Yao Yang on the End of Ideology

Yao Yang, “The End of Ideology?”[1]
 
David Ownby, Introduction and Translation
 
Introduction
 
Yao Yang (b. 1964) is a well known economist at Peking University, Director of the China Center for Economic Research and the Dean of the National School of Development.  He is also a prolific writer, in both Chinese and English, on issues large and small.  I am researching Yao’s “Confucian turn,” which began around 2015, and have thus been reading and translating Yao’s writing for the past few weeks.  For a description of Yao’s Confucian turn, which began to occur around 2015, see here and here.  The text translated here precedes Yao’s Confucian turn, but is helpful in illustrating the set of concerns that ultimately led him there. 
 
Here, Yao both celebrates and worries about the end of ideology in China, by which he means the ideology of the Maoist era, vestiges of which survived his passing for a time, to be largely swept away by markets and money by the time Yao composed this essay.  Ideology may have been helpful in forging the consensus necessary to launch China’s reconstruction, Yao argues, but eventually evolved in dangerous directions during the Great Leap Forward and particularly the Cultural Revolution.  No one in China is nostalgic for that kind of ideology, Yao insists.
 
At the same time, however, if a person’s—or a nation’s—sole goal is to make money, this can quickly devolve into mere opportunism, which is what concerns Yao.  In this piece, he seems more concerned with opportunism as practiced by China’s government under the cover of pragmatism and commercialization—various levels of government shifting and avoiding responsibilities by centralizing or decentralizing as the situation dictates, without consideration of long-term results or social justice.  He cites Russia and India as two examples China definitely does not want to follow, Russia being a kleptocracy and India a non-functional “democracy.”
 
In other texts published at roughly the same time, Yao suggests that China should move toward liberal democracy (see, here for a text originally published in Hong Kong), but he does not say that here, also he does endore pluralism and civil society, which perhaps take us close to the same thing.  In any event, he was clearly concerned about China’s ideological vacuum and absence of values consensus, a concern which would lead him to Confucianism a few years down the road. 

Links to other texts on the site

For texts related to ideology, click here
 
Translation 
 
We are currently saying goodbye to ideology. We no longer need to take political exams to enter university, college students no longer talk about national affairs, the Internet is full of commercial hype, and what we see on television are handsome men and beautiful women.  No matter whether you are a white-collar worker or a blue-collar worker, everyone's goal is the same: to earn money and enjoy it.  All of which is to say that China is moving towards a civil society. For a nation accustomed to imperial power and rigid dogma, this change has not come easily and is therefore all the more precious to us. 
 
On the institutional front, a quiet revolution is also taking place in China. The newly adopted “Rural Land Contracting Law” stipulates that, in the absence of special circumstances, a farmer's land may not be reallocated; at the same time, this land may be inherited and the right to use it may be transferred in perpetuity. In this way, rural land ownership basically has the two main characteristics of private property rights, namely excludibility 排地性 and transferability. Consequently, a third land revolution, following land reform and the responsibility system, has quietly taken place in rural China without anyone noticing.
 
In urban areas, massive enterprise restructuring is changing the face of China's economy. For most state-owned enterprises (SOEs), the essence of restructuring is privatization, and "the state retreats and the people advance" is the slogan for restructuring in many cities. Many SOEs have become private enterprises overnight, and their employees have become employees of private enterprises. When the enterprises were state-owned enterprises, the employees filed petitions[2] 上访 at every turn; when they became employees of private enterprises, they immediately settled down. Ownership has just this kind of magical power:  since the enterprise is owned by someone else, as long as I get my money I don’t worry about the rest.

Corporate restructuring is one of those things that can only be done, and not just talked about, and although it is has been no less dramatic in China than in the former Soviet Union or Eastern European countries, there has been little international reaction to the dramatic changes in China's economic system, and even ordinary Chinese would not have noticed much if they had not experienced it firsthand. For whatever reason, in the 1990s, China quietly completed the dramatic if tragic economic transformation of the former Soviet Union and Eastern Europe. 
 
The Chinese people have had their fill of ideology. In the era of the planned economy, everyone had to live according to a uniform ideology, and even an old farmer in a remote mountain village had to check in with Chairman Mao in the morning and report to Chairman Mao at night.[3]   The imposition of this ideology played a certain positive role in the early stages of socialist construction, and the dream of achieving communism overnight inspired everyone to temporarily set aside their considerations of self-interest. 

However, people's enthusiasm was dashed during the famine of the early 1960s, and the ensuing Cultural Revolution turned ideology into a tool for persecuting others. From the point of view of economic efficiency, the planned economy was undoubtedly a failed experiment; but if one looks at the constraints on the lives and freedoms of ordinary people, the rigid yet volatile ideology did more damage than the planned economy itself.  The pace of China's economic growth during the planned economy era was no less than the world average for the same period, and far outpaced other developing countries in education, health, and women's emancipation; therefore, the three decades of the planned economy were not without bright spots.

By contrast, the rigid yet volatile ideology left nothing but painful memories and adverse effects that are still visible today. In this sense, the pragmatic orientation established since the Third Plenary Session of the Eleventh Central Committee, held in December of 1978, is significant, and it is this orientation that has led to the civil society we see today. However, although the old ideology has lost its influence, a new ideology adapted to civil society has yet to take root. When ideology fades away, profit becomes king.  At the individual level, this may be merely a question of an attitude toward life—you can choose to revel in material pleasures or you can bemoan the fate of humanity—but for a country, this may well be a disaster. 
 
The best negative example of this is the former Soviet Union. When Gorbachev launched his "public" reforms, a group of oligarchs emerged from the old government agencies and enterprises, and when the country collapsed in 1991, these oligarchs quickly took control of Russian finance. Their power was so great that even the Russian government had to yield to them. Not only that, the democratic politics that developed overnight provided a platform for these financial oligarchs to take control of the country, allowing them to hold the state apparatus hostage. Despite the existence of nominally democratic institutions, the state was effectively in the hands of a handful of oligarchs. 
 
If Russian politics can be compared to a slippery slope, Indian politics is slow-motion suicide.  Before the arrival of the British, India had never evolved into a fully centralized state. By the time of independence in 1947, democracy appeared to be the only acceptable option for a unified India. However, because of excessive demographic and ethnic polarization, any decision that emerged from such a democratic framework was thoroughly compromised, often resulting in a society unable to make real progress.

A friend who works at the World Bank told me the following story. India has few state-owned enterprises, but they lose a lot of money. Therefore, when right-wing parties are in power, the government wants to privatize these enterprises. Privatization means layoffs, and workers lose their jobs. When this happens, the leftist parties out of power lead the workers to the streets to prevent privatization from occurring.

However, when the leftist parties take power, the government still wants to privatize, because the losses of state-owned enterprises put a huge strain on the government's finances. The leftist parties completely abandon their ideology and embrace profit. What is more interesting is that the right-wing opposition parties then pretend to oppose privatization and lead the workers to the streets, so that privatization fails again. The right-wing parties also disregard their own ideology because they are bent on opposing the left. 
 
Even the most thorough-going and liberal democratic society needs to be grounded in a fundamental civic consensus. When the war in Afghanistan was going badly, some newspapers in Britain began to criticize Tony Blair's policy of following the US, and some even doubted the propriety of Britain's participation in the war. Blair's spokesperson had an interesting response; she said, "Britain is a country that knows right from wrong."

​While we can accuse the U.S. humanitarian intervention of practicing hegemony under the banner of freedom and democracy, the reason why the intervention is generally accepted by the majority of Americans is that human freedom and social democracy are consensus American values. American society has a clear set of values, which are reflected in both domestic and international policies; even if they are superficial, they serve the purpose of convincing public opinion and gaining the political acceptance of the people. 
 
To a large extent, China doing better than Russia and India. We have experienced neither the dramatic changes of Russia, nor the fragmented interest groups of India, and the course of the past two decades shows that the Chinese Communist Party, as the broadest representative of public opinion, has led China along a largely correct path. The success of this path, however, stems in part from the space for innovation created by the failure of the planned economy. What must be understood is that this space has become very narrow today, and further change must necessarily move toward a greater redistribution of interests. In an ideological vacuum, interests are more likely to become the dominant force driving officials at all levels. The reality is that such tendencies have already emerged. 
 
A distinctive feature of China's government structure is the coexistence of a high degree of fiscal decentralization and a high degree of administrative centralization. Moderate fiscal decentralization has a positive effect on local motivation, as Mao Zedong pointed out in his "On the Ten Major Relationships," written in 1957. Excessive fiscal decentralization, however, can have significant negative effects. One of the problems is the inadequate provision of local public goods. The current fiscal decentralization has reached the county level, and each county is responsible for the finances of its own district.  This means that pensions and health insurance are carried out at the county level as well, and since insurance functions on the basis of broad coverage, it is not surprising that the current highly fragmented pension and health insurance systems are stretched to the limit.
 
Another notable example is education. Daily expenses for education are fully covered by county governments, which is not a problem for wealthy counties, but has become a major problem for poor counties, and some spend 60% of their fiscal resources on education. Education is the foundation of the nation, but unfortunately our fiscal policy does not reflect this consensus. 
 
Another undesirable consequence of excessive fiscal decentralization is the commercialization and opportunistic tendencies of local government administration. Each level of government aims to reduce its own burden and increase its own revenues; a notable consequence of this is the paradoxical devolution of burdens to ever lower levels. Why are governments at the township level overstaffed?  Because upper-level governments keep devolving things to the townships.  When it’s time to find jobs for university and high school graduates, especially those from agriculture, forestry and teacher training colleges, no one in the provincial, municipal, or county-level governments wants them, so they wind up in the townships.   The same is true for military transfers. This is true in the countryside and in the cities.
 
In recent years, state-owned enterprises have lost money across the board, and have become a burden to local governments, so they are decentralized. Governments at the county level and above grabbed the few enterprises that were still functional or could be sold, while most were devolved to the district and county levels. For the restructured enterprises, almost all cities required the new enterprises to keep all the original workers, regardless of the size of the previously bloated labor force. In order to balance the interests of the new managers, cities discounted the assets and sold them to the new managers at extremely cheap prices, while postponing the question of whether of the new managers were going to be able to keep their promise not to fire their employees.

This approach appears to solve the problem, but in fact it simply kicks the problem down to a lower level, where it will re-emerge under certain conditions. For example, the new managers of a state-owned enterprise in a certain city sold the business to another company, and the first thing the latter did after taking over was to lay off employees. 
 
The downside of excessive decentralization is related to China's high degree of administrative centralization. On the one hand, higher levels of government have absolute authority over lower levels of government and can simply direct them to carry out their orders; on the other hand, administration at all levels of government is rarely monitored from below.  The juxtaposition of these two facts produces opportunistic tendencies in the operation of all levels of government. In peacetime, a nation's fiscal structure determines its governmental structure; the economist Joseph Schumpeter (1883-1950) went so far as to say that "A nation's fiscal expenditures are its ideology." In other words, a state’s ideology is not what the state says it is, but rather where the state spends its money.  When we apply this insight to China's current situation, it is not a pretty picture.
 
Since the introduction of the tax-sharing system[4] in 1994, the gap in fiscal spending between provinces has widened rather than narrowed; some backward regions, where the tobacco and alcohol industries are the backbone of the economy, have even become net revenue exporters. To this day, the central government still has not established a complete revenue transfer mechanism, and the central government's allocations to localities are not issued in the form of transfer payments, but in the form of investment projects. Since investment projects generally require local matching funds, developed regions naturally have an advantage over underdeveloped regions. Such a fiscal spending approach does not narrow, but rather magnifies, regional disparities. 
 
The market has proven to be the most efficient mechanism for allocating resources, but there are limits to what the market can do. In recent years, classical liberals such as Friedrich Hayek (1899-1992) have become increasingly influential in Chinese intellectual circles. Hayek undoubtedly had remarkable insight in criticizing the shortcomings of the planned economy; however, some of his views have been applied inappropriately by Chinese thinkers, one manifestation of which is their excessive confidence in the role of the market.
 
For example, it has been argued that competition among local governments over taxes, and among local officials over promotions, is sufficient to discipline their behavior and make it compatible with social efficiency. However, the competitive principles of the market are the opposite of what we want for governments. Markets require that each participant maximize their own interests, but this is precisely what governments should not do; the commercialization of government behavior and the resulting negative consequences are ample proof of this. Government was created to serve the public interest and it is these interests that it must serve; the commercialization of government behavior runs counter to this. 
 
It makes no sense to blame the commercialization of government behavior on the rationality of government officials and to tolerate it for this reason.  “Rationality” can be a working hypothesis for a researcher studying government behavior, but at this point it only yields empirical conclusions about "what reality is like" without addressing the normative question of "what reality should be like.”  At the same time, although the commercialization of government behavior is related to institutional design, such as the contradiction between vertical administration and fiscal decentralization, institutions are not the fundamental problem. The fundamental problem is that we do not have a complete theory of social justice to answer the following questions: What rights should citizens enjoy? What kind of social distribution is an acceptable distribution?
 
Answering these two questions is a prerequisite for a pluralistic society to maintain its political unity. China, which is moving toward citizenship, is also moving toward pluralism at the same time, a process that has become irreversible. In this context, I am afraid that what we need to address is not the question of representation, but the question of how to provide the public with a vision of justice; a vision of justice that shows the public a picture of an ideal society, a criterion for judging how goods and wealth are distributed in society, and a value system adapted to the contemporary world. 
 
Utopia is not something that truly exists, but utopian ideals point us toward what to strive for. At a time when the economy is becoming increasingly market-oriented and civil society is taking shape, pragmatism does not mean that we must abandon our ideals. A person without ideals will spend his life in vain, and a country without ideals will be, as Sun Yat-sen famously said, a sheet of loose sand; a person without ideals will definitely focus on the petty profits he can reap today, and a country without ideals will become a tool for a few people to reap personal benefits. Twenty years of reform and opening up have broken the shackles of the old ideology, and the cognitive level of the people has been greatly improved, so now is the time to establish new ideals. 
 
Notes

[1]姚洋, “意识形态的终结?”  I have not yet found where this text was originally published.  There are online versions that go back to 2008; the text was posted on Aisixiang on June 22, 2010. 

[2]Translator’s note:  “Filing petitions” was one of the few ways to register a complaint in the era of public ownership.  Although the language suggests parallels with “filing a grievance” as do unions and union members, my impression is that the system was much more like leaving a document in the kind of “suggestion box” once seen in some enterprises and government offices in North America (and still available on Amazon).

[3]Translator’s note:  Literally, “ask permission” of Chairman Mao in the morning, by facing his poster on the wall of your home and telling the Great Helmsman your revolutionary plans for the day, a common practice during the Cultural Revolution.

[4]Translator’s note:  The 1994 tax reform was a major moment in contemporary China’s fiscal history, which basically served the fill the coffers of the central government at the expense of local governments, and set the stage for the central government’s decision to allow local governments to finance themselves via land sales, a precondition to China’s recent real estate boom.  See here for more information.