CityReads│A Red Capitalist in Shanghai in 1966
In 1966, Barry Richman, a Canadian and a professor of management and international business at the University of California, Los Angeles, went to communist China. He particularly described one of his interviewees, Wu Tsung-i, to show how a red capitalist worked and lived in a communist society.
BARRY RICHMAN, 1969. Industrial society in communist China:a firsthand study of Chinese economic development and management-with significant comparisons with industry in India, the U.S.S.R., Japan, and the United States,New York: Vintage Books.
Picture source:http://www.mjshsw.org.cn/shmj2011/node632/node636/u1a15316.html
IAbout the Book, Industrial Society in Communist China
Barry Richman is a Canadian and he is a professor of of management and international business at the University of California, Los Angeles. Based on a a two-month firsthand study of Chinese industrial management during April and June of 1966, Barry Richman published a book, Industrial society in communist China:a firsthand study of Chinese economic development and management-with significant comparisons with industry in India, the U.S.S.R., Japan, and the United States, in 1969 by Vintage Books. It is the result in large part of the findings, observations, and impressions derived from my first hand study of management, industry, society and economic development in China.
In China he visited 11 major cities and surveyed 38 industrial enterprises in a wide range of industries. In total, he had formal interviews directly related to my research project with more than 200 Chinese citizens, and informal discussions with many more.
His background is such that he have been to gain some insights and make comparisons regarding industrial management and economic development in Communist China.
Communist China, with its own unusual type of Communist ideology, has a unique environment for productive firms and their managements different from that of most other countries. The book attempts to provide linkages between the macro-factors, or environmental changes, in the Chinese society, and how these affect the management, operations, and performance at the enterprise or factory level.
The environment in this study has four major dimensions--educational, sociological-cultural, political-legal, and economic. A basic hypothesis is that the first two are the most crucial for managerial effectiveness and economic progress in an underdeveloped or newly developing country, and that the latter two dimensions become of primary importance only as the economy becomes fairly sophisticated and advanced.
Some points of the Chinese Maoist doctrine, if actually applied in practice over time, would lead to economic chaos and probably the total collapse of production.There is a constant struggle between ideology and managerial, technical, and economic reality.This book is a study of economic development and particularly of the impact of ideology on the environment and performance of management and industry in China.
The red Chinese nation has done better with regard to industrial development than the Soviet Union did during its first two decades under communism. It has so far done better than India. However, ideological extremism was a chief cause of China’s temporary but severe economic crisis during the Great Leap Forward and its aftermath; and ideological extremism could lead to a similar crisis again under conditions prevailing in 1968 or in the future.
IIHow I Got into Communist China
Because I was a Canadian citizen, the Chinese were willing to issue me a visa that enabled me to undertake my research project. Personal letters of introduction to influential Communist Chinese officials from a number of leading Canadian educators, professional people, and businessmen who have been to Red China in recent years were a critical factor.
I originally thought of going to China in 1965, when I accepted a Massachusetts Institute of Technology appointment as a visiting professor at the Indian Institute of Management in Calcutta for the 1965-1966 academic year.
In October 1965, I went to the Chinese embassy in New Delhi to apply for my visa. I was questioned in detail not only about what type of research I wanted to do in China, but also on what I thought of industrial management in Russia, the United States, Canada, and India.
Although I am a Canadian citizen, I am a permanent resident of the United States and therefore required United States government approval to go to Communist China. In February 1966, I finally received approval from the United States government to go to China with the help of my dean at U.C.L.A., Neil Jacoby.
In March 1966, a three-month visa had been granted to me by Peking and I was to pick it up at Delhi. Only a few days before my departure for China I found that I needed approval from the Indian government if I was to return to India from China. With the help of the Ford Foundation’s Representative in India, Dr. Douglas Ensminger, I finally got the approval and I was on my way.
IIICommunist China's Red Capitalists
When the Communist came to power in 1949, the regime differentiated between two types of capitalists: bureaucratic and national/nationalistic. Most of the bureaucratic capitalists fled China; those few who remained behind were typically killed or imprisoned. All of the assets of this type of capitalist were expropriated outright by the Communists. The national capitalists may or may not have had big business, but they did not actively support the Chiang Kai-shek regime or play a very significant role in politics. At the outset of the communist takeover, the Red regime encouraged the national capitalist to stay on and run their businesses. The regime also did much to persuade those who fled China to return home and run their companies.The capitalists were assured good treatment, their old incomes and assets, and an important role in building a socialist economy with the help of “state capitalism”. Many did return, and by far the majority stayed in Red China.
During my trip to China in 1966, there were 300,000 capitalists in China and some 90,000 capitalists in Shanghai.Most of China’s capitalists are small businessmen or shopkeepers, but there are also many industrial capitalists, a sizable number of whom are wealthy managers of their large-scale nationalized firms. And they can receive dividends on their former business investments, and where many of them still hold managerial positions at their nationalized firms which are called joint state-private enterprises.
In general, important progressive capitalists are, at times, allowed to travel abroad--usually to other socialist countries and without their families-- and some of them even have foreign investment abroad (including factories, mostly in Hong Kong) from which they derive foreign exchange to buy imported goods, such as cars, appliances, clothing, jewelry, and works of art. In recent years the regime has apparently been exerting pressure on capitalists to give their foreign-exchange earnings to the state and to “donate” their more valuable art treasures and antiques to state museums. While the children of Red China’s capitalists are legally entitled to inherit their family’s wealth, there are strong social pressures applied, so that most of them renounce such an inheritance.
It is common for westerners who go to Communist China--especially the city of Shanghai-- to ask for and be assigned, a red capitalist to interview. Wu Tsung-i was assigned to me as the fairly large one. I have an intuitive feeling that the Chinese capitalists interviewed by foreigners, do not express many of the key deep-down feelings that they have in their hearts and minds. They are caught between two worlds. On the one hand, I believe that they tend to feel that in numerous respects the present regime is much better for the country and for its people than the former highly inept one. On the other hand, China’s capitalists are now mere cogs in a giant machine, with little real freedom, prestige, or influence as compared with what they enjoyed in the past. They are perpetually surrounded by party cadres and other people who tell them what they can and cannot do, what to say, whom to see, and even what to think. If they do not toe the line they will immediately be put through more thought remolding or otherwise be subject to harassment.
IVThe Story of Wu Tsung-i
On my visit to Shanghai in May 1966 it was indeed disconcerting for me to be picked up by a native Chinese capitalist in a new Jaguar, taken to his large factory for a day of discussions, and later to his sumptuous home, where he still lives as a wealthy industrialist does in a capitalistic nation.
Mr. Wu Tsung-i, my Chinese Communist capitalist acquaintance, not only lives like a capitalist but also looks like a capitalist and, at times, still thinks and acts like a capitalist. However, he does not talk like a capitalist. In fact, he is verbally enthusiastic about the joys of communism and has much to say about the evils of capitalism (not to mention Soviet revisionism).
Mr. Wu is a distinguished and handsome gentleman in his early fifties; he is married and has four children. In the early 1930s he studied at Bolton Technical College in Manchester, England. He is quite representative of Red China’s bigger industrial capitalist, but he is far from being the wealthiest, and he is not among the few most important or influential ones.
Before the Communist takeover, Wu and his family owned 30% of the Sung Sing Textile Corporation which controlled nine textile mills in Shanghai. They were the major owners of Mill No. 9, which I visited, and Wu was its general manager. He was also a vice general manager of the Sung Sing Textile Corporation, one of the largest textile mills in China, with 6,000 employees, 110,000 spindles, and over 1,000 looms, and the largest joint state-private one. The Yung family were the major owners of his corporation, which was founded with its first mill in 1915. By 1935 it was the largest Chinese owned national textile corporation with ten major shareholders, all in the Yung and Wu families.
During the Japanese attack, Mr. Wu spent two months in jail. He was a strong nationalist, and this made him feel very insecure about himself and his country.After Japan was defeated, Wu felt he could not trust the corrupt and inept Kuomintang regime, but he also feared the Chinese Communists. In 1947, he began to send capital abroad--chiefly to Hong Kong-- and in 1948 he took his whole family to Hong Kong. His business agent was left in charge of this factory.
In 1949, after the Communist took control of Shanghai, they did not confiscate his enterprise, and his business agent went to Hong Kong to see him. Wu came to Shanghai alone in late 1949. He learned for the first time about the new regime’s policy toward capitalists and was encouraged to return to run his firm. He told me that he was classified as a national capitalist because he had bravely resisted Japanese and was even jailed by them, and also because his business had suffered at the hands of the Kuomintang, bureaucratic capitalists, and foreign imperialists. In addition, he had a reputation as being relatively fair and humane with his workers. In 1950 Wu returned permanently to Shanghai with his wife. They were joined by their children in 1951, but his father and some other relatives chose to stay behind.
In the early 1950s all of Red China’s cotton industry was completely dependent on the state for raw material allocations, and textile firms were merely processing plants for the state.
In 1953, nationalization and joint state-private ownership was officially raised. In 1954, the board of directors of the Sung Sing Textile Corporation applied for joint ownership. In 1955, the application was approved and the state appointed two vice directors, and a new permanent party secretary to Wu’s enterprise. Wu stayed on with the title of director.
An approved value of 50 million yuan was placed on the assets of the Sung Sing Corporation,, and Mill No. 9 was valued at about 16 million yuan. Wu's personal share in the corporation and this mill was placed at 1.6 million yuan. Although members of his family-chiefly his father-owned about 30 percent of the corporation, they were not entitled to any compensation if they did not live in Communist China. Wu's father, who was about eighty years old in 1966, chose to remain in Hong Kong and give up his fortune entirely on the Chinese mainland. Apparently in such cases, family members and heirs living in Red China had no claim to such wealth, and the state wrote it off its books.
On his appraised capital, Mr. Wu was receiving 80,000 yuan annually paid quarterly since 1956. I asked him whether his business assets were evaluated fairlv, and he answered that "under the circumstances" his compensation was "reasonably just and adequate." He would not comment further on this subject.
All of these capitalists received their former salaries, which in each individual case came to substantially more than any of the other employees received. Mr. Wu received 380 yuan per month, the two capitalist vice directors about 350, and the other six capitalists from 220 to 350 yuan. The top-paid state employees were the party secretary and the other two vice director who received 100 to 110 yuan per month. The average factory monthly pay was 78 yuan.
Wu and numerous other capitalists, because of their knowledge, experience, and skills, still play important roles in decision making,rendering advice, and generally in the management of their enterprises,although they are, of course, subject to the veto powers of party and state appointees. He seems to have more leeway in making technical decisions and in drawing up plans than in making decisions directly involving personnel matters.
Wu spends about the equivalent of three days each week on the average at his enterprise. The rest of his working time is spent in civic and political activities. As of 1966, he was active in the Democratic Party and was vice chairman of the Shanghai branch of the party. He was also an elected deputy of the National People's Congress and was on the executive committee of the Shanghai Federation of Industry and Commerce.
As of 1966, Wu was still allowed to keep the profits he earns from a textile firm in Hong Kong of which he is part owner. This is how he gets foreign exchange to buy imported goods, including his cars. He told me that the state had recently begun to "persuade" him to turn over all of his foreign-exchange earnings to the government and that he was "seriously considering this proposal." He has been free to travel to Hong Kong-always leaving his wife and children behind several times a year on business, and to see his aging father. He also visited Russia in 1956 with a delegation of Chinese capitalists, and North Korea on another trip.
Wu lives with his attractive wife, who speaks English quite fluently, and four children in his original sumptuous home. The house has about fourteen rooms,and several of the family's pre-1949 servants still work for them. He spends some of his income on luxury goods, antiques, art, and his coin and stamp collections. However, in recent years he has been "persuaded" to turn over some of his best antiques and works of art to the Shanghai Museum: for this he gets award certificates from the Ministry of Culture. He admits that he cannot find ways to spend most of his money, so he banks it and earns about 3.3 percent interest on it. This life, he claims is far better than his decadent life before Communism.
None of his four children wants his wealth when he dies because they want to be good Maoists and perhaps get into the party someday. His charming teenage daughter then a high school senior who played"Granada" for me on her Steinway piano, may not yet be fully remolded. He has another daughter who was twenty-two and still single. She was in medical school and a member of the Young Communist League. It seemed that she had a fairly good chance of getting into the party eventually. She was not at home when I visited there. He has a son in his twenties, who was studying physics at the university, and another boy in high school who briefly and reluctantly practiced his English on me. To me, those of Wu's children whom I met seemed to be quite respectful, and affectionate toward their parents. Whether this is really the case or whether this is part of a carefully constructed facade of the Chinese capitalist world, I shall never know for sure.