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close this bookCERES No. 074 (FAO Ceres, 1980, 50 p.)
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China's performance in social equity

by R.A. Bishop

The authors have set themselves the tasks of studying how prices are deter mined in China and their evolution over time; estimating current and past levels of rural and urban incomes; anti thus obtaining an idea of the relative level of income of different sectors of the Chinese population, especially in town and country, and of their standard of living both present and past. The time frame of their study is 1952 to 1974. These related topics are of course central to any assessment of the Chinese economy in terms of its , own claims, namely, that the Chinese model results in a more equitable distribution of income and thus a more rapid growth rate than any alternative type of politico-economic organization.

In making this study, the authors face formidable difficulties because economic concepts must be interpreted in the light of Chinese definitions (an outstanding example being that of GNP), and there is a lack of comprehensive and consistent data. The writers rely very much on secondary sources, which may provide several varying figures, as is shown for instance in Table 1-2 of the book, which gives five different estimates of Chinese national income, diverging by a factor of more than two in 1974.

Since they wish to use such estimates for further computations, they prefer to make a courageous single choice among alternatives rather than base themselves on a range that would finally lead to meaninglessly wide results.

Two approaches

The authors follow, as they call it, two approaches: the one, in their terminology, macroeconomic, the other microeconomic. The macroeconomic approach, treated essentially in Chapters 1 and 2 of the book, consists in arriving at a hypothesis about the national income of China, to be used as a reference point against which to check the estimates of per caput income derived from the microeconomic approach. Further hypotheses concernnig the total population permit a view about the national average per caput income, its growth over time and, by applying price indexes, changes in the average per caput income in real terms. The authors estimate that there was an increase of about 2.4 percent per annum compound between the average of the quinquennium 1952-56 and 1974. A breakdown of the population between urban and rural and between employed and "others," when coupled with estimates of earnings derived from the microapproach, will eventually enable the authors to close the circle with the national income estimates; at the least, their estimates are mutually consistent and in accordance with the initial hypotheses. Any challenger must be prepared to examine all the figures and not just one or two select examples.

The micro-approach? treated in Chapters 3 and 4, takes two forms. First there is a direct estimate, relating to 1974, of average earnings. For the urban population, this is derived from estimates of wage and salary levels in various urban economic sectors, weighted by the numbers of people in each group. For the rural population, the authors attempt a direct estimate of earnings derived from collective activity in the communes, from artisan (i.e., non-industrial) work by farm families, from sales of agricultural inputs (mainly organic fertilizer) to the brigades, and from privately owned plots of land or animals. As they themselves admit, the question of agricultural incomes is the most difficult of all. Such indications as exist are sparse, contradictory and vary widely, sometimes for reasons of definition, which are not obvious. In any case, in a country such as China, with wide variations of climatic and other conditions for agriculture, it would be surprising if agricultural incomes also did not vary widely. For these reasons, many have rejected the idea of talking of an average rural income. Nevertheless, our authors, courageous as always, do make such an estimate, believing that for their study it would be quite inadequate to leave out the 80 percent of the Chinese population that is rural. They support this estimate by making also an estimate of the dispersion of incomes about the mean.

The second form of the micro-approach consists in estimating the cost of the standard food basket in town and in country. If to this is added expenditure on non-food elements, one may arrive indirectly at an estimate of per caput income; in fact, in view of the difficulties of arriving at a direct estimate of rural income, the authors prefer this second form of the micro-approach. Their estimates are that for 1974 the indirect approach gives a figure of about 16() yuan as the average annual per caput rural income, and about 256 yuan for urban incomes. Given 56 percent employed in rural areas, annual average earnings are about 288 yuan per caput in rural areas; again, given 50 percent employed in urban areas, annual average urban per caput earnings are about 516 yunan. The authors further conclude that the gap between urban and rural earnings has increased rather than diminished over the years. "Notwithstanding the massive transfers of income from the city to the country, rural incomes have not kept pace with urban incomes."

At least as good

This brief account cannot do justice to the mass of figures and information presented in the book, nor to the ingenuity and assiduity of the authors in utilizing all kinds of sources to achieve their purpose. The reader who wants to know more should refer to the book itself; among other things, he will find a list of something like 200 publications quoted as having contributed to the study. As a bibliography alone, the book makes a useful contribution.

But what of the substantive results? Does China have a better income distribution than other countries? Has the rate of economic growth been faster?

The authors' answers to these questions are mainly to be found in Chapter 6, with allusions elsewhere. By and large, they feel that China's performance in terms of growth has been at feast as good as that of other comparable countries and, in terms of social equity, has been much better. The difficulty is on the one hand to identify another country as a yardstick by which to measure China's performance, and, on the other, to pick out the causative factors for success or otherwise. Although they do not ignore other countries, the authors clearly consider India as the most significant standard of comparison, not only because of similarities in geographical size and number of inhabitants but also perhaps because, as they quote from elsewhere "the primary reason for the interest of such a comparison may be found precisely in the difference of a political nature between the two countries: in China, a true-blue socialist organization; in India, a parliamentary democracy that has revealed a surprising capacity for survival. Thus the comparative results of the two countries are often assumed to be a testimony to the effectiveness of the two systems of government." It is not clear whether the authors themselves hold this opinion. In any case, the figures they adduce do not conclusively demonstrate, in the opinion of this reviewer, whether India or China is superior in terms of growth rate.

On the other hand, they are much more positive about social equity, showing that China, according to their figures, has a much more equitable distribution of income than other countries at about the same level of per caput income, and is indeed, in this respect, on a par with the high-income countries of the world. In India the distribution of income is less equitable than in China and, electing a ten-year period of the time under review, has actually deteriorated. This relative equality of income in China is related to the fact that throughout the country people are welt fed, with food supplies guaranteed by the State, a point made not only in this book but also in a recent article in ceres.

Certainly in this respect, the Chinese are better off than the citizens of many other countries.

But how much does it mean to say that the distribution of income in China is as equitable as in the high-income countries of the world? Is the distribution of income in these countries considered to be equitable? Would not the policy-makers of China have preferred to go further than that? If so, what prevented them, given their powerful control prices and wages in an economy where for many years external influences played little part? This book goes a long way to providing the facts and figures required for discussing these questions, but the answers lie in the field of politics, not economics.

The forces behind the grain trade

by Peter Hendry

Merchants of Grain by Dan Morgan. Viking Press, New York, 1979, 514.95

A half dozen years ago, when the establishment of an effective global information system for food supplies was being debated at various intergovernmental meetings, a frequent warning was that the assembled information must be processed and circulated to governments in utmost secrecy lest speculators and profiteering transnational firms obtain such intelligence and benefit unduly from it. Such fond precautions are brought to mind by Morgan's impressive detailing of the intricacies of the international grain trade and, in particular, the operations of five family-owned grain companies that control so much of it. The image that arises from one well documented chapter after another is of a close-knit, close-mouthed order of entrepreneurs aptitude for sensing the slightest winds of change in world grain markets far surpasses that of any government or group of governments. There is, for instance, the almost plaintive testimony of a US assistant secretary for agriculture in support of a tax break for the US-based grain companies: "There is a US public interest in supporting the companies. They're the ones who keep us posted as to what's going on all over the world. Their system is ahead of our system."

Gentlemanly restraint

Merchants of Grain is rich in these touches of irony, and in its supporting anecdotal material. Too rich, perhaps, for the scholarly minded seeking quantitative assessments of the international grain trade or more definitive prescriptions for its better regulation. There are times when Morgan's fascination with the exotic background of the great grain dynasties seems almost to get in the way of clearer comprehension. The cast of characters assembled for the enactment of each new drama in the unfolding grain epic would do justice to a Russian novel. But Morgan is a journalist, not a theorist, and he wisely pennits the massive evidence he has assembled to bear its own message rather than burdening it with judgements and prophecies. The value of his work lies in the insights provided, certainly for lay readers, but likely for many specialists as well, into what has hitherto been a murky and much misunderstood business.

For as long as the cereal deficits of developing countries remained at modest levels and the surpluses produced elsewhere were usually managed with a certain degree of gentlemanly restraint by the four major exporters, no one paid much attention to the activities of Cargill, Continental, Bunge, Louis Dreyfus and Andre. Yet, as Morgan reveals, it was precisely during these moribund (as far as the grain trade was concerned) decades that the companies were strengthening their position through adaptation and diversification. When the USSR made its massive move into international grain markets in the summer of 1972, all of the companies, plus the "upstart" Cook firm of Memphis were quick off the mark, much quicker, as was documented in Congressional hearings, than the US Department of Agriculture.

On the issue of whether there may have been collusion between USDA and the grain companies, Morgan's journalistic penchant for focusing on personalities serves a useful purpose. Did Clarence Palmby, who left his post as assistant secretary of agriculture to become a vice-president at Continental during the early stages of the negotiations with the USSR, thereby provide that company with advantageous inside information? Not likely, says Morgan, and for a reason already familiar: even as a high-level government official, Palmby probably had no information that was not already well known at Continental.

On the other hand, Palmby's successor, Carroll Brunthaver, was, by Morgan's account, exceptionally slow either to grasp or to communicate to superiors the magnitude of the USSR purchases.

Not surprisingly, these transactions of 1972 serve as a kind of watershed in Merchants of Grain. But, commendably, these dramatic events are linked backward into the past and forward nearly to the present. There is a detailed account, for example, of the frantic but little-known negotiations that transpired in Ottawa in 1963 when the USSR first showed signs of becoming a major cereal importer. (The role for US grain in this case was restricted by the requirement for use of costlier US shipping for half of any transaction, but this, of course, did not rule out transnational grain firms from supplying the USSR from other sources.)

Readers seeking conclusive evidence to support convenient conspiracy theories may be disappointed by Morgan's work; so, too, will be those expecting some miraculous mechanism for making world grain movements more responsive to evident human need. Instead, there is Morgan's caustic one-line comment on inflated earnings and bonuses arising from the hectic transactions of 1973: "Serving 'a great human need' had become a most rewarding activity."

What Morgan has done is to serve us a strong dose of reality: refreshing, certainly, because it is original rather than a rehash of familiar ingredients; but definitely tart in the aftertaste when one begins to contemplate the many pious resolutions and plans of action that have been formulated by august bodies for the presumed betterment of the world's food supply system without a glimmer of comprehension of the forces that really shape the global movements of our most important staple foods.

Not one event, but a long process

by Umberto Di Giorgi

In this collection of essays, the author studies the relationship between the poverty of each country in particular and the accentuation of inequalities at international level. The basic idea behind the book, which gives it an organic character, is that international integration has aggravated the dependence of the Third World and unleashed the process of national disintegration.

The author is equally at home with methods of economics analysis and with those of sociology. Of these, three seem particularly important: analysis of social classes (class differences imply conflicts of interest); of the role of power, both political and economic, with all the consequences this has for the international economy; of the category of the historical period: forces in action in the international economy do not fluctuate around a point of balance - on the contrary, they continue to create imbalances.

One of the causes of this imbalance is technical change, the driving force of the world economy. The new technology developed in the advanced countries sets in motion on the international market forces that help to accentuate the inequality between North and South. This process is not without consequences at national level; it involves a more and more sharply defined stratification of society, of which an outstanding feature is the unity of interest between Third World elites and those of the advanced countries, reflected within the Third World by a conflict of interest between the ruling classes and the great majority of the people.

Shed new light

It goes without saying that this very rough outline of the author's theories does not do justice to the richness of his analyses. One might think it was just another book on dependence and inequality.' Nothing of the sort. It is, on the contrary, an original contribution, both in the method followed and in the author's capacity to match theoretical analysis with precise historical examples to support his point. The essays on the international transfer of inequality, the role of foreign capital and poverty in the Third World, which constitute the first three chapters, shed new light on these questions. This work could also be seen as a continuous dialogue on the theoretical level between those who advocate a return to the classics (Smith, Ricardo and Marx) and those who are still faithful to neo-classic analysis. Griffin comes out clearly in favour of the economic thinking of the classics, emphasizing that the free play of market forces is not in itself enough to achieve social justice.

The reality of the Third World is depicted in an extremely pessimistic light. Unlike Griffin's other works (The Political Economy of Agrarian Change, for example), this book does not always provide a positive exit to analysis. In other words, it does not always give precise answers to the fateful question, "What is to be done?" This is undoubtedly the limitation of this work. It is true that, here and there, one can find some interesting ideas. For example, in the essay on multinationals, Griffin maintains that, in the context of a development policy hinged on basic needs, multinational enterprises of a new type could make their appearance, offering different kinds of products with different technologies. Such a policy would lead to a more equal distribution of income, and also make the role of the multinationals largely marginal in relation to the global development process. It would however be a role "marginally beneficial rather than the reverse."

But although he accepts the basic needs philosophy, he remains extremely sceptical as to the concrete possibilities of its implementation, so that it becomes much more of an interpretative manure than a new economic policy. This scepticism is evident when he comes to the problem of the new international economic order (NIEO), which is the keystone of the alternative to present development policy. There are certainly many obstacles to the implementation of NIEO, and they can be found inside as well as outside developing countries. But this is no reason to avoid the task of overcoming them. In fact, a detailed review of the state of negotiations, even if one thinks of the slender achievements of the Manila Conference, should not let us forget that the restructuring of North-South relations is not one event, but a long-drawn-out process, as Mabbub ul Haq pointed out with his usual perspicacity.

Works like Griffin's are, however, useful, because they bring out a bitter reality which could serve as a stimulus, both to international organizations and to Western public opinion, to tackle Third World poverty on a global scale.