Sunday, March 05, 2006

Dogmatic adherence to stagnant policies

Chinese Premier Wen Jiabao has been speaking a great deal recently on the need to improve opportunities and investment in rural China.

According to some critics, what is needed isn't just greater government investment in rural areas, but giving rural people (farmers) a stake in the system by granting land ownership to them. Currently, Chinese farmers take out long-term leases of the land from the government, who still owns the land. This system has led to a great deal of unrest among China's farmers as they feel corrupt town and county officials have been selling off land they have leased to developers in order to pocket large profits. (Anecdotal evidence suggests the farmers suspicions are right.)

In his most recent statement about central government investment in rural China, Premier Wen said, "[W]e must build a new socialist countryside." It seems to me that the socialist countryside is exactly the problem.

With government owning the means of production in rural China (land) and the people who use it having no control over how it is allocated, in spite leases they are contract to, there is little incentive for the system to improve.

That's why I have a suggestion:
Give farmers in rural China property rights. Grant them deeds to the land they currently lease from the government. This will give them rights and claims in China's developing legal system. By causing individual investiture across the whole of the country, the CCP would also be catapulting the legal system from one where there is little independent judicial decision, to the type needed to allow it's commerce and industry to continue developing at the pace needed for job growth to keep apace population growth. (sorry for the convoluted sentences.)

As with any system involving rapid privatization and granting of capital to previously impoverished individuals, there is a risk that the unscroupulous will come along and buy up the resources for far less than they are worth--and people will sell for any number of seemingly valid reasons.

To get around this, I propose having an arbiter of land-sales during the first 5 years after privatization. This should be an independent not-for-profit organization (possibly funded by the World Bank) whose purpose is to give advice to the parties involved in land-sales; and make sure the farmers interested in selling their land are aware of its actual value, and the mechanisms which it can be put to: using it as collateral, leasing it rather than selling it, establishing coops with neighboring farmers (yes, I'm cognicent of the cultural and historical concerns on that subject). Basically, to give farmers every opportunity to make the most of their private property.

Let's face it, every country that has succeeded in the long term has managed to create a system where everyone was able to use the resources available to them to further their own goals. Until China is able to do this for it's 750 million rural citizens, it will be walking a tightrope stretched over a chasm with anarchy on the left and repression on the right.

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