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Soviet Management: With Significant American
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\ OTHER BOOKS BY BARRY M. RICHMAN
Soviet Management: With Significant American
Industrial Society
:.JOl71:/JA,."
•
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Comparative Management and Economic Progress
Communist
(with R. Farmer)
CHINA
I ncidents for Applying Management Theory (with R. Farmer and W. Ryan)
I nternational Business: An Operational Theory (with R. Farmer) , ..
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Management Development and Education in the Soviet Union
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A Firsthand Study of Chinese Economic Development
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and Management •
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-with Significant Comparisons "
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with Industry in India, the U.S.S.R., Japan, and
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the United States !
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BARRY
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RAN D 0 MHO USE / New York
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For the many Chinese Com-
munist, Canadian, American and British citizens who made the writing of this book possible-I hope that they, as well as other readers, will view this book as an honest study of a fascinating and unique country
I .
FIRST
PRINTING
© Copyright 1969 by Barry M. Richman All rights reserved under International and Pan-American Copyright Conventions. Published in the United States by Random House, Inc., New York, and simultaneously in Canada by Random House of Canada, Limited, Toronto. Manufactured in the United States of America by H. Wolff Book Manufacturing Co. Library of Congress catalog card number: 67-22660
Designed by Janet Casson
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CONTENTS
PREFACE INTRODUCTION
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PART I:
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• Chapter 1
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MAOISM, MARXISM, MANAGEMENT, AND ECONOMIC PROGRESS
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CONCEPTUAL FRAMEWORK
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Universal Economic Goals and the Case of Communist China Management and Industrial Progress Basic Economic Decisions and the Critical Productive Functions Common Policy Decisions The Functions of Management Critical Elements of the Management Process Micromanagement and Macromanagement Economic Organization and the Interaction of Macromanagement and Micromanagement in the United States Economic Organization and the Interaction of Macromanagement and Micromanagement in Communist China Dimensions of the External Environment of the Enterprise: An Introduction Ideology versus Managerial, Technical, and Economic Rationality THE ENVIRONMENT OF MANAGEMENT AND INDUSTRY
Identification and Classification of Critical Environmental Constraints •
IX
Contents Key Relationships The Constraint Management-Process Matrix The Environment of an Underdeveloped Country: What Makes an Underdeveloped Country Underdeveloped? Educational Constraints Sociological-Cultural Constraints Legal-Political Constraints Economic Constraints
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xi
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Contents
63 65
68 69 78
Chapter 6
94 101
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~r:
ENVIRONMENT
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•
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Chapter 3
Chinese Education: General Background Literacy and Primary Education Specialized Vocational and Technical Training and General Secondarv, Education Higher Education Management-Development Programs Attitude toward Education • Matching Education with Industrial Requirements and Manpower Utilization
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CHINA'S RESPONSE: SOCIOLOGICAL-CULTURAL EDUCATION
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12 5 12 5
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140 161 206 209
PART
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II
Chapter 7
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CHINA'S RESPONSE: SOCIOLOGICAL-CULTURAL FACTORS
214
223
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Attitude toward Industrial Managers and Management Attitude toward Authority, Responsibility, and Subordination Interorgani!1:ational and Individual Cooperation Attitude toward Achievement and Work Class Structure and Individual Mobility Attitude toward Wealth, Material Gain and Self-Interest Attitude toward Scientific Method Attitude toward Risk Taking Attitude toward Change
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Chapter 5
226 243 264 281 29 1
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309 pI 331 340
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CHINA'S RESPONSE: THE POLITICAL-LEGAL DIMENSION
36 5
Relevant Legal Rules of the Game
366
CHINA'S RESPONSE: ECONOMIC CONSTRAINTS
•
III:
STRUCTURE, OPERATIONS, AND PERFORMANCE
QUANTITATIVE DIMENSIONS OF COMMUNIST CHINA'S AGGREGATE ECONOMIC AND INDUSTRIAL PERFORMANCE
;
•
• Chapter 4
1.
Basic Economic Svstem Central Banking System and Monetary Policy Fiscal Policy and the State Budget Economic Stability Organization of Capital Markets Factor Endowment Market Size Social-Overhead Capital
•
PART
Flexibility of Law and Legal Changes Defense and Military Policy Foreign Policy Political Stability Political Organization
I
Aggregate Growth Trends: 1949-66 Growth in Industrial Employment and Labor Productivity. Aggregate Performance in Real Terms: 1933-66 Growth and Environmental Trends during Selected Critical Periods Industry's Contribution to China's National Incom6: 1933-65 Branch of Industry Performance: 1933-66 Physical Output Trends for Twenty Major Products, 1952-65 Product Development and Technology Production of Twenty Major Commodities in Red China, India, U.S.S.R., Japan and the U.S., Mid-1960's Suggestive Comparisons of Some Key Aspects of Aggregate Performance for China, India, Russia, Japan and the U.S., 1963-66 China and the Future Suggestive Quantitative Ratings of Environmental Constraints for China, India, Russia, Japan, and the United States
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Contents /
• Chapter 8
CHINESE INDUSTRIAL ORGANIZATION AND PLANNING
xii
xiii
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Contents
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Grading of Enterprises Surveyed in Terms of Managerial Know-How and General Operating Efficiency with Available Technology Quantitative Perfolmance Trends in the 1960's Labor Productivity Value of Output per Employee Value Added per Employee Profitability Cost Structure Concluding Remarks
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Organization of Government and Party The Center or National Level The Provincial Level The Municipal Level Industrial Corporations Industrial Enterprises Distribution and the Trade Sector Industrial Planning
• Chapter 9
67'2 673
688
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INDUSTRIAL SECONDARY I AND I AGRICULTURAL SCHOOLS I SECONDARY
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SPARE-TIME HIGHER EDUCATIONAL SCHOOLS
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FIGURE
3-1
STRUCTURE OF EDUCATIONAL SYSTEM
(CIRCA 1960)
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ENVIRONMENT
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other, and of learning from and surpassing the more advanced. Both pure and practical ideology serve to communicate values in standardized language throughout the educational system and to provide guidelines for correct thought and behavior. The entire Chinese educational system is under party leadership and is controlled through party organizations, branches, and committees at all educational institutions. China has invested heavily in education as can be seen from Table 3- 1 below.3 Since the mid-1950's substantially more funds have also been channeled into scientific research, probably much of it related to the defense sector. It should be pointed out that the expenditures on education and scientific research presented in Table 3-1 do not take into account many of the expenditures made for this purpose by Chinese enterprises. During the 1950'S, annual state budget expenditures, including capital expenditures, on education have averaged about 3 percent of China's national income, and in 1959 the figure was about 5 percent.4 The figures for India, Japan, the Soviet Union, and the United States at the end of the 1950'S were about 1.7 percent, 5-7 percent, 7.1 percent, and 4.6 percent respectively.5 In the 1950'S China devoted substantially more of its financial resources to education than India. I was told by a Ministry of Higher Education official in Peking that about 5 percent of national income was spent on education in 1965.
TABLE
3-1
EXPENDITURES FOR EDUCATION AND SCIENTIFIC RESEARCH IN RED CHINA
Total State Year Expenditures
(Mill. of yuan) *
1952 1955 1957 1959 19 60
16,79 0 26,9 20 29,020 53,770 70,020
Expenditures for All Levels of Education (Mill. of yuan)
(% of total state expend.)
81 17 61 29 06
7 6 10
not available
not available
64 00
9
.. The yuan, the basic monetary unit, is divided into mately equal to 40 cents in U.S. money.
Expenditures for Scientific Research (Mill. of yuan) 11
100
38 293 820 1081
(% of total state expend.) not available not available I
2 2
Chinese cents; it is approxi-
As we shall see further in this chapter, the quantitative achievements in Chines.e education have been very impressive since 1949. The content ·of educational programs and the general attitude toward education-as compared with that in the past have also undoubtedly done much to in-
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China's Response: Education
crease managerial effectiveness and industrial progress on a national scale. However, the quality of Chinese education in general still lags significantly behind advanced industrial nations, and the effectiveness of Red China's educational system has been erratic, with negative results emerging during periods when the regime has gone overboard with the implementation of ideology in the system. When the principles and policies of the Great Leap Forward were extended to the fields of education and culture in 1958, the system for training professional and semiprofessional manpower for industry and business was particularly gravely affected. 6 Quantity in education became the watchword, and quality suffered immensely. Hundreds of new educational institutions of all types were rashly established at all levels and enrollments exploded. Numerous new students were admitted purely because of their political loyalty and ideological correctness, and they were grossly deficient in the pretraining nationally required at a given level of education. Early in 1958, the Ministry of Education decreed that all types of students must combine with their formal education physical work in factories or on farms. Educational institutions were required to set up miniature, and at times full-scale, shops and farms, while factories and communes were required to set uP. schools. Larger factories and communes set up schools of all levels, while most smaller ones set up at least literacy classes and, in many cases, primary and junior high schools. Enrollments in sparetime educational programs mushroomed greatly at all levels, bursting available facilities at the seams. By 1960 there were about twenty-five million workers and employees attending spare-time programs at all levels. This strategy was seen as a strong march toward a classless society. Distinctions between brain and brawn workers would disappear as everybody cvolved into a mentally, physically, and ideologically balanced worker, and hence into a pure communist proletarian. Another chief aim here was universal education for all who qualified within fifteen years. Embarking so rashly on such a widespread educational reform turned out to have quite chaotic results. Much time was also taken up by studentfaculty ideological and political meetings and discussions at educational institutions, and ideological indoctrination became extremely intensive. This became a period of anti-intellectualism, and faculty· members educated in non-Marxist countries-and a substantial number of professors were-were particularly suspect. By late 1960 it was evident to the Chinese leaders that a crisis had emerged in the educational system, as well as in the economy, and the regime made a sharp retreat from its earlier educational reforms. The period between 1961 and 1962 was one of readjustment and consolidation in the overall educational system. Many educational institutions were
ENVIRONMENT
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merged or closed down, and enrollments dropped. Better-quality educa~ion ~as to. be stressed; less time was to be spent on meetings and ideologIcal discussiOn; and a more balanced and thought-out program of physical labor was to be introduced. By late 1962 or early 1963 the worst was probably over. Enrollments started to rise again, and the educational system became more effective in terms of providing required manpower for industry. This ~eems t? have been the situation until about 1965. At that time economic conditions and performance were again relativelv favorable and the regime once again became concerned that revolutio~ary fervo; was endangered because of relative affluence and that revisionism was a real potential threat. Soviet revisionism, including deviation ism in education was being assailed in the Chinese press. Foreign visitors were told that th~ Chinese society would not allow Soviet-style revisionism which enables intellectuals to become detached from the masses. They were also told that ~he S~viets .don't emphasize politics, ideology, and physical labor suffiCiently m their educational system and that they place too much stress on techmcal aspects thus causing a separation of intellectuals and workers.7 In 1966 I was told the same thing by almost every education official, teacher, and p~ofessor I met in China. Since 1965 there seems to have been an emergmg trend of more emphasis on physical labor for faculty as well as for students-and student employment in regular educational prog~ams. The current goal seems to be to transform the educational system mto one ?f half work and half study, particularly in specialized secon?ary a~d higher programs. There were all types of such experiments gomg on m 1966. For example, in some programs students were spending half days working, in others alternate days, alternate weeks, or alternate months, and I was told in some cases that, in the future, students will spend as m~ch as half the year working and the other half studying. It seems that, m the future, secondary and higher-level students will probabl~ devote forty to fifty.percent of their time working and the rest in thelf formal studies. The~e have been a few experiments involving half-work and half-stud v e~ucahonal p~ograms in China for several years. For example, in 1961 ~ higher educa.hcmal program of this type was established at the Yang-pu Cotton Tex.hle Machinery Enterprise. There have been a variety of problem~ regardmg the effectiveness of this experimental program. s It was not un hI 1965 that official party policy advocated an extensive system of such half-work and half-study programs; and in 1966 there was much evidence that such a transformation was underway. If too much stress is placed on the work aspect of educational programs, this would tend to slow down greatly the training of vitally needed skilled manpower for industry.
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China's Response: Education
During my visit to China in April through June of 1966, the Chinese educational system did not yet seem to be seriously affected by overemphasis on ideologically motivated reforms. There was somewhat more stress on ideology and politics than in the Soviet educational system but, given the heavy instruCtional load, this did not yet seem to be diluting other subjects severely. While some schools at various levels had recently introduced added compulsory physical labor, nQne of them had yet switched to a half-work, half-study program, although some of them expected to do so in the future. Many of the industrial enterprises surveyed --land all of the larger ones-ran regular primary and junior middle schools. Some of them operated regular schools at all levels, including higher educational programs_ In these enterprise-operated schools there did appear to be somewhat more time devoted to physical labor than at schools not attached to factories, but employment did not generally constitute more than about one-third of the students' time. The large majority of the enterprises surveyed ran their own literacy classes as well as spare-time primary and junior middle school programs for employees. A number also ran spare-time senior middle schools and specialized secondary programs as well as those of an even higher level. At all of the enterprises surveyed at least ten percent of their employees were enrolled in some type of spare-time educational program at the enterprise or elsewhere. At several enterprises more than half of the employees were attending such programs. In most major Chinese cities radio and television are utilized to supplement lower-level spare-time-including correspond~ ence-educational programs. In general, during my stay in China I came across no concrete evidence that the educational system had, at any point, actually embarked on extreme or irrational courses of action similar to those that emerged during the Great Leap Forward. However, there was much in the air, and in the press, indicating that such action was on the threshold of taking place. By May 1966 the Great Proletarian Socialist Cultural Revolution was well underway. The regime was calling for much more time in the overall educational system to be devoted to physical labor and employment, ideological indoctrination, meetings, self-criticism therapy, and the like. Clear elements of anti-intellectualism again began to emerge, and some prominent educators were purged. Professors and teachers were called on to spend more of their time in physical labor. Toward the end of June 1966, very shortly after I had left China, it was announced that most schools would not reopen for the fall term because facilities, programs, and educational materials were to be studied and revised under the direction of reliable party cadres, teachers, and students;including Red Guard members who had displayed ideologically correct thought and behavior. During the following months the Chinese press
ENVIRONMENT
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frequently proclaimed that "the whole country should become a great school for the teaching of Mao Tse-tung's Thought" 9 and that through correct education everyone should be molded into a worker-peasantsoldier-intellectual. This gives us a preview of what might be in store for the Chinese educational system. As of mid-1968 many schools that had been shut down had apparently been reopened, but many were not functioning very effectively, if at all. It seems reasonable to predict that the longer the educational institutions remain closed the greater will be the negative impact on future managerial effectiveness and industrial progress. If the reopening of the schools is accompanied by substantially more time devoted to political meetings, ideological indoctrination, excessive and rashly introduccd physical labor or work-study programs, along with the creation of a general atmosphere of anti-intellectualism, such restrictions would also tend to have a negative impact on industrial progress. It may take a few vears for . ' senous educational deficiencies to be revealed in China's aggregate economic and industrial results, but they will no doubt show up again if ideology does go too far in the educational system. One should not conclude, however, that work and study programs, or physical labor in education, and spare-time education in China are necessarily ineffective or irrational. It is only when they have been introduced very rashly and too extensively that serious problems have emerged in China. Where such programs are utilized in a reasonably balanced manner they probably have a positive impact on managerial effectiveness and industrial progress. Given China's huge population and limited financial and high-talent human resources, a full-time educational svstem where all eligible students are admitted is impossible. It would be ir;ational to sacrifice massive labor power to a wholly food-dependent educational system that is by its very nature nonproductive in the economic sense. Yet China does believe strongly in mass education or education for all those who qualify. A substantially large portion of the population can become educated at different levels if there are many spare-time and work and study programs. Such a system would enable greater use of facilities and teaching staffs and make it possible for many students to support themselves entirely with the incomes they earn from employment, thus relieving the state, and in some cases their families, of the financial burden of paying for such expenses as their room and board. It also provides a larger pool of manpower resources for industry and agriculture. The stress on physical labor in educational programs also tends to bring about greater respect for the dignity of labor-an attitude that is drastically needed in numerous countries, including India, desiring. economic development. In China before 1949 even primary school graduates were considered intellectuals, since there were· relatively few of them. Now there are so many primary and even middle school graduates that many of
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China's Response: Education
them must work as laborers in factories or on farms, and the only way they can continue their formal education is through part-time programs. Moreover, if they were not imbued with a respect for physical labor in primary and middle school, they would tend to be much more resentful and frustrated in their work after graduation. For those students who eventually become managers, participation in physical labor in the educational system may well make them more sensitive to the problems and needs of workers and hence make them more effective managers. This may in fact be the best way to break down the old dominant attitude of disdain for physical labor that was held in the past by the Chinese intelligentsia and those in positions of authority. Where the aim in Red China has been not to reduce intellectuals to the level of laborers but to teach them the meaning and problems of labor, this system has probably had a positive impact on managerial effectiveness and industrial progress. The same would be true where the aim of sparetime education for workers has been to enable them to better comprehend the work of intellectuals and its practical applications in order to improve results. However, during the Great Leap Forward, numerous intellectuals, including faculty members, as well as educated managers, technicians, and engineers, were in fact disparaged, misutilized greatly, and often reduced to the level of students or workers, while students and industrial personnel without adequate education or training were often permitted to make and implement irrational and inefficient decisions. If such a situation emerges again on an extensive scale for a prolonged period, economic crisis seems to be inevitable.
LITERACY AND PRIMARY EDUCATION
It is substantially more difficult in China to acquire basic literacy, in terms of reading and writing, than in America because the Chinese written language contains some four thousand complex characters that are currently in use. The Chinese have recently made a major effort to simplify and even to romanize many of the characters. They appear to have made quite impressive progress, and in the larger cities one can observe that numerous names of stores, factories, streets, signs, and the like are written in a transliterated romanized form, as well as in Chinese characters. A Chinese urban citizen is considered basically literate if he comprehends about fifteen hundred to two thousand characters-about half the number required for completion of primary education. This is adequate for reading newspapers and magazines of the mass media type. Peasants are considered literate if they comprehend about fifteen hundred characters. Fortunately for China the written language is quite standardized
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ENVIRONMENT
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throughout most of the country. However, there are a number of major spoken languages, notably Mandarin and Cantonese, and a variety of dialects. This can pose somewhat of a problem when industrial personnel are transferred from one part of the country to another. For example, a key technical manager and a foreman whom I met at the Wuhan Iron and Steel Works were shifted there recently from their native Anshan in north China (Manchuria), where a different language is spoken. Since they had not acquired the local language, at times they had to make use of interpreters when communicating with other members of the personnel. However, the language problem in China is not nearly as serious as in India, where there are about twelve different written scripts, sixteen official languages, and some two hundred different dialects. This situation serves as a significant constraint on communication at numerous enterprises and requires much expenditure of time for translations. A typical case that I observed was at a Calcutta factory where managers had to communicate with substantial portions of the labor force in Bengali, Tamil, Urdu, standard Hindi, a Bihar dialect of Hindi, Assamese, and Oria. At a Madras enterprise large numbers of workers could clearly understand only one of the following languages: Tamil, Telugu, Hindi, Malalayam, or Kannada. China has been more successful than India in raising the literacy level of its population. Prior to 1949 over 90 percent of the Chinese population was illiterate, and among industrial personnel it was about eighty percent. In 1957 Chou En-Iai estimated that the illiteracy rate had fallen to 70 percent. In the mid 1950'S nearly 50 percent of the industrial work force was still illiterate. By 1960 it was about 66 percent for the rural population and 24 percent in urban areas.lO In 1966 I was told by various Chinese officials that national illiteracy was under 60 percent, urban illiteracy was under 20 percent, and among industrial personnel it was probably no more than about 10 percent, in spite of the vast increase in industrial employment in the last decade. At the enterprises I surveyed, only three claimed that they had illiteracy rates of 10 percent or more: these were the Wusih Silk Factory NO.2 with a rate of 15 percent to 20 percent; the Fu Chong Clothing Factory in Hankchow, 10 percent-15 percent; and the Lan Yang Electrical Appliance Enterprise in Canton, 10 percent-15 percent. These three enterprises said that their relatively high rates of illiteracy were due to the fact that they had many old workers who lacked the ability, desire and/or energy to become literate through spare-time education. All of the illiterates were engaged in very simple routine manual jobs. But even these enterprises have reduced the illiteracy rate among personnel from well over 50 percent about a decade ago. Likewise, many of the other enterprises surveyed have done the same through spare-time
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China's Response: Education
basic literacy programs. For example, the Tientsin Shoe Factory had an illiteracy rate of 80 percent in 1949 and by the mid-1960's this had been reduced to about 6 percent; the Sung Sing Cotton Mill NO.9 in Shanghai reduced illiteracy from 80 percent to 3 percent during the same period. I was told of similar achievements at many of the other firms surveyed. Many of the enterprises surveyed claimed to have less than 1 percent or no illiteracy. In India in 1951 about 83.5 percent of the population was illiterate, and by 1961 this was reduced to 76 percent.u The standard of literacy in India involves basic reading and writing in anyone of the major languages and scripts. In 1966 I was told by Indian education officials that the illiteracy rate was still around 70 percent. There are no official statistics available regarding the literacy level in Indian industry. Estimates given to me by various officials indicate that about 20 percent to 30 percent of the industrial work force is illiterate. At about fifteen of the Indian factories and firms where I inquired about literacy levels of employees, none had a rate of less than 10 percent, most fell between 20 percent and 30 percent, and some in jute, textiles, and railway-wagon production-had illiteracy rates of 35 percent-40 percent and more. China's success in wiping out illiteracy in industry can be attributed in large part to the pervasive system of spare-time adult literacy programs. During the period from 1958 to 1962 about nine million workers learned to read and write through spare-time educationP Most of the enterprises surveyed ran their own literacy classes, while some small ones either ran such classes jointly with other enterprises or made provision for sending personnel to programs run by educational institutions or other organizations. In many cases better-educated enterprise personnel conduct these classes for their co-workers-apparently with nominal extra pay in some cases and as a voluntary service in others. Schoolteachers also participate in many of these programs. In some of the enterprise literacy programs, employees were also exposed to elementary arithmetic. Television is also used in China for literacy education. There is no television in India as of 1968, except for very limited experiments with closed circuit 1V in Delhi. On a national scale, enrollments in spare-time adult-literacy programs in China for the years for which statistics are available are presented in Table
3-2 •13 TABLE
3-2
ADULT LITERACY PROGRAM DATA
1952 1955 1957 1958
.
65 6,000 3,67 8,000 7,208,000 40,000,000
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With the inception of the Great Leap Forward in 1958, there was nearly a sixfold increase in enrollment as compared with 1957. No doubt many people were coerced into attending these classes, and probably numerous citizens did not successfully complete the program. However, the programs were probably generally quite successful among industrial personnel, who may be more eager to become literate since they tend to have more opportunities to get ahead than do typical peasants in rural areas. A number of large, progressive Indian firms have had literacy classes for many years, and recently the Indian government has offered incentives for all types of enterprises to offer part-time literacy programs for their employee~. However, such programs are not apparently meeting with much enthusIasm by most enterprises, and where enterprises do set up literacy ~l~sses, there does not generally seem to be much interest on the part of ~lhterate employees. In many cases, management does not have a serious mterest in raising the literacy level of employees, and the employees thems~lves tend t~ b~ apathetic because they feel that even if they become hterate ther~ IS .httle. oppor~unity for advancement. The general feeling of apa~hy,. pessImIsm, msecunty, and uncertainty, which seems to pervade I~dIan md.ustry, as compared with a general sense of optimism, opportumty, ~ecunty, and certainty about industrial progress in China, probably explams much about the difference in the extent and effectiveness of literacy education in the two countries. In China, the social structure is such that numerous illiterate workers who become literate can obtain better jobs ~nd/o~ proceed further with their education. This is generally not the case m IndIa. . In China one does get the feeling that by acquiring basic literacy the worker substantially raises his aspiration level, self-image, and confid'ence, ~hat h~ gets a thirst for even more knowledge and education, and that he IS I?otIvated to .improve his performance and his position in life. At the Chmese enterpnses surveyed, I observed many workers, alone and in small groups, studying ~heir characters during breaks. In many cases other personnel were helpmg them in their studies. In India there seems to be a low ,ceiling on the aspiration levels of poorly educat~d workers, and their self-Images seem to be straitjacketed at low levels. The ?hines~ regime desires universal literacy among industrial personnel for IdeologIcal and political as well as economic reasons. At all factories there are many ideological posters, slogans, and reports all over the walls and grounds, and personnel are expected to read the works of Mao and the newspapers as part of their ideological indoctrination. Hence literacy facilitates the molding of the pure communist man. ' ~t the same time, however, literacy also enables employees to improve thelI ?erforma?c~s by rcading articles in newspapcrs and magazines which pertam to thelI Jobs. Frequently there are articles dealing with a wide
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China's Response: Education
variety of occupations, such as welding, machine operation, maintenance and repair work, care of equipment, quality control, handling and storage of materials, and heat equipment. Often these articles are written in simple language and are aimed at workers with only a modicum of education. What may seem childish or very unsophisticated to a well-educated person can often provide the motivation to improve the performance of barely literate workers. There are other apparent significant differences in Chinese enterprises as compared with those in India which are probably due in part to higher literacy levels and as will be discussed later to more extensive primary education in China. 14 One sees many more workers reading, writing, and even compiling data in Chinese enterprises than in Indian firms. One also sees Chinese workers perusing drawings, designs, charts, and various other types of reports and instructions. In general, there seem to be more written communication and greater worker participation in reporting, planning, and control at the lower operating levels of Chinese firms than in Indian ones. Moreover, supervision, direction, and control over workers do not seem to be nearly as tight in China as in India. One also senses less frustration among Chinese workers, and self-education is clearly much mOre in evidence in Chinese industry. In Chinese factories, individual, work-group, and shop statistical performances are displayed for all to see, as a means for creating "socialist competition" whereby lagging performers try to "learn from, catch up with, and overtake the advanced ones." One rnrely sees this type of thing on the work floors of Indian enterprises, and an important reason may often be that many workers cannot understand such statistical compilations, even simple ones. One other dimension of literacy in a country such as China is worth mentioning here, and that is literacy in foreign languages. Since China is still a newly developing country, much of the technical, scientific, managerial, and economic literature significant for industrial progress is written in foreign languages, particularly English, Russian, German, and French. This in itself is somewhat of a constraint on potential managerial effectiveness and industrial progress. If Chinese industrial enterprises are to make use of the writings and experiences of the advanced nations, scarce educated manpower must be used to translate such data. There do seem to be sizable numbers of people, employed full or part time in industrial ministries, the Academy of Sciences, rcsearch organizations, educational institutions, and even factories, who translate Russian sources; there is an increasing number translating English, Japanese and, to a lesser extent, other foreign language sources. No doubt the defense sector absorbs many and perhaps the largest number of such translators. At some of the enterprises I visited, there
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were full-time translators employed. For example, at the Wuhan Iron and Steel Corporation there are seven translators who work with sources in about nine foreign languages. I met some of them, and also observed that they were translating several American technical journals. Even the Peking Clothing Factory had a few people translating American and other foreign fashion magazines and clothing publications with the aim of designing new styles and products for export. . India mar have a potential advantage over China regarding dissemination of foreIgn sources and experiences because most significant information. is available in English language sources and a fairly substantial proportion of the educated population understands English. However, the typical indigenous Indian firm does not seem to capitalize very much on a~ailable forei~n experiences, and this is probably due in part to the relatively low achIevement drive of many Indian managers. (More will be said about this in the next chapter.) China has als.o done s.ubstantially better than India in primary or elementary ed~catIon. Dunng the period from 1959 to 1960, 36 percent of ~he populatIon aged five .to fourteen were enrolled in elementary schools m Chma as .c~mpared WIth 24 percent in IndiaYi In 1955-56 there were about 5? mIllIon students enrolled in Chinese primary schools as compared WIth ~~out 25 million in India. I6 The 1962-63 figure for India was about 42 ~1l.1110~ as compared with over ~.- identification with, loyalty, a sense of belonging and commitment to their enterprises, and this probably has a favorable motivating effect. It appeared to serve as a good educational device, since workers are called on to analyze problems, plans, and results, to extend their initiative, and to make suggestions for improvements in performance and operations. It also tends to provide far more effective communication, greater dissemination of information regarding attitudes, opinions, and capabilities, and to generally narrow the information gap at different levels of the organization. Furtherll1ore, it seems to be a good way to keep the managers on their toes , since their subordinates and the workers must at least be lis-
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tened to. They can and do evaluate the managers and point out what they perceive as deficiencies in managerial performance. The workers, whitecollar staff, and lower-level managers still were entitled to bonuses as of 1966. Such bonuses were based largely on favorable economic results, and if their bonuses are lost because of the decisions or incompetence of higher-level managers, their voices would probably not remain silent or uncritical. More important perhaps to the regime, is that employee participation in management provides for a type of bottom-up control not. only over economic and technical performance but also over the proper mterpretation of party and state policy and ideologically correct behavior. It is not possible to measure the effectiveness of employee participation in Chinese industry in terms of economic or technical results, although I would guess that in 1966 it was rather effective. In Soviet industry there are some quantitative indicators of how effective employee participation in management really is, an important one being the effectiveness of formal suggestion systems found at all enterprises. Fairly careful tabulations are generally made of the number of suggestions put forth by employees for a particular period, the number implemented, co~ts entailed, a~d the economic, technical, and other improvements resultmg from the Implemented proposals. At many Soviet enterprises, and on a nation.al scale, the results are quite impressive. The same is true for many Amencan companies that have formal employee-suggestion systems. In China apparently very few industrial enterprises have formal suggestion systems for which records are kept. While there was undoubtedly greater stress on hierarchical authority, division of work, and technical organization in general in 1966 tha~ there was during the Great Leap Forward period, I was nevertheless surpnsed. to find how much emphasis was given to human organization at the enterprises surveyed. In virtually any industrial firm, havi~g at least sev~ral members, in any country one finds both a formal and mf~rmal orgam.zation. In its pure form, the formal organization is a t~chmcal, ~ ~~enan type of organization with clear-cut hierarchical authonty-respo~sI~Ihty relationships, clearly defined division of labor based on specIah.zahon and technology, and many routinized activities and procedures. An mformal.or strictly interpersonal organization is built around natural human-behaVIOr patterns, personalities, and interpersonal relations often largely indepen· dent of formal hierarchical positions. In perhaps no other country does the interpersonal and informal organization play such a pervasive and significant role in the functioning of enterprises as in Communist China. This ties in with the regime's negative attitude toward bureaucracy to be discussed in later chapters its view of organizational solidarity, and its concept of "bottom-up" and horizontal control.
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At the Chinese enterprises surveyed, I frequently observed workers and managers disregarding the formal chain of command by bypassing their subordinates and going directly to higher-level managers or Red officials for advice and instructions. On the other hand, higher-level managers and party cadres often went directly to workers. Personnel from different departments and shops also frequently were communicating and interacting directly with one another and undertook joint decisions and tasks on a horizontal plane without higher or vertical approval. While formal authority relationships tended to be maintained for major decisions, they were frequently disregarded for minor decisions, communication purposes, and the exchange of information, knowledge, and skills. In general, authority within the enterprise seemed to be fairly decentralized and dispersed both vertically and horizontally at all levels. Selfcoordination and self-control were evident in many cases. In many instances there was no clear-cut division of work. It seemed common for managers, Reds, technicians, other Experts, and "leading skilled workers" to drift around doing all types of jobs, from working on different technical problems and machines, innovating, giving advice or instructions; and/or training other personnel. Even workers trained other workers. At many enterprises I was told much about, and observed in practice the "three-inone" method which combines cadres, technicians, and workers in projecttype work teams. However, unlike the situation during the Great Leap Forward period, it appeared in the majority of cases observed that the cadres were reasonably well-qualified managers who extended general leadership over the team, the technicians were employing their expertise, and the workers were performing tasks suited to their skills and often were also being trained in new skills. But this was clearly not always the case. .1 In general, disregard for formal authority relationships, division of labor /' _~nd work. specialization, and clearly defined individual responsibility did, , In many Instances, seem to be resulting in varying degrees of confusion, unproductive time, and general inefficiency at the enterprises surveyed. If such trends were pushed much further at many of these enterprises rather serious problems and inefficiencies would surely result. However, this considerable stress on informal organization based on personal relationships in Chinese industry makes more sense than meets the eye when applied in a country that does not have nearly enough experts or skilled people to operate tens of thousands of fairly complex and in many cases very complex Weberian-type technical organizations. When only a relatively small proportion of personnel are highly skilled or knowledgeable about managerial, technical, and economic problems, the pooling of know-how, the sharing of information, mutual aid, and cooperation can, and does ; frequently, lead to net gains in productivity and efficiency over time, ,. Moreover, it often appears to promote trust, cohesiveness, harmony, and
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unity of purpose, and probably better information for decision making at all levels than would otherwise be the case in Chinese enterprises. However, if Chinese industry and individual industrial firms are to expand substantially and become even more complex, it appears that unless more stress is placed on formal organization, serious problems and even stagnation are likely to emerge. The stress on informal organization seemed to be resulting in serious inefficiencies particularly in some of the larger and more complex firms surveyed. _" While there was undoubtedly more emphasis on individual responsibil-' ity and apparently less fear on the part of managers for assuming responsibility in 1966 than in the Great Leap period, individual responsibility is not generally stressed as much in Chinese industry as it is in the United States or, for that matter, the Soviet Union. Responsibility for overall enterprise performance seems to fall on the enterprise party committee and the top-level management group which consists of the director and vice directors. These top-level managers no longer get bonuses based on enterprise-plan fulfillment, and there does not seem to be very much weight placed on individual responsibility at this level regarding overall economic or technical results. This view of top-management collective responsibility is also quite common in Japanese industry; however, in China, there is considerable stress placed on individual blame and self-criticism at I all levels when it comes to ideological deficiencies. " .~.J In 1966, there seemed to be quite a bit of emphasis on individual responsibility at the middle- and lower-management levels. These managers can still get monthly or quarterly bonuses, and the awarding of such bonuses is generally based largely on an analysis of their job performance and contributions. While they often function within the informal organi- " zation, their formal rolls generally seem to be reasonably well defined. If ) trends continue in the direction taken during the Great Leap Forward period, however, stress will probably tend to be placed on collective re- " sponsibility at all managerial levels, and managers will probably become increasingly reluctant to assume individual r e s p o n s i b i l i t y . At the worker level in 1966 there typically seemed to be a balance between individual and collective responsibility. Workers, in most cases, are, ! also entitled to bonuses not piece-rate incentives, however which are .~ . based in part on how well they carry out their assignments. But the performance of their work group is also taken into account in many cases, and this is done to promote cooperation, as well as a sense of collective responsibility. Although many workers typically the "leading" or skilled workers spend much of their time operating in the informal organization, the majority of workers do seem to have reasonably well-defined formal jobs and tasks upon which they can be evaluated. As was mentioned earlier, even before 1949, there was a relatively high i
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degree of paternalism, in terms of various welfare ben~fits and facilities, in Chinese industry. Since 1949 the degree of paternalIsm as measured by employee welfare has increased substantially, and the welfare benefits and facilities provided at enterprises are probably significantly better and more 'extensive, in general, than they were in the past. In 1966 such b~nefits ~nd . facilities typically included subsidized meals, very low-cost famIly housmg . at larger enterprises and at least dormitories for single workers at most \ smaller factories, medical care, recreational facilities, ope.ra, choral, and \ literary groups, social security and pension benefits, educat~onal pro?rams, •nurseries, and so forth. Given Chinese conditions, paternalIsm of this type undoubtedly makes for a more energetic, better mo~ivat~d, and genera~ly more productive work force. However, such paternalism IS ~~t. managenal paternalism since major welfare services, benefits, and faCilitIes are pro.. vided chiefly by the state by law and by plan. While enterprise management must devote some of ItS time and energies to the administration of welfare programs, such programs, as well as personal and social problems in general, are primarily the local concern of the party cadres and enterprise trade union officials. Hence, the dependency and loyalty and gratitude of enterprise personnel for welfare programs have shifted from the enterprise owners and managers to the party and the state. There does not seem to be much of a paternalistic relationship between managers and workers or supervisors and subordinates. It is certainly nowhere comparable with the dominant pattern in Japan ,:here subordinates often get the personal advice and even the help of their superiors on a wide range of personal problems, including marriage. , In general, there can be little doubt that as of the spring of 1966 the . dominant attitudes toward authority, responsibility, and subordination in Chinese industry were much more conducive to greater managerial effectiveness and industrial progress than they were, prior to 1949. Enterprise employees are probably, for the most part, healthier, less frustrated, more secure, more grateful and loyal, and identify more closely with organizational objectives, have a greater sense of purpose, commitment, and purpose, and are better motivated and more productive than they were in old China. I was told by both older managers and workers at some of the enterprises that were originally established prior to 1949 that absenteeism before 1949 typically averaged in the range of 10 to 20 percent annually. This is quite possible since the absenteeism rate of most enterprises in India that I surveyed in 1965 and 1966 was in this range and in some cases even higher with the lowest rate at a firm in India being about 8 or 9 percent. Absenteeism is one likely indication of the compatibility of dominant views of authority, responsibility, and subordination and resulting behavior patterns with employee needs, motivation, and product~vity. All of the Chinese enterprises questioned on absenteeism in 1966 claimed
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that their annual average absenteeism rates were not more than about 3 percent, with some seasonal variations. In most cases, the annual average rate was about 1 to 2 percent. In several cases, enterprise officials looked at the personnel records in response to my question about absenteeism, and I am inclined to believe that the figures given to me were not intentionally distorted. Of course, there are probably much social control and, at times, significant penalties, which place considerable pressure on Chin~se .personnel from being absent without good cause. Nevertheless, I am mclmed to believe that absenteeism is substantially less than it was, prior to 1949, and that this is due, in significant part, to a better overall work environment rather than to mere coercion. Contemporary authority relationships, responsibility patterns, and the contemporary role of subordinates and workers have undoubtedly contributed to this better work environment.
Current Trends and the Future
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