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Chapter 5

ECON 336 Naughton - Chapter 5.docx

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McGill University
Economics (Arts)
ECON 336
Christopher Green

Chapter 5: The Rural Urban Divide The urban rural gap in China is very large and has some important characteristics: o Different governance structures and different property rights o Different forms of citizenship, one for rural, one for urban Rural Chinese have less privileges than urban dwellers o There are strict restrictions on mobility, where it is often difficult for rural Chinese to move to urban areas; however, more immigration is beginning to occur There is a substantial urban rural income gap and is a product of the urban bias in policy making Although there has been significant movement from rural to urban, it is unlikely that current gaps will be reduced 5.1 A Dualistic System: The division between urban and rural 5.1.1 Origins of the urban-rural divide In traditional China, there were few urban rural barriers These barriers have origins in socialist China Because citizens were connected to the socialist state by their workplace (which were almost all publically owned) However, how these were organized was different in urban and rural areas o In urban areas, residents were organized according to their place of employment by their work unit, or danwei These urban work units were controlled by government planning These work units had systems of entitlements and benefits, extended quite uniformly to all urban workers Therefore, they were quite a privileged group in society o In contrast, rural institutions were different, where land was owned and controlled by the village and consequently became property of the village. This is the model of collective ownership Residents, by default, became owners of such collectives and access to land was equalized within the collectives However, there were no rules governing the redistribution of resources across collectives There were no entitlements that applied to all rural residents; instead, they were encouraged to provide services from their local resources The goal of agricultural collectives was primarily to sell produce for revenue, and use such profits from a surplus to provide services Therefore, they were poorer and had less provision of benefits and services, along with the fact they had less social institutions to serve them The reasons for the differences was due to the Big Push strategy: o Rural systems were given the goal of producing low cost food and the collectives were supposed to manage and deliver grain to the government o However, in urban areas, work units received investment from the government o Therefore, the rural systems role was to extract resources for industrialization In addition, there was grain rationing, where grain was delivered to urban residents through their work units But this dualist system was an implicit tax on farmers in rural areas who had to sell at artificially low prices, controlled by the government Therefore, farming became a low return occupation, more so than before However, for this system to work, farmers had to be tied permanently to their lando An example of a failure of this was during the GLF (1958-1960), when many farmers emigrated to urban areas seeking better paying jobs o However, the collapse of the GLF produced dire consequences as the government continued to extract grain from the rural areas when there was none left to be extracted o Therefore, urban dwellers were now an additionally privileged group, insulated from the devastated rural provinces The response of the GLF was to change policies: o Leaders reduced their obligations to urban residents and restricted the number of beneficiaries o Many of those who immigrated from the countryside were forced to return to their rural origins, never allowed to return to the city o The hukou was created, initially to monitor population movement; however, it evolved into a determinant of a familys life prospects o Without a hukou, an individual or farmer could not go to the city to work, where the hukou acted as sort of a urban residence permit These changes resulted in almost 0 migration and segregation of entitlements and privileges at different levels to urban and rural Chinese This dualism was only softened much later in the early 1980s and was mainly due to the increased availability of grain o There was easing of migration, usually as a temporary resident o Economic changes increased employment prospects for rural workers in cities o However, the hukou remains a divisive element in Chinese society, where many avera
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