PROPERTY RIGHTS UNDER MARKET SOCIALISM WITH CHINESE CHARACTERISTICS
#7 in a series on THE FUTURE OF TIBET
The 1990s saw great changes, as China emerged as the world’s factory. Industrialisation accelerated, powerful enterprises grew, vested interests resisted central efforts at reform, the idea of property rights began to take hold, and central leaders tried to juggle contradictory demands. On one hand, it had long been policy to keep mineral and energy prices as low as possible, in order to boost the profitability of manufacturing. This was easily done under a command economy, in which everything was state owned, and subject to official directives. But as the big oil, gas, electricity and mineral companies, though still state-owned, started to corporatize, and sell shares to investors, the demand grew for higher prices to make the profits that would finance future expansion (and enrich those newly in control). However, higher prices for minerals and energy meant higher prices for consumers, and the regime was acutely aware of the need to maintain social stability after the patriotic student movement occupying Tiananmen in 1989 was bloodily suppressed.
By 1996 China was negotiating its entry to the World Trade Organisation, which could mean allowing international mining companies in, as long as China provided a legislative framework guaranteeing their rights. By 1993 China lost its self-reliance in oil, and started importing, while looking to the oil transnationals to help find more oil in China, an effort which largely failed.
But facing the outside world was not the only concern. Much tougher decisions needed to be made about the status of small miners operated by townships as collectively owned enterprises, which were often the only chance for cadres in remote areas to join Deng Xiaoping’s invitation to get rich. The role of township governments was not just as regulators of mining on their patch. Often the township was owner, operator and regulator of the mine, and reliant on it for revenue. These township-owned mines were part of the TVEs –township and village enterprises- which successfully brought industrialisation to rural areas.
It was in the 1990s that the work of geologists coalesced into the realisation that the Tibetan Plateau has many substantial mineral deposits, big enough to warrant systematic mining. In fact, the haphazard scratching at the surface done by township miners was, in some cases, actually spoiling these deposits, not only by blurring the landscape, burying landforms under mullock, alienating the locals, polluting streams and poisoning livestock, but also by creaming off the mineral-rich caps of deeper deposits. Sometimes, the overblanket of especially rich ores, close to the surface, made all the difference as to whether a mine, operating for decades, capable of fully exhausting an entire deposit, was warranted. The rich gold cap would enable a big, capital-intensive, heavily inbdebted mining operation to repay its loans fast, and then be highly profitable. So there were scientific reasons for asserting central control overriding township cadres. The vested interests within the state who fought over China’s first Mineral Resources Law all agreed that minerals belong to the state, but the legal status of the township mines had to be clarified, and standardised management procedures defined. But, Wei Tiejiun says, did this mean “the township mining is to be a strictly controlled system or further liberalized” as a way of encouraging local economic development?
In practice, the townships continued to control their territories, except when a deposit was so big that the state asserted overriding control. Nearly all mining remained locally controlled, by cadres nominally responsible for serving the masses, enforcing environmental law but, more importantly, responsible for economic growth, industrialisation and raising revenues. This entrenched conflict of interests inevitably tipped towards privatised control, in the hands of leading cadres, of local minerals and mines, for their private enrichment. Officially, the boom in “township and village enterprises” or TVEs, was one of the great success stories of reform China, but it did not bring wealth to Tibetan areas.
Township governments had for decades done all but the biggest mining, and it was essential to the ideology of letting the best endowed get rich first that poor areas with resource endowments were entitled to exploit them. TVEs were a celebrated success story, extending wealth into rural areas in contrast to the usual developing country concentration of opportunity in cities. In areas where township leaders, though not subject to democratic election, understood that they operate with a social licence, of acceptance by the township populace, such enterprises often benefited not only the cadres but the community. Even if the cadres were answerable only to officials above them, they also provided employment and wealth accumulation possibilities within their community.
Because there is a wide spectrum of relations between local leaders and their populations, there is a variety of economic consequences of decentralised control of mining and mineral processing. In areas where cadres were imposed from above, had little in common with those they governed, not even sharing a common ethnicity, the cadre owner-managers of mining and resource processing enterprises had little incentive to share the wealth created, or behave in an environmentally responsible manner. In areas where there was evident mistrust between cadres and population, with alienation and suspicion among the people, aloofness or even repressiveness from the leaders, such enterprises could become malignant, consuming and destroying rivers and farmland, polluting agricultural land with uncontained industrial fumes, dumping wastes in places where water and air quality were harmed.
One consequence was indifference to quality, and much wastefulness inbuilt into the entire commodity chain. At a local level, TVEs were often built by cadres greedy for quick profit, without regard to suitable scale. Tibetan wool producers, for example, were led to believe that local TVE wool scouring and cleaning plants would add value to their wool, rather than sending it off to eastern China greasy, unprocessed and unsorted by quality. But far from increasing returns to the wool growers, the TVEs collapsed, leaving the nomads at the mercy of buyers willing to pay only low prices, with no care taken to protect wool quality. The reason why the TVEs collapsed in the “wool war” of the 1980s was that, in their greed, township cadres used all available revenue to build wool scouring plants that were bigger than could be sustained by local production, which led to competition between scouring plants for a finite quantum of wool. This cut into the profit margins of the scourers, who foolishly tried to compensate by weighing down the bags of wool sold to woollen mills with stones. Not only were the distant woollen mills angry at being duped, the dirt and stones added to Tibetan wool damaged machinery. They responded by switching to substitute fibres, and then to importing the finer grades of wool from overseas, leaving the Tibetans without a market, unless they were willing to accept low prices for wool classed as low grade suitable only for being beaten together to make felt.
Similarly short-sighted approaches were taken by many TVEs mining and smelting in Tibetan areas. One example is the aluminium smelter near Maba village just north of Amdo Rebkong (Qinghai Tongren in Chinese). A smelter belching thick fluoride-laden smoke from every factory orifice (except the chimney) is located in highly productive farming country of grain fields, animal pens, prayer flags and shrines to local gods. None of the raw materials for making aluminium are local. The alumina powder is trucked in from Gansu, the electricity comes via high voltage lines from hydro dams to the north, on the upper Yellow River. Under such circumstances, there can be only one reason for locating a heavily polluting factory amid the yellow rapeseed crops, which is local profit obtained by cutting costs, due to the utter absence of any equipment installed to capture and remove the fluorides. When the sheep of the Tibetan farmers lose their teeth, through fluorosis poisoning, and the farmers complain, the local authorities, who own and operate the plant, order them to disperse, on pain of being labelled splittists, a category which invokes the arrival of riot police. Several Tibetans in Rebkong have burned themselves to death, in protest against their silencing, unanswered petitions, and loss of farming livelihoods as sheep starve.
China’s reputation for pollution, wastefulness and inefficiency comes from a thousand such factories, and from the inbuilt waste of resources, in bigger factories, of the legacies of the command and control system of the state-run resource economy. In the time of centrally planned production quotas, all that mattered was quantity, not quality, efficiency, or customer needs. A classic example is a steel mill set up in inland China to make shipbuilding steel plates far from where ships are built, on the coast. A senior manager told British management experts: “We produce a huge tonnage of steel in China. Often it is the wrong type of product. For example, our specialism is in steel for shipbuilding, but the plate we make is really too small for today’s ships. Our technology is also old, and our location is wrong for our markets and suppliers.” (John Hassard, Jonathan Morris, Jackie Sheehan, Xiao Yuxin, ,”China’s state-owned enterprises: economic reform and organizational restructuring”, Journal of Organizational Change Management, Vol. 23, 2010, 500 – 516)
In a market economy, this company would have to switch to what the market does want, or go out of business. In China, massive oversupply of steel, an overcapacity measured in hundreds of millions of tonnes a year, persists. Protected by local vested interests, these companies, under the control of local government, carry on.
For Tibetans, state ownership of minerals, state control of the processing of crops, fibres and underground wealth, have now generated wealth in Tibetan hands. At no point in the many sharp turns of official policy have Tibetan communities benefited.