The Chinese Industrial Cooperatives
The Chinese Industrial Cooperatives (Chung-kuo Kung-yeh Ho-tso Hsieh-hui) are an important and widely publicized outgrowth of the war, and are perhaps the only feature of domestic Chinese affairs—outside of the Communist area and the roads program—which is as well known beyond China as within. The purpose of the cooperatives is to launch an enormous program of decentralized industry throughout Free China, with thirty thousand separate industrial cooperatives for the first major goal. The purpose is to develop an industrial system which will keep China autarkic for resistance and reconstruction; long-range, the purpose is to circumvent impending evils of concentrated industrialism, slums, megalopolitan crowding, extra-legal oppression. China might thus proceed directly from a decentralized half-handicraft economy to the decentralized power economy of the future. Four principles underlie the program: sound technical design, cooperative organization, voluntary self-discipline, and social welfare on the basis of Sun's min shêng.[5]
Formally, the C.I.C. Headquarters is a social organization sponsored by the Executive Yüan. H. H. K'ung, Minister of Finance and Vice-President of the Yüan, is its Chairman. The Secretary-General and Associate Secretary-General, Messrs. K. P. Liu and Hubert Liang, are both American-returned students; the former once worked in the Ford factories while studying at the University of Cincinnati and later was a banker in Manchuria. The most inspiring force in the movement is Mr. Rewi Alley, a New Zealander strongly interested in cooperatives and in labor welfare, formerly factory inspector in the International Settlement. Familiar, because of his Shanghai experiences and famine-relief work, with the problems of economic organization in China, he presented his plan to Generalissimo and Mme. Chiang through the intervention of that extraordinarily popular British Ambassador, Sir Archibald Clark-Kerr. The Chiangs were impressed with it, and the Generalissimo gave it his support. A headquarters was established at Hankow in August 1938, with the following five departments: general, for secretarial and administrative housekeeping; financial, administering funds for the headquarters and the cooperative units; organization, in charge of planning and inauguration of cooperatives; technical, devising simple industrial techniques; and accounting, an independent agency of audit.[6] The Executive Yüan has continued to make administrative funds available; the central headquarters near Chungking now has a staff of about seven hundred. Professor J. B. Tayler of Yenching University, a noted economic expert, is consultant for staff service.
As projected by Rewi Alley and his fellow-enthusiasts, the C.I.C. had to adjust itself to three zones of China's war-time economy. A guerrilla zone in and around the combat area, as well as behind the Japanese lines, concentrated on the creation of immediate war-time necessities. Some of these were in the form of direct medical and military supplies; others, replacements of indispensable articles which otherwise would have been procured from the enemy. The second zone, of light industry, was within easy reach of Japanese air raids and espionage, and consequently given to enterprises having light capital investment, mobile, and readily concealed. The third, or inmost Chinese zone, being best protected, was the proper area for the development of the heavier industries, although even here no grandiose or heavily centralized works are planned. The ultimate aim, peace-time as well as military, of the C.I.C. is to distribute industry across the countryside, replacing the once flourishing handicraft industries, and allowing Chinese society to develop naturally and continuously.
The author attended a C.I.C. exhibit in Chungking which presented a startling array of modern goods. Ford tools and auxiliary parts, matches, lamps (electric, kerosene, and an improved wood-oil lamp which equals kerosene), light electric appliances, lathes, machine-shop tools, medical kits, Western shoes, toothpaste, canned foods, paper, printing presses, books, and fountain pens—all were produced in areas which did not even have the spinning wheel in some instances, and which until recently imported all Western or modern goods from the coast or from outside.
The organization and practical accomplishments of the C.I.C. are well summarized in a recent article by K. P. Liu, Secretary-General:
INTRODUCTION: When it became clear that in order to continue economic resistance against Japan China must at all costs develop production in the rear of the fighting line, one of the steps taken was the founding of the Chinese Industrial Cooperatives by Dr. H. H. Kung.
The plan was to construct throughout China chains of small industries which should use local materials to supply the manufactured goods fundamentally necessary to the life of the people.
Industrial cooperative societies are organized around about 60 depots over 16 provinces. An average depot of about 25 cooperatives is supervised and advised by a group of men consisting of depotmaster, accountant, technician, and two or three organizers.
For the coordination of work depots are divided among five regions: the Northwest (NW), the Southeast (SE), the Chuankang (Szechwan and Sikang) region (CK), the Southwest (SW), and Yunnan (Y). Each is headed by regional headquarters, which are responsible to the Central Headquarters at Chungking which represents the C.I.C. on general questions and negotiations, and decides, in consultation with regional chiefs, on broad lines of policy. The Central Headquarters also supplies the services of traveling advisers on engineering, accounting, and organization problems.
The staff of 700 is financed by Government funds, since the C.I.C. has been named a social organization responsible to the Executive Yüan. Further, the C.I.C. was given $5,000,000 by the Central Government to be used as loan capital for cooperatives. More recently, negotiations with various banks have made new large sums available, so that the amount which can now be used for the capitalization of cooperatives is near $30,000,000.
The above two sources of income provide no money for education, research, evacuation of workers from occupied areas, technical training, refugee work relief, medical help, or capital loans in guerrilla regions. Necessary auxiliary activities as these are provided for to a certain extent by gifts from interested men and women in China and abroad.... FORMING AN INDUSTRIAL COOPERATIVE: When a depot is first set up, the depotmaster advertises the objectives of the C.I.C. by posters and speeches. But as soon as a few workmen get to know about its activities there is no more need to advertise. There are always plenty of workers who will prefer the security and freedom of a cooperative to unemployment or to working for a master.
The number of men needed to form a cooperative is at least seven, but there is no upper limit. They first come to talk things over with a C.I.C. organizer, present their plan for setting up a factory or workshop, with proof of their qualifications and a tentative budget showing how much loan capital will be needed to start work. The organizer explains to them the cooperative system of self-government, Chinese cooperative law, and the C.I.C. Model Constitution. Then they take some descriptive literature home, and discuss among themselves whom they want as their officers.
Meanwhile, their plans are talked over by the depotmaster, accountant, organizer, and engineer, and modifications suggested. If, as often happens, it turns out that they are only merchants anxious to get rich quick and not bona fide workmen ready to work hard, the plans are rejected.
If all is satisfactory, a meeting is held for the election of officers, determination of share capital, voting of wages, and work begins as soon as the loan is put through. At least one quarter of the subscribed share capital must be paid up immediately, and the total loan—long-term and short—cannot exceed 20 times the subscribed share capital.... The actual ratio of share to loan capital averages about 1 to 6.
INDUSTRIAL DISTRIBUTION: Distribution of industry is shown in the following condensed table:
Textiles 610 [cooperatives] Engineering 49 Mining 118 Chemical 206 Pottery 69 Foodstuffs 83 Transport 4 Miscellaneous 395 ——— 1,534 There are no less than 114 types of cooperatives, and almost every daily need of the people can be met.
Before any cooperative is organized, investigations are made to ensure that (I) there are raw materials near at hand, (II) there is skilled workmanship available, and (III) there is a market for the finished product. Where these three do not co-exist at one place, a compromise of the most reasonable kind is effected if possible. Some examples—by no means exhaustive—of the adaptation of types of industry to meet local conditions are described as follows:
Wool ... In the beginning of 1939 woolspinners of Chentu were still using either the simple old whorl or the handturned wheel. The volume of production was very small. But during 1939 the C.I.C. embarked on a huge program of blanket production for the army, and improved streamlined treadle spinners were introduced, and thousands of men and women taught the technique of using them. Blankets were made at eight centers of west and northern China; everywhere improved woolspinning and woolweaving machines and techniques brought new productive power. During the winter of 1939-40, 400,000 blankets were turned out, and another million and a half will be made during the remainder of 1940.
The wool used by the blanket-making cooperatives comes from the highlands of Chinghai, Kansu, Ningsia, and Shensi, and now instead of being carried raw to Tientsin or Shanghai as in the old days, it is being spun and woven near to the source of supply. Improvements are constantly being made—better machines, finer spinning, use of waterpower, better carding and finishing—so that the whole project works to raise the efficiency and living standard of the local people.
Cotton. Wherever cotton is grown spinning and weaving cooperatives are numerous, for clothing is one of the fundamental needs of life....
Grass Cloth. Linen, or more correctly grass cloth, was introduced into Szechwan from Kwangtung generations ago, and now fine cloth is woven. Production thereof from ramie thread was at its height 20 years ago, but since then the craft has declined until recently, when the partial blockade of the war made the industry profitable again....
Goldwashing. Placer gold exists along every river in West China and in many parts of South China too. Even in Chungking one may see needy coolies scraping up and washing riverside mud for its tiny precious content.
The gold is easily available by simple methods, though certain difficulties have hitherto prevented its extraction on a larger scale. But now every grain is an asset to China in economic warfare, and so many goldwashing cooperatives have been organized. In the whole country there are 66 cooperatives, most of which are in the Han valley.... Now the cooperatives ... are self-supporting and produce 60 to 70 oz. of gold a day.
Coal and Iron. Throughout the hinterland of China new sources of coal and iron are being needed continually by newly transplanted industry. Szechwan has good coal, widespread, but rather thin in seam....
At the same time plans for the construction of blast furnaces have been worked out by C.I.C. engineers, and only wait for adequate financing. It is planned first to set up in South Shensi at a point within easy distance of coal and iron supplies a coke-making and a smelting plant, the total capitalization being $105,000.
Alcohol. A first experimental plant for the production of 96 per cent pure alcohol has been running nearly a year with a maximum output of 350 gallons a day. Since the cost of such a plant is comparatively small, and available supplies of grain make the cost of alcohol much less than that of gasoline, other plants have been set up. There are now six in operation and greater production in the future is envisaged. The sites of alcohol plants are naturally at key positions on the highway, where good supplies of coarse grain meet with the traffic line.
Prime Movers. In many cooperatives one may see a quaint mixture of old and new, where big flywheels are turned by human labor to maintain the spin of lathes, carding machines, and the like. This is a useful temporary expedient, possible where labor is cheap. Animal power is also used.
But C.I.C. engineers are not satisfied with this state of affairs; they are always on the lookout for new sources of power. So charcoal-or gasoline-burning internal combustion engines are commonly employed.
But most popular are waterwheels, and in every part of China will be found old wheels adapted for modern uses—driving textile machinery, turning lathes, grinding flour—undershot or overshot, single or in series. Gradually the wheels are being made of better materials and more efficient. Iron wheels are constructed at present weighing about one ton, at a cost of $3,000, and generating over 30 H.P.
In the plains waterpower is rarely available, but in the foothills of Tibet, the Tsingling Shan, or in the rough country of southern China this cheapest of all forms of power will come more and more into its own as C.I.C. machine shops construct improved waterwheels.
ACCOUNTING: During the past two years the C.I.C. staff has tackled the question of modern accounting wholeheartedly in every depot, and training classes in cost accounting have been given for cooperative accountants who only know old style Chinese bookkeeping. C.I.C. trained accountants have been allocated to cooperatives—for big cooperatives one accountant is employed by each society, for small, one accountant serves two or three. Emphasis has been placed on the presentation of monthly balance sheets and yearly closing of accounts with profit sharing.
Profits are divided among the members once—or in rare cases twice—a year. The usual method of division, all claims including interest on loans and shares having first been paid, is as follows:
Reserves 20 per cent Emergency Fund 10 per cent Bonus to Officers of Society 10 per cent Common Good Fund 10 per cent Divided among Members 50 per cent The division accords with Chinese Law. The bonus to officers is usually made to include gifts to apprentices and hired workers such as cooks, and the Common Good Fund is used for education, medical welfare, and other social service. The division among members is made in strict proportion to wage and time worked.
Local conditions and various industries differ so much that no wage-policy has at present been applied. In general it may be said that wages in cooperatives—fixed by the members themselves—are about the same as those in private factories of the district. The products in general sell at prevailing rates, though in some cases the prices have been lowered and profiteering prevented by the action of the cooperatives.
COOPERATIVE FEDERATIONS: Wherever the societies have passed the first short period of infantile dependence on the C.I.C. they have been associated into federations, sometimes according to trade, but more often and more wholesomely, according to districts. The most important immediate function of the federation is to open a supply and marketing agency, which by its centralization, specialization, and greater supply of circulating capital is able to relieve the cooperatives of most of their problems of buying and selling....
TRAINING: Training of organizers is of vital importance, for it is they who will succeed or fail in giving to the workers true conceptions of cooperation, industry, and business, and in inculcating efficient methods and habits. Classes for organizers have consequently been held in every region.
Training of cooperative chairmen in their duties is also undertaken. They "learn by doing,"—how to conduct meetings, business principles, cooperative law, history of cooperation, scope and significance of industrial cooperation in China.... The most usual training is by weekly night classes and meetings. There is also constant informal training by the organizers, who devote about one day a week to each cooperative, and work with the members on the solution of immediate problems by the application of cooperative principles. Popular education of workers will be described later.
Another important aspect of training is technical. In no case is a society organized until the technical ability of the members is adequate for making a successful business. So, with refugees and unskilled peasants it is usually necessary to give preliminary training—mainly in textiles. Wherever there is textile work, training classes have been held in spinning and weaving....
SOCIAL WELFARE WORK: No statistics have been compiled about the social contribution of the C.I.C. to the communities around its depot. The work varies according to local needs and opportunities, and according to available resources in funds and manpower....
OUTLOOK: After the war there will undoubtedly come a period of readjustment, when the renewed influx of machinery and machine-finished goods will demand a shift of emphasis—for instance handspinning cannot survive indefinitely, no matter how essential it is at present. It is to be expected that at that period the C.I.C. will continue to use in some industries methods now employed, but that in others there will be a transition to rationalization and mechanization. With a soundly integrated network of skilled workmen, experienced engineers, and bankers' confidence, the C.I.C. will be able to make this transition without severe dislocation.
The C.I.C. is essentially a non-political organization; its functions are all technical, and its staff is composed of experts in various lines—cooperative methods, accounting, engineering. Success does not depend on political position or power, but on the simple and essential condition that this type of industry produces efficiently the goods that China needs. The C.I.C. objective is just Dr. Sun Yat-sen's Third Principle—People's Livelihood—practically expressed.
The success of cooperative movements in other parts of the world—their ability to weather economic crises and depressions—has been due to the solidarity that comes when the motive force in industry and commerce is not the profit of a few but the livelihood of many. In the same way the C.I.C. can become a permanent force for national stability and strength.[7]
| Textiles | 610 | [cooperatives] |
| Engineering | 49 | |
| Mining | 118 | |
| Chemical | 206 | |
| Pottery | 69 | |
| Foodstuffs | 83 | |
| Transport | 4 | |
| Miscellaneous | 395 | |
| ——— | ||
| 1,534 |
| Reserves | 20 per cent |
| Emergency Fund | 10 per cent |
| Bonus to Officers of Society | 10 per cent |
| Common Good Fund | 10 per cent |
| Divided among Members | 50 per cent |
The Model Constitution for an Industrial Cooperative[8] establishes safeguards to keep the cooperatives from becoming profiteering sweatshops. Bankrupts, drug addicts, persons incapable of working, and persons already members of a unit are forbidden to join a unit being formed (Art. 7). No member may subscribe more than 20 per cent of the share capital of a single society (Art. 9). A general annual meeting, with the quorum set at one-half, and action requiring the majority of a quorum, is the highest authority in a unit (Art. 19). This meeting elects a board of directors and a separate board of supervisors (Arts. 22 and 23). Sweeping disqualifications keep members from mixing personal or outside interests and cooperative matters (Art. 32). The design of the unit constitution is such that each unit is an authentic, autonomous cooperative, governed well or badly in accordance with the abilities and needs of its members, and is not a mere fraction of state capitalism.
The C.I.C. taps a level of Chinese society hitherto largely unused[9]—the family, guild, village, and volunteer-society devices of the peasantry and townsmen who lived beneath the lowest limits of the scholastic bureaucracy. The Communists act as the inheritors to temporarily fanatical peasant rebellions; the National Government and Kuomintang, to ascendant mandarinates; the C.I.C. brings into play the rich experience of the Chinese with collective action. The resources of the social power so mobilized cannot easily be estimated, but general success would reshape much of Chinese society.
In fitting the C.I.C. to the general Chinese scene, however, it is important to compare the movement with some of the New Deal reforms in the United States, such as T.V.A. (Tennessee Valley Authority). Though these are important, neither the American nor the Chinese enterprises proclaim social revolution or charter Utopias. The reforms of President Roosevelt have had incalculable effect; no one knows what would have happened without them. Nevertheless, it is excessive to suggest that the existence of the United States as a political society depends upon these reforms. Similarly, the continuation of the National Government of China does not rest on the C.I.C., or on any other single institution alone.
The C.I.C. extends patterns of cooperation and farm-factory balance already tried in Europe, and also approached by such diverse agencies as the Soviet state and collective farms, and Mr. Henry Ford's worker-garden plans. Hitherto the Chinese cooperative workers have had a closer contact with Dearborn, Michigan, than with Moscow, R.S.F.S.R. The endeavor is a serious and important one. It supplements and develops the facilities—themselves very extensive—which are under full state-capitalist or private control. But Free China's markets, while they contain C.I.C.-made goods, are mostly filled with private or government products. A private Chinese business system which has survived thirty years of domestic war does not obsolesce instantaneously. The cooperative movement is, largely because of the integrity, enthusiasm, and tirelessness of Mr. Alley, the nearest thing to a realization of min shêng which China has yet seen; but the Right still plans for a China with vast state-capitalist and state-subsidized private industries, along with an all-pervading flow of laissez-faire commerce. The Marxians look on sympathetically but contemptuously.