal that l o c a l administrative maturity.should bring added authority to the l o c a l i t y , the Chinese case since 1976 Indicates the d i f f i c u l t i e s involved i n decentralizing authority over economic development when the economic importance of local industries begins to affect national economic concerns. The decline i n commune and brigade authority i n setting out plans for the development of their own enterprises did not signal an increase i n the import- ance of the county-level planning authority. At the Second National Conferences on Learning Prom Tachai i n Agriculture and Prom Taching i n Industry held In December 1976 and Apri l 1977 respectively, the division of competence between hsien and provincial authority with respect to the rural industrialization pro- gram was outlined. In building Tachai-type counties, the hsien party committee was to act i n the capacity of a key link according to the six c r i t e r i a esta- blished by Chairman Hua Kuo-feng. This did not mean that the county would provide the main i n i t i a t i v e i n promoting rural industrial development. The primary role of the hsien was to act as a coordinating link for policies and plans established higher up i n the administrative hierarchy, and to mobilize the energies of the masses to f u l f i l l the ambitious plans of the leadership. The i n i t i a t i v e i n the movement was to come from the provincial and/or prefec- tural levels (P.R., No. 2, 7 Jan. 1977, 17). . As far as agricultural mechanization was concerned, the provinces were clearly to take the lead: The situation w i l l improve rapidly i f the provin- c i a l party committee firmly keeps leadership of agricultural mechanization i n i t s own hands, the secretaries take command of i t and the whole party takes action to integrate agricultural mechaniza- tion with the movement to learn from Tachai i n agriculture and develop agriculture and industry at the same time. (FBIS, 2 June 1977, El4). To meet this demand planning and coordinating agencies have been set up at the provincial levels to oversee commune and brigade industrial operations (Riskin, 1978b, 686). In addition, higher party cadres at the level of the provinces',' • municipalities and central departments have been urged to become 'experts' In -52- understanding economic development as well as paying attention to ideological work and class struggle (P.R., No.2, 7 Jan. 1977, 17). This emphasis on expertise may represent an attempt by the Party to avoid suffering a loss of influence vis a. vis the state planners where plan- ning decisions of a highly technical nature need to be taken. The concentration of effort on acquiring the requisite s k i l l s to make such decisions at and above the level of the province suggests that much of the planning and decision-mak- ing concerning industrial development w i l l be supervised, i f not actually undertaken, by party experts i n the traditional centres of industrial activity. At the same time, organizational s k i l l s and ideological fervor remain important features of the county-led strategy to promote the physical transformation of the countryside through the use of mass campaigns. The emphasis of the industrial strategy i s clearly on expanding the basic industries i n steel, mining, chemicals, fuel and power, industries to be under- taken by the'"Centre and the provinces. Attention therefore i s to be paid to the conservation of materials, energy, and capital i n the mechanization of agricultural production, a strategy which demands a higher level of authority i n planning the allocation of these s t i l l scarce resources. In terms of the planning authority for rural industry, the present sys- tem represents a f a i r l y substantial reconcentration of power In the hands of the provincial party apparatus. In comparison to the 1968-1972 period, the hsien has declined i n importance as the planning level for much of the indus- t r i a l expansion at and below the county. The hsien now appears to be much more important as a supervisor of coordinator of lower level industrial deve- lopment activity acting i n the capacity of a f i e l d administration for the . provincial industrial planning apparatus, while the largest portion of rural Industrial activity i s now occurring i n the communes. At the same time, both -53- the provinces and; the hsien have deconcentrated at least some administrative authority to workteams sent down from higher levels to oversee the implementa- tion of Party policies but also to provide the necessary first-hand observa- tion of local reactions to plans formulated by higher levels. Although o f f i c i a l Party pronouncements insist that local input into rural industrial planning i s significant, the emphasis on technological improvements and economic efficie n - cy and the priority given to developing the basic industries suggests that such input as there i s from the locality must necessarily be limited. It should be emphasized that the present Industrial planning system does not represent a return to the highly centralized planning apparatus which domi- nated the early 1950s. Nor i s there evidence of the centrally-operated trusts which, during the I96I-I965 period, began to operate as vi r t u a l l y independent/ industrial systems beyond the reaches of local governments. There continues to be a substantial devolution of authority fnom the centre to the provinces with respect to industrial planning, and formal Party statements indicate that regional economic development (referring to the self-reliant development of the six major t e r r i t o r i a l regions of the north, northeast, northwest, southwest, z central-south, and east China) w i l l continue to dominate the Chinese approach to planned economic development (P.R., No. 22, 27 May 1977, 17). The Decline i n Basic-level Production and Financial Management After 1972: As M the case with respect to economic planning, the 1970s have w i t - ^ • nessed a gradual decline i n local authority and control over production and financial management i n the producing units and rural enterprises. Two trends, i n fact, appear to be underway simultaneously. The present period of economic mobilization has encouraged a movement toward higher level control over the management and accounting practices,of rural Industries by making them account- able, not to.'the ;demanas:of the local population or authorities, but to plan-r. . -54- ners at higher levels of the state administration. This reflects the overall trend i n industrial development to respond to functional rather than to t e r r i t o r i a l branches of the admirristfative.'apparatus. A second trend, marked by the recent shift toward the adoption of pro- f i t a b i l i t y as a means of evaluating the performance of an enterprise, suggests that at least some of the production decisions have devolved to the enter- prises themselves as they respond to the demands of the market for their goods. In general, the pattern appears to be one of establishing management principles and practices as well as accounting procedures and production standards at '..A. higher levels while leaving to the factory management the responsibility to " make the necessary decisions concerning how the c r i t e r i a of profitability,given the limited availability of local talents and material resources, i s to best be met. Self-reliance i n rural industrial development does not, as Perkins points out, mean that each local enterprise i s to become completely self-sufficient i n production but rather that the enterprise expects to receive inputs from within the planning system i n which i t operates (Perkins, 1977, 15). In pracfe:! t i c e , commune and brigade-run enterprises receive the majority of their inputs from within their own county while the county, i n turn, receives inputs from the major urban factories controlled by provincial planners (SCMP 5906, 7 Oct. 1975, 213-214). This assistance comes to the factories i n the form of advice from technical experts, transfers of technology and used equipment. Only i n the most backward communes and brigades or i n the case of natural disasters can the local units expect financial or material assistance from the State (SCMP 5982, 13 Nov. 1975, 73-77). To speak of enterprise autonomy therefore one must speak only i n relative terms for the dependency of lower level units upon pro- vinci a l or central inputs of advanced technologies necessarily limits the -55- degree of freedom with which the local authorities are able to execute their plans. As basic level plants are pushed to adopt more advanced production techniques requiring even greater inputs of modern technology and up-to-date equipment, the independence of rural enterprises i s l i k e l y to be increasingly compromised. The choices made by policy-makers i n terms of the promotion of modern techniques versus indigenous technological innovation w i l l have a large impact on the management autonomy of local f i r m s . ^ The autonomy of local industrial undertakings i s also affected by the extent to which the policies adopted- by the Centre.encourage the development o of small but complete local industrial systems as opposed to greater special- ization and production of components. The former reduces the demand for expand- ed transportation networks and for the vertical coordination 6S production. The disadvantage l i e s i n the restricted market which the plant can serve which w i l l ultimately limit growth. A policy favoring small complete plants also en- courages a duplication of production and a subsequent waste of scarce raw mater- i a l s since the smaller plants typically have less efficient production process- es."' It:;;might, however, be economically efficient i n the short-run as i t en-r" bles the employment of rural labor i n the offseason and at wage rates below those of the larger urban enterprises. It also makes possible the use of infer- ior inputs i n the form of raw materials and equipment and depends less oh the standardization of product quality. The choice of large-scale specialized production on the other hand, while taking advantage of economies of scale, requires extensive interplant coordi- nation. I t also increases the pressure for standardization of product.size and quality, for more accurate:: plarning and detailed output targets, and an e f f i - cient transportation and communication network which w i l l ensure that the f i n a l -56- product w i l l be assembled and delivered where and when i t i s needed. The ad- ministrative demands of t h i s strategy are therefore much more complex than those required.by the small and complete model. More importantly i n terms of the present discussion, the administrative requirements of the l a t t e r pattern of i n d u s t r i a l i z a t i o n necessarily involve a higher l e v e l of authority and re- s p o n s i b i l i t y both for planning and f o r economic management i n order to coordi- nate the production e f f o r t s of multiple l o c a l firms. The decisions of policy-makers over whether to adopt a r u r a l i n d u s t r i a l - i z a t i o n program based upon small but complete units versus large-scale s p e c i a l - ized production and indigenous labor-intensive techniques versus modern techno- logy and greater c a p i t a l requirements w i l l be influenced both by the a v a i l a b i l i - ty of the necessary resources f o r the adoption of either strategy and by the preferences of the leadership, on p o l i t i c a l , s o c i a l or economic grounds, for one strategy over the other. In the 1950s, China had neither the necessary infrastructure nor s u f f i c i e n t c a p i t a l to choose the modern, specialized system of i n d u s t r i a l organization unless i t was w i l l i n g to l i m i t r u r a l i n d u s t r i a l deve- lopment for an extended period of time, r e l y heavily on foreign assistance to subsidize the modern i n d u s t r i a l sector, and forego i t s p o l i t i c a l goals of r e - ducing the gap between c i t y and countryside, workers and peasants, and mental and manual labor. By the 1970s, however,' many of these conditions had changed. Improved transportation and communication.1 systems, an expanded modern i n d u s t r i a l and technological base, greater numbers of experienced administra- tors and s k i l l e d technicians had by the 1970s increased the p o s s i b i l i t y of developing modern i n d u s t r i a l networks l i n k i n g the r u r a l areas to the c i t y . This base was not so large nor so improved as to achieve the simultaneous develop- ment of v e r t i c a l l y integrated modern i n d u s t r i a l networks on a country-wide basis. Some of the more industrially advanced plants and regions could be expected to benefit i n i t i a l l y from the stimulus to production which the inte- grated systems would create while others would for some time be required to f a l l back on their own resources. As an alternative the leadership could opt for the development of independent local industrial systems relying on both modern and indigenous inputs which would be coordinated with developments i n education, culture, health and welfare services on a t e r r i t o r i a l basis perhaps at the level of the hsien. This model would provide for slower growth i n the i n i t i a l stages and would s t i l l require some dependence upon outside technical assistance as well as a higher level redistributive process to offset the im- balances i n the distribution of natural resources but would also induce local plants to produce to meet local needs and encourage mass i n i t i a t i v e i n advan- cing community development. The strategy, adopted by the leadership since 1976 appears to conform more closely to the pattern of vertically integrated specialized production processes than to the latter model discussed. The present rural industrial policy represents an attempt to f u l l y exploit the resources of communes, b r i - gades and production teams to feed the expansion of vertically controlled specialized industrial systems operated by the provinces. Agriculture and mainly sideline production w i l l supply the inputs to achieve the rapid expan- sion of commune and brigade industries using indigenous techniques of produc- tion which w i l l , i n turn, generate the capital to "provide the modern technical inputs to county and provincial industries. The process i s best Illustrated i n the following account of Chairman^Hua's statements to the F i f t h National n :o,.\. People 1s Congress: In order to rapidly develop agriculture, i t i s essential to engage i n socialist agriculture i n a big way, carry out large scale farmland capital -58- construction, and use modern technology to mecha-. ize agriculture. A l l this requires large amounts of capital equipment and. technical forces. Where does the capital come from? Since agriculture's finan- c i a l accumulation i s very low, the problem should be solved by relying mainly on the efforts td deve- lop rural sideline occupations and on the financial accumulation of the commune-run and brigade-run enterprises. (FBIS, 6 April 1978, E10). In those areas i n which commune industries are more advanced they w i l l also serve large Industries (FBIS, 27 Feb. 1978, E10). In other words, the advanced commune-run industries are, l i k e the county-run factories, to be integrated into the provlncially controlled vertical industrial systems which w i l l supply agriculture with i t s needed machinery. The cycle i s thereby completed without large-scale capital inputs into agricultural machinery production from the Centre. The establishment of interdependent systems such as that presently pur- sued by the Chinese leadership w i l l have certain obvious repercussions on the freedom of local enterprises and production units to control their own produc- tion and financial processes. In the f i r s t place, since agricultural mechani- zation i s dependent upon locally generated capital, i t becomes extremely impor- tant that commune and brigade-operated factories produce efficiently and oper- ate profitably. At the same time care must be taken to insure that communes and brigades do not violate the rights or property of the production teams, compete with agriculture for resources or i n any way disturb the agricultural cycle. Both of these objectives require increased higher level control and supervi- sion since, as was argued earlier, the natural inclination of the commune and brigade enterprises i n responding to higher level pressures to increase produc- tion w i l l be to squeeze the production teams for labor, capital and industrial crop production. The f i r s t signs that the commune and brigade-run factories were to play -59- a strategic economic. role i n the o v e r a l l strategy to rapidly develop r u r a l industry appeared at the National Conference on Learning From Tachai held i n September 1975. Following three years of attacks against the excesses committed by. commune and brigade industries, the clear emphasis attached to t h i s l e v e l of i n d u s t r i a l i z a t i o n by Vice- Chairman Hua Kuo-feng signaled the introduction of the new r u r a l p o l i c y : The expansion of commune and brigade-run enterprises strengthens the economy at the commune and brigade l e v e l s ; i t has e f f e c t i v e l y helped the poorer brigades and teams, accelerated farm production, supported na^Iovr. t i o n a l construction and speeded up the pace of mecha- niz a t i o n of agriculture. I t constitutes an Important material guarantee f o r the further development of the people's commune system. (P.R., No.44, 31 $ct. 1975, 10). The conference c a l l e d for the rapid expansion of the entire farm machinery i n - dustry and for the development of 100 Tachai-type counties to be re a l i z e d i n each of the following f i v e years. In concrete terms the strategy aimed at the mechanization of 70 percent of the major jobs i n farming, forestry, animal husbandry, sideline occupations and f i s h i n g by the year 1980 (P.R., No.48, 28 Nov. 1975, 9) . The movement, according to Hua, was comparable i n importance and scope to that of a l l preceding experiences i n the s o c i a l i s t transformation of agriculture. As i n previous campaigns, firm centralized Party leadership was essen t i a l , he argued, for the vic t o r y of the movement. Despite the ambitious goals expressed at the conference i t soon became apparent that the leadership was not':interested i n the unplanned expansion of the multiple small-scale^undertakings at the commune and brigade l e v e l s . P r o v i n c i a l l e v e l party committees were directed to strengthen t h e i r leadership over the movement (SCMP 5974, 12 Oct. 1975, 167). P r i o r i t y was to be given to the planned production of parts and a d i v i s i o n of labor established between province, county, and commune i n d u s t r i a l production with the major concerns - 6 0 - . concentrated at the top and minor manufacturing and repairs further down the administrative ladder. Paralleling this division of competence with respect to industrial undertakings the leadership envisioned the establishment of ver t i c a l - ly integrated systems of production i n which a division of labor would be work- ed out between levels producing specialized parts. "In this way" i t was argued, "the potential of the existing factories i s f u l l y u t i l i z e d and mass production ... made possible without more new factories. As a result, investment needs are small... standards high and costs kept low." (SCMP 5982, 13 Nov. 1975, 76). In Anwhei Province more than 100,000 provincial level cadres i n the form of work teams were sent to the basic levels to oversee the implementation of the Party policy, a pattern which was repeated dn a similar- scale i n numerous other provinces and regions throughout 1976 (FBIS, 4 Jan. 1977, Gl - 7 ; K3; L5; 13 Jan. 1977, M7). In spite of the intensified campaign to increase the efficiency of exist- ing enterprises, the impact on agricultural performance by the end of 1976 had been negligible. According to later reports serious disruptions to the economy had occurred i n several provinces as a.result of the negative impact on produc- tion by the ;,Gang of Four' (P.R., No.2, 7 -Jan. 1977, 10-12). whatever the ex̂ ... tent of the damage done to the economy by the struggle for power at the Centre, the winning faction, under the leadership of Hua Kuo-feng clearly intended to make up for past shortcomings. At the Second National Tachai Conference held In December 1976, Ch'en Yung-kuei, vice-premier of the State Council, l a i d the groundwork for the leap into mechanized farming: We must race against time, surmount a l l d i f f i c u l t i e s and resolutely push forward farm mechanization work ...rely on the masses... and the s p i r i t of self-re eiiance, make f u l l use of local resources and ener- getically expand small local industries and manufac- ture of farm machinery...(P.R., No.2, 7 Jan. 1977, 15). At the l e v e l of the production team, the effects of the mobilization campaign spread to nearly every aspect of team competence. The team's author- i t y to direct i t s own f i n a n c i a l and management a f f a i r s has been circumscribed by the presence of p r o v i n c i a l l e v e l work teams sent down to correct lags i n planting, f a i l u r e s to meet the plans f o r f e r t i l i z e r c o l l e c t i o n and I n d u s t r i a l crop production, and most importantly, f a i l u r e to implement the Party's p o l - icy with respect to work point d i s t r i b u t i o n . The practice of a l l o c a t i n g work points on an e g a l i t a r i a n basis had, i t appears, become a f a i r l y widespread phenomenon among the production teams. Now a uniform system of workpoint a l l o c a t i o n based upon quantity and quality of work performed was to be implemented and, i n some cases, the old piece-rate system i s to be re-introduced. Commune and brigade investigation teams have gone,into i n d i v i d u a l households to demand a return of overpayments. Team ;,:o~v\ accounts and warehouses have been examined for instances of hoarding'(FBIS, 18 Jan. 1978, H2; 1 March 1978, H4). In Kwangtung, work teams of county-level banking cadres were sent down to the basic levels to work out d i s t r i b u t i o n plans and to persuade advanced teams to supplement backward teams In f u l f i l l i n g state quotas (FBIS, 23 Jan. 1978, H4). Labor management 'systems' have been set up by communes and brigades (under higher l e v e l direction) to cover most farming tasks to which fi x e d production quotas based upon s k i l l , quantity and quality of labor are to be applied. Individual r e s p o n s i b i l i t y , or what has been termed 'post' responsi- b i l i t y , has been assigned to team members for the f u l f i l l m e n t of specialized tasks (FBIS, m March 1978, J l ) . F a i l u r e to meet the c r i t e r i a established by these systems res u l t s i n l o s t work points. Overproduction w i l l be rewarded. In order to create additional s t a b i l i t y and p r e d i c t a b i l i t y i n income d i s t r i b u t i o n management production teams have been directed to set up -62- permanent f i n a n c i a l management groups consisting of cadres, f i n a n c i a l person- nel and poor peasants whose r e s p o n s i b i l i t i e s w i l l include the checking of team accounting practices (FBIS, 22 March 1978, G5). The leadership has also Insisted that basic-level accountants not be transferred from one unit to n.rrv'.; another and has attempted to reinforce t h i s emphasis upon orderly and uniform practices by insuring t h e t s t a b i l i t y of the production teams' leaders as well (FBIS, 22 Feb.. 1978, G l ; 27 Jan. 197.8, G5)?*Tn contrast to the mass-line emphasis of the 1968-1972 period, the present stress (at least i n terms of f i n a n c i a l and managerial r e s p o n s i b i l i t i e s ) i s on the establishment of perma- nent posts of r e s p o n s i b i l i t y with the primary q u a l i f i c a t i o n being the posses^- sion or a c q u i s i t i o n of specialized administrative s k i l l s . In compliance with central directives to apply credit r e s t r a i n t , teams have been required to repay outstanding loans'", to the State. Where in d i v i d u a l households are unable to meet these requirements, the team accumulation fund i s to be used to provide the balance (FBIS, 22 Nov. 1977, L-4). This i s a l l a part of the national campaign to cut down on unproductive expenditures, to promote the usage of material incentives among the masses and to increase the f i n a n c i a l resources of the State. Beyond t h i s , however, i t i s apparent that i f the r u r a l enterprises are to be included i n the state plans at and above the l e v e l of the hsien, and i f the major portion of the iresources supplied to t h c ^ these industries sis'- to come from agriculture, i t i s incumbent upon the leader- ship to provide some degree of s t a b i l i t y and p r e d i c t a b i l i t y i n the accounting practices and income d i s t r i b u t i o n work of the production teams. This i s also the main rationale f o r the recent interference by higher l e v e l cadres In the team's management of i t s production a c t i v i t i e s including crop selection and f e r t i l i z e r c o l l e c t i o n . The rapid development of the commune economy based upon - 6 3 - the development of local enterprises rests on the capacity of the production teams to expand their output,and cut down on waste. The presence of a higher level authority i s intended to insure that both of these conditions are being met. In the majority of the cases reported i t has been the provincial and county level work teams which have been employed to oversee these changes In production team practices. Commune and brigade-led rectification has been limited, i n a l l probability, due to the fact that they too have come under f i r e from higher levels especially i n the area of financial mismanagement and i n the misappropriation of team labor and funds. Under threat of higher level disciplinary actions communes and brigades have been warned not to engage i n any unplanned construction, to cut back on the spending of social organizations, and to reduce the numbers of unproductive personnel to a minimum (FBIS, 22 Dec. 1977» E6). It i s i n the area of enterprise management, however, that communes and brigades have experienced the greatest degree of provincial and county Party interference. Beginning i n January 1977, provincial l e v e l work teams and public security organs began to appear i n communes and brigades to check on the imple- mentation of party policy, conduct rectification campaigns and restore order (FBIS, 19 Jan. 1988, H9)/ Following thi s , the attention of provincial leaders has shifted to questions of enterprise management, income distribution within communes and profit-making undertakings. Frequent regional and provincial level meetings were held to discuss these issues and work teams sent out to assist communes and brigades i n setting up correct management practices in"'their en̂ ;. terprises involving the establishment of uniform procedures governing manage- ment and accounting practices, wage assessments on the basis of work points, and the strengthening of Party leadership over management (FBIS, 3 Nov.11977, - 6 4 - M2). In November 1977, i t was announced that the revolutionary committees, or" - organs of mass representation i n the factories, were to be abolished. Taking their place would be 'more functional systems' consisting of one and two-man directorships (FBIS, 15 Nov. 1977, E l ) . Special 'organs' are to be set up to 'take charge' of the work of management reform, to assist i n the formulation of commune and brigade enterprise production plans and 'gradually bring these enterprises onto the track of the socialist economic plan' (FBIS, 22 March 1977, J l - 2 ) . In conjunction with the rationalization of basic-level enterprise pro- duction, provincial telephone conferences urged the establishment of special organizations under Party auspices to ensure that a l l enterprises realized a profit (FBIS, 26 Oct. 1977, K4). P r o f i t a b i l i t y , not service to the local com- munity, was to be the yardstick by which the success of the enterprise i n f u l - f i l l i n g the objectives of the Tachai and Taching campaigns was to be measured. In a f i n a l effort to reduce the accountability of the local industries to their owners, commune and brigade-run enterprises were directed to assume the responsibility for their own profits and losses; they are to become individual units of accounting (FBIS, 22 NOv. 1977, L3). These enterprises now w i l l be responsible only to higher level planning authorities i n meeting the goals and regulations established by them and to the market as a guide to production ac^ t i v i t i e s . In January 1978, the People's Daily published an editorial on the reorgan- ization of the farm machinery which effectively spelled the end to small-scale general production of farm machines. Citing proof of the increased productivity of large-scale specialized production, the editorial urged the universal adop- tion of "specialized and coordinated production techniques... including commune- run enterprises." (FBIS, 25 Jan. 1978, E12). Beyond the concern for increased -65- productivity was the problem of l o c a l designing and manufacturing which ignored uniform product standards. Parts were not interchangeable and machines were standing i d l e . The answer, according to the present leadership, i s the adoption Qf.3 specialized production of a small range of components by each enterprise (P.R., No.8, 24 Feb. 1978, 13-14). This atomization of production ( i f i t does occur), w i l l e f f e c t i v e l y destroy the basis for b a s i c - l e v e l technological inno- vation which the small complete plant could provide. This point was argued by the opponents of s p e c i a l i z a t i o n i n 1966 and remains a v a l i d c r i t i c i s m at t h i s time (Andors, 1974, 28). I t excludes the role of mass i n i t i a t i v e i n techno- l o g i c a l innovation and encourages the role of higher l e v e l s c i e n t i f i c research which i s underway at present. I t almost cert a i n l y eliminates the p o s s i b i l i t y c\? of l o c a l f l e x i b i l i t y i n plan Implementation and w i l l further the dependence of the l o c a l firm on inputs from above. The introduction of uniform managerial and accounting practices, the standardization of product design and q u a l i t y , and the emphasis oh' the produc- t i o n of parts rather than of entire units represent attempts to bring a great- er measure of control, s t a b i l i t y and p r e d i c t a b i l i t y to the l o c a l economies and thenceforth to the national economy as a whole. The reforms signal an attempt to bring order to the functional d i v i s i o n of labor with respect to i n d u s t r i a l - i z a t i o n between the various administrative levels such that the destructive and d e s t a b i l i z i n g competition for scarce resources which appeared during the early 1970s can be avoided. They are also i n d i c a t i v e of the trend toward the future development of regionally integrated i n d u s t r i a l systems l i n k i n g b a s i c - l e v e l production a c t i v i t i e s to the primary centres of modern i n d u s t r i a l a c t i v i t y . In administrative terms, these reforms have involved a reconcentration of decision-making authority i n the hands of the provinces and t h e i r s p e c i a l - ized commercial and i n d u s t r i a l departments. At the same time, through admini^ -66- s t r a t i v e deconcentration, p r o v i n c i a l and hslen-level work teams have been delegated the authority to supervise the implementation of higher l e v e l i n i t i a - tives., to educate the l o c a l population as to the objectives of programs and. p o l i c i e s designed at higher levels of the administration as w e l l as i n the ac~ q u i s i t i o n of important.skills (accounting and managerial as w e l l as t e c h n i c a l ) , and f i n a l l y , to act as a channel of communication between the b a s i c - l e v e l units and t h e i r planning authorities. To what degree t h i s i s representative of the 'mass l i n e ' i n action i t i s d i f f i c u l t to assess. However, the recent decision to do away with the production unit revolutionary committees would suggest that . the provision for mass inputs Into the decision-making process i s not a high p r i o r i t y issue, at least for the present. In addition to the administrative changes noted above, there i s a t h i r d process underway involving the devolution of at least some authority to respond to the demands of the market to the production units themselves. Both t h i s and the independent accountability of the l o c a l enterprises indicate a weakening of c o l l e c t i v e influence over decisions taken by the firms and production teams,".], although which decisions these are and how much additional r e s p o n s i b i l i t y they represent remain matters of speculation. One can only surmise, based largely on circumstantial evidence, that the move to establish one-man enterprise directorships held accountable to commune andubrigade'' industrial-branches organized at the p r o v i n c i a l l e v e l must dlrnlnish the number of i n i t i a t i v e s o r i g i n a t i n g at the subprovincial l e v e l of administration. Prom the perspective of the l o c a l authorities (hsien,.commune and brigade) power has moved out of t h e i r hands i n both an upward and a downward (or out- ward) d i r e c t i o n simultaneously. In comparison to the 1968-1972 period, the authority to i n i t i a t e i n d u s t r i a l strategy at these levels i s substantially r e - duced. Their primary function with regard to the managerial and f i n a n c i a l ," •: -67- decisions relating to local enterprise performance, appears to be a supervi- sory one. In support of this conclusion i s the establishment by the Party of 'special' organizations at the local administrative levels to oversee the im- plementation and fulfillment of the reform measures introduced by the provinces. This would appear to represent an attempt by the Party to avoid the excessive production unit autonomy associated with the earlier reforms of the 1961- I965 period as. well as the narrow economic localism which characterized the 1968-I972 era when local Party influence over economic decision-making was at i t s height. Summary The strategy adopted by the leadership i n the 1970s to achieve rapid rural industrialization has once again called for a shift i n the planning and management responsibilities between the various economic actors i n the PRC. Since 1972, and particularly since 1976, the party leadership has been engaged in an attempt to bring a l l levels of the Chinese economic system more firmly under a higher planning authority. Unlike the Cultural Revolution strategy which preceded i t , the present approach to rural industrial development i s not designed to be a comprehensive policy of rural development. It i s not a policy geared to the establishment of independent local industrial systems. It i s rather an attempt to establish the basis of comprehensive industrial networks relying on modern technology which w i l l link the rural sector of industry to the modern industrial sector. The objective of the present campaign i s to achieve the rapid but control- led expansion of modern industry. It involves the rationalization of economic relationships from the top of the system down to the grassroots factories and production units. Material gain i s the prime motivating forcerin the campaign - 6 8 - supported by a system of rules, regulations, standards of production, quality and quantity even to the levels of the production teams themselves. Linking each level of industrial activity and overseeing the implementation of these regulatory mechanisms are party-organized management and coordinating bodies, special organs linked to higher level organs under various functional depart- ments . The renewed emphasis on functional hierarchies linking industrial and communications departments at a l l levels, linking banking and commerce as well as credit f a c i l i t i e s indicates that, i n addition to increased economic efficien- cy, improvements i n administrative efficiency are among the order of prio r i t i e s of the present administrative reforms. A further sign that the present leaders ship'-..continues to be occupied by attempts to close the age-old gap between the formal administrative apparatus and the grassroots society i s the increase i n the numbers of state cadres who have been permanently allocated to positions i n the system below the level of the formal administrative structure! 1 In Ay-*--. stressing the vertical loyalties of these f i e l d agents to their particular functional departments, the centre can hope to avoid the administrative con- fusion which has resulted from the dual responsibility system arising from the accountability of local cadres totboth t e r r i t o r i a l and functional branches of administration. The emphasis on functional divisions of labor among admini- strative cadres may also assist i n cutting down on administrative costs arising from a duplication of responsibilities and f a c i l i t a t e the return of a large number of administrative cadres to productive labor. As indicated earlier, the divisions of competence. with respect to the present mobilization campaign also appear to conform to functional principles of administration. Agricultural and Industrial Bureaus linking province, hsien, and commune have become the main.channel of communication from top to bottom. -69- There also seems to be developing a d i v i s i o n of functions with respect to industry and agriculture between the p r o v i n c i a l and county levels of admini=tr' s t r a t i o n . The county i s to provide the leadership of the Tachai campaign and to formulate i t s program for the achievement of the creation of Tachai-type counties as set out i n the s i x c r i t e r i a . The'-prbvinc'es":and:''mun±eipalities are to provide the d i r e c t i o n f o r the r u r a l mechanization campaign with the Taching o i l f i e l d s as a model. Having said t h i s , however, there are also signs that the functional d i - v i s i o n of r e s p o n s i b i l i t i e s i s related to the size of the project to be under- taken as w e l l as to i t s nature. In contrast to the emphasis on small-scale l ^ c l o c a l l y organized land.improvement schemes which characterized the 1968-1972 period, the present trend i s toward the creation of massive water conservation and farmland c a p i t a l construction schemes employing m i l l i o n s of peasants i n intercounty cooperative e f f o r t s . The locus of authority f o r these mass move- ments of men and materials i s the province,' a suggestion that even here the oo county may not be as important i n i n i t i a t i n g programs of t h i s nature as i t has been i n the past. For similar:':0 reasons, the importance of the brigade i n t h i s respect i s also seen to have declined. A further major departure from the Cultural Revolution strategy f o r r u r a l i n d u s t r i a l development i s seen i n the declining r o l e of mass: organizations i n - volved i n the decision-making processes^:; of the production u n i t s , the primary i n d i c a t i o n being the a b o l i t i o n of enterprise revolutionary committees. Taking t h e i r place as the main channels of mass influence i n the system w i l l be the revived mass organizations which came under such severe attack during the Cul- t u r a l Revolution as bastions of conservatism (P.R., No.20, 19 May 1978, 10). The i n d i c a t i o n i s , however, that these w i l l serve more as channels of mobili- zation f o r central p o l i c i e s than of instruments of mass influence upon the o^i -70- c'entre. \ For the moment, the Party continues to play the leading role i n thero. r u r a l i n d u s t r i a l i z a t i o n drive. I t i s , at least formally, considered to be the guiding force i n the two mass campaigns gripping the country. I t s continued predominance w i l l depend, however, on how quickly party cadres are able to grasp the requisite s k i l l s and specialized knowledge necessary to lead a move- ment that depends upon expertise and s c i e n t i f i c t r a i n i n g . Present already are pressures from the Party hierarchy upon l o c a l cadres to acquire these s k i l l s . How. t h i s i s to be accomplished without running into the problems of bureau- c r a t i c p r i v i l e g e and the bureaucratization of the Party which arose during the I96I-I965 period remains unanswered. I f h i s t o r i c a l references are to provide t the clues, the leadership may be s a c r i f i c i n g the long-run p o l i t i c a l s t a b i l i t y of the country to. the immediate economic gains of the present strategy. (71) Conclusion: The case study provided by the preceding chapters illustrates vividly the complexities involved i n the attempt to achieve an optimal balance between central andtlocal administrative authority In the PRC. The evidence presented here suggests that the concept of a progressive linear decentralization df authority over locally relevant developmental issues may represent a far too simplistic approach to the development of administrative relations i n the modernizing state. Administrative developments i n China since 1958 indicate that administrative reform i s more l i k e l y to be an almost continual process of realigning powers and responsibilities i n response not only to changing objective circumstances but also to variations i n leadership preferences which arise with the changing circumstances of p o l i t i c a l elites. The Chinese case also suggests that a concept of administrative development which f a i l s to account for centres of influence outside of the formal administrative apparatus i s l i k e l y to provide an insufficient guide to administrative re- form i n the majority of developing states today. Each phase of the rural industrialization program outlined i n the pages above has been marked by major readjustments i n the distribution of authority between different levels of the administrative apparatus, between State and Party, and between both of these and enterprise management. Yet at no one time has the direction of the flow of power been the same for a l l of the actors i n the system. The concept of a cyclical process of centralization followed by a phase of decentralization and then a re-centralization of aaministrative power implies a unifctmity^within each phase which the evidence clearly f a i l s to sup- port. In addition, i n each of the periods discussed, there are indications zr>: • that a more f r u i t f u l approach to the study of administrative decentralization must take into account the various aspects of authority which make up the -t;-.v:-.G! (72) entire gamut of economic relationships. The present study has examined only t" two of these variables, administrative planning and enterprise management. I t has touched only briefly questions of f i s c a l and monetary powers. In separat- ing the two functions of planning and management i t has become obvious that while a concentration of planning authority may be taking place, i t may be accompanied by a marked deconcentration of production unit management. One could go a stage further and suggest that even these variables have been far too general i n attempting to ascertain the flow of power and that a further breakdown w i l l be necessary before a more accurate picture of administrative relations can be revealed. Despite the d i f f i c u l t i e s encountered i n making generalizations with respect to administrative developments i n China i t i s possible to describe some of the processes underlying administrative reform during the past two decades. The materials examined indicate a development -of a pattern of functional d i v i - sions of labor between t e r r i t o r i a l administrative units i n connection with v r- rural industrial developments. An examination of the role of the hsien i n this regard offers an interesting example of leadership attempts to align adminis-s-' trative functions with resource av a i l a b i l i t y . The hsien has been a remarkably stable unit of administration for centur- ies. Although i t has been adjusted i n size from one period to another i t s geo- graphical boundaries have remained unaltered since 1958. This may be due to the resistance to change of traditional reinforcing patterns of social, p o l i t i c a l , and economic interactions, or to the discovery that the hsien i s an efficient unit of administration i n terms of costs (Whitney, 1970, 167 and 170). It may also be due to shifts i n the rural industrial strategy i n the early 1960s which built upon the.~:strength of these traditional patterns. In the administrative reforms following the Great Leap Forward (1958-1961) . (73) the hsien assumed a strategically important role i n rural industrial develop- ment serving as a major coordinating link between the modern provincial indus- tries and the communes and brigades and for the development of a modern agro- scientif i c network. It also began to serve as the Industrial base for the de- velopment of agricultural support industries producing water pumps and chemi- cal f e r t i l i z e r s . The Importance of the hsien i n the new rural strategy stemmed from the traditional position of the hsien capital as a centre of rural econo- mic interaction. The rural industrialization strategy which began i n the early 1960s shifted the emphasis away from a reliance upon the development of village industries toward the development of a rural Industrial network based i n the towns; i t represented a balance between a strategy emphasizing the support of the modern industrial sector for rural mechanization and the Great Leap stra- tegy emphasizing village-level industrial developments (Sigurdson, 19.77» 15)- Between 1968 and 1972, the powers of the hsien were further expanded to aaeorambdate the new emphasis i n the rural industrial strategy on the develop- ment of self-reliant rural economic systems. The industrial base of the hsien which had been expanded i n the early 1960s now was enlarged farther to include the production of steel, cement, and small farm machines, development of the infrastructure necessary to assist commune and brigade industrial expansion. After 1976, the capacity of the hsien to i n i t i a t e , industrial activities dee? .In- clined as the emphasis i n industrial development shifted to give priority to the development of vertically integrated industrial networks i n which the role of the hsien would be reduced to that of a coordinating link, again between r-'- the provinces and the communes. These developments In hsien-level administrative responsibilities i l l u s - trate the functional approach to administrative development which has been adopted by the Chinese leadership. They also provide evidence of the importance (74) of various factors i n determining the l e v e l of authority f o r a given policy." The t r a d i t i o n a l socio-economic strength- ;of_vthe' hsien provided i t with the ne-eo cessary resources to enable i t to play an important r o l e i n a strategy empha- s i z i n g r u r a l towns as the locus for r u r a l i n d u s t r i a l developments. At the same time, the discussion above reveals the impact of the choice of strategy adopted by the leadership on the d i s t r i b u t i o n of planning authority within the system. In the 1950s the emphasis on modern i n d u s t r i a l development led to a concentra- t i o n of planning authority at the centre. The Great Leap strategy of develop- ing both modern and small-scale v i l l a g e industries simultaneously encouraged a concentration of power at the p r o v i n c i a l and commune levels of administration. In the 1970s, v e r t i c a l l y integrated i n d u s t r i a l production has l e d to a concen- t r a t i o n of planning a c t i v i t i e s at the p r o v i n c i a l l e v e l . The Impact of strategic choice on planning i s p a r a l l e l e d by that of l3; :.' leadership preferences with respect to the system of incentives and -the tech- nology adopted, the nature of the enterprise and of .the i n d u s t r i a l network on the d i s t r i b u t i o n df authority both between actors at a given l e v e l of adminis- t r a t i o n as w e l l as between levels of the administration i t s e l f . In the 1968- 1972 period, the emphasis on the development of small/plants r e l y i n g i n large part on indigenous technological innovations to produce whole machines and integrated with l o c a l developments i n education, health-care, culture,-, e t c . , encouraged the adoption of the 'mass-line' i n both planning and management of l o c a l enterprise a c t i v i t i e s . The stress on non-material incentives, on redness, rather than expertise led to a concentration of authority i n the hands of the l o c a l party committee. Enterprise management was to devolve to the workers themselves guided by the enterprise party committee. At present the adoption of material incentives has led to outside i n t e r - ference i n the accounting practices of production teams, communes and brigades. - 7 5 - The stress i s on specialized s k i l l s and on management expertise rather than on worker p a r t i c i p a t i o n i n management decisions. Technological modernization and product s p e c i a l i z a t i o n have taken precedence over indigenous technological innovations and the production of whole machines, a move which has led to the concentration of authority f o r the establishment of rules and regulations governing production i n the hands of technical experts i n special p r o v i n c i a l i n d u s t r i a l departments. Expertise, not ideological p u r i t y , i s the objective of recent changes i n the educational system. I t i s t h i s emphasis on the acquisi- t i o n of specialized s k i l l s which threatens to swing decision-making power away from the Party into the hands of the better q u a l i f i e d state cadres. The recent push to ensure that party cadres acquire advanced economic s k i l l s would suggest that the Party has been put into the p o s i t i o n where i t must struggle to r e t a i n i t s hegemony over decisions concerning economic planning and management. The foregoing discussion indicates that knowledge of leaders' p r i o r i t i e s with respect to the broader objectives of administrative decentralization ( i . e . socio-economic development, administrative e f f i c i e n c y , Ideological conformity) w i l l not provide s u f f i c i e n t information to a s s i s t administrators i n determin- ing the pattern of administrative relations to be adopted. The Chinese case i l l u s t r a t e s the importance of the impact of leaders' choices of strategies, and leaders' preferences with respect to operational c r i t e r i a upon the d i s t r i b u t i o n of r e s p o n s i b i l i t i e s and the pattern of administrative relations adopted. A simi- lar, conclusion regarding the impact of leaders' choices of p o l i c i e s was reached by Moshe Lewin i n discussing Stalin's r o l e i n determining the nature of the Soviet economic system i n the 1930s: While the influence of individuals on h i s t o r i c a l phenomenal ̂ should not be overstated, i t cannot be ignored that i n the pyramidal power structure the men or man at the top i s more than an i n d i v i d u a l : he i s an i n s t i t u t i o n ^ a powerful one. Although he i s part of a larger system that imposes re- -7.6- s t r a i n t s on him, his actions can have l a s t i n g i n - fluence on the history of the country, provided . he i s powerful enough. (Lewin, 1974, 101) . The present study also suggests that administrative f l e x i b i l i t y , that i s the capacity to shift, administrative r e s p o n s i b i l i t i e s i n order to accoirm.o- date changes i n the choice of strategy adopted, may be a more important fac- tor i n securing economic development than i s the pursuit of the more r i g i d symmetrical d i s t r i b u t i o n of administrative authority suggested by Maddick (1963, 2 2 6 ) . Although the impact of the modernization process on.the' d i s - t r i b u t i o n of administrative authority i s discussed i n the Western l i t e r a t u r e surveyed, f l e x i b i l i t y i s usually discussed i n terms of a l t e r i n g the geographical boundaries of the t e r r i t o r i a l units. In China t h i s has not occurred (at least since 1958); instead geographical:stability has been a s i g n i f i c a n t feature of administrative developments In the PRC. Since others have pointed to the pro- blems involved i n redefining t e r r i t o r i a l administrative units i n countries where geographical l o y a l t i e s remain strong, the Chinese case may o f f e r a more workable solution to the problems of administrative f l e x i b i l i t y i n the newly developing state,(Whitney, 1970; Parish, 1976). In conclusion, a f i n a l word should be offered i n connection with the choice of administrative concepts employed i n t h i s study. Although the useful- ness of the concept of the progressive l i n e a r decentralization of administra- t i v e functions has been brought into question by t h i s analysis of China's administrative experience, the terminological d i s t i n c t i o n s made between the deconcentration and the devolution of administrative authority have proved to be extremely hel p f u l i n breaking down the monolithic discussions of decentra- l i z a t i o n which have been most often applied to the Chinese case. Even the d i s t i n c t i o n s made by Schurmann (1968) between decentralization one (1) and two (2) remain far too general to provide a detailed account of the resulting dis- tribution of administrative authority.. Townsend (1974) too f a i l s to discuss decentralization i n China i n a l l but the most general of terms. Bastid's study of economic decision-making (1973) i s a possible exception i n this regard a l - though she neglects to make a sufficient distinction between deconcentrated and devolved authority. Making the distinction between the deconcentration and devolution of administrative functions not only enables one to gain greater insight into the Chinese approach to administrative development but also increases the possibil i t y of conducting cross-national comparisons between the PRC and other develop ing states which while sharing many of the developmental problems confronting the Chinese leadership may not share similar party-systems or state systems. Despite the neglect of the role of one-party systems i n the administrative developments discussed i n the literature surveyed, i t has been possible- to i "o identify similarities of function between administrative f i e l d agents for example, and work teams of cadres sent down to the lower levels of administra- tion. Terminological consistency can only add totthe potential of identifying the common features of and functions performed by different groups of actors i n other states' administrative systems. -78- Notes to the text: Chapter One: 1. The terms devolution and deconcentration of administrative functions appear frequently i n the l i t e r a t u r e dealing with l o c a l government. I have used the terms as defined by Maddick i n his work Democracy, Decentralization, and Development (1963). Maddick defines decentrali- zation as a combination of devolution and deconcentration of authority. Devolution refers to the l e g a l conferring of powers to discharge speci- f i e d or residual functions upon formally constituted l o c a l authorities. Deconcentration, on the other hand, involves a simple delegation of o central authority to f i e l d s t a f f of a central department and would be considered more characteristic of the highly centralized Soviet model of development adopted by the Chinese i n the 1950s and of the system of cen t r a l l y organized and controlled coordinating bodies of the so-called L i u i s t period (196l-1965)j although I would suggest, much less clear-- 5'! cut i n the l a t t e r case. Chapter Two: 1. Considerable evidence was brought to l i g h t as a re s u l t of documents re- leased during the Cultural Revolution that the Party leadership was divided on several major issues during t h i s time. Although much of t h i s 'evidence' has been dismissed as propaganda, several studies have shown that these charges made by the Red Guards may not be e n t i r e l y without foundation. McParquhar's study of the period indicates that there were indeed several issues of contention among the leading members of Party and State at the time. The fact the Mao was reported to have been forced to go over the heads of the opposition i n the Central Committee on t h i s issue i s an Indication of the degree of divisiveness at the Centre over the desired p o l i c y to be adopted. See R. McFarquhar. The Origins of The Cultural Revolution:Contradictions Among The People, 1956-1957-(N.Y.: Columbia University Press, 1974). 2. According to Schurmann there were two options to decentralization offered at t h i s time. The form which t h i s decentralization was to take was, he argues, determined by the perceived s o c i a l and p o l i t i c a l consequences :;/.:•. involved. Decentralization 1, or decentralization to the l e v e l of the production unit, would e n t a i l the adoption of material incentives and the ide o l o g i c a l l y undesirable consequence of reliance on the market for the a l l o c a t i o n of resources. Decentralization 2, or decentralization to some l e v e l of l o c a l administration, would put decision-making under Party control and would rest on s o c i a l mobilization primarily through normative appeals i n order to achieve an increase i n economic growth. Apparently the controversy arose over the desire to apply a combination of these two strategies or a l t e r n a t i v e l y , the adoption of only the second. The d i v i d i n g l i n e seems to correspond closely to that which existed be- tween advocates of the strategy favoring the adoption of material incen- tives to stimulate the economy and those opposed to such a move. In in-^t s t i t u t i o n a l terms, the struggle appears, to have been waged between the -79- State Planners whoSstood to lose more authority i f the second strategy :<was adopted and the Party which would gain i n power. See Schurmann(1968) p a r t i c u l a r l y pages 188-210 f o r d e t a i l s . 3. Red Guard publications, from t h i s period s t i l l provide the best d e t a i l - ,. ed account of the problems associated with the L i u i s t strategy. Por de t a i l s the reader should consult SCMM 605, 11 Dec. 1969; 651, 22 A p r i l 1969, 1-10; 653, 5 May 1969, 21-31. 4. Stephen Andors and Charles Bettleheim were perhaps two of the most optimistic Western writers at the time over the p o s i t i v e impact of the role pf these i n s t i t u t i o n s i n bringing the influence of the workers to bear on decisions concerning economic management. Others were not as readily convinced. L i v l o Maitan argues that with the exception of the lowest levels (and only then at the very early stages) the revolutionary committees remained i n PLA or 'old cadres' hands and ele c t i o n to these committees eventually gave way to selection and Party approval. He con- cludes that no true instruments of mass representation were permitted to exis t by the leadership. Por further d e t a i l s of the two sides of the debate see Andors,S. (1974), BettleheimU974) and Maitan (1976), espe- c i a l l y pp.246-266. Chapter Three: 1. Sigurdson includes the region as an important l e v e l i n the r u r a l indus - r t r i a l strategy as an intermediate l e v e l between the province and the hsien. However, he f a i l s to define what i n his study constitutes a region. The number of regions given .Tor China based upon a 1965 publication i s placed at 192, Since this.does nonconform to the number of special d i s - t r i c t s which Barnett (1966, 115)rplaces at 151 based on 1963 data, there i s l i t t l e reason to assume that Sigurdson's "regions" correspond to the t ?.c 3 " s p e c l a l i d i s t r i c t : aevel of administration. Since there i s l i t t l e r e f e r - ence to the regional r o l e i n the press translations used for t h i s study, I have not included i t i n my analysis. Sigurdson admits that there are a li m i t e d number of enterprises at the regional l e v e l . (1977, 36). This may explain the lack of attention i n the press. 2. Por a coverage of the reports of v i s i t i n g experts to China during t h i s period the reader should consult Bastid (1973), Sigurdson (1977), and Perkins (1977) as noted i n the accompanying bibliography.. 3. These ' c r i t e r i a ' are adopted from Vi c t o r Falkenheim (1972). 4. This and the following information are adapted from Appendix B., Table B l , 165, and B2, 166-167, i n F i e l d , Robert (1975). 5- There i s l i t t l e s p e c i f i c information regarding the actual r e d i s t r i b u - t i v e mechanism at the basic l e v e l s . Reports i n the media indicate that, at least at and below the l e v e l of the hsien, the r e d i s t r i b u t i o n of resources occurred primarily through commune i n d u s t r i a l p r o f i t s reinvest- ed i n commune-wide projects or interest-free 't i e d ' loans f o r the pur- chase of equipment (SCMP 5445, 15 Aug.1973, 53). In addition, the hsien - 8 0 - established a f i x e d portion of commune and brigade accumulation funds which were to go toward a s s i s t i n g a g r i c u l t u r a l production and farmland c a p i t a l construction projects (SCMM 794, 20 Sept. 1974, 25).. Resources were also dist r i b u t e d through large-enterprise assistance to smaller units engaged i n the same trade (SCMP 5960, 7 Oct. 1975, 213-214). State assistance arrived i n the form of tax r e l i e f , or through the re- duction of state quotas to those units which had suffered from natural disasters. Above the p r o v i n c i a l l e v e l , the degree of r e d i s t r i b u t i o n conducted by. the centre i s hotly debated. Lardy (1976,340-354; .1975, 94-115), contends that a f a i r l y substantial r e d i s t r i b u t i o n of resources from advanced to backward provinces i s conducted by the Centre. DonrriA.: thorne (1976,328-340; 1972, 14), on the other hand rejects Lardy's thesis. She argues rather that, at least since the Cultural Revolution, the centre has had neither the power nor the i n c l i n a t i o n to negotiate transfers between the provinces. 6. Although the 1978 Constitution does make provision for the advance to a higher stage of ownership, the main emphasis of the a r t i c l e s which have been exainined i n r e l a t i o n to the present study continues to be on the three l e v e l system of ownership with the production team as the basic unit of account. As Scott H a l l f o r d argues (1976, 1-11), given the basis f o r movement to a higher stage of ownership established by Mao and s t i l l c i t e d by the leadership (that i s that the commune's income must be 50 percent of the gross income of the commune, brigades and teams which comprise i t before the t r a n s i t i o n can take place), i t i s l i k e l y to be a considerable length of time before the changeover w i l l take place. This does not negate the fact that the present leadership sees the rapid expansion of the economic base of the commune as an important feature i n speeding up the t r a n s i t i o n process. I t s emphasis on the economy at the commune l e v e l as compared to that of the brigade may be an in d i c a t i o n that the leadership envisages a leap d i r e c t l y from team to commune by-passing the brigade altogether. 7. R i s k i n (1978b) notes that i t i s the hsien industries which have been made to suffer the decline i n labor allocations. This he interprets as an indic a t i o n of the slowing down of i n d u s t r i a l expansion at the l e v e l of the hsien. I would argue that i t Is the commune and brigade-run enter- prises which have suffered from these labor r e s t r i c t i o n s by vir t u e of the fact that, as already noted, they are much more labor-intensive undertakings than those industries operating at the l e v e l of the hsien. Certainly i t i s the communes and brigades which have been subjected to the most.severe c r i t i c i s m s i n t h i s regard, and i t has been the hsien. authorities who have been frequently employed i n d i r e c t i n g the r e c t i f i - cation of the communes and brigades for t h e i r v i o l a t i o n s of these regu- lat i o n s . 8. The reader should consult Jurgen Domes (1977, 1-18), f o r a good summary of the issues surrounding the i n t r a - e l i t e c o n f l i c t at t h i s time. 9. The s i x c r i t e r i a of a Tachai-type county are summarized as follows: (I) The county Party•committee should be a leading core espe- c i a l l y i n applying Party policy, ( i i ) Poor and middle class peasants are to lead the class struggle, ( i i i ) County,'commune and brigade l e v e l cadres must par t i c i p a t e i n I -81- labor. (iv) Farmland c a p i t a l construction, mechanization of agriculture and s c i e n t i f i c farming are to receive p r i o r i t y and must ex- pand rapidly. (v) A l l brigades, communes and teams are to achieve levels of ^ production achieved by the most advanced units i n the county, (vi) Sideline production i s to play a leading r o l e i n increasing the contributions to the state and i n improving the l i v e l i - hood of the masses (adapted from P.R., No.2, 7 Jan. 1977, 1" 17). 10. Andors (197*')') opposes t h i s view of technological constraints on l o c a l - l e v e l decision-making". In a study which he conducted on the speed i n the formation of enterprise revolutionary committees (which he interprets as an i n d i c a t i o n <3f? the.ease with which decentralization of enterprise man- agement was obtained) during the Cultural Revolution (I967-I969), he concludes that technical, economic , ;J and! geographic factors were less s i g n i f i c a n t as obstacles to decentralized decision-making than were l o c a l p o l i t i c a l power or the educational and t r a i n i n g backgrounds of workers and cadres. While the scope of the present study does not permit a re t e s t i n g of Andor's hypothesis, the trends i n administrative r e - adjustment observed recently (including the a b o l i t i o n of enterprise revolutionary committees) suggest that the present drive for technical modernization i n i n d u s t r i a l production i s indeed closely aligned with the reconcentration of administrative authority. In addition, a sub- s t a n t i a l degree of doubt exists regarding the extent to which worker p a r t i c i p a t i o n i n management decision-making actually prevailed beyond the euphoria of the I966-I968 period. For the time-being , however, these issues remain open f o r further study. 11. The evidence of increased state a c t i v i t y at the lower levels of the society stems from a report from Hunan Province which c i t e s a doubling i r i the number of state cadres i n the communes and the presence of at least two state cadres i n each brigade (FBIS, 14 A p r i l 1.978, H6). - 8 2 - Bibliograpfiical References: Books: Barnett, A.Doak (1967). Cadres, Bureaucracy, and P o l i t i c a l Power i n Communist China. New York: Columbia Press. Bastid, Marianne. (1973). "Levels of economic decision-making." In Authority, P a r t i c i p a t i o n , and Cultural Change i n China, pp.159-197. Edited by Stuart Schram. Cambridge: Cambridge University Press. Bettleheim, Charles (1974). Cultural Revolution and I n d u s t r i a l Organization i n China:Changes i n Management and The Di v i s i o n Of Labor. London: Monthly Review Press. Chang, Parris (1975). Power and Policy i n China. University Park:Pennsylvania State University Press. Donnithorne, Audrey (1972). The Budget and The Plan i n China. Contemporary China Papers No.3. Canberra: Australian National University Press. Eckstein, Alexander (1977). China's Economic Revolution. Cambridge: Cambridge University Press. F i e l d , Robert (1975). " C i v i l i a n I n d u s t r i a l Production i n the PRC: 1949- 1974." In China:A Reassessment of The Economy. A Compendium of Papers Submitted to The Joint Economic Committee, Congress of The United States. July 10,1975. Washington: United States Government P r i n t i n g Office. Gray, Jack (1970). "The Chinese Model." In S o c i a l i s t Economics, pp.491-510. Edited by Alex Nove and D.M. Nuti. Middlesex, England: Penguin. Gudoshnikov, L.M. (1966). "Development of the Organs of Local Government and A<±riinistration i n the People's Republic 6f China." In Government of Communist China, pp.288-305. Edited by George P. Jan. San Fransico: Chandler Publishing Co. Howe, Christopher (1973) • "Labour.:.Organization and incentives i n industry, before and a f t e r the Cultural Revolution." In Authority, P a r t i c i p a t i o n , and Cultural Change. Humes, Samuel and Martin, Eileen (1961). The Structure of Local Governments Throughout The World. The Hague: Martinus Ni j h o f f . Lardy, Nicolas (1975). "Economic Planning i n The PRC: Central-Provincial F i s c a l Relations." In China: A Reassessment of The Economy, pp.94-115. Leemans, A.F. (1970). Changing Patterns of Local Government. The Hague: International Union of Local Authorities. Lewin, Moshe (1974). P o l i t i c a l Undercurrents i n Soviet Economic Debates. Princeton: Princeton University Press. .-83- Maddick, Henry (1963). Democracy, Decentralization and Development. London: Asia Publishing House. Maitan, L i v i o (1976). Party, Army and Masses i n China. London: New Left Books. McFarquhar, Roderick (1974). The Origins of The Cultural Revolution: Contradictions Among The People, 1956-1957. New York: Columbia University Press. Perkins, Dwight (1977).,ed. Rural Small-Scale Industry i n The People's Republic of China. Berkeley: University of C a l i f o r n i a Press. Schurmann, Franz (1968). Ideology and Organization i n Communist China. Berkeley: University of C a l i f o r n i a Press. Seldon, Mark (1969). " "The Yenan Legacy: The Mass Line." In Chinese Communist P o l i t i c s In Action. Edited by A.Doak Barnett. Seattle:, University of Washington Press. Sigurdson, Jan (1977). Rural I n d u s t r i a l i z a t i o n i n China. Council on East Asian Studies. Cambridge: Harvard University Press. (1973). "Rural Economic Planning." In China's Developmental Economic Experience, pp.68-79- Edited by Michel Oksenberg. New York: Praeger Publishers. Skinner, Wm. and Winckler, E.A. (1969). "Compliance Succession i n Rural Communist China: A C y c l i c a l Theory." In A Sociological Reader on Complex Organizations. Edited by A. E t z i o n l . New York: Holt, Rinehart and Winston Inc. Townsend, James (1974). P o l i t i c s i n China. Boston: L i t t l e , Brown and Company. Whitney, 'Joseph B. (1970). China: Area, Atlriinistration and Nation Building; • Toronto: University of Toronto Press. Other Sources: Journals and Reports, Theses. Ann, Byung-Jan (1975). "The P o l i t i c a l Economy of The People's Communes i n China: Changes and Continuities." Journal of Asian Studies. Vol.XXXIV, No.3. (May, 1975): 631-658. Andors, Stephen (1974). "Hobbes and Weber vs. Marx and Mao: The P o l i t i c a l Economy of Decentralization i n China." B u l l e t i n of Concerned Asian Scholars. Vol.VI, No.3. (Sept/October, 1974):19-34. Cento Treaty Organization (1967). Cento Symposium on Decentralization of Government. Tehran/Shiraz. ; •. (1965). Cento .Symposium on The Role of Local Government i n National Development. Ankara, Turkey. -84- Domes, Jurgen (1977)"- "China i n 1976: Tremors of Transition." Asian Survey. Vol.XVII, No.l. (January, 1977): 1-18. Donnlthorne, Audrey (1976). "Comment: Centralization and Decentralization i n China's F i s c a l Management." China Quarterly. No.66. (June, 1976): 328-340. ; ' Falkenheim, V i c t o r (1972). "Continuing Central Predominance." Problems, of Communism. Vol'.XXI. . (July/August, 1972): 75-83. H a l l f o r d , Scott (1976). "Mechanization i n the P.R.C." Current Scene. Vol.XIV, No.5. (May, 1976): 1-11. Hofhelnz, Roy (1962). "Rural Administration i n Communist China." China Quarterly. N o i l l (July/Sept., 1962):, 140-159- Johnson, Graham (1965). "Modernization, Growth, and Diversity: The Chinese Case, 1958-1963." M.A. Thesis, Cornell University. Lardy, Nicolas (1976). "Reply to Donnlthorne's 'Comment: Centralization and Decentralization i n China's F i s c a l Management'.." China Quarterly. No.66. (June, 1976): 340-354. • ,; Ma, Sen (1977). "The Rural People's Commune i n Shandong Province; 1958- 1965: A Model of Social and Economic Development." Ph.D. di s s e r t a t i o n , University of B r i t i s h Columbia. Parish, William (1976). "China: Team, Brigade or Commune?" Problems of Communism. Vol.XXV, No.2. (March/April, 1976): 51-65- R l s k l n , Carl (1978a). "China's Rural Industries: Self-Reliant Systems or Independent Kingdoms?" China Quarterly. No.73. (March, 1978):77-98. (1978b). " P o l i t i c a l C o n f l i c t and Rural I n d u s t r i a l i z a t i o n i n China." World Development. Vol.V, No.5- (May, 1978): 681-692. (1971). "Small Industry and The Chinese Model of Development." China Quarterly. No.46. (April/June, 1971): 245-273. Newspapers: Foreign Broadcast Information Service (FBIS). Daily Report. People's Republic of China. (Jan. 1977-May, 1978). S p r i n g f i e l d , V i r g i n i a : U.S. Department of Commerce, National Technical Information Service. Peking Review, 2 0 , 19 May 1978; 11, 17 March 1978; 8, 24 Feb. 1978.. 2 2 , 27 May 1977; 2, 7 Jan. 1 9 7 7 ;"l, 1 Jan. 1977; 48, 28 Nov. 1975; 40, 31 Oct. 1975; 4, 24 Jan. 1975- - 8 5 - 'Selections From China Mainland Magazines (SCMM). 794, 20 Sept. 1974; 653, 5 May 1969; 651, 22 A p r i l 1969; 605, 11 Dec. 1968. American Consulate General, Hong Kong. Survey of China Mainland Press. (SCMP). (January 1970- A p r i l 1976). American Consulate General, Hong Kong.

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