Chapter XV: 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]

[Footnote 7: The China Information Committee, _News Release_, July 15,
1940. The article and tables have been somewhat abridged. The
cooperatives spread so rapidly that figures are often obsolete before
they are tabulated.]

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.

[Footnote 8: "Model Constitution for Chinese Cooperative Societies,
Revised July 7th, 1940," The China Information Committee, _News
Release_, July 15, 1940.]

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.

[Footnote 9: Nevertheless, the rural cooperative movement must be
counted in as having made some beginnings, despite the obstacles it
has faced. More than seventy thousand credit and marketing
cooperatives were in service last year. (The same, April 22, 1940.)]

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.

UNORGANIZED PRESSURE

The long one-party rule of the Kuomintang, now relaxed but not disestablished, has habituated the Chinese to the use of completely non-political groups--families and their connections; economic associations of various kinds; religious agencies--for political leverage. There are relatively few groups which possess clear public purposes and at the same time maintain unofficial status. Indeed, the stamp of quasi-official approval is so highly prized that many groups which seem to have no affiliation with the government are discovered to seek affiliation or to have acquired it roundabout.

Among the private or quasi-private groups which take most effect may be mentioned, however, the People's Foreign Relations Association, the League of Nations Union, and the China Branch of the International Peace Campaign. The first of these publishes the useful quarterly, _The China Herald_. The Campaign, which was launched as a world-wide center-and-left drive for peace, was under respected European leadership, and was favored by a large labor bloc in England. In the United States it was associated in the minds of some people with the Stalinist fellow-travellers--the elements who sat in the councils of the temporarily-joined forces of anti-Fascism and pro-Stalinism, who organized the American League for Peace and Democracy (a Popular Front movement), the American Friends of the Chinese People, and who dominated groups such as the American Youth Congress. In China, contrariwise, the International Peace Campaign, fitting in with purposes of government and people, seemed to offer a world-wide sympathy for China's anti-aggression activities. The China Branch was among the most effective organizations in the Campaign. It developed vitality in diffusing peace propaganda--that is, for peace after the war. There was no trace of defeatism, sabotage of national defense, or obstruction to defensive war. With the outbreak of the European war, the I.P.C. disappeared almost altogether from the Western scene, but continues in China. Finally, the China League of Nations Union publishes _The China Forum_, and carries on an educational campaign.

Christian activities have been extended and activized by war. Never before have the missions had as many opportunities for social and national service in China. Their schools are filled; their hospitals, crowded; their cause, related to America, to peace, and to a sane long view, is welcomed. The Chinese Y.M.C.A. has met the shock of war with extensive participation in relief, particularly among students and soldiers. Medical aid, tragically inadequate but infinitely better than nothing at all, is coming into China. The curtailment of mission activities in occupied China makes exploitation of the Christian field in the West even more desirable from the viewpoint of the Western churches. A recent work, by two Christians born in China, one American and the other Chinese, describes this situation clearly and significantly: _China Rediscovers Her West_.[10]

[Footnote 10: Wu Yi-fang and Price, Frank W., editors; New York,
1940.]

The other side of extra-political pressure comes in the form of class and regional interests. The phenomena of lobbying and special favor are less evident in Chungking than in previous governments of China. Special groups representing industries, areas, or vested interests do appear, but are apt to work through casual, untraceable patterns of personal relationships. There is no Chinese C.I.O., nor A. F. of L., but there is also no National Association of Manufacturers. The politics of economics gains by diffusion and absence of protest what it loses in sensitivity and explicitness. An economic group which feels itself outraged takes a long time to develop group consciousness; hence, it is less apt to feel outraged, and the generality of the people, the public, is often better off. There are undoubtedly scurrilous, politically vile, selfish advantages being taken in West China today; but the net outcome is counterbalanced by concrete improvement in the condition of the people as a whole, and the unquestionable morale of the leading and administrative classes.

Every government, where and however it may operate, has a double set of barriers which form its corridor of further existence: on the left it must meet the minimal needs of the governed, satisfy their physical and moral appetites sufficiently to keep itself from being ignored or overthrown; on the right it must compensate the persons who govern, and do so well enough to retain personnel adequate to government. The Marxians stress the former element; the Paretians, the latter. Both are visible in China. Had the exigencies of reform, social change, and military activity proved too sharp, too violent, too profitless, the personnel trained by experience and fitted by temperament to government might have gone over to Japan. The low caliber of Wang Ch'ing-wei and his clique is testimony to the _élan_ of the West Chinese leaders. Chungking has ample reserves of administrative talent, military intelligence, and political acumen upon which to draw.

The last part of the picture is the most important: the _lao-pai-hsing_, the Old Hundred Names, the common people of China. They are the ultimate arbiters of this war, and of all future wars in East Asia: to this degree they are a superlative force in the world. Hundreds of millions strong, adept, flexible, trained in a culture which has flowed under (but not through) literacy for centuries, hard-working, patient, and physiologically sound, they are perhaps the greatest unified human group. Upon their anger against Japan depends the future of that Empire; if the _lao-pai-hsing_ are determined to resist, Chiang could go, Chungking fall, the government scatter, the Communists collapse, and there would yet be war--restless, bitter, implacable, with the ferocity of a sane man employing violence as a last defense against violence not sane. Leaders exist aplenty in that sea of men, waiting for circumstance to cast them forth. Intelligence, information, cunning, power, and patience are all at hand.

The difference between a strange half-industrial modern Chinese Republic, striding toward the twenty-first century with seven-league boots of progress, and a Chinese chaos stinking with vice and disease under Japanese rule--this difference lies within the decision of the common people. The war has roused the workers, peasants, and petty townsmen. The Japanese bombers have carried ubiquitous messages of alarm. The Western world gasped when across the dusty plains of North China there rolled the tidal wave of Boxerism; but the _I Ho Ch'üan_ of yesteryear is a passing fad in contrast to the bitterness and resolution of today's common people. There is no defeat in most of the faces in Shanghai, no surrender in the eyes of men who live, and must keep on living, surrounded by enemy vainglory. The traitors are marked by their own behavior; they bear the stigmata of a surrender to vice. Yet even they cannot be trusted by Japan. One who has visited the sources and the mouths of the rivers, who has seen the free Yangtze pouring out of Tibet and the captive Yangtze ripple past the grey flanks of Imperial Japanese destroyers, can testify that the Chinese people are not beaten now. If they are ever going to be beaten, it will take a bigger force than Japan to do it--a morally greater, technically surer, politically wiser force.

The Chinese people know they are unconquered. They do not know it with their minds, despite hopeful calculations in terms of years and yen and reserves of oil. They do not even know it with a conscious assumption of faith, a fanatical determination to die for the new state. They know it just as men have always known the simplest things of life--things so simple that they may trouble the psychologist or elude the philosopher, and never even enter the vocabulary of political science. The Chinese sense of victory is like a reminiscent fragrance, a half-heard but poignant sound, a flash of inexpressible but profound meaning out of everyman's irrecoverable past. This omnipresent sense of victory and freedom may be twisted. Weak and cunning men rationalize this sense of victory into self-deceiving subterfuges of boring from within; they accept Japanese salaries while promising themselves sometime, always tomorrow, to subvert Japan; but even they lack no assurance of ultimate Chinese victory.

The winning of that victory lies on the sweating backs of men--in paddy-fields, on flaring highways, on flagstone pathways across a world, or behind the adobe and lattice walls of China's workshops. The war has conjured up an awareness of power. No one asks the _lao-pai-hsing_ what they want; no ballots, no polls can reach them. But no people can hold such overt power and be unconscious of their own strength. China has awakened.