Home sweet hometown

 

Cartoon by Gou Ben; Poem by Long Yuan

 

I carry a money bag in one hand,
And a graph in the other.
I am returning to the countryside,
New opportunities to discover.
With capital and networks
As well as flows of information,
I am confident in my ability to
Achieve financial emancipation.

---

 

In 2004, when China experienced a shortage of migrant labor for the first time in its history, it set off a heated debate in academia over whether the nation had reached the Lewis turning point.

Named after Nobel laureate Arthur Lewis, the Lewis turning point describes a stage in a country’s development at which there is no longer surplus agricultural labor, and wages begin to rise. For China, a nation that has traditionally relied on cheap labor as a comparative advantage, the concept has huge implications—especially during a time of structural transition.

Lewis  proposed that a nation actually undergoes two turning points. But, whether China has reached the first or second point still remains to be seen. Undoubtedly, the Chinese economy is undergoing great changes in the demand and supply of labor, and the supply of agricultural labor is no longer limitless.

According to Lewis’ dual sector model, to achieve economic integration, the traditional agricultural sector needs to provide unlimited labor supply and sufficient surplus products to drive expansion and consumption in the modern industrial sector. Otherwise, surplus rural labor will not be totally absorbed, and a food crisis could possibly result. Therefore, Lewis’ model is based on the prerequisite that the reduction of agricultural labor force will not affect the marginal output.

 

At present, China is undertaking a crucial period of rapid industrialization and urbanization, and has not achieved economic integration yet. Rural labor flocks to cities in droves, leaving behind women and the elderly while undermining the ability of rural areas to provide a continual stream of surplus labor and products.

The reality in China diverges from the assumptions of the Lewis model, which describes agriculture as a secondary and passive sector. The agricultural sector in China must enhance productivity and improve technologies in order to realize the synchronous development of agricultural modernization, industrialization and urbanization.

 

Modern agriculture
Coordinating urban and rural development requires industry to support agriculture. However, under the economic “new normal,” the industrial sector is undergoing various painful reforms, including upgrading, destocking and reducing cost. This has squeezed the space for development and employment, affecting industry’s capacity to support agriculture. Moreover, state financial resources cannot bear the cost of providing agricultural subsidies all across the nation in the short term. In this context, it is essential to tap the self-development potential of the agricultural sector.

In fact, the weakness of agriculture lies in the particular phase of development and traditional production models. By introducing modern productive factors, agriculture can also become a competitive industry with intrinsic sources of growth.

A modern agricultural sector can continue to provide surplus products to urban areas and meet the challenges brought by excessive transfer of labor while serving as a new driving force for economic development. To this end, it is imperative to transform the model of agricultural development.
 

 

The key is to get rid of the obstacles to long-term development in rural areas by introducing new and modern productive factors. Farmers should learn to turn new factors into tangible benefits. In this regard, investment in human capital is needed, including education, healthcare, training and labor mobility. In the dual sector model, labor mobility is a core variable related to industrialization and urbanization, which can be enhanced through optimizing and balancing the allocation of human capital.

 

Human capital
To build a modern agricultural sector with high returns, the government should invest in physical capital, such as infrastructure, development and research, mechanization, and “Internet Plus” in order to advance agricultural technologies. At the same time, the most important task is to cultivate knowledgeable professional farmers who are capable of adopting new technologies and management skills.

There has been a wave of migration back to the countryside in recent years. Some carry back to their hometowns a spirit of entrepreneurship, greatly contributing to China’s goal of promoting mass innovation and small businesses. In addition to knowledge and abilities, the experience of working in cities has also changed their ideas and values.

This is fundamentally different from migration in which rural laborers move to cities and work in labor-intensive industries. Having been involved in the process of industrialization, urbanization and marketization, the new generation of migrant workers is more aware of the development rules governing the market economy and the industrial system.

They bring the most precious human capital along with them when returning to rural areas, which will have a great impact on traditional agriculture and help to modernize rural society.

New operating entities are the key to constructing an industrial chain as well as a production and operation system for modern agriculture. Unlike traditional farming households, the majority of large contractors, cooperatives, agricultural enterprises and other new forms of rural organization focus on specialized and intensive production or social services. For them to be integrated into the market while avoiding risks and sharing profits, entrepreneurs, leaders and professional workers are needed. In other words, the return of migrants to their hometowns is perfect timing.

The physical and social capital migrant workers have accumulated in cities will inject a flow of capital, technologies and information, spreading new ideas and modern lifestyles in rural areas. The process will bring great transformations to rural society.

Moreover, it will lay the foundation for the smooth transfer of industries in eastern areas to central and western regions, thus narrowing the gap of urban-rural income and regional development. In the process, social problems, such as the exodus of farmers, will also be alleviated.

 

Multidirectional transfer
Diverging from the dual-track model, the transfer of China’s labor force is a repeated back-and-forth transfer between rural and urban areas. In the previous round of transfers, most migrant workers did not become urban citizens with a hukou—an official household registration—in their new location. The new round of labor migrations will play an important role in coordinating urban and rural development and facilitate synergy among industrialization, urbanization and agricultural modernization.

Approved by the State Council, one major approach to realizing the aforementioned goals has been to encourage mass innovation and entrepreneurship in rural areas. For thousands of years, Chinese agriculture has adopted modes of production characterized by intensive labor input and small-scale farming.

The new model will put an end to the small-scale subsistence economy and bring fundamental changes to rural society if we take the initiative to improve labor mobility and transform the traditional modes of production.

The ultimate goal of the dual sector model is to achieve economic integration, making urbanization an irresistible trend. It seems that the return of migrant workers to rural areas is out of accord with the trend. Nonetheless, it is a necessary and transitional stage for China in line with its national conditions.

Furthermore, Lewis’ model does not account for how the traditional agricultural sector can catch up with the industrial sector in marginal productivity. The new round of labor transfer in China will contribute to agricultural modernization and achieving equal marginal returns, which may be the essence of economic integration.

It should be noted that migrant workers may encounter various difficulties when returning to hometowns and starting businesses. Given supporting policies, however, those who were once the backbone in urban construction will also break new ground in the development of vast rural areas.

 

Li Gucheng is from the College of Economics and Management at Huazhong Agricultural University in Wuhan, Hubei Province.