Living in Two Chinas; D. Russell

While the communist armies clearly won the long war in China between the two sides in the 1940s, their current leaders are now beginDr. Russell, whose latest book is Government and Le gal Plunder, recently spent six months teaching at the National Taiwan University. 648 ning to abandon the· economic sys tem they fought for and have fol lowed since 1949. The communist leaders on the mainland are now increasingly en dorsing the basic economic idea that free-market production guided by the desire for profit is (in most areas of daily living) superior to govern ment-directed production for the general welfare. That 'development deserves the serious attention of all of us who value human freedom. Here's why: Along with a trend toward the market economy, a different form of government necessarily begins to emerge in practice. For when a peo ple are free to choose as consumers, a large shift in authority must nec essarily begin to flow from the cen tral government to local groups and individuals who determine what to LIVING IN TWO CHINAS 649 produce 'and how best to do it in or der to meet consumer demand. The checks and balances of market-di rected production and of voluntary selling and buying begin to displace the arbitrary decrees of government officials. That's a first necessary step toward some form of democratic government.

I first became personally involved in studying and comparing the two Chinas when I entered communist China as a tourist a few years ago. It was a short visit, totally under the supervision of government guides during the entire trip. While I en joyed it (first-class hotels, excellent food, fascinating archeological sites, and such), I had almost no direct con tact with the Chinese people. Even so, I saw enough drabness, regimen tation, and sullenness to convince me I wouldn't want to live and work there. I am, however, now living and working in the Republic of China on Taiwan as a Visiting Professor at the National University. My observa tions and experiences here have been markedly different from those on the mainland. And I'm convinced that the difference stems basically from the economic systems of the two countries. I've never seen nor heard of more individual economic activity than I've encountered here on Taiwan. It seems at least as frantic as that gen erated by their Chinese cousins in Hong Kong. Across the street from the faculty housing compound where I live, new businesses are suddenly born every day when entrepreneurs drive up (truck or bicycle-cart), roll out a tarpaulin on the sidewalk, and begin selling any number of items.

I've bought "designer jeans" there for $9, and "brand name" $16 sweat suits for $4. I can get leather jackets at perhaps 20 per cent of the price I'd pay at home. Caps, bananas, gloves, oranges, cigarettes, face pow der, books, watermelons-you name it and it'll eventually show up on a street corner in my neighborhood. And that's only a hint of what goes on all over this city (Taipei) of some two-and-one-half million people. The Two Chinas Compared That's what free enterprise and the profit motive do. It works every time it's tried. Given half a chance, it'll work in communist China as well as here. In fact, it is working there. Un der even a rudimentary sort of free market in food production, appar ently the communist Chinese are now finally getting enough to eat. And many are now earning enough money as private business people to buy TV sets, an occasional mo torcycle (no cars yet, however), and building materials to repair their government-owned and government assigned housing units.

When I compare what's available in the Republic of China (most es pecially housing) with the pathetic 650 THE FREEMAN November situation in the People's Republic on the mainland (or in Russia or Cuba), I wonder how any person can defend communism as the friend of the workers. In 1984, the Republic of China en joyed a high 10.92 per cent economic growth. And the per capita income exceeded $3,000. Meanwhile in com munist China, per capita income is somewhere between $300 and $500. Communist officials are reluctant to supply this type of information, and the few statistics they make avail able are often contradictory. In any case-with their great economic leaps forward, their cultural revo lutions to purify the spirit of the peo ple, and the inevitable communist leadership intrigues-the per capita income in mainland China doesn't seem to have improved much over the past 30 years. The Miracle on Taiwan The Republic of China is rapidly turning from an underdeveloped country into a highly industrialized nation with a large surplus in its balance of payments account. Pri vate enterprise and the market econ omy have worked their magic again on Taiwan-as they always do every where when permitted to operate.

And while the United States ren dered valuable assistance in supply ing both armaments and economic aid, the "miracle" of Taiwan was mostly accomplished by the people of Taiwan and their government. Here's an absurdly brief summary of how they went about it. In harmony with the "Principles of the People" advocated by Dr. Sun Yat-sen (the first pres.ident of China in 1912 and the leader of the revo lution against the imperial Ching or Manchu dynasty), the government started with food production. To in crease it, they instituted a "land to the tillers" program to encourage peasant ownership on easy terms. The government compensated the former landowners by giving them equity-shares in the new industries that immediately began to appear on Taiwan. And as had been promised, the United States government "matched" every dollar of this new capital that had been invested in in dustrial development of all cate gories, both public and private. The Taiwanese people themselves were encouraged to invest their earnings in the new companies that were springing up all over the island. For eign investors were also invited in to "take advantage of the cheap and hardworking labor to be found there."

Again in harmony with the teach ings of Dr. Sun Yat-sen, the govern ment itself maintained complete ownership of twelve key industries steel, railroads, utilities, and such. But light industry and agriculture were left to private ownership and the dictates of the customers in a 1985 LIVING IN TWO CHINAS 651 market economy. The "market test" of the value of products and services was also supposed to apply to the government-owned industries-a theoretical idea that's difficult to ap ply in practice. But for the most part, anyone could start his own company and make whatever he thought he could sell for a profit. (In communist China under total government own ership, there was strict rationing of almost everything; and it still exists there today for the items most wanted by the consumers.) Economic and Political Liberty True, the economy of Taiwan is not a free market economy as we know it in the United States; it's more like that of Great Britain, with govern ment ownership of major industries.

(In fact, Dr. Sun most likely got his economic ideas from the Fabian so cialists in England where he lived and studied for several years.) But when the Taiwanese economy is compared with the communist eco nomic system on the mainland, it is free indeed. And while the dominant political party on Taiwan (the Kuomintang) doesn't exactly en courage competing political parties (there are two more), the people gen erally have a choice among candi dates when they vote for their rep resentatives to the National Assembly and to the other national and local offices. The economy and government of the Republic of China on Taiwan today are unquestionably the freest and most democratic the Chinese people have ever known in their long history. The results of this Taiwan-style market economy and representative government have generally been a distinct improvement. Education: attendance is required through ninth grade, and it is thereafter available (and essentially tuition free through the university level) for all those showing sufficient aptitude according to competitive examina tions open to everyone. Religion: choose your own, or even start a new one. Travel: live where you please, and travel anywhere except to com munist China. Jobs and material possessions: in essence, there is full employment, and as I view the con stant traffic jams, it seems to me that "everybody" owns a car or motor cycle-and also a color TV set, con siderable electrical equipment in homes that are mostly owned by the people who live in them, and well sty led clothing for every season.

Medical: I have found the hospitals and doctors here to be reasonably close to the standards I've been ac customed to in New York-and med ical care is generally available to everyone in one form or another. This "living example" of the re sults of freedom for almost 20 mil lion nationalist Chinese on Taiwan has faced the communist Chinese on the mainland for the past 35 years.

652 THE FREEMAN November As the standard of living here has constantly gone up, it has remained essentially stationary there. And that fact is known to millions of the mainland Chinese, and most espe cially to the communist leaders. Per haps that explains why those lead ershaveannouncedthattheyintend to apply market-oriented principles to their own economy in an effort to satisfy the pressing material needs ofthe one billion Chinese under their authority. A Step Toward Freedom But can they go from total control of all resources and all production to a considerable degree of freedom of choice? Might this "new economic policy" get out of control and result in a demand by the Chinese people for political freedom? After all, that result happened several times in Eastern Europe, and at least once in Russia itself. We can't know, of course, if it will happen in commu nist China. But the leaders of the Re public of China on Taiwan would be short-sighted indeed to take any ac tion to impede this trend toward eco nomic freedom for the mainland Chinese. They might even support it by taking no action'to discourage the "illegal" trade now rapidly devel oping between the two Chinas, For example, dUring the past 12 months, there has been as much as one billion dollars in trade from Tai wan with mainland China-all technically illegal. Most of it has been indirect via Hong Kong and other countries along the Chinese border, but some of it has been direct by pri vately owned "fishing boats" from Taiwan to various Chinese ports.

And this trade is growing steadily. It could soon be two billion, then three, and so on. This practical "as sistance to the development of a free market on mainlanti China" needs no encouragement but merely the absence of official discouragement. And the same policy might also be applied to the "illegal" visits by Tai wanese Chinese to see relatives on the mainland, No one on Taiwan really knows how· many Chinese from here have "vacationed in Hong Kong" and then gone on into mainland China, where they are most welcome. The communist border officials don't even record their entry in the pass ports issued by the Republic of China, since the visits are "illegal." Instead they merely give them a slip of paper that can be discarded before they return to Taiwan! The number of these visits is substantial, and is growing. As a result of these visits and trade, the Chinese on the mainland hear firsthand about the freedom and prosperity of their relatives on Taiwan. And, no doubt, these visits also remind them that the only way they can get out of China is to slip past guards,· dogs, and barbed wire1985 LIVING IN TWO CHINAS 653 and then perhaps swim for three hours through shark-infested waters to Hong Kong. These comparisons can only encourage the ever-present desire for similar freedom to trade and travel in the People's Republic of China.

Exchange Is the Key It is clear to me that the Republic of China on Taiwan has nothing to fear when its system is compared with that of the People's Republic of China on the mainland. Further, the material level of living in both Chi nas is automatically raised by this exchange of products. Obviously, each party to the trade gains some thing he would rather have than what he gives up in exchange. That's the purpose of all trade, both do mestic and foreign. Unfortunately, many government leaders on Taiwan seem unaware of the power of ideas, and some of them are now campaigning for strict en forcement of the long-existing laws against travel and trade with red China. I'm convinced, however, that if the Legislative Assembly decides to enforce those laws, they will thereby destroy the only possible de velopment that could permit some sort of mutually acceptable contact (not necessarily formal re-unifica tion) between the two Chinas.

Human freedom starts with the free market and stops with the con trolled market. That's necessarily the case since it is people who are controlled, not markets. That's all that any government is ever de signed to do, i.e., to control people. And that's the purpose of all laws. (Can you name a law that isn't de signed to compel or prevent someone from doing something?) And the law itself eventually follows the market. If people are free to voluntarily ex change their goods and services, the law is (or soon will be) in harmony with that economic situation. And it is well to remember that freedom feeds on itself. People with a little economic freedom want more freedom, and they will automati cally move in that direction until stopped by the police powers of gov ernment. A powerful example of this tendency is evident in communist China today. The communists there have always posted guards along the Hong Kong border in an effort to pre vent their people from escaping into a free market economy. And now' that the government has created an experimental "free zone" within China along the same border with Hong Kong, additional guards are now posted between the communist China "free zone" border and the rest of China. The purpose, of course, is to prevent the Chinese people from escaping from the more-controlled areas of China into the less-con trolled areas of China.

When the communist leaders fi nally and fully understand that eco654 THE FREEMAN nomic freedom brings a correspond ing degree of political freedom, they may try to return to complete eco nomic controls. The result could be a revolution, as occurred in East Germany, Czechoslovakia, Hun gary, and even in Russia itself. That result would present all sorts of in triguing possibilities to the leaders of the Republic of China who still claim to be the only legitimate gov ernment of all China. But suppose the mainland com munists continue this trend toward a market-type economy based on Dr. Sun's principles? (After all, the com munists claim Dr. Sun as their foun der, too.) And suppose that this in creasing economic freedom on the Upcoming Articles mainland is followed in due course by a representative type of govern ment in the People's Republic of China? In short, suppose the two di vided Chinas end with somewhat the same economic and governmental systems? Then who would be presi dent or prime minister or first sec retary of all China? Would he come from Taiwan or the mainland?

My answer is simple: It's not in the least important to the Chinese peo ple who is president of an economi cally and politically free China. What is important is that the Chinese people be able to produce, trade, and travel freely in a market economy based on the ideas of pri vate ownership. ® DECEMBER • On the Bishops and the Market-Charles A. Baird • Getting There-John K. Williams • John Witherspoon: "Animated Son of Liberty"-Robert A. Peterson JANUARY • What Is a Just International Order?-William H. Peterson • Toward a Market Monetary System-Alberto Benegas' Lynch, Jr.