land redistribution and economic development a brief explanation on the changing land rights in...
TRANSCRIPT
Land Redistribution and Economic Development
A Brief Explanation on the Changing Land Rights
in Modern China
Xiaopeng Luo
Zhejiang University
July 2007
Outline of the Presentation
• Main characteristics of the land rights arrangements in China’s history
• Strength and weakness of China’s land rights arrangements in the history
• Changes brought by the revolution and the land reforms in the middle of the last century
• Changes brought by the social experiments and the reforms took place in the last half century
• Strength and weakness of the current land tenure arrangements in China
Framework and Key Concepts used in this Presentation
The framework is inspired by the main idea from the theory of state by Yorarm Barzel:
No property rights can be defined ‘airtight’ and costless, so state power is needed to protect property rights and to enforce contracts in all civilizations, therefore the structure of state power shapes land rights in all countries.
Framework and Key Concepts used in this Presentation
The basic framework used in this presentation is to explain the following questions:
1. How structures of the state power shaped the land rights in China?
2. What were the economic effects generated by the interplay of the state power and the property rights in China?
3. In return, how China’s economic development induced the changes in the relationship between the state power and the property rights?
Framework and Key Concepts used in this Presentation
The concept of Entitlement System by Amartia Sen is used in analyzing the relationship between State Power and Property Rights.
What is Entitlement System?
Market entitlements and Social entitlements make an Entitlement System.
Framework and Key Concepts used in this Presentation
Market Entitlements are equivalent to Property Rights derived from individual asset ownership, but Social Entitlements are based on public revenues, so the legitimacy for Market entitlement Exchange and Social Entitlement Exchange is fundamentally different. In principle, MEs are free to exchange while SEs are not.
The Pattern of Land Redistribution in China’s History
Ever since 219 BC when Qin Empire established, Chinese civilization has maintained a number of important features of its state power structure and property rights arrangements. The rulers of the empire with highly centralized state power tended to allocate land to the maximum number of independent peasant cultivators.
The Mode of Land Redistribution in China’s History
All large empires did not want land ownership to be too concentrated, as this was conducive neither to the central revenues or its authority, then how the Chinese central rulers succeeded in suppressing feudal powers and maintained a centralized political power with dispersed land rights?
The Mode of Land Redistribution in China’s History
The answer lies in the ally between the emperor and the the massive scholar stratum (the gentry class) :To win the support and loyalty from the gentry class, the emperors gave them social and economic privileges that were based on family land ownership. The state also supported equi-partition of land among a household’s male descendants rather than primogeniture, encouraging land redistribution caused by family cycle.
The Mode of Land Redistribution in China’s History
The imperial examination system invented for selecting civil servants also constituted an institutional factor in the land redistribution mechanism, because it offered a pathway by which talented man from small landlord and landowning peasant families could study, win office and gain wealth, which was used to purchase land in their home districts.
The Mode of Land Redistribution in China’s History
At the macro level, the dynastic cycle was an important mechanism for the large-scale redistribution of land. After the Qin Dynasty, most Chinese dynasties were established on the basis of large-scale peasant uprisings and civil strife.
The Strength and Weakness of China’s Land Rights in the HistoryThe dispersed land rights could generate strong incentive for prosperity, but the highly centralized political power limited the development of rule of law, created the “Circle of Order and Chaos” in the Chinese history.
The Great Chinese Revolution and Mao’s Social Experiments
China’s rural crises in the first half of the 20th century was not caused by land concentration but by deterioration of rural governance.
The rural crises created opportunity for revolutionary armed separatism and Mao Zedong led CCP and the Red Army took this opportunity to win the civil war. Radical land reforms helped the CCP to attract supports from the poor peasants in the civil war.
The Great Chinese Revolution and Mao’s Social Experiments
The most far-reaching impact of the 1947-1952 land reforms was the total overturning of the social foundation of China’s traditional rural governance, shaking the legitimacy of private property. China’s state power gained unprecedented capacity of mobilization and organization in the countryside, creating conditions for radical social experiments.
The Great Chinese Revolution and Mao’s Social Experiments
In 1958, not deterred by the lack of success of agriculture collectivization, Mao created his own socialist model to speed up economic development. Although millions of people died of famine caused by the campaign for People’s Communes, China did not return to the models prior to collectivization, but gradually evolved unique rural governance and property institutions.
The Concept of Hierarchical Property Rights and
the Rules for Rent-sharing through Hierarchy
The Big Famine could not force Mao to take a complete retreat, but Mao did realize the need for property rights. China formed the concept of hierarchical property rights. Under this concept, within the unified administrative and economic entity of the People’s commune, a three-level hierarchy of ownership of all economic resources would operate, and in which land was the main asset primarily owned by production team, the smallest unit for collectivized farming.
Two basic rules for rent-sharing through hierarchy:
Rule One: “horizontal exclusiveness” which means the upper level was not allowed to redistribute assets and income across units at same lower level, however, vertically the upper level in the hierarchy has certain rights to directly derive some economic rents from the proceeds of lower level operations.
Rule Two: every level has the right to carry out relatively independent economic activities at its level. Proceeds of operations at each level must in the first instance be shared with those higher, but not necessarily with those lower.
The Social Contract under Hierarchical Property Rights
• the peasants’ land rights became an institutional arrangement defining their social status. A basic principle was that the peasantry had no share in urban land rents and they had no freedom of movement to the city.
• The high-level units had privileged access to economic resources and higher SEs distributed by the state. However, higher-grade unit had more restrictions to their MEs than lower grade ones, while the latter had relatively greater rights to autonomy in disposing of resources.
The Effects of Hierarchical Rent-sharing
1. Giving great power to the state to concentrate economic rents for industrialization.
2. Providing basic economic security for everyone, while institutionalized unequal social entitlements, especially between urban and rural residents.
3. The substitution between ME and SE reduced demands on the central administrative capacity, allowing a more decentralized industrialization under China’s command economy.
Why some collective farming failed some did not?
For those units that have opportunity to generate more cash income though industrial activities the “work point system” applied for internal income distribution may produce sufficient incentive for collective farming. However, most rural collectives could not have industrial opportunities so they were vulnerable to falling into “collective poverty trap”.
The Mechanism for Collective Poverty Trap before the ReformsAs the decline in the collective’s output resulted in per capita income dropping, the proportion of products subject to equal per capita distribution increasing; marginal income of reproduction exceeded that from labour, thus increasing the collective’s predicament. While Mao Zedong mobilized the entire peasantry to continually improve the conditions of basic agricultural production, more than one third of the rural population falling into the collective poverty trap.
What is the Household Responsibility System? How this radical reform happened?
1. HRS is to lease the collectively owned land to individual households with obligation to fulfill state grain procurement quota and tax.
2. This radical reform measure was excluded at the beginning of the reforms by the policymaker but later permitted for poverty areas due to the pressure from the peasants.
3. It took three years of regional competition for HRS to become a dominant model.
How land was redistributed during the reforms
In early 1980 when the reforms started, there were about 180 million rural households and 800 million rural population, a survey conducted in 1984 shows that the average land holding per household in China was 0.56 ha, composing 9.7 plots of farm land, 0.06 ha for each plot on average.
How land was redistributed during the reforms
• No redistribution of land across production teams.
• No respect to private land ownership in history.
• Equal land rights within production team.
• Successful collectives can remain collective farming.
How land was redistributed during the reforms
The collective land was rapidly distributed to households with great uncertainty about the future, thereforeLand was distributed among current family size and age structure without clear rules for future adjustment.Same plot of land was tried to distributed to more households to solve problem of quality.
Why the de-collectivization was successful?
• Capitalized the investment in infrastructure for agriculture production, so the land productivity jumped purely caused by incentive improvement.
• New procurement policy maintained high demand and high price for grain production.
• Fiscal decentralization encourage local government to support market oriented reforms.
The evolution of land tenancy after the de-collectivization
The intention of the central policymaker: Stabilizing the land rights for the peasants.
The reality in the ground:
High localization of land policies.
Three main local patterns of land tenancy policy in China
1. Guizhou Model: no land redistribution regardless to family changes.
2. Inner provinces: maintaining equal land rights through frequent adjustments.
3. Coastal provinces: concentrating land to ‘specialized farmers’ .
Why China’s land tenancy policy is so localized?
• The fiscal decentralization has driven the local governments to maximize short term rent income at minimum administrative and political costs.
• While the institutional arrangements are the same, the resource endowment and market opportunities are different in different regions.
How did the new land tenancy help the Chinese economy
1. More than 200 million rural people got out of collective poverty trap.
2. Ending the long time food shortage, removed a main constrain to the economic development.
3. The rise of rural industry and private entrepreneurship. Millions of peasants started their own non-farming business.
4. ‘Unlimited’ supply of low cost migrant workers to the export industry and urban development. More than 150 millions of migrant workers now working outside their village and even their home provinces.
The Challenge to China’s Current Land Rights Arrangements
• The peasants who are counted for more than 70% of China’s total population only get about 15% of China’s GDP.
• More than 40 millions of peasants lost their land without fair compensation and most Chinese peasants still lack of social security.
• Agricultural modernization is obstructed.
Why did China’s reforms help the economy more than the peasants?
The Chinese reforms did not change the hierarchical entitlement system that put peasants in great disadvantage. The reforms only introduced more market entitlements into the system and gave more economic opportunities to the peasants. As the rent were still largely shared through hierarchy, most economic benefits of the reforms went to the people who were closer to the state power.
Conclusion
The case of China for land redistribution shows that a state system in which political power was highly centralized can allow land rights to be dispersed, and for a certain degree, economic prosperity to be achieved. However, the allocation of land rent induced by the centralized state power drove people to devote major resources to the pursuit of monopoly power and social privilege, as result, innovation of a cooperative order was suppressed and the economic prosperity is ultimately unsustainable.
Conclusion
China's current land system is a product of more than half century search for rapid path to modernization. China has achieved some successes with high price and the search is still going on. For other developing countries, China's most valuable experience lies not in its specific institutional choice, but in its strong will to maintain autonomy in collective learning.