Public Land Ownership: A Key to Explaining the China Miracle

From: English Edition of Qiushi Journal Updated: 2012-03-31 13:28
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 With only 7% of the world’s cultivated land, China has managed to lead 22% of the world’s population onto the path of modernization, turning itself into a middle-income country within the space of just decades. Never before in the history of the world has an achievement such as this been made. This miracle of development has triggered widespread discussion on China’s development model. However, amidst a wide spectrum of analysis and research, the important role of public land ownership in China has gone much overlooked. 

October 23, 2008, the National Land-Use Planning Outline (2006-2020)

 I. The large-scale development and utilization of land resources is a basic condition for modernization

 As the primary means of production, land is essential for the survival and development of human beings, and is also a prerequisite for modernization. Modernization in the true sense begins with industrialization. The rapid development of the industrial sector leads to the clustering of economic resources in cities and the migration of the rural labor force to urban areas, which provides a sustained impetus for the process of urbanization. In turn, urbanization facilitates the rapid spread of new technologies, new knowledge, and new ideas, which brings about profound changes to modes of living and production and in turn propels the process of modernization forward. As the two pillars of modernization,  industrialization and urbanization represent not only the impetus behind modernization, but also the only means by which modernization can be achieved. Moreover, neither industrialization nor urbanization would be possible without the development and utilization of land resources. 

 First, the launch and continuation of industrialization are dependent on the large-scale development and utilization of land resources. As the most fundamental condition for production, land is both a physical medium for industrial development and a basic factor of input for the industrial economy. Without land, and the resources that are derived from it, there would be no way for human beings to engage in industrial production. On one hand, the development of modern industry places a direct demand on the large-scale development and utilization of land resources, as the concentration of large areas of land is required for the clustering of industries and the creation of economies of scale. On the other hand, modern industry also creates a massive indirect demand for land resources, which originates from the large-scale input of raw materials and energy sources obtained through the continuous exploitation of minerals and other natural resources. 

 Next, the large-scale construction of infrastructure that is required to support the rise and development of modern cities during the course of industrialization creates a huge demand for land. Urbanization does not only create demand for infrastructure such as transportation networks, power supply, water supply and drainage systems, but also requires the comprehensive development of modern service industries such as commerce, finance, education and health. Once a city has modernized, its cost effective production process and convenient living conditions may exert a much stronger pull on industries and populations in the surrounding areas, which consequently leads to the accelerated expansion of the city. During this process, both the growth of the population and the development of urban industries will present a continuously increasing demand for the use of land.

 Third, as urbanization progresses, there is a tendency for industries and urban functions to relocate to the periphery, which results in a constant increase in the demand for land resources. Economically speaking, the rising density of the population and industry causes land prices in central urban areas to increase constantly, which in turn forces enterprises and residents with low levels of income per unit area of land to gradually relocate to new industrial and residential areas in the suburbs. From a technological perspective, the development of modern transportation and communication technologies significantly narrows the gap between urban and suburban areas, endowing periphery areas with more favorable industrial and living conditions and making them more attractive to both industries and residents. From an environmental perspective, the concentration of industries and residents in city centers causes problems inherent to cities, such as traffic congestion and cramped housing conditions. This causes the urban population to flow back towards the outskirts of the city, promoting the prosperity of the real estate sector in the outer suburbs. Culturally speaking, higher income levels bring about greater demands in regard to culture, leisure and the environment, resulting in the constant evolution of urban concepts. The continuous expansion of urban spaces creates a sustained and vigorous demand for the development of land resources. 

 II. Private land ownership does not promote the process of modernization, but in fact holds it back 

 Land provides people with the basic conditions for production. Therefore, the ownership, allocation and use of land are fundamental in deciding whether modernization is delayed or surges ahead. Ruthless exploitation of land resources has been seen in some capitalist countries exercising the private ownership of land. While this did serve to promote economic growth, it also had the undesired effect of holding back the process of modernization.

 1. The private ownership of land inevitably deprives large numbers of rural laborers of their land, separates laborers from the means of production and thus results in the enormous waste of social productive forces. The English enclosure movement of the late 15th century may be seen as an example of this. At that time, sheep herding had already become a profitable industry owing to the development of the woolen textile sector and the rising price of wool. Seeking to profit, the fledging bourgeoisie drove farmers off their land and forcefully occupied public land and shared land for the purpose of establishing private livestock farms. Starting in 1688, the English government began to openly support the enclosure movement, promulgating more than 4,000 laws and decrees for the enclosure of land. This caused the movement to escalate further. During this process, tens of millions of farmers were forced from their land and made homeless, creating countless personal tragedies. 

 Some people believe that the private ownership of land is the best way for farmers to protect their own rights and interests. However, regardless of which part of history or which country or region we look to, farmers have always been at a disadvantage during the course of industrialization and urbanization, and have tended to place too great an emphasis on their immediate interests. Under systems where land is owned privately and exchanged freely, it is inevitable that large numbers of subsistence farmers, who are dependent on agriculture for their survival, will be forcefully deprived of their land by capitalists and the powerful and wealthy elite. The private ownership of land provides capitalists with a lawful means of plundering farmers, and acts as an institutional foundation for the forcible occupation or purchase of land at low prices.

 After losing their land, a small proportion of farmers remain in the countryside to sell their labor in capitalist farms, while the majority have no choice but to crowd into cities. With no means of production, no capital, and few opportunities for education, these people are powerless to change their profession, and thus become dislocated from the process of industrialization and urbanization. As we can see, the private ownership of land inevitably results in the waste and stagnation of social productive forces, which in turn hampers the process of modernization. 

 2. Private land ownership inevitably leads to economic decline in rural areas and causes agricultural development to lag behind the pace of industrialization and urbanization. According to systems theory, the various sectors and departments of society and the economy must be kept at an appropriate proportion to one another in order for the national economy to develop in a coordinated manner. In early 20th century Latin America, where land could be owned privately, more than half of all cultivated land was controlled by a small minority of major landlords that accounted for just 1.5% of the farming population. In Mexico, for example, a group of less than 200 estate owners controlled a quarter of the country’s land, whereas 95% of the peasant population had no land on which to farm. Owing to the highly concentrated ownership of land, rural areas of Latin America have remained in a state of poverty for a long period of time. By the year 1980, backward modes of production were still being employed throughout the vast rural areas of Latin America, and 137 million people in the region were living in a state of extreme poverty, of whom 60% were found in rural areas.

 In addition to being a cause of poverty in rural areas, the private ownership of land has also brought about the decline and destitution of rural economies in some Latin American countries. With its fertile land, plentiful sunshine, and abundant rainfall, Latin America enjoys some of the best conditions for agricultural production in the world. The region has 575 million hectares of arable land in total, which equates to an average of 1.42 hectares per capita, one of the highest levels in the world. Despite this, however, the region is still unable to produce enough grain to meet demand. According to data from the World Bank, during the period from 1974 to 1992, almost all major Latin American countries were dependent on imported grain.

 The decline of rural economies in Latin America drove large numbers of landless farmers into cities, the result of which was lopsided urbanization. In the year 2000, the percentage of the population living in cities was 89.16% in Argentina, 79.19% in Brazil, 75.14% in Mexico, and 93.17% in Uruguay. These extremely high rates of urbanization are by no means marks of modernization. On the contrary, lopsided urbanization has far exceeded the pace of industrialization, and the government is unable to provide residents with adequate employment and the necessary living conditions. At the same time, overpopulation in cities has put urban construction and urban resources under great strain, resulting in the constant creation and expansion of urban slums. 

 Fundamentally speaking, as a phenomenon, the influx of rural labor into cities is a reflection of the uneven development that is characteristic of capitalist economies. The uneven development of agriculture and industry disrupts the overall balance that is held in society and the economy, causing the process of modernization to grind to a halt. This is because there can be no true modernization without the modernization of rural areas. If this occurs, the modernization of rural areas must be supplemented, and this is a detour that undoubtedly delays the process of modernization.

 3. The private ownership of land inevitably leads to high institutional costs and huge social costs. Modernization is a natural historical process. It begins with the rapid development of industrial sectors stimulated by technological progress and the growth of market demand. As this occurs, productive factors and rural populations begin to cluster towards industries and cities owing to the higher profitability of industry in comparison to agriculture. This process ultimately leads to the transition from a traditional agricultural society to a modern industrial society.

 However, under systems where land is owned privately, processes such as the concentration of land and the clustering of populations in urban areas have often been manipulated by the alliance of power and capital. As a result, capitalist societies have been forced to pay a high institutional price for violating the natural laws of development and interfering with this historical process. 

 The private ownership of land has also caused a huge social trauma in India. In economics, land is viewed as a public good. Land not only has natural attributes, but also social attributes, as it represents the most fundamental form of assurance for farmers, who account for the overwhelming majority of the population. Issues pertaining to land therefore cannot be left entirely to the market, as doing so would easily give rise to the consolidation and concentration of land, which in turn would aggravate social problems such as reckless urban expansion and poverty. Recent statistics indicate that the number of people living in poverty in India reached 372 million in 2010, nearly 100 million more than the total in 1994, with some 100 million people living in urban slums. In Mumbai, India’s largest city, roughly 60% of the population still live in slums. These slums lack even the most basic of amenities, such as running water, electricity and toilets, while poor sanitary conditions and the prevalence of flies and mosquitoes make them hotbeds for infectious disease.

 There is enough evidence to show that the private ownership of land is incapable of providing the institutional foundations needed to realize and protect the interests of farmers, and therefore unable to provide an effective solution to difficulties encountered in the course of modernization, such as the development and utilization of land and the transfer of the rural labor force. The private ownership of land not only fails to promote the process of modernization, but actually holds it back. 

 Of course, developed countries in Europe and America have already completed the process of industrialization and urbanization. However, we should not overlook the fact that their modernization depended on the whole world becoming a market for their industrial products, and that it came at the cost of the world’s resources and ecological environments. This miracle was not achieved through the private ownership of land, but by relying on the global expansion of capital to shift the high cost of industrialization and urbanization onto the shoulders of all humankind. For the majority of developing countries today, such historical conditions no longer exist. Therefore, the search for a harmonious approach to development that will lead us towards modernization is a new task that we are confronted with.

 III. The public ownership of land has allowed China to create a miracle of development

 China is a socialist country. The public ownership of land is a key feature of relations of production in contemporary China, a fundamental economic system that distinguishes socialism from capitalism, and an institutional foundation for the development of the socialist market economy. Since the introduction of the reform and opening up policy, China has made efforts to promote industrialization and urbanization on the basis of public land ownership. In doing so, it has evaded the pitfalls in regard to the development and utilization of land and the transfer of the rural labor force, and succeeded in developing a new approach to modernization with distinctly Chinese characteristics.

 The most salient feature of socialist public land ownership is that it allows the government to play the leading role in the allocation of land resources in line with requirements for development and steadily promote modernization. Public land ownership has unique advantages that cannot be matched by private ownership. The first advantage is planning over land development. Since the 1980s, China has formulated three overall national plans in regard to land. It has put forward binding indexes and anticipatory indexes in regard to the protection of cultivated land, the optimization of land use, and the strengthening of ecological development, thus forming the basic framework of a permanent mechanism to support the sustainable development of the economy with land resources. The second advantage is the administration of land use. In an effort to strengthen land administration, China has established a dedicated authority for land administration, promulgated and implemented important laws such as the Land Administration Law, implemented the strictest possible systems for land administration and the protection of arable land, and continuously strengthened dedicated efforts to rectify idle land. Through these efforts, the basic elements of a mechanism for the administration of land resources that is conducive to scientific development have been established. The third advantage is the use of the market. Following the introduction of reform and opening up policy, a major change that took place in public land ownership was the separation of ownership rights from usage rights. While maintaining its ownership over land, the government transfers rights for land usage via auctions, public bidding, and negotiations, thereby enabling the market to play a fundamental role in the allocation of resources. This has led to the gradual formation of a land transfer market that is able to reflect the true value of land. The fourth advantage is the guarantee that is provided to landless farmers. Where farmland is appropriated, the government not only provides rural residents with economic compensation and resettlement subsidies, but also emphasizes the importance of vocational training and reemployment in non-agricultural sectors. At the same time, all relocated rural residents are brought under the coverage of social safety nets in order to ensure that their basic living needs are met.

 China is a populous country with relatively little land. The area of land per capita in China is much lower than the average of 1 hectare per household for Asia as a whole. At the same time, China’s industrialization and urbanization is subject to more serious land constraints than that of most other countries. Despite this, however, China’s modernization has not been held back by the shortage of land; on the contrary, China has created a miracle of economic growth over more than 30 years of reform and opening up. In 33 years of reform and opening up, the Chinese economy has maintained a high annual growth rate of 9.9%; its rate of industrialization has risen from 71.8% to 89.8%; and its rate of urbanization has risen from 17.9% to 49.68%. Research by the International Monetary Fund (IMF) indicates that the co-movement between China and the world economy rose from 0.07 in the period from 1960-1973 to 0.20 in the period from 1996-2006, and that China’s stimulus on the world economy is continuing to strengthen. Fact has demonstrated that by relying on the public ownership of land, China has found an efficient and low cost means of ensuring the supply of land needed for industrialization and urbanization, and that this institutional guarantee has promoted the rapid pace of the country’s modernization. 

 The public ownership of land has effectively underpinned China’s rapid industrialization. In the early stages of the reform and opening up drive, the Party and the government exerted the superiorities of public land ownership by lifting restrictions on the supply of land in urban and rural areas and encouraging the development of various forms of ownership in the economy. With the emergence of large numbers of individual-proprietorship businesses and private enterprises in cities and towns and the rapid development of rural and township enterprises, China relied on the low cost of land and labor to usher in a period of accelerated industrialization. In the 1990s, in order to attract external investment, local governments began to establish economic development zones and industrial parks. These initiatives allowed for the absorption of large amounts of external investment, particularly from overseas, which promoted the sustained and rapid growth of the economy throughout the country. Under the market economy, these economic development zones and industrial parks were attractive to investors not only because of their excellent infrastructure and economies of scale, which were formed through the clustering of enterprises, but more importantly, because they employed land use mechanisms that were able to reduce the investment costs of enterprises. Owing to the low cost provision of land resources, various kinds of development zones and industrial parks flourished across the country, becoming the primary driving force behind China’s economic growth and an important factor in the global rise of Chinese manufacturing.

 The public ownership of land has effectively underpinned China’s rapid urbanization. The development of industry has given China’s urban industries the capacity to absorb large amounts of rural labor, which has accelerated the transfer of the surplus labor force in rural areas. In the early stages of economic development, the appropriation of land was a relatively simple process, being low in cost and high in efficiency. As the economy developed, the rapid clustering of urban industries and the rapid growth of the population brought about a surge in demand for infrastructure construction and investment in housing, which caused land prices to rise continuously. Confronted with such a situation, China relied on the public ownership of land to manage its land resources at the strategic level in an effort to promote the conservation and intensive utilization of land resources. In addition to effectively meeting the demand for urban and industrial land, China also made great efforts to develop new channels for investment and financing that were geared towards the needs of the market economy. On one hand, this allowed for the provision of higher levels of compensation for the appropriation of rural land and the demolition and relocation of urban properties; on the other hand, it provided a solution to the problem of funding for urban construction. These initiatives not only speeded up the pace of urban construction, but also laid down solid foundations for the sustainable development of cities. Since then, the world has been left in awe by the sheer pace at which fledgling cities, lined with block after block of housing, have risen up from the ground in China.

 The public ownership of land has effectively underpinned the orderly transfer of China’s rural labor force. At the beginning of the reform and opening up drive, among China’s population of one billion people, 800 million were rural residents. By the end of 2009, a total of 340 million rural residents had relocated into cities. The migration and reemployment of a rural population of this size is totally unprecedented. More impressive still is the fact that migration on this scale did not result in the decline of the rural economy or the appearance of slums in cities; on the contrary, grain output in rural areas has increased for seven consecutive years, and rural migrants have settled into new homes and jobs in the cities. Above all else, this is because China has consistently adhered to and improved its system of public land ownership, and identified the stabilization and improvement of land contracting as the cornerstone of its policies to benefit rural residents. By ensuring that rural residents have permanent access to means of production, the basic needs for their survival and development have been guaranteed. They can either find work in the cities or go back to the countryside where they still have land to till. In both cases their basic needs are guaranteed. We can imagine that if China had pursued the privatization of land in the primary stage of socialism, a phase in which farmers account for the majority of the population, the result would have been the emergence of social conflicts in rural areas, the rise of poverty in cities, and the occurrence of large scale social unrest at the same time. Moreover, the intensity of such upheavals would be much more severe than those seen in other countries.

 We must be aware of the fact that China’s rapid industrialization and urbanization have also given rise to problems, such as the waste of land resources, and in particular the infringement of the interests of rural residents in the course of land appropriation and relocation, which has occurred in some areas from time to time. In a period of accelerated industrialization and urbanization, these are objective problems that must be taken seriously and addressed by taking a range of measures. However, it should be noted that these are only very minor diversions in the overall course of China’s modernization. The overwhelming truth is that China has promoted extraordinary progress in industrialization and urbanization and created the miracle of China’s harmonious rise by drawing on the strengths of public land ownership. Of course, China is still in the primary stage of socialism, and there is a long way to go before it can complete the processes of industrialization and urbanization, and thereby realize its modernization. Moreover, there are still many difficulties that China must address in order to build a moderately prosperous society at a higher level for the benefit of 1.3 billion people. In light of this, it is essential that we keep a clear head, unswervingly adhere to the basic economic system of socialism, take public land ownership as our foothold and our foundation, and strive to create a new and more glorious phase of socialist modernization.

(Originally appeared in Red Flag Manuscript, No.22, 2011)

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