Today's date:
Spring 2005

China's New Left

JEHANGIR S. POCHA is NPQ contributing correspondent in Beijing.

Beijing - With its soaring glass towers and giant neon signs, Beijing looks like the new Mecca of global capitalism. But behind the glitz, there's growing disenchantment with the relentless market reforms that have shrunken social services and thrown hundreds of millions out of work.

The echo of this disillusionment within intellectual circles has become the rallying cry of a group of intellectuals known as China's New Left.

This loose coalition comprises leading academics, many of whom have studied in the West and are disenchanted by it. They're challenging China's current market reforms with a simple message: that China's failed 20th-century experiment with communism cannot be undone in the 21st century by embracing 19th-century-style, laissez-faire capitalism.

China is "caught between the two extremes of misguided socialism and crony capitalism, and suffering from the worst of both systems," says Wang Hui, a professor of literature at Beijing's Tsinghua University. His passionate denouncements of China's market reforms in Du Shu, a magazine he edits, are partly credited with energizing China's New Left intellectuals. "We have to find an alternate way. This is the great mission of our generation."

Such grand visions notwithstanding, the New Left's adherents don't have a unified ideology beyond the broad brushstrokes or a coherent set of alternate policies.

Some are hardliners who find common cause with China's "old" leftists, who still support collectivization and remain faithful to Mao's radical "communism with Chinese characteristics."

The showcase of their ideas is Nanjie, a small town of about 3,000 in the central province of Henan. Once a nondescript farming town, Nanjie used the reforms of 1979 to marry collectivism with market forces to build 26 factories that produce goods ranging from plastic wraps to snacks, and the town is one of China's biggest producers of instant noodles.

Workers must attend study sessions of Mao's teachings and make critiques of each other's behavior in Cultural Revolution style. And though the average salary is only about $50 a month, everyone receives free housing, health care, a ration of goods like eggs and meat, a bust of Chairman Mao and a daily bottle of beer.

But the majority of New Left intellectuals are moderates who recognize that Mao's tactics lie discredited, and say they simply want to rein in the excesses in China's market reforms. Their main complaint is that China's export-led growth strategy skews society and allows the fruits of reform to be cornered by urban residents and government and Communist Party officials.

That criticism is increasingly resonating with both discontented workers and peasants.

"This is (now) an unjust society," says Lu She Zhong, 55, a village leader from Guan Yang village in central Henan province. He's been battling local authorities for six years over unpaid compensation after his entire village was resettled to make way for the giant Xiao Langdi dam across the Yellow River. "I know such projects are important (for the country), but why were we cheated in the bargain?"

Public anger over illegal demolitions, withheld pensions and corruption led to more than 50,000 protests in China last year, a rise of more than 400 percent over the past decade according to official reports, including those from the Ministry of Public Security.

But significantly, public security officials and police who used to crack down hard on such protests and blame them on external forces trying to destabilize China now apply New Left thinking to explain the causes of the unrest and urge a kinder, gentler response.

"Surprising numbers of analysts in the public security system display an undisguised sympathy for the very worker and peasant protestors the police are supposed to suppress," wrote Murray Scot Tanner, an analyst at the RAND Corporation in Washington, D.C., in an article in The Washington Review. "In their writings, they characterize laid-off demonstrators as 'exploited,' 'marginalized,' 'socially disadvantaged,' 'victims,' and 'losers' in economic competition, driven to protest by social distrust and the "heartlessness" of the free market. They frankly concede that many protestors are victims of crooked managers who drove their factories into bankruptcy through illicit dealings or who absconded with company assets."

Indeed, the degree to which the New Left's rhetoric confluences with that of the governments' indicates President Hu Jintao and team are tacitly supporting the New Left and using it to attack previous President Jiang Zemin and his Three Represents theory, which is widely blamed for many of the deep inequalities gripping China.

Today, measured by the Gini coefficient, China's income inequality stands at 45. That's worse than the United States, which has a Gini coefficient of around 41, but better than Russia or the Philippines whose Gini coefficients are 46 and 47 respectively, according to the United Nations Human Development Report of 2004. (In the Gini coefficient 0 represents perfect equality in the distribution of wealth and 100 represents extreme inequality.)

In a country where people saved for months to buy a Flying Pigeon bicycle, the roads are jammed with gleaming Audis and Buicks. But between them, the unlucky ones who've been passed over by market reforms still pedal their now-rusty Flying Pigeons. Free access to education and health care has been drastically cut, especially in rural areas, and property that was once seized from the rich and redistributed to the poor is being taken from farmers and given to developers.

The argument that these changes were forced by "the discipline of the market" has angered many Chinese, causing party leaders to worry for the nation's stability.

Chen Xin, a professor of sociology at the Chinese Academy of Social Science (CASS) in Beijing and a self-described New Lefter, says Hu realizes he must correct the imbalances created during Jiang's term because while a democracy can balance between extremes by throwing a party or president who's gone too far out of power, "in a one-party system, the party must have its own self-correcting mechanisms. Or else, it will lose touch with the people."

To unite people and buy time for a ?x to these problems both Hu's government and the New Left have increasingly been relying on a nationalist populism. By draping themselves in the Chinese flag, many New Left thinkers such as Chen are also stoking China's rising anti-Americanism to discredit capitalism and the Washington consensus.

"The (US's) real aim is to keep China down-I think they use the word contain," says Chen. "If we follow the global system the US created we will always be a junior player (so) to protect our interests we need to be independent and make our own system."

The military spillover of this nationalist economic thinking is most troublingly evident over Taiwan, which Chen says China should retain sovereignty over "even if it means war" with the US.

Critics of the New Left, such as Professor Shi Yinhong, director for American Studies at the People's University in Beijing, say such jingoism only highlights the fact that the New Left has no real prescription for correcting the imbalances in China's society and economy.

"They're frustrated fellows who can only criticize," says Shi.

But while Wang accepts that the major focus of the New Left is constructive criticism, he says a new economic framework is a "work in progress. Just because those without imagination cannot see it doesn't mean it isn't being formed."

The core of the New Left's policy recommendations is a focus on what they call the San Nong (or Three Nongs): issues concerning the plight of the nongmin (peasants), nongye (agriculture) and nongcun (rural communities).

That the government seems to have responded by focusing recent policy on increasing rural incomes and boosting agriculture has boosted the New Left's confidence and they've stepped up their rhetoric.

Wang says it's time people understood that the abysmal condition of China's have-nots is not merely a fallout of market mechanics, but the result of "bad macroeconomic policies and bad governance." He and other Chinese intellectuals in the New Left have begun educating the public about the faults they see in China's current reforms and advocating alternate economic and social policies through a series of well-publicized articles.

"(This government is still) more focused on helping export manufacturers than agriculture and rural welfare," which affect far more people, says Cui Zhi Yuan, a professor at Tsinghua University's School of Public Policy and Management in Beijing. "(One of) the largest expenditure items in (China's) budget is not education or health care but tax rebates to exporters. So essentially, the government is returning money to (domestic and multinational) exporters while cutting welfare programs."

Such incentives have swelled China's exports to more than 50 percent of its GDP, as opposed to about 10 percent in the US and 20 percent in Japan, Professor Tang Zhong at the People's University in Beijing said recently. That's brought about 260 million of China's 1.3 billion people into the middle class, according to a recent report from the Chinese Academy of Social Sciences in Beijing. But it also means that the Chinese government is less concerned with raising domestic consumption and domestic wages, says Cui. In 2003 average rural incomes rose just 4 percent to reach RMB 2,622 (or $318). China's 786 million farmers who are 70 percent of the population account for only 39 percent of domestic consumption and hold just 19 percent of all deposits in the country's individual bank accounts, according to government reports. More than 50 million people still live in poverty, according to government figures, and the real number is likely to be much higher. What this means is that "the country is essentially renting out its workers" to foreign capital while most people continue to live in terrible conditions, says Wang. "It's too easy to say the farmers leaving their farms to work for starvation wages (in urban factories) are doing this out of free will. The truth is they're forced to do this...because the government gives them no choice."

Cui says the "current reality" is that China's Communist Party, despite its pro-worker rhetoric, has forsaken worker's rights in its pursuit of foreign investment and export-led growth.

Many Chinese workers, particularly migrant construction laborers in big cities, endure harsh conditions, often not getting paid at all. "They have nothing else they can do, so they just work in the hope of some future payment, which of course never comes," Cui says.

Forced labor, known as "laogai," is also common in prisons where prisoners are paid sub-market wages and "quotas are tied to beatings, leniency, favors, food or sleep," says David Welker, a Washington, D.C.-based executive with the Food and Allied Service Trade Department of the AFL-CIO.

Sometimes, even workers employed by US and other foreign companies work seven days a week. Efforts to address these issues receive resistance instead of support from the Chinese government. Just last December, a conference jointly organized by the Chinese government and the Organization for Economic Cooperation and Development (OECD) in Beijing aimed at getting multinational companies to follow international standards and guarantee Chinese workers' rights was canceled at the last minute by Chinese authorities.

What seems clear is that "China is replacing its worker-oriented Stalinist-style control economy with a one-party dictatorship led by a politically connected managerial class-that's fascism," says Welker. "With the New Left rising, you have the classic divide between Right and Left...except in this case the Right is pretending to be the Left."

Cui says "ideological evidence" of this came in 2002 when businesspeople were allowed to join the Communist Party. Now New Left intellectuals are also challenging the growing nexus that's created between corrupt politicians, bankers and businessmen.

A confidential study of China's 20,000 richest people titled "The Present Economic Situation of All Classes of Society," jointly produced by the Central Research Office, State Council Research Office and Chinese Social Sciences Academy, found that only 5 percent of China's wealthy had made it on merit, according to a report in the China Rights Forum by Liu Xiaobao. More than 90 percent were part of connected clans, i.e. related to senior government or Communist Party officials.

"In the name of reform (these people) are looting China," says Cui, who doesn't use the word looting lightly, but in the way it is used in the theory of looting.

Put forward by Nobel Prize-winning economist George A. Akerlof, who also coined the term "lemon" for crummy products, the theory holds that corrupt business owners often use bankruptcy as a backhanded way to loot workers, the government and investors. Cui maintains that is exactly what is happening in China today.

Thousands of China's State-Owned Enterprises (SOEs) have been bought at ?re-sale prices by politically connected persons who, in collusion with corrupt officials and banks, have often stripped the enterprises of assets and employees without any accountability. This has saddled China's banking system with about $500 billion in bad debt, "but more importantly, it has created a might-is-right culture across the country," says Cui. "I know a company in Chongqing (in western Sichuan province) that was sold to its managers for 20 million RMB ($3.5 million), when the workers had offered to pay 40 million RMB ($7 million) for it with funds they'd begged and borrowed from relatives and friends."

Though both Wang and Cui say there is no doubt that Chinese SOEs, which generally lose vast amounts of money every year, need change, they are calling for a process of institutional renovation that would allow SOEs to restructure without surrendering ownership or abdicating responsibilities to workers.

Part of this would mean first trying to revive the SOE through a change in management. If that fails Cui says workers should be given the first right of refusal to buy the company.

Cui also says SOE sales should be executed through open auctions or stock markets, because this generally brings in a fairer price than a "behind-the-door privatization." Once the sale is made, proceeds must first be used to pay overdue salaries and fair unemployment benefits to laid-off workers, he says.

Since this and other New Left prescriptions threaten powerful vested interests, and dissent is still a delicate business in China, CASS's Chen is quick to say that "our concern is not politics but social welfare. We're only amplifying what we see happening around us...hopefully, that will aid and guide the government."

"Even the term New Left is not ours," says Wang. "It was first used (by pro-reform groups) to discredit us as old socialists. But I don't really mind. When something new is happening, it's normal for people to try and define it in old terms."

If Wang's benevolence toward his would-be labelers seems magnanimous, it is also partly driven by the fact that the Left label has begun to work in favor of the intellectuals.

"I've been reading some (New Left) articles, and they make me feel very warm because they remind me of the values my parents used to talk to me about," says Maria Zhang, 24, a student at the Beijing Forestry University. "I feel like China has lost its bearing by bending too much toward Western ways....We're out of touch with our past (and) core values."

The notion that the New Left is trying to create a socio-economic framework relevant to Chinese realities instead of aping American ways pleases many young Chinese who say they see little in common with America. That, and a continuing deterioration in Chinese public opinion of American foreign policy, are raising the suspicions of many Chinese toward the US and casting a shadow over future Sino-US ties.

"The 4 June (Tiananmen Square) movement was rooted in American notions, (but today) few believe America has moral leadership, the right to rule the world," says Chen. "They feel cautious of America, even the younger generation that never knew Mao. They see America as powerful and selfish...and bent on keeping China down."

Politically, concern with Washington's foray into Iraq and its tough talk, which many here see as irresponsible, are also leading China to forge closer ties with Paris, Berlin, Moscow, New Delhi and even Tehran.

Chen says that despite the political differences between the countries, what links them is a common desire to build socially oriented economies and create a multi-polar world.

Whether China will really alter its current reforms in any meaningful way is questioned by many. In Henan, Lu, the village leader, says he fears all the pro-farmer talk he's hearing from Hu's government is "only words" intended to mollify restive groups.

But Chen says rhetoric is always the first step toward change in China. "That sets the national mood. Then, there are some broad changes in policy and then, over many years, detailed changes in governance and implementation of laws. Right now, I think we are already at the second stage," he says.

Indeed, Hu is currently overseeing a massive reshuffle of officials and replacing older and discredited officials with a new generation of younger technocrats.

But even Hu's public indications that he intends to steer China more toward a German-style socially responsive state doesn't entirely satisfy Cui.

"The truth is that even the Western Left's policies (like progressive taxes) are only reactive and aimed at correcting imbalances caused by a capitalistic system," he says. "Our ultimate goal should be to develop a new theory of poverty and an independent society where such massive imbalances do not occur in the first place."

Cui, whose school is jointly funded and run by Harvard University's John F. Kennedy School of Government, admits most of the essential principles for accomplishing this have come from the West: Principles like full cost pricing (which pass on the costs of environmental and health damage caused by products to their manufacturers), full financial disclosure (which rein in potentially destabilizing financial tools such as hedge funds), dismantling of tax loopholes and havens (in countries such as Switzerland), and new definitions of patents, copyrights and royalties (which emphasize their productive use rather than restricting ownership), and new salary schemes (which emphasize wages plus a share in profits).

That these principles are still eons away from being adopted by the West doesn't daunt him.

"China is finding itself," he says. "We have a new will to build a certain kind of society (and) this is irreversible."