China must provide a solid baseline guarantee for its hundreds of millions of farmers
He Xuefeng
[Hundreds of millions of farmers are the most vulnerable group in China. The state cannot guarantee that all farmers will prosper, but it can design institutions to provide a baseline guarantee for all farmers.]
China has always had an urban-rural gap. In the early days of reform and opening up, the income gap between urban and rural residents once narrowed. By the late 1980s, the urban-rural gap widened again, and by now the income gap between urban and rural residents has reached 3.1:1, that is, the per capita income level in cities is more than 3 times the per capita income level in rural areas.
One explanation for the widening urban-rural gap is that since reform and opening up, especially since the 1990s, rural human, financial and material resources have continuously flowed out of the countryside and into the cities. The cities have developed rapidly while the countryside has gradually declined, so the urban-rural gap has widened further. The solution is to make human, financial and material resources flow back to the countryside. However, China is in the process of rapid urbanization. The outflow of human, financial and material resources from the countryside should be an intrinsic part of China's urbanization and modernization. How could one go against the tide of history and make human, financial and material resources flow back to the countryside?
Another policy proposal for narrowing the urban-rural gap argues that only by letting farmers enter the cities and letting urban capital go to the countryside, by revitalizing rural land resources, letting farmers transfer their land rights to obtain their first pot of gold for entering the cities, and at the same time letting urban capital obtain rural land resources for development. In this way, because resource flows improve the efficiency of resource allocation, farmers enter the cities, capital goes to the countryside, and the urban-rural gap naturally narrows.
The widening urban-rural gap and the low incomes of farmers have obviously also always been a focus of state attention. In almost all central government documents concerning agriculture, “increasing farmers' incomes and improving agricultural efficiency” are treated as key priorities. In order to increase farmers' incomes, the central government has devised many countermeasures and methods, such as encouraging farmers to adjust the industrial structure, connecting with the market through agricultural industrialization, promoting the company plus farmer cooperation model, cultivating leaders who can help farmers get rich, developing integration of production, supply and marketing and of agriculture, industry and trade, developing rural tourism and leisure agriculture, and even treating the opening of “farmhouse inns” as a way for farmers to get rich and giving it policy support. Of course, this also includes raising the prices of agricultural products and purchasing grain at protective prices.
It was roughly after the 2008 global financial crisis that, because the state invested 4 trillion yuan in infrastructure construction, a labor shortage appeared in the cities, and migrant workers' wages grew at double-digit rates for many consecutive years, the income gap between urban and rural residents narrowed slightly. Farmers clearly did not achieve large income growth because of increased agricultural income, but because of increased income from working off the farm.
The current problem is that there are only two ways to increase farmers' incomes: one is the income of migrant workers from working and doing business in the cities, and the other is the income farmers obtain from agriculture. From the perspective of working and doing business, a relatively complete nationally unified labor market has already formed, and migrant workers seek employment opportunities and obtain income in this nationally unified labor market. This is the farmers' own affair, and farmers have enough motivation and enthusiasm to obtain high-income opportunities. In this regard, what the state needs to do is maintain market order, including resolutely cracking down on malicious wage arrears by enterprises that owe migrant workers their pay. As for farmers going into business in the cities, the key is to have an equal business environment. Doing business can make money, and the market has risks. Farmers who do business must bear the risks themselves, and of course also enjoy all the gains and joy of success themselves.
⟦NL> The income farmers obtain from agriculture is generally limited, because agriculture's share of GDP is constantly declining. At present, agriculture's share of GDP is already below 10% and will go even lower, while there are more than 200 million agricultural laborers and more than 600 million rural people. With such a huge agricultural population sharing such a small agricultural GDP, it is naturally very difficult for farmers to get rich. In order to help farmers get rich, policy has pushed farmers to adjust the industrial structure. The result is that whatever the government encourages farmers to plant is what does not make money. Policy has also pushed capital to go to the countryside and combine with farmers. It is said that farmers cannot get rich because small farmers cannot connect with the big market, and through the company plus farmer model, farmers' small production can be connected to the market. But capital going to the countryside is meant to make money. When agricultural GDP is limited, capital going to the countryside will certainly share in agricultural GDP. The more capital goes to the countryside and the larger the share of agricultural GDP it takes, the smaller the agricultural GDP that more than 200 million farmers can share.
In order to support farmers in getting rich by raising pigs, the state provided fiscal support to large-scale pig farms, especially support to ten-thousand-head pig farms. The result is that in the past, scattered household pig raising was the most important source of sideline income for farmers, but now ten-thousand-head pig farms under government support have almost monopolized the market, and scattered household pig raising by farmers has become extremely rare. Farmers have therefore lost pig raising, this traditionally important source of sideline income. And ten-thousand-head pig raising is of course a capital operation. Even if it is run by a farmer, that household is also a wealthy farmer differentiated out from among the farmers.
The same principle is shown in support for large grain-growing households. The Ministry of Agriculture commends national large grain-growing households. These large grain-growing households cultivate thousands or tens of thousands of mu of land and produce thousands or tens of thousands of tons of grain, contributing to national food security, and it is right that they be commended. But income increases for these large grain-growing households cannot represent income increases for ordinary farmers. At present, farmers are not unwilling to farm, but have no land to farm, because China's arable land is limited.
In other words, if one examines policy support and fiscal subsidy projects in the agricultural sector, their greatest nominal purpose is to increase farmers' incomes, but the actual beneficiaries are all capital that has gone to the countryside or a very small number of wealthy farmers differentiated out from among the farmers.
In recent years, there has again been a seemingly good theory, which says that farmers should be allowed to increase their property income. How to increase it? By making farmers' homestead land, housing and land contractual management rights flow. Statements about letting urban people go to the countryside to buy land and houses so as to increase farmers' property income have also repeatedly appeared in the press. This proposition holds that urban people go to the countryside and farmers enter the cities, urban and rural areas become integrated, the efficiency of resource allocation improves, urban people have places for leisure, and rural people obtain property income. The problem is whether farmers who enter the cities can live there with dignity. If they do not live well in the cities, can they still come back to the countryside? Rural land rights are farmers' basic guarantee and social insurance. Can they be traded easily? Some people also argue that the operating area from which farmers can obtain a decent income from agriculture cannot be less than 100 mu, and for this reason central policy proposes vigorously cultivating new types of agricultural operating entities, with the focus on family farms operating at a scale of between 100 and 200 mu. A family farm operating 100 to 200 mu of land can get rich, but the problem is that there are still more than 200 million farming households that need to obtain income from the land.
China currently practices a market economy, and the urban-rural dual system has basically eliminated the unfair content that discriminates against farmers, and is still being cleaned up. The institutional obstacles for farmers entering the cities to seek opportunities to work and do business also basically no longer exist, and the institutional obstacles for farmers to engage in agriculture and thereby get rich are also basically gone. Under such circumstances, farmers' enthusiasm for seeking opportunities to get rich is far higher than that of officials. Getting rich is everyone's instinct and does not need the state to guide it through policy or support it financially. What the state needs to do is provide a fair and transparent market environment.
That some farmers get rich is the product of their efforts combined with luck. But most farmers will find it hard to get rich in the short term, and some of them may not only fail to get rich but also fall into a poverty trap. At this time, the state needs to provide support and help to farming households that fall into the poverty trap, and the most critical thing is to provide basic guarantees and social insurance for farmers who may fall into difficulty through institutional design. Such basic guarantees and social insurance are mandatory.
If farmers make a fortune and their standard of living is far above the baseline of basic guarantees and social insurance, that is of course good. If farmers have bad luck and fail after entering the cities, such a baseline is extremely important. Under current market economy conditions, hundreds of millions of farmers are the most vulnerable group in China. The state cannot guarantee that all farmers will prosper, but it can design institutions to provide a baseline guarantee for all farmers. The current urban-rural dual system restricts capital from going to the countryside precisely in order to prevent excess urban capital, at the present stage when most farmers cannot settle in the cities with dignity, from going to the countryside to take possession of farmers' homestead land, housing and land contractual rights. These three rights are the fallback for farmers who fail after entering the cities, their basic guarantee and social insurance, and the survival baseline of farmers. The author believes that for a long period in the future they must not be lost.
(The author is director of the China Rural Governance Research Center at Huazhong University of Science and Technology)