Why Is Guaranteeing the Contract Rights of Farmers Who Have Moved to the Cities Destroying China's Villages?

China's marketization, urbanization and reform of the farmland system have already produced severe differentiation among farmers within every village. At present, all kinds of farmers, as long as they have not changed their village household registration, are given a single designation in the various documents of the central government: “farmer”, or “farming household”. This crude use of concepts is in fact like carving a mark on a boat to find a dropped sword. It makes policy far from able to achieve its intended effects. It also means more and more private agendas are smuggled into policy. The most typical case is the direct subsidy policy the government has applied to agriculture since 2006. Originally this kind of government subsidy should have been a subsidy for the production process, in order to protect the interests of farmers as producers. But in the villages, the government allocated the subsidy according to the contract rights certificate, paying the subsidy directly into the accounts of the contracting villagers. And many farming households that had gone out to work were not farming, yet they enjoyed most of this subsidy. So this subsidy is in fact a “contract right” subsidy.

The differentiation of farmers has already formed different types of villagers. Many villagers are not necessarily farmers. But farmers are certainly villagers. The villagers in a village can broadly be divided into three types: the first are the farmers who truly live in the village and work the land. They possess 100% of the character of a farmer. The state's agricultural policy should mainly target them and protect them. Not exploit them and oppress them. They are the most vulnerable group in society. This is the first type of farmer. The second are the semi-urbanized farmers. That is, their household registration is still a village household registration. But they work in towns and cities and mostly live in towns and cities too. These villagers are the majority of villagers. They are the second type of villager. The third part are the farmers who have already or basically urbanized. This part of farmers has already changed their village household registration. They work in towns and cities and live in towns and cities too. They have already become urban citizens. But they still retain contract rights over village farmland. According to policy, the village collective cannot take it back and redistribute it. This is the third type of villager. The interests of these three types of farmers in the land are not the same. The first type of villager depends heavily on farmland and agriculture. The second type of villager mainly relies on working for wages. The third type of villager depends on their employment situation in the towns and cities. It has almost nothing to do with their villager status. But reform has never made any distinction about this. When the government speaks of “protecting farmers' rights and interests”, it grabs beard and eyebrows together, and most of the time it is in fact sacrificing the interests of the first type of villager while genuinely protecting the “interests” of the second and third types of villager. Because this fits the state's current interest structure of industrialization and urbanization. It fits the current need for this temporarily stable society.

Director Chen Xiwen wrote in an article in the People's Daily on December 8, 2015 that “effectively guaranteeing the land contract rights, the right to use residential land and the right to share in collective returns of farmers who have settled in the cities is crucial to raising farmers' enthusiasm for settling in the cities, smoothly advancing reform of the household registration system, and promoting the healthy development of new-type urbanization.” This is continuing to emphasize protection of the interests of the second and third types of villager. The purpose is very strong. But what consequences will this kind of “guarantee” have for the first type of villager who has not moved to the cities? Director Chen did not say. Not saying so does not mean that the severe plunder and harm this consistent agricultural policy inflicts on the first type of villager does not exist. And in fact, just as the reform top level constantly stresses the need to “stabilize contract rights” and “guarantee the contract rights of farmers who have moved to the cities”, the painful situation of the first type of villager in most villages across the country is growing more and more severe. The decay and pollution of most villages across the country are growing more and more severe. From institutional reform to this kind of serious consequence, there is a completely necessary logical connection.

Tracing back to the source, the error of farmland reform, after the first button was wrongly fastened in 1984 when the collective economic organization's right to contract out land was abolished, has basically been a “path dependence” of one error after another, compounding error upon error. The “guarantee of the contract rights of farmers who have moved to the cities” that Chen Xiwen speaks of is no different in essence from the earlier “unchanged for 15 years”, “unchanged for 30 years” and “unchanged for a long time”. They are all tautologies. Because the interest structure of a huge decision-making group has already formed, correcting this wrong path is extremely difficult.

First, the reform of the farmland management system that began after 1979 gradually deviated from the correct direction after 1984. This is a reform direction and process of de-organization. It is the result of a clamor of policy errors, theoretical errors and public opinion errors combined. What then is the correct direction? Whether seen from Marx's political economy or from modern capitalist industrial organization theory, organization is the only correct direction for modern industry, including agricultural development. The reason is simple: only organization can realize Smithian division of labor and technological progress. But organization in agriculture does not equal enterprise-ization or corporatization. Nor does it mean that rigid collective management and collective labor must be adopted. Organization should have very rich forms. The people's communes after 1958 were correct in the general direction of organization. They also successfully realized Smithian division of labor through organization and greatly raised agricultural productivity. In China they basically achieved water conservancy. Their 30-year history, leaving behind more than 80,000 large and small reservoirs and hundreds of thousands of kilometers of irrigation canals, is the proof. It is enough to show that organization is indeed a correct direction for rural development. It is an essential breakthrough in the agricultural management system. But the people's communes had certain defects in their mode of organization, or mode of management, in the agricultural production process. That is, most production teams basically replaced the special, flexible unified management that agriculture requires with enterprise-style management. This led to incentive problems in the production process. These problems in the incentive mechanism evolved into different performance among production teams. In the words of reform authorities such as Du Runsheng and Wan Li, this was the three thirds. One third of villages did well, one third were average, one third did poorly. Facing history, these authorities were in fact not carrying out a total negation. This incentive problem of the production teams was later unanimously criticized by public opinion as “big shouting matches”, “slacking off” and “blind commands”. This criticism of the management mode took a part for the whole, went to extremes, but still had some basis, revealing the problems of the people's communes' specific management system in the production process, namely that in the agricultural production process, because of the dispersed, seasonal and diverse character of agriculture, enterprise-style management cannot be adopted. Instead it should be a household management mode. Let agricultural laborers have greater flexibility and adaptability. If reform had been limited to reforming and adjusting the people's communes' management mode, then the organization of China's agriculture, rural areas and farmers would not have been interrupted and could have continued. The ever-worsening “three rural issues” would not have appeared. Unfortunately, “truth, once pushed one step beyond its limits, becomes error”. Reform elevated the criticism of the people's communes' management mode into a negation of the people's communes' collective property rights and a total negation of agricultural organization.

Reform, when it had just been launched, replaced collective labor with household management. It achieved certain results. This was first because the people's communes at that time had basically completed water conservancy. This raised the production curve of village agriculture. Second, it was because household management was relatively suited to the productivity characteristics of agriculture. So on the foundation of water conservancy, rapid agricultural growth from 1979 to 1984 became possible. Lin Yifu, Du Runsheng and others, as theorists on this question, seriously misled the state's policy and public opinion. But household management does not equal smallholder management. Smallholder management is a state of household management with private land property rights. It is an “atomized” state lacking organization. It can almost never spontaneously give rise to new productive forces. China's several thousand years of history have already proved that this smallholder management mode will certainly form a severe shackle on and regression of agricultural productivity. The reason is that it completely violates the direction of industrial organization. So the smallholder management mode is certainly an obsolete and backward management mode. Moreover, under modern market economy conditions, because of the intervention of modern chemical elements such as pesticides and chemical fertilizers, without the coordinated management of collective economic organizations, its damage to the sustainability of village agriculture is often even more severe than that of the smallholder economy in history.

The No. 1 Document of 1984, with “contract rights unchanged for 15 years”, turned household management into smallholder management. This confusion and misunderstanding of concepts changed the nature of China's farmland reform. It launched a process of thorough destruction of agricultural organization. The central government even strictly ordered the restriction and dissolution of collective economic organizations. The integrity of the village disappeared along with it. In the reform arena clamoring with marketization and privatization, the central government was intoxicated by the temporary success of household management. It was completely unaware that the destruction of the organization of rural areas, agriculture and farmers was a very dangerous direction. The “30 years” unchanged after 1998 and the “unchanged for a long time” of 2008 basically froze China's agricultural management mode into the smallholder management model. The “combination of unified and separate management, two-tier management” stipulated in Article 8 of the Constitution was substantively abandoned. This is also a severe blow to China's legal construction and government credibility. Since the direction of China's development is to build a rule-of-law society, why can reform be lawless? Farmland reform, by a gradualist strategy, moves toward substantive privatization. This de-organizing reform of the management system and reform of the property rights system makes rural areas, agriculture and the first type of villager more and more distant from the division of labor and cooperation that development requires. So China's “three rural issues” have basically lost the hope of development. At the same time, this is another reason for the emergence of the “migrant worker tide”. The only way for villagers to change their own situation is through working for wages and doing business. They try every means to transform themselves from the first type of villager into the second and third types of villager. This transformation can partly change their income situation. But it very easily conceals the difficult situation of the first type of farmer after losing organization in the village.

So China's “migrant worker tide” cannot simply be misread as a Lewis-style labor transfer or urbanization. Behind it is the comprehensive deterioration of the rural environment caused by reform.

The deterioration of the village environment comes from two aspects. The first is that after agricultural organization was destroyed, the agricultural management costs of smallholders rose out of thin air. For the first type of villager, to complete agricultural production, even for only one season, they need to have all kinds of means of production ready. Especially agricultural machinery and various irrigation equipment. For example, plowing and transport require tractors, and pumping water for irrigation requires pumps. There are also rice transplanters, harvesters and so on. Without these agricultural machines, relying on human labor for agricultural production is extremely hard and extremely inefficient. But these agricultural machines, as fixed assets, are not cheap. Their use is efficient only at a certain scale. Only then can the apportioned cost be lowered. For example, a production team, or a villager group, at a scale of around 1000 mu, owning tractors, harvesters and other agricultural machinery. The efficiency of use would be greatly raised. The average apportioned cost per mu would be greatly lowered. But reform, while destroying the people's communes' management system, also thoroughly destroyed the scale of agriculture. At present in many villages in Guangdong, during the rice harvest season, farmers have to rely on manual harvesting for this very reason. Because the household scale is too small, agricultural machinery is very hard to make economically viable, so they can only continue manual labor. The second is that after labor cooperation disappeared, Smithian division of labor disappeared. A small-scale smallholder management mode cannot produce a rich, scientific Smithian division of labor. This causes a sharp decline in the labor efficiency of the first type of villager. Every farming household has to take on all the necessary work before, during and after agricultural production in order to complete the whole process. For the sake of seeds for a few fen of land, for a packet of pesticide, for a bag of feed, they may have to keep riding a motorcycle back and forth to the town, or running back and forth between the field ridges. “Small but complete” certainly means high labor costs, and it makes it impossible for the first and second types of villager to settle down to farming at all. So China's agriculture, under this “de-organized” farmland system, has gradually evolved into a very helpless “old people's agriculture”. Only some elderly people who have lost their labor capacity are forced to farm at home. Agriculture becomes their reliance for escaping the market, being self-sufficient and barely making a living.

Second, the disintegration of the people's communes made the organization of the non-economic factors of each village disappear. The factors within a village are far from being only productive factors. There are also many non-economic factors. Such as ecological factors, social factors, cultural factors and so on. These factors or environments likewise determine the quality of life of villagers and the efficiency of agricultural production. Under a modern market economy, it cannot rely on “governing by non-interference”. There must be an organizational body to supervise, organize and manage it daily. This is precisely the key productivity basis for the people's communes' “integration of government and commune”. When Mao Zedong promoted the establishment of the people's communes in 1958, the general direction was not wrong at all. On the contrary, it now seems very far-sighted. He saw the limits of the market. He also clearly saw the general direction of future village governance. But after the people's communes were forcibly dissolved in 1983, driven by market-oriented reform, the three-level institutions of township, village and group no longer bore responsibility for organizing and managing these non-economic factors. And individual farmers could not bear this kind of public management responsibility. Thus in these important areas a supervision vacuum, an organization vacuum and a management vacuum formed. Because the market pricing of these non-economic factors completely failed, these factors and areas became places for the discharge of all kinds of “negative externalities” in villagers' pursuit of single-minded economic profit. The discharge of sewage and the dumping of garbage, under this organization vacuum, grew more and more severe. Some small chemical plants, small dyeing and printing works and small hardware factories, in order to evade urban supervision, built their factories in the countryside. As a result industrial sewage caused the water systems of nearby villages to be completely polluted. Even basic drinking water for villagers became a problem. Many villages that should have been “small bridges, flowing streams, and households” with beautiful environments are now too filthy to look at. Some even developed into “cancer villages”. This continuous deterioration of the village ecological environment makes the basic life of villagers suffer an unprecedented severe threat. And to escape this threat, there is only one road: fleeing the village.

The continuous deterioration of China's village environment is the result of the wrong farmland reform. So in the big cities of Beijing, Shanghai, Guangzhou and Shenzhen, one can often see some elderly farmers wandering and begging. They are in fact refugees created by the farmland reform. They have contracted land, so why are they displaced in the cities? If decisions were made according to Deng Xiaoping's “productivity” standard, then the wrong farmland reform should immediately be reformed. Rather than continuing “path dependence”.

China's agriculture, rural areas and the first type of villager have always been paying a huge price for reform. How long can this price be sustained? It certainly cannot be sustained indefinitely. One important reason is that the comprehensive deterioration of the rural ecological environment directly and indirectly caused by the “household contract management” system may one day in the future detonate a comprehensive ecological crisis and agricultural crisis covering both urban and rural areas. Because rural organization has constantly been destroyed by wrong reform, every village has fallen into a comprehensive organization vacuum and management vacuum. So all kinds of ecological and environmental disasters occurring in villages, such as floods, droughts and mudslides, will become more and more frequent. Moreover, they will spread from the countryside to every town and city. So the logic of the so-called “guarantee of the contract rights of farmers who have moved to the cities” is in fact the logic of continuing to destroy the integrity of China's villages and China's agriculture. It has not the slightest intention of reflecting on the errors of reform. Regarding the citizenization of the 260 million second type of migrant workers, the reform top level has constantly stressed an interesting reason, namely that because economic capacity is limited, the cities cannot provide social security for all farmers. The meaning is that farmers can go to the cities to work, but that citizenization cannot be achieved is proper, reasonable and understandable (or of Chinese characteristics). The meaning is that the cities can share the “demographic dividend” from migrant workers, but cannot bear the cost of urbanization. The “dividend” is mainly shared by the cities, while the cost has always been borne by the countryside. The meaning is that the cost the wealthy cities cannot bear must continue to be borne by the poor villages. It is like a rich landlord, feasting every day on delicacies and living in splendor, then saying to a long-term hired hand with a knowing look that because economic development is limited, I am not able to let you eat twice-cooked pork once a year. But moldy baked cakes are guaranteed. Eat them, and once you have eaten, do not rebel. This must be one of the most absurd logics in history. If reform cannot touch, dares not touch, and is unwilling to touch the cheese of the urban interest groups, then it can only continue to scheme after the land of the first type of farmer. “Guaranteeing the contract rights of farmers who have moved to the cities” is reform shirking responsibility for the urban interest groups.

Second, “guaranteeing the contract rights of farmers who have moved to the cities” is in fact allowing the second and third types of villager to “bring land into the cities”. China's urbanization trend is that the absolute number of the first type of villager, that is, true farmers, will become fewer and fewer, and in the end probably only two or three hundred million villagers will continue to live in villages and farm as farmers. That is about 30% of the current total number of villagers. That is to say, 70% of villagers will “bring land into the cities”. They will also take away 70% of land contract rights and use rights. Even more. This huge group of villagers possesses “contract rights” that the government has repeatedly favored and protected. What will they do? First, they certainly will not farm directly. In terms of method, either they simply leave the land fallow. At present in rural Guangdong much land is in this state. Top-level elites say this problem can be solved through transfer. But against the background of the disappearance of village organization, institutional costs rise out of thin air. Farming very likely means business failure. How many farmers would be willing to transfer land that is already “fragmented” in order to farm? Especially directly growing grain crops. Cash crops have great market elasticity, and the risk is in fact considerable too. At the same time, these tiny fragmented plots of land, without being contiguous and without scale, basically have only the most basic guarantee significance and no economic significance. For the second type of villager, the risk of working for wages can happen at any time. And local governments basically refuse to provide unemployment security and old-age security. Why should they “transfer” out land that has this guarantee significance? So the government's hope of relying on farmers' “voluntariness” and “transfer” to solve the problem of farmland fragmentation simply cannot be realized. Farmland transfer is not impossible. Some farming households, when agricultural management goes smoothly, may also expand scale through land transfer. But they must bear another kind of institutional cost beyond normal agricultural production costs——land rent. The price of land rent is between 500 yuan and 1000 yuan per mu. This means that agriculture, which already has meager returns, will face land rent making things “worse and worse”. Land rent nearly doubles the material costs of agriculture. This is an institutional “exploitation” that reform imposes on the first type of farmer. It can conclusively prove that farmland reform is a failure and an error. China's land revolution was originally precisely because it eliminated landlords and land rent, conforming to the direction of historical development. That is why it won the support of most farmers. That is how it drove China's industrialization and modernization. But reform, through “guaranteeing the contract rights of farmers who have moved to the cities”, creates a large number of landlords out of thin air. It lets the second and third types of villager lie prone in the villages “for a long time”, becoming parasites on the body of the first type of farmer. In the countryside it deliberately creates the differentiation and splitting of farmers.

In modern society, land is certainly not the main form of security. So replacing land security with social security is the correct direction for China's urbanization, industrialization and modernization. It is the direction for thoroughly solving the “three rural issues”. Unfortunately, today, when the urban-rural gap continues to widen and the “three rural issues” continue to worsen, reform is still continuing to “guarantee the contract rights of farmers who have moved to the cities”. Playing the same old tune and repeating the same old trick is simply shirking responsibility and continuing to push China's agriculture, rural areas and farmers into the abyss.