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ºÚÁÏÉç worked together to create an academic journal, reflecting their ability to think critically about the Middle Kingdom and the implications of its rise. These collections of thoughts come together to form “Xinmin Pinglun,” our Journal dedicated to the publication of the informative and analytical essays of our scholars. As the application deadline for the class of 2019 is approaching and the arrival of the incoming class is on its way, we are sharing pieces from the second issue of Ximin Pinglun to give insight into the critical thinking and scholarship taking place at Schwarzman College. Here, David Chi Zhang, (Class of 2017) discusses the transformation of the Chinese society over the past twenty years.

The question of where China should head has been asked countless times since the pride of the?Tianchao (Heaven State) was destroyed by the warships of Great Britain. Shall we follow the West, for which the Chinese people have mixed feelings? They envy Western nations¡¯ wealth and power, yet as a victim of imperialism, they have not forgotten the pains suffered in the past hundred years. Two opposite voices are always competing in the minds of the Chinese. Whenever the country is bullied, the urge to learn from the west to strengthen itself increases. Whenever the Chinese perceive a problem with Western society, pride for our own traditions and institutions prevails. Most of the time, the desire to learn from the West wins the debate, sparking the country¡¯s attempt to transform into a society modeled on the strong countries on the world stage: first the UK, then the US, and finally the late Soviet Union. During these years, people in this country ¡ª young and old, workers and students ¡ª cared greatly about the direction their motherland was heading, and were willing to protect that direction at the expense of youth, wealth, liberty, and even life. Unfortunately, all these efforts would eventually come to failure.

Over the past twenty years, China has witnessed a splendid transformation. Interestingly,?this came at a time when debate over East and West was at its least pronounced. One may easily believe that the accumulation of wealth would create a more harmonious society. However, after twenty years of development, there is more and more dissatisfaction among Chinese people regarding food safety, inequality, social mobility, and air pollution. The debate of where China should be heading has been restarted. This is no surprise since nearly all the Western countries experienced similar painful stages of social development after the initial burst of their Industrial Revolution.?Now that society has full stomachs, a new social consensus is needed to respond to increasingly diverse demands. People want a coherent story to explain their history, to guide their thoughts, to justify their efforts, and to comfort themselves amid endless competition. The people in China must provide an answer, whether they are willing to turn back to Chinese tradition, turn to the West, or come up with a new option.

Defining the West

In the eyes of Chinese people, the West is a broad concept. It is often used in its Cold War meaning, referring to the economically and politically powerful countries outside the Soviet bloc. But there are many more definitions that have been suggested for the West, in terms of geography, culture, and religion. The West is certainly not a geographical concept. Japan in the 1900s came up with the slogan ¡°Departing Asia for Europe¡± and during the Cold War, South Korea was considered part of the West, at least in the eyes of the Soviet countries, even though its government was authoritarian until recently. I would argue that the defining characteristic of the West is not solely its emphasis on individualism, but the belief that individual rights are not in conflict with the collective interest. Moreover, I do believe freedom is what people have always wanted. However, how much freedom people consume depends on the price of freedom. For most of us, trading life for freedom is not a good deal. If one¡¯s livelihood is dependent on the control of the authoritarian regime, suppressing one¡¯s individual needs will be a wise choice. For most of human history, collective interests were prioritized over that of the individual. Maintaining tight control for the good of the society as a whole has always been the most effective justification of authoritarian governance, whether implemented through military, administration agencies, or churches.

In an agricultural society, land is the single most important production input. Land is important not only because it is indispensable in the production process, but also because it cannot be reproduced by human effort. Able people in an agricultural society compete to fully control the land, which legitimizes their control of the whole society. In an industrial society, the situation is fundamentally changed. Land is no longer the most critical production input. Other inputs, such as capital, are reproducible. Even if a machine is controlled by an emperor, one may decide to make a new one instead of bowing to the crown. The reproducibility of industrial production inputs ensured that people can support themselves. The industrial revolution, in this sense, provides the confidence and the material basis to rebel. How does a society transform itself from an agricultural society to an industrial one? This question has troubled economic historians for centuries. I dare not provide an answer to it, but what is important to realize is that the emphasis on individual interest is a result of the revolution, not a prerequisite. By the late 1700s, the United Kingdom had been transformed into an industrial country where old regimes and values were being challenged.

It is against this backdrop of manufacturing and overseas exploitation that Adam Smith published his famous book, An Inquiry?into The Nature and Cause of the Wealth of Nations. Specifically, a famous quote from the book is: ¡°It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.¡± Smith¡¯s point is that people ultimately care more about themselves than about others, which, to be honest, is old news. It is the following two sentences that open the door to a whole new world: ¡°By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.¡±

“The emphasis on individual interest is a result of the revolution, not a prerequisite.”

What Smith is arguing is that it is not necessarily bad when people act based on their own self-interests. On the contrary, they will maximize the welfare of the society as a whole to the greatest extent by doing so. One does not need to be instructed or submit to authority. Rather, a world where everyone acts freely will ultimately be a better world than one where everyone submits to the control of a few. The spirit of democracy was brought back from ancient Greece. Freedom of each individual, including speech and religious conformation, was emphasized to a marvelous extent, symbolized by the Declaration of the Rights of Man?and of the Citizen. What does that portend for China?

China in the past 20 years: a similar transformation

Convergence to the West is less a question of whether China will eventually have a liberalized market economy, a voting democracy, or begin embracing human rights such as freedom of speech, but more of a question of whether the majority of Chinese society will believe in the good nature of self-driven actions. Even if the society as a whole is not ready to embrace that idea, I would argue that since the economic foundation has changed, it is very likely that in the future this country will converge to it. China has experienced exceptional economic growth in the past thirty years, which is regarded as evidence of the effectiveness of the Communist Party¡¯s institutions and systems. There are even voices advocating for the substitution of the Washington Consensus with a Beijing Consensus. However, by looking closely at the past 30 years one may get a different feeling. The economic miracle, in a general picture, justifies the good nature of actions driven by self-interest. Agriculture and township and village enterprises (TVEs) provide two examples.

From 1976 to 1986, China¡¯s grain production grew more than 35%, from 28.6 million tons to 39.1 million tons, according to government statistics. This is the direct result of the policy which allows Chinese households to keep a major portion of their farm production after turning in a certain part, rather than handing in all their production. This policy is not innovative at all since it merely restores the basic ideal of individual incentives, which ultimately supports Smith¡¯s argument. History textbooks use the phrase ¡°surprising emergence¡± to describe TVEs that were started in the early 1980s. These small firms held by townships and villages produce goods with machines belonging to the collectives, and lure technicians in State-Owned Enterprises (SOEs) with higher salaries. They not only survived but prospered in the cracks of the command economy. This is because they utilized a performance- based payment system, again a natural element of incentivized labor. Self-interested individuals indeed contributed to the society.

By comparison, the so-called benevolent collectives experienced bitter failures. The Chinese government tried various methods to incentivize the SOEs, such as profit responsibility, contracting, and tax reform. But in the end, most of them were privatized during the late 1990s and early 2000s, resulting in tens of millions of workers losing their jobs. Those firms still held by the state have two types of destinies. The first type, enjoying a monopolistic or oligopolistic status, evolved into giants, becoming globally recognized corporations, such as Sinopec and China Unicom. Some of them now have world-leading technologies, but still suffer from bureaucratic low efficiency. Others are in a much more unfortunate shape, largely relying on government subsidies and quasi-government credit to feed their employees, resulting in negative profits. CALCHO, an aluminum corporation, is an example. Together with the tightly controlled financial system, this development has resulted in overcapacity and indebtedness time and time again.

Clearly, China did not find a way to develop its economy differently from the West. Critics may argue that there is much heavier government intervention than in the West. However, in the 1700s, the manufacturing industry in the UK was also tightly regulated. In developing its domestic industry, the?U.S. was not adverse to strong trade protections. China has followed a similar script since opening up, but at greater speed. Accompanying the change in economic production was the fact that people have less (direct) reliance on the state. When students at Tiananmen Square were protesting in the hope that the Chinese government would become a voting democracy, most urban citizens were living in government-controlled units. Units were more than employers in the sense that the former provided many other welfare services. In the late 1980s, SOE employees ate fruits given as welfare by their SOE employer. They lived in the apartments built by their SOE employer. Their child went to the kindergarten affiliated with the SOE. Their parents enjoyed healthcare from the hospital affiliated to the SOE. Can you imagine workers would support the idea of eliminating their SOE employer in exchange for a voting ballot?

Similar stories were happening in the countryside. Although those living in rural areas were mostly excluded from state welfare, they were just granted by the government a longer lease to cultivate
their own lands. They were busy working in the fields to gain more output for profit. Most of them had not even heard of political campaigns. They expected peace and commitment from the extended grant, and thus were not willing to stand up against the government. In 1989, scholars and intellectuals were the de facto accelerators advocating for social transformation. Yet, they were not the main engine of the society. They did not represent a majority, nor are they the indispensable part of the society. People need food to eat, clothes to wear, and a roof over their head, but they can do without books or intellectual quarrels. The Tiananmen strike was doomed not because of the government¡¯s tolerance of brutality, but because it was led by a small educated minority rather than the majority of Chinese civilians.

The past 28 years have seen unprecedented change. The privatization of SOEs, the entry of multinational corporations, and the rise of entrepreneurship has dragged more and more people out of the state welfare system. The formerly condemned capitalist mantra of ¡°no effort, no reward¡± is now recognized by the majority of citizens in China. Today¡¯s youngest generation has to rent a house, pay for health insurance, purchase pensions, and take care of their parents by themselves. They start to realize it is their sweat that earns them money and social benefits, and in a sense that gives them freedom to say no to collectivism. They try to defend the result of their labor and intelligence, resulting in higher sensitivity to taxes and fees. They are reluctant to sacrifice themselves for the vague concept of collectives, because they need monetary rewards to make a living. They want?to have a predictable life controlled by themselves, resulting in a demand for written rules stating clearly what is allowed and what is forbidden, rather than having an authority make a judgement every time a conflict emerges.?For those who made their way into the middle class, the above changes are not enough. Their demand has escalated from surviving to living a life of quality. They want less traffic jams, safer milk, better doctors, cleaner air, and better education for their children. The protests against PX Projects, a chemical engineering plant, in Xiamen and five other cities reflect people¡¯s determination to make their voice heard. A life of quality also means not to be treated as unimportant. They might tolerate internet monitoring as long as what they find to be correct and justified is not deleted by the government. Forgoing their political voice in exchange for an income increase hardly works anymore, especially in regions where the middle class has grown the most.

“The Tiananmen strike was doomed not because of the government’s tolerance of brutality, but because it was led by small educated minority rather than the majority of Chinese civilians.”

Does that prove China is ready for a civil society? Probably not. Citizens who desire to participate in public decision-making are not doing so because they believe in civil society or voting democracy. Rather, they are inspired by self-love and individual interests. China did not find a unique way to develop its economy. Liberalization and marketization has led to self-responsible citizens, which has transformed people¡¯s mindsets. It has just been 30 years since individual production activities were restored. It is still too early to draw a conclusion until more evidence is accrued. In my perspective, China is on the same path with the West. The shift from the collective to the individual is almost inevitable.

Future path: natural and gradual transformation

Transforming a society is never easy. The world has not yet?seen a country with such huge geographical, cultural, and economic diversity transform into a so-called modern society. The United States is large. However, the founding principles of the country were established when it was just a narrow belt lying on the eastern coast of North America with most of the population European immigrants.?What China faces today is unique. When people from the east are worrying about environmental and food safety, residents in the west are still struggling to earn their basic needs. For example, GDP per capita in Shanghai in 2014 is about $14K, while that in Ningxia, a western province is $6.2K. For comparison, the GDP per capita in the US in 2014 is about $54.6K, according to the World Bank. In China, the upper middle class is asking for a liberalized financial market, while workers and farmers are condemning the revival of capitalism. Some young people are furious for not being able to reach Facebook and YouTube while some of the old call for the return of Mao¡¯s thought.

Careful techniques are required to manage the transformation process, otherwise the two conflicting forces may tear up the society. In general, there are three possible options. The first is maintaining the current governing style, suppressing liberal forces with political power. The second involves an aggressive leap towards an individually oriented society. The third is a careful retreat of government intervention from places with high civil pressure, while still providing support with basic social security and opportunities to accum