The Path of Transformation from a Smallholder Economy to Agricultural Modernization

I. Introduction: The Voice of Transformation in Agricultural Modernization

From a macro perspective, the advancement of China's modernization process mainly requires properly handling the relationship between urban and rural areas. Since the reform and opening up, cities have been the propeller and engine of China's modernization drive. China's high GDP growth rate for more than 30 consecutive years has mainly benefited from the vigorous development of the urban economy; at the same time, rural development has clearly lagged behind, becoming an object that requires the city and industry to nurture and support in return. The declining and withering countryside, together with the development and growth of cities, jointly constitute the magnificent panorama of China's modernization. In short, the transformation and disintegration of rural society and the relative lag of the rural economy both need to be placed within the urban-rural relationship for rethinking.

The current mainstream view holds that in the advancement of China's modernization, the development of the urban economy has already entered the right track, while the development of the rural economy is completely lifeless. China's modernization is urban-rural integration, and the urban-rural dual structure under the planned economic system has greatly hindered the free flow of urban-rural production factors. Only through a series of institutional reforms, especially reform of the rural land system, and the release of urban-rural production factors, can the urban-rural gap be expected to narrow. What follows naturally is the increase in the urbanization rate and the rapid advancement of China's modernization.

Specifically, the arguments advocating the release of urban-rural factors can be divided into two points. First, it is believed that the current organizational mode of agricultural operation has defects of low efficiency and inability to achieve increased production and income, and that only by developing large-scale land operation, especially capitalist-style large farms, can farmers' incomes increase and agriculture prosper. Second, it is believed that agricultural production factors urgently need market-based allocation; rural land is rich in wealth, and through market-based operation farmers can obtain funds to enter cities, thereby narrowing the urban-rural gap. In fact, the former involves the relationship between productive forces and relations of production, while the latter involves institutional reform in rural production factors and belongs to the category of superstructural change. Combined, they are essentially a question of the contradiction between the economic base and the superstructure.

At present, the mainstream urbanization strategy and the policy propositions on agriculture, rural areas, and farmers hold that the existing smallholder production model represents backward agricultural productive forces, and that only through changes in the superstructure can the tension between productive forces and relations of production in the agricultural field be alleviated. Overall, these statements can be called agricultural modernization radicalism. This proposition also has considerable influence in practice.

To sum up, the current voice of transformation in agricultural modernization is highly convergent in its judgment of national conditions and agricultural conditions. The most basic point is, first, that the urban-rural dual structure greatly limits the transfer of urban resources to rural areas and the market-based realization of rural asset factors, thereby causing rural backwardness relative to cities. This is essentially a question of determining the nature of the urban-rural relationship. Second, there is a misunderstanding of the agricultural operation model dominated by owner-cultivators, believing that traditional agriculture is inefficient and cannot make farmers wealthy, and is an object that agricultural modernization needs to eliminate. Finally, and most importantly, agricultural modernization radicalism fails to recognize the real problems that urgently need to be solved in agricultural production development, or in advancing agricultural modernization. What is involved here is the relationship between the economic base and the superstructure in agricultural operation. The above issues will be discussed and analyzed one by one below.

II. The Protective Urban-Rural Dual Structure and the “Smallholder” Path of Agricultural Modernization

Constrained by the objective economic and social gap between urban and rural areas caused by the urban-rural dual structure over the long term, both political and academic circles almost universally believe that the urban-rural dual structure is a structural obstacle hindering China's modernization, and advocate actively promoting urban-rural integration to resolve the urban-rural dual structure formed in history. The theory of rights poverty holds that the root of farmers' poverty lies in poverty of rights, and that farmers' poverty of rights is caused by the urban-rural dual structure. Although the theory of rights poverty stands on the so-called moral high ground of human rights, its biggest problem is its lack of deep understanding of rural issues. The rural problem is not about abstract rights, but about farmers' right to move back and forth between rural and urban areas, which should be farmers' greatest human right. Market theory holds that the crux of the “three rural issues” (agriculture, rural areas, and farmers) lies in rural production factors being too dispersed, and that urban-rural integration, by breaking through the urban-rural dual structure, can precisely achieve concentrated utilization of production factors and realize farmer employment on the basis of developing distinctive industries. Agricultural modernization theory holds that China's traditional agriculture must develop in sync with industrialization and urbanization; therefore, the rural land system needs comprehensive reform, achieving urban-rural integration through farmers entering cities and urban capital going to the countryside.

In fact, the urban-rural dual structure is a common phenomenon in the vast number of developing countries. Developing countries are at the periphery of the world system, while developed countries have the capacity to extract resources from developing countries and to shift internal crises onto developing countries. Overall, China's urban-rural dual structure is fundamentally different from that of other developing countries. In the eyes of the theory of rights poverty, market theory, and agricultural modernization theory, the urban-rural dual structure constitutes an institutional obstacle to China's effective modernization. This in fact inversely proves the institutional nature of China's urban-rural dual structure.

(1) The Formation and Implications of the Exploitative Institutional Urban-Rural Dual Structure

In fact, the emergence of China's urban-rural dual structure had its historical inevitability. The formation of the urban-rural dual structure was not a spontaneous process, but had the distinct characteristic of state institutional construction; it was the result of the state's forceful promotion of institutional building. After the completion of socialist transformation in 1956, urban-rural conflict showed a tendency toward intensification. The “rash advance” momentum appearing in the process of economic construction caused a surge in urban floating population, with large numbers of rural people entering cities. Specifically, the urban-rural conflict after the completion of socialist transformation was manifested in the fact that the tense grain situation was not alleviated, the rural population push suddenly increased, economic “rash advance” and the growth in the number of staff and workers spiraled out of control, and the problem of employment for new urban labor force became prominent. In 1957, the government introduced measures strictly restricting farmers from entering cities, establishing an urban-rural separation belt through administrative means such as household registration management, grain and oil supply, and labor employment. In 1958, the central government promulgated the Regulations of the People's Republic of China on Household Registration, fixing in legal form the already formed urban-rural dual interest pattern. That is to say, the establishment of the urban-rural dual household registration system marked the formation of the institutional urban-rural dual structure. But the urban-rural dual household registration system was in fact gradually established under specific historical conditions in order to implement the national industrialization strategy of prioritizing heavy industry, in the process of regulating urban-rural dual interest conflicts.

It should be said that the urban-rural dual structure formed in the early period of the founding of the People's Republic was a development strategy actively chosen by the state, with the aim of achieving China's rapid industrialization. History has proven that the urban-rural dual structure provided the foundation for China to obtain a favorable international position in the world system. The urban-rural dual structure locked vast amounts of people, finance, and materials in the countryside; the rural population unable to enter cities became the main force for building the countryside and developing agriculture. During the people's commune period, by organizing farmers, on the one hand agricultural collectivized production under the system of “three-level ownership with the team as the foundation” was carried out, and on the other hand agricultural labor was organized to develop basic farmland construction, water conservancy construction, and infrastructure construction, thereby greatly changing the basic conditions of agricultural production in a short period.

Viewed historically, the rural surplus labor at that time could not enter cities; they transformed into “minban teachers” (community-run school teachers), “barefoot doctors”, “film projectionists”, “literary and artistic propaganda team members”, “local legal workers”, and various brigade and team cadres who did not leave production, thereby achieving a concentration of human resources in education, medical care, culture, public security, and organization. In a short period, they developed education and medical care in China's rural areas, enriched rural culture, raised traditional Chinese farmers' awareness of the state, enhanced farmers' sense of national identity, shaped farmers' core values of the nation-state, and molded traditional Chinese farmers into national citizens with a truly modern state consciousness. In a certain sense, this actually constituted a part of national capacity building and was a vivid manifestation of the state's “enculturation capacity.” Furthermore, only after the reform and opening up did the countryside thereby provide a large number of high-quality cheap laborers for export-oriented “Made in China,” thus using comparative advantage to achieve rapid economic development.

Of course, the institutional urban-rural dual structure meant an enormous difference between the two welfare provision systems of urban and rural areas. Urban household registration meant various social benefits; urban residents could not only rely on their work units to solve employment problems, but also enjoy comprehensive social security in housing, medical care, education, and old-age support. In rural areas, farmers could only rely on land, homestead land, and housing to achieve the most basic social security. In this sense, the institutional urban-rural dual structure before the reform and opening up was a form of urban exploitation of the countryside, an exploitative institutional urban-rural dual structure.

(2) The Loosening and Transformation of the Institutional Urban-Rural Dual Structure

Since the reform and opening up, with the vigorous development of the market economy, the urban-rural dual household registration system began to disintegrate, and the urban-rural dual structure accordingly loosened. In the mid-1970s, rural township and village enterprises developed rapidly, and farmers began to enter the industrial sector, “leaving the land but not the village” and “entering the factory but not the city.” In the 1980s, farmers entering cities were no longer subject to household registration restrictions, and it became common for farmers to bring their own grain rations when entering cities. In the 1990s, China's coastal export-oriented processing and manufacturing industries developed rapidly, China joined the international division of labor system, and migrant workers became the absolute main force of “Made in China.”

With the relaxation of policies on rural labor going to cities for work and the rapid development of China's “informal economy,” social benefits attached to urban household registration also gradually began to be stripped away. Housing allocation benefits, commodity grain benefits, and work-unit benefits in state-owned enterprises and other units have basically become history; the benefits of rural household registration are realized through village membership rights. As long as one is a member of the village collective economic organization, one can enjoy contracted management rights to cultivated land, the right to use homestead land, and self-built housing. These three major benefits manifest in suburban villages, urban villages, and rural areas in developed coastal zones as considerable spillover income from urban economic interests and compensation income from land requisition and demolition, and in ordinary rural areas as basic social life security.

Compared with the urban-rural dual structure formed in the early period of the founding of the People's Republic, the current urban-rural dual structure reflects fewer urban-rural differences at the institutional level. At present, the duality of the urban-rural structure is more a historical result of the evolution of urban-rural differences. From the perspective of institutional and policy design, the state's restrictions on capital going to the countryside and the legal limits on urban residents entering rural society both highlight the protective nature of the urban-rural dual structure.

(3) The Protective Urban-Rural Dual Structure and the Path Choice of Agricultural Modernization

The protective urban-rural dual structure is not a negation of the urban-rural dual gap. The protective urban-rural dual structure is precisely an acknowledgment of the urban-rural dual gap; however, this acknowledgment contains a certain affirmation of the exploitative urban-rural dual structure. Specifically, the urban-rural dual structure since the founding of the People's Republic was not a spontaneous product, but the result of state institutional construction. Under the form of the urban-rural dual structure centered on the urban-rural dual structure of resident household registration, China achieved preliminary industrialization and, after the reform and opening up, achieved rapid economic growth. From the perspective of the catch-up strategy of late-developing countries, the exploitative urban-rural dual structure objectively made great contributions to China's rise in the world system, and the implication of institutional dividends in it cannot be ignored.

From the perspective of modern nation-state building, there is a world of difference between the institutional and spontaneous nature of the urban-rural dual structure. A spontaneous urban-rural dual structure is passive; in the national conditions of other developing countries, the urban-rural dual structure is the consequence of developed countries shifting their internal crises. By contrast, China's urban-rural dual structure is an important component of the national development strategy and an active choice at the level of national development strategy. Therefore, China's urban-rural dual structure is not entirely an opposition between city and countryside, or between market economy and natural economy, but an interaction and complementarity between urban and rural areas. Different judgments about the nature of the urban-rural relationship will lead to enormous tension in the choice of the path of agricultural modernization.

The current mainstream view holds that the essence of the urban-rural dual structure is the difference and opposition between the two economic forms of natural economy and market economy, and that the problem of the urban-rural dual structure arises in the process of transition from natural economy to market economy and from traditional property rights to modern industry. The process of transforming the urban-rural dual structure into a unitary structure is the process of the market economy replacing the natural economy. The urban-rural dual economic structure embodied by the traditional agricultural sector and the modern industrial sector is essentially the coexistence and opposition of natural economy and market economy. The urban-rural difference in China's marketization process has hindered the transformation of the urban-rural dual structure.

The essence of integrated urban-rural development is the integration of urban and rural market economy development. China's urban-rural gap stems from differences in the marketization process between towns and villages. The market economy is an economy of factor agglomeration and an economy of scale. Therefore, in the process of integrated urban-rural development, modern market economy should be vigorously developed in urban and rural areas, especially in rural areas. Through the trinity model of “product—enterprise—industry,” the contradiction between the concentration of production factors in towns and the dispersion of production factors in rural areas should be resolved, promoting the gradual convergence of the degree of urban and rural market economy development.

Obviously, the above proposition sees only the “economic duality” in the urban-rural dual structure, and holds that the coordination of the urban-rural dual structure is urban-rural integration, and that only through rural marketization can the backward appearance of rural areas be solved. Under this theoretical logic, the future path of China's rural development is naturally a highly marketized path of agricultural industrialization, a path of agricultural capitalization, and a path of agricultural enterprise-ization. However, if viewed from the protective urban-rural dual structure, the countryside has provided large amounts of cheap labor for the urban economy, provided the Chinese people with ample and cheap grain, melons, fruits, and vegetables, and provided a “stabilizer” and “reservoir” for China's modernization. Therefore, the path of agricultural modernization is not the concrete realization of urban-rural integration, not the equalization of differences in the degree of marketization between city and countryside, and not the concentration of rural production factors; rather, on the premise of fully affirming the movement of the existing urban-rural dual relationship toward a protective structure, the path choice of China's agricultural modernization should be conceived from the real dilemmas faced by agricultural development, the actual conditions of rural society, and what farmers think and hope for.