Fei Xiaotong, representative of national scholars of his age, devoted himself to the salvation and revival of China through transition, which was the trend of the time and central point of Mr. Fei’s ideology. Based on a comprehensive judgment of social transition and a field survey of Silk Refining Cooperatives Marketing Co. in Kaixiangong Village, Mr. Fei was convinced that modern industry could be introduced into the social structure of rural China to gradually promote the transition of rural society. The industrial experiment in Kaixiangong Village proved the feasibility of cooperatives in rural industry. Its advantages such as “economic flexibility” made it capable of facing the challenges of the world market so as to revive rural economy and promote social transition.

Consistence of Ethics and Industry:

Reasons for “Rural Industry”

Till the 1930s, the western world market and modern industry and commerce had eroded China’s rural economic system in profundity from the southeast coast to the hinterland. The rural economy became depressed, usury ran wild, land ownership continuously changed and farmers lived in famine. The rural economy and even state economy went on to the edge of bankruptcy. Correspondingly, the focus of academic fields converted from “on what to build our country” to “how to realize industrialization.” Most scholars approved “urban industry.” It was not easy for them to reach an agreement on the choice of the Anglo-American’s free market (capitalism) or the Soviet Union’s collective plan (socialism).

Mr. Fei criticized the hasty introduction of new education to Kaixiangong Village, pointing out that it could neither bring necessary skills such as “accountancy” to villagers nor shape the young elites with proper values. “Without wise leaders,” Kaixiangong Village went into chaos and was unable to revive. In addition, industry could not develop by itself. Its development might not benefit its nation or people without support from a mature social system and it might make the same mistakes of the Soviet Union and America and “formed a deformed society.” Then why did Mr. Fei think that “Local Industry” would benefit China’s industrialization?

First of all, the current economic and social conditions should be taken into account. Even though some out-dated factors hindered reform, they still shouldn’t be replaced within a short time. Considering population distribution in urban and rural areas with 90% of the population living in the countryside, the replacement of the silk industry in the countryside by urban capital and technology was not feasible because it might force the farmers who could maintain their lives to live in famine and debt. Farmers would have to leave their homeland for cities to seek employment. Consequently, the countryside would face a total bankruptcy of its social economy and cities would be challenged by “a rapid increase of labor reserve team,” which would impact the vitality of urban workers.

Secondly, updated social organization and social structure should be ready for the application of technology. At that time in China, new modern metropolises like Shanghai, in transitional periods, were driven by “the western force in China” (concession) and “political operation,” resulting in a superficial imitation of western urban civilization without absorbing its essence. Therefore, the negative effects of the pattern “capital+industry+city” were obvious. Indentured Laborer written by Xia Yan is a true portrayal of the hard life of urban workers at the time.

Comparatively, Chinese traditional family handicraft industry protected human nature, although its productivity could not match the industrial model of socialized mass production. In Chinese traditional family handicraft industry, man was not pure labor force or a walking machine. Man’s labor referred to man himself and his family and community. This “family” spirit should be preserved.

Thirdly, it would heighten factories’ risk bearing capacity. Compared with city silk businesses, the cooperative in Kaixiangong Village had the advantage of “economic flexibility.” On the one hand, the workers’ factory life was still involved in the original family social life because their fellow workers were their neighbors, so they all had high social credit and strong cohesion. On the other hand, the end purpose of the cooperative was to maintain the daily likelihood of every worker but not to satisfy the interest of stockholders. So Mr. Fei proposed a new mode of industrial model, which was different from the western model of “city--capital--labor force,” to enhance the flexibility and competitive power of economic organizations by ethical community awareness in rural society. In this way, we might save the decaying rural economy and even promote Chinese economy to get ahead of others.

Fourthly, it was cost-saving. Considering such factors as quality control of raw materials, the cost of raw materials, the cost of transportation, land-value, rent, manpower costs and the convenience of technology imports, etc, light industries like the silk industry could develop much better in the countryside than in modern cities.

Main Features of the Cooperative

Ownership: the cooperative was owned by all members (ownership-in-common). The members from Kaixiangong Village or other villages bought shares out of their own will. Their duty was decided by the shares they held. Management right were separated from ownership rights and their corresponding mechanism was Executive Committee and General Meeting of Members. Due to the members lacking the required educational level and concept, the factories were actually managed by capable villagers appointed by sericulture school.

Funds: loans from Farmers’ Bank were the main source because farmers lacked funds and had various concerns.

Raw materials: the members provided raw materials and were paid 70% of the value upfront, and the other 30% would be paid at the end of the year.

Technology: with the joint support of the sericulture school and the bank, advanced technology and machines should be used.

Labor force: it was made up of the members. With the help of machines at work, only some young members were employed. They received salaries as well as bonuses.

Form of production: with enough materials, all steps of production from silkworm breeding to silk reeling should be centralized in order to apply new technology and improve product quality.

Scale: small enterprises of about 60 members.

Distribution: members received bonuses based on the raw materials they provided and the shares they held.

Significance of the Cooperative

Modern China’s transition was an overall transition. It was a complete social and conceptual reformation. Its success could never be achieved without being guaranteed by such factors as the political system, mode of production, civil life and values, etc. For such a country with a long history and immense civilization as China, it was almost impossible to find a simple solution to appease everyone.

Compared with previous and contemporary scholars who urged political and cultural transition, the essence of Mr. Fei’s theory was whether civilization’s transition would succeed or not consisted in the change of farmers, who comprised 90% of the whole population. To most farmers, rural economic transition must and should be a priority and basic necessity. More importantly, facing the bankruptcy of the rural economy, a successful economic transition would make smooth transitions of civilization possible. Otherwise, farmers would be thrown into starvation and violent social unrest would be inevitable.

Mr. Fei paid great attention to the cooperative in Kaixiangong Village so as to find, from practice, a feasible way to revive the rural economy to realize the transition of the whole civilization. Although the cooperative did not work well and was finally ruined by Japanese invaders, its significance should never be ignored. Mr. Fei highly praised the experimental reform in Kaixiangong Village that “it was the forerunner of the great rural industrial reform in China.” Looking back to all rural reforms after the foundation of China in 1949, we should never ignore the significance of the cooperative promoted by Mr. Fei. It is significant in the following aspects: Setting up factories in communities and gradually transforming the whole society by changing the mode of production.

Compared with urban industry, the cooperative did not breach the farmers’ family life but offered the countryside (community) a new economic property through the cooperative fund raising. In this way, the advantage of the unity of ethical emotion and community could be maintained and the new economic institution like factories with machines could be embedded into local communities. Theoretically speaking, the cooperative could prevent capital exploitation and the decline of human nature, improve factories’ solidarity and vitality and strengthen their flexibility against economic risks.

The reform experiment in Kaixiangong Village created an industrial mode in traditional social structure and brought chain changes to regional social structure. It was a typical experiment in which economic elements “gradually” spurred the whole rural social transition. It was a beneficial experiment that prevented rural society from becoming a spiritual void and even seeing its cultural system from collapse during the transitional period. For the same reasons, Mr. Fei advocated “rural and small town enterprises” in his old age.

Evading “Ethical Common Property Right”

Though the unit of the marketing cooperative was family, institutionally, the unit of possession, management, distribution and labor was individual. Therefore, the cooperative, as a new economic organization of the rural community, could use the advantages of local industrialization and adopt centralized production of non-family workshops to evade mingling of family relationships and ethical common property rights. The cooperative reformers tried to follow the principles of voluntary contribution, joint shareholding management and distributing profits based on shares. It “set up an economic system in which all production equipment was owned by the farmers who participated in the work, all management and administration power was supervised by members and all interest was shared fairly by members.” This is a kind of property right combining “community ownership” with “private ownership.” What’s more, the right of the initiative was in the members’ hands.

If we review the changes of rural economic organizations after the foundation of New China, from mutual-aid teams, cooperatives, people’s communes in the initial stage to fixing farm output quotas on the household basis in the early stage of reform and opening up to the large scale “joint stock economic cooperatives” and “professional cooperatives” in the countryside at present, history seems to prove the thoughts and concerns of Mr. Fei over the direction of rural economic transition rights. It also reminds scholars that during the “new normal” transitional period, it is necessary to take the whole transition into consideration to sort out the various choices of the elements like politics, economy, society and culture, etc. and their change patterns in different stages, pondering over its advantages and disadvantages, gains and losses to put forward scientific principles for China.

Pan Jianlei is from the Department of Sociology at the Party School of Beijing Municipal Party Committee.