China's economic revolution: experimenting with incentives

''From each according to his ability, to each according to his work.'' China is in the midst of a far-reaching economic revolution, symbolized by this slogan. Marx's slogan, ''From each according to his ability, to each according to his need,'' is not forgotten. But it cannot be practiced, the leadership says, until the stage of pure communism is reached.

Egalitarianism, in the economic sense, is out. The idea of ''getting rich first'' is in. That is to say, while the goal is for society as a whole to get rich, those who work harder will get rich first.

And that, say Messrs. Deng Xiaoping, Hu Yaobang, and Zhao Ziyang, is a good thing. These three are the most influential of China's collective leadership, Mr. Deng being chairman of the party's Advisory Commission, Mr. Hu being general secretary, and Mr. Zhao, premier.

The leadership vehemently denies that ''getting rich first'' means creeping capitalism or anything of the sort. They insist their program of the four modernizations is based firmly on four cardinal principles - the socialist road, the dictatorship of the proletariat, the leadership of the Communist Party, and Marxism-Leninism-Mao Tse-tung thought.

In short, the Communist Party and its central leadership is to remain solidly in control. (China's economic modernization program has as its goal the quadrupling of industrial and agricultural output by the year 2000 by modernizing agriculture, industry, science and technology, and defense. These are the so-called four modernizations which are so highly touted.)

Within this framework, more economic experimentation is going on in China today than at any other period in the 34 years since the founding of the People's Republic in 1949.

The experiment extends from various forms of what is generally called the ''responsibility system'' to out-and-out free enterprise.

Free enterprise operates within strictly defined limits. A peasant can take what he grows on his private plot (usually no more than 720 square feet per family member) to the free market and sell it for whatever he can get for it. Or he might make armchairs, or baskets, or use any other skill he possesses to increase his own income.

In towns an individual can set up a tailor shop or become a private carpenter , operate a restaurant, or engage in any other trade. He may ask family members to help him. But he must not hire more than five persons - otherwise he will be considered a capitalistic exploiter.

These private entrepreneurs are considered a useful adjunct to the collective economy, but they do not by any means replace it.

Meanwhile, the collective economy itself is being transformed by various experiments, the purpose of which is to get rid of the rigidities and inefficiencies of overcentralized planning and control. The central authorities do not want to lose overall control of the economy, nor do they want to fragment China's economic map by allowing provincial or municipal authorities to set themselves up as economic dictators in their own bailiwicks.

Nanxiang commune, outside Shanghai, and Shoudu Iron and Steel Corporation in Peking are representative examples of approaches taken by the authorities in agriculture and industry. They serve as models for the kind of change the leadership wishes to see throughout China.

''I had my doubts about the get-rich-first policy,'' said Shen Yongyuan in a recent interview. Mr. Shen is manager of the Nanxiang commune, a collection of 18 production brigades or villages, with 28,000 people and about 5,000 acres of cultivated land.

Shen and his fellow peasants had been through movement after movement since 1949 - first the cooperative movement, then communization and the Great Leap Forward, then the Cultural Revolution. Through them all, the villagers' common goal was to lift themselves out of poverty.

''We could all see the defects of big-pottism,'' said Shen, referring to the concept that everyone should eat out of the same big pot, with no one getting more or less to eat because of having done more or less work.

''But I was afraid that get-rich-first might result in polarization. In fact, things haven't worked out that way. All of us are richer now than before, although some are richer than others.''

In this commune land is still worked in common, but every agricultural worker is given responsibility for a certain amount of land and can work it when he or she pleases.

''In the past, we all went out to the fields when the drum sounded,'' said Gu Qiubing. ''Now, the three field hands in my family have responsibility for a total of six mou [about one acre]. We can work the land when we please, as we please, and our only responsibility is to hand over 600 jin [about 300 kilograms or 660 pounds] of wheat per mou to the state at the end of each harvest. Everything over that amount we can keep for ourselves, or sell as we please.''

Mrs. Gu has her own vegetable patch. Her husband is an electrician, her sister-in-law a worker on a road maintenance team. The family is comfortably well-off, living in a two-story house with parents-in-law and even a great-grandmother.

This is not just because of the responsibility system. Mrs. Gu's family is well-off because two of its members have nonagricultural jobs. This is becoming increasingly true of communes near large cities like Nanxiang.

To keep income growing, and to provide jobs for all its members, Nanxiang operates a variety of industrial enterprises, including a light-bulb factory started with a government loan of 800,000 yuan (about $400,000). The factory pays wages averaging 60 yuan per month to about 1,500 workers in nine workshops.

Of the commune's total income of 47,910,000 yuan (about $23.9 million) in 1981, 35.8 million yuan ($17.9 million) came from industry, and 6.5 million ($3. 2 million) from sideline occupations such as raising pigs and poultry or growing mushrooms. Only 4.6 million ($2.3 million) came from growing crops - rice, cotton, wheat, and rapeseed. Of the total labor force of 18,600, some 9,000 work in agriculture and 3,000 are in sideline occupations. Only one-third of the total labor force is in industry, yet these workers produce three-fourths of the commune's annual income.

This is the real dimension of China's problem. The responsibility system has brought a measure of prosperity to the countryside. But until modernization proceeds to the point where many more jobs can be provided outside agriculture, overall prosperity cannot come to the 800 million peasants who constitute four-fifths of China's billion people.

How does the responsibility system work in the cities, in a large enterprise like Shoudu Iron and Steel Corporation, which has 70,000 employees and turns out 3 million tons of pig iron and 1 1/2 million tons of crude steel every year?

Ma Guitian, an operator of an overhead crane at Shoudu, said in a recent interview that he had doubts about the new system when it was introduced into his workshop four years ago.

''We were given a long list of tasks to be performed throughout the eight-hour workday. Our bonuses would depend on how well we did the work. If we failed or were inadequate in any of these tasks, we would lose a part, or sometimes all, of our bonuses.''

But as matters turned out, Mr. Ma said, he and his teammates have done quite well. Ma's pay, allowances, and bonuses today total 113 yuan per month (about $ 56), nearly double what they were four years ago. About 30 yuan ($15) of this is a bonus, with the specific amount varying depending on how well he does his work.

''One month I overloaded the crane and nearly dropped a load,'' Ma recalls. ''There could have been a terrible accident. Fortunately nothing happened, but I lost my entire bonus that month.''

Ma has no resentment about that incident.

''It was a lesson for me,'' he said. ''I much prefer the new system to the big-pottism we had in the past, when it didn't matter how hard you worked or how little. In fact, in those days many of us would spend our work shifts repairing our own bicycles, or making pipes for our own purposes.''

Shoudu was one of the first state enterprises to go on the responsibility system. It has been so successful that it is serving as a model for others. In 1979 Shoudu was entirely controlled by the state, according to company official Gao Jianxia. All the capital investments it required came from the state, and all its annual profits were returned to the state. The director could not even buy a $400 electric motor without seeking state approval.

In the first stage of reform, introduced in 1979, Shoudu was allowed to keep a small proportion of its profits for three purposes: to expand production, to improve worker facilities such as housing, and to give worker bonuses. This stage went well, and two years later, in 1981, the company was given a larger share of responsibility.

''The previous year, our total profits had reached 286 million yuan [$143 million],'' Mr. Gao said. ''But in 1981, the state presented us with our first big challenge.

''Because of economic difficulties heavy industry was being cut, and we were told to produce 290,000 tons less of iron and 70,000 tons less of steel than the previous year. At the same time we were told to hand over 270 million yuan [$135 million] of profit to the state, 23 million yuan more than the previous year.

''Whatever profit we made more than 270 million, we could keep. If we made less than 270 million, we would have to borrow from the state bank to make up the difference.''

Plantwide ''pep'' talks were held, and it was decided to try for 304 million in profits - about 6 percent more than the previous year. Since cost of materials and the prices of finished products are both fixed by the state, the plant could increase profits only by reducing waste, improving efficiency, and actively going out and seeking customers for its products. For instance, in May 1981 the company had 190,000 tons of pig iron unsold. Previously, it would have let the state worry about this. But now it had to go out and beat the bushes for customers.

A whole new marketing division was set up and successfully tackled this job. At the end of the year, the company's total profits came to 312 million yuan ($ 156 million), 42 million more than the 270 million to be handed over to the state.

Last year the record was even better. Total profits came to 380 million ($190 million), of which 286 million was handed to the state. The rest was for Shoudu itself to use for bonuses, for worker benefits, and for its own development and expansion.

This year the state is starting a new system, whereby most enterprises will pay 55 percent of their profits to the state as taxes. The rest will be divided between the state and the company according to various formulas, depending on how profitable the enterprise may be.

Shoudu, however, has an agreement with the state that instead of taxes, it will pay the state 6 percent more in profits every year. Last year it paid the state 286 million. This year it will pay about 303 million. In light of Shoudu's recent profits, this is well within the company's means.

Clearly, at this stage industrial enterprises in China are far from having reached true independence as in the capitalistic countries of the West. The prices of their raw materials are set by the state. Shoudu benefits from the artificially low costs of coal, oil, and transport. (Oil costs one-third, and coal one-fifth, of the costs in the West.) Nor is there a free labor market.

Enterprises cannot hire and fire as they would like. They do control bonuses, and this is an important incentive. At Shoudu, for instance, in any given month 10 percent of the work force receives no bonus at all because of inferior work or infractions of discipline.

These rigidities may be lessened as the leadership feels its way forward. It has consciously rejected the Soviet model. How far it will go in the other direction still remains to be seen.

About these ads
Sponsored Content by LockerDome

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK