Washington’s Missing China Strategy
To Counter Beijing, the Biden Administration Needs to Decide What It Wants
THE first two years of independence in Burma were a period of the greatest difficulty for the new régime. The country, which was devastated by the two Japanese campaigns, has since been torn by internal strife, partly due to Communist groups in open revolt against the newly elected Government, and partly arising from racial conflicts.
The situation today in the third year of independence seems more promising for eventual stability. The main Communist groups have been dispersed by government troops and the countryside is quieter. Conditions are far from settled, however. The Communist influence is partly dependent on events in China and Korea, so that it cannot be considered disposed of by military victories. Further, the countryside is still disturbed by marauding bands, calling themselves Communists although often only brigands.
The resulting chaos cannot easily be attributed to Burma's choice of independence, even by Churchillian critics of the régime, in view of the greater strength of the Communist-Nationalist opposition in both Malaya and Indo-China. Neither in Burma nor Siam can Communism appear as the champion of nationalist aspirations. Significantly the Communist opposition is weaker than elsewhere in Southeast Asia. In Burma it is also divided into two groups, kept apart by personal enmity between its leaders.
The reasons for other outbreaks of fighting can all be traced to separate tendencies of minority groups, distrustful of the Burmese majority. Yet, except for the Karens, the numbers have been small and the movements have had little support from responsible elements in the minorities themselves. With the semi-federal constitution of the Union, local autonomy already exists for most tribal minorities and its extension is always constitutionally possible. With the Karen rebels now defeated, the Government has the opportunity of developing constitutional reforms to provide Karen autonomy, and the principle of a new Karen state has been accepted.
Government troops seem to have turned the tide against all the various rebel groups in the last 12 months. Yet it is clearly going to take some time to disarm the countryside. Looted weapons were in the possession of every village after the Japanese campaigns, and the dispersion of arms and ammunition has been increased as a result of the present rebellions. Even in the nineteenth century it took British troops years to pacify the countryside; and after 40 years of the pax Britannica, Burma still had one of the highest rates of robbery with violence in the world. For dacoity, or brigandage, has always been a favorite means of livelihood.
This is one reason why some of those who support the Burmese desire for independence have thought that it was perhaps undertaken too soon after the war. The Burmese argue, however, that dacoity would be the same problem to any administration, while the state of civil war would have been far more serious had Burma not gained her independence. The British, they say, would have had to face a people united in rebellion.
Much the greater problem to the first elected Government, in the Burmese view, is the present economic condition of the country. The destruction caused by the two Japanese campaigns is described in the following extracts from the first Burmese Finance Minister's budget speech of September 1948:
Burma before the war was a surplus country in many respects . . . she had surplus rice, timber, petroleum, kerosene, lead, tin, wolfram, silver, hides, rubber, etc. . . . If war had not come to Burma she, like India, would have emerged as a creditor country, with her material resources greatly developed. . . . The Anglo-Japanese wars twice fought over the length and breadth of Burma have wiped out all her sources of income.
The Minister's figures indicated a catastrophic fall in current output since the war. Oil and mineral output, which had formed 40 percent of the value of the prewar export total, are negligible, and will not be produced on any scale before 1951. Timber output in 1947 was assessed at 29 percent by volume of the 1939-40 figure. Rice cultivation is yielding only 50 percent of prewar averages, largely owing to a decline in the area cultivated in the fertile delta region, where much damage has been caused by the destruction of the sea-dykes, or bunds.
With Burma's national income at half its prewar level, the task of her reconstruction is indeed great. The courage or temerity of her leaders in taking on simultaneously the problems of the transition to independence and of the rehabilitation of the economy seems only too apparent. Yet any other choice would have been politically impossible, as was shown by the referendum of 1946 in favor of leaving the Commonwealth. This political atmosphere is due in part to the centuries-old tradition of independence, for there has been a kingdom in Central Burma since the twelfth century. Since 1919, moreover, the trend of opinion in the Far East has been increasingly critical of the colonizing Powers, and suspicious of the good intentions of their administrations. This has certainly been the case in Burma, despite the great increase in the wealth of the territory in the 60 years since its annexation.
Between the first Burmese War of 1852 and the last of 1886, the main interest of the British settlements at Moulmein and elsewhere was trade with the still independent Burmese kingdom further north. Railway development assisted the phenomenal expansion of the rice and timber trade which began only a decade after the opening of the Suez Canal. Modern oil and mineral extraction came only at the end of the century; and the development of adequate road communications came later still. The rapid growth of trade is reflected in Burma's exports, whose value rose from Rs 45,000,000 in 1872-73 to a peak of Rs 654,000,000 in the boom of 1926-27.
In spite of this progress it was widely felt in Burma that foreigners had benefited more than her own people. Her first Two-Year Plan said:
During the period in which she formed part of the overseas dominions of Britain, Burma has been the scene of intense economic activity. . . . But this period was dominated by the ruling doctrines of laiss[ILLEGIBLE WORDS]z faire, and the nature and extent of the economic development were determined almost exclusively by the self-interest of foreign capitalists and entrepreneurs. Hence the paradox that while the national wealth of the country undoubtedly increased manifold, the lot of the villager remained unchanged, and he continued to live in squalor and extreme poverty.
Many who know Burma would deny the truth of this dark picture of Burmese village life, and others would contest the statement that it has seen no improvement in the last 50 years. But the evidence as to the net effect of the British occupation upon Burmese welfare has never been thoroughly examined. The expansion of rice exports indicates the rising productivity of the land, and supports the view that Burma shared in the wave of the nineteenth century world prosperity and progress. Yet, although total income rose fast, income per head appears to have risen in this period only by about 50 percent, partly because the population of British Burma also had doubled in the 50 years before 1926. Despite this increase in numbers, consumption of home-produced food is not thought by the Burmese themselves to have fallen in this period because of the increase in agricultural output; and the per capita value of imports, adjusted for price changes, rose also from Rs 10 in 1900 to Rs 16 in 1926. The story is very different after that date, however, and it is certain that the decade of depression which then followed witnessed a definite recession of living standards, as compared with the 1920's.
Whatever may have been the long-term trends in economic welfare before 1930, the Burmese peasant certainly has suffered in the trade depressions and uncertainties of the inter-war period. Rice prices fluctuated between Rs 150 and Rs 180 in the early 1920's only to fall at the end of that decade suddenly to a level of between Rs 50 and Rs 90. In the circumstances, increasing agricultural indebtedness and the alienation of mortgaged land were inevitable: by 1939 in the richest rice-growing areas, the land owned by non-agriculturalists ranged from 50 percent to 70 percent of the total in any district. That the money-lenders were very often Indian did nothing to reduce the sense of grievance caused by the loss of land and by the heavy incidence of interest charges, at rates ranging from 12 percent to 50 percent, in times of falling prices. The Provincial Banking Enquiry Committee estimates the short-term agricultural debt alone at about Rs 120,000,000 per annum, while the total value of the rice crop in that year has been estimated at only Rs 300,000,000 after having been worth about Rs 700,000,000 in the boom year of 1927. With 65 percent of Burma's population engaged in agriculture, the period since 1930 has been marked by great discontent, manifested in a succession of riots directed chiefly against the Indians and Chinese.
Hostility to European firms also grew in this period. The first and most outstanding case of this was the agitation against the Bullinger Pool, a combination of the four chief rice-exporting European firms, formed in 1921 to "observe a common policy in rice-purchases and sales." This was generally believed to have lowered the prices received by farmers and to have injured the small rice mills of the interior owned mainly by the Burmese, Chinese and Indian millers. The committee appointed to inquire into the rice and paddy trade, as a result of the nationalist agitation of 1928 against the pool, reported that this was "an organization devised in the need of self-preservation in the fight against the too numerous small mills" and held that "it does not seem right to scrutinize too closely the tactics in a fight for existence. The Pool enjoys no legal advantage. It has no monopoly. It rests on its commercial reputation, its business skill, and its financial backing." Although the Pool did not survive the long depression and one of its biggest firms went bankrupt, the impression of the ruthlessness of giant enterprise still lingers in Burma, and partly explains the fear of foreign private enterprise.
In the period of economic depression, after the collapse of rice prices in 1927, the conviction spread that the country was being exploited by Indian money-lenders and by the foreign trading community. It is significant that nationalist outbreaks began only at this point. In Burma, as elsewhere, nationalism has been partly the product of economic discontent. The decade after 1930 began with a rebellion against British rule (the first since 1890) and was characterized by communal tensions culminating in repeated riots. It is significant that the agitation against the Bullinger Pool gathered force only after 1928.
Many of Burma's plans for economic reconstruction and development can be understood only in the light of these basic antagonisms. Socialist theory and nationalist feeling found a common ground for action both in the programs for land reform and for an increasing measure of state enterprise. The problem of the absentee landlord (very often Indian), which has so long troubled agricultural relations in Burma, is being dealt with by the compulsory acquisition of the land by the state (with compensation to previous owners) and its redistribution to the peasants. The aim is to provide each cultivator with 12 acres of land (i.e. as much as he can plough with one yoke of oxen), although previous owners of larger plots will be allowed to retain up to 50 acres of their land, providing they propose to cultivate it themselves.
The problems of the money-lender (long the subject of legislation), of fixing fair rates of interest, and of rent where the mortgaged land has changed hands are to be ameliorated by the provision of both short and long term state credit on a generous scale. These measures have been supported by legislation, passed in the first month of independence, making it illegal for land to be transferred to the ownership of non-nationals. Although present non-Burmese owners of non-agricultural land may retain it, they are not permitted to acquire more without a special dispensation. The application of these sections of the land program has been delayed by the civil war.
State enterprise has been extended to the export marketing of rice and timber, and the development of coöperatives in the internal distribution of imports is being encouraged. The internal purchase, milling and export sale of milled rice and other agricultural products are handled solely through the State Agricultural Marketing Board. A corresponding export agency, the State Timber Board, also handles all export sales of teak and other timbers. A Government Timber Extraction Agency has for many years been responsible for the actual working of one forest area. This organization, now part of the State Timber Board, has extended its activities to cover areas recently taken over from private firms. The whole industry is now state operated, although full working of the forests is impossible owing to unsettled conditions.
An extension of government milling activity and an increase in state operated public utilities are projected. The country's railways have always been run as a state monopoly, and one of the first nationalization measures of the new Union Government was the taking over of the privately owned river transport monopoly, the Irrawaddy Flotilla Company. Electrical undertakings come next on the list; the date will depend partly on the progress made with the proposed scheme of hydroelectric development and partly upon technical considerations, such as the availability of trained men.
These programs of land reform and of nationalization will redistribute Burma's national income in favor of her own nationals as against the foreigner, but the level of her aggregate income at present is only about half that of prewar. With the disruptions of civil war following upon wartime devastations, the lot of the villager has shown little, if any, improvement as a result of independence, and the Communist rebels are said to be still trying to use this to foster discontent. The main contention of the "Red Flag" Communist group is that the Government's attitude to foreign capital is weak. This group alleges that had expropriation taken place without compensation, Burma would have received more benefit from nationalization.
In fact this criticism has little validity, since the actual compensations paid have been small. The timber companies' leases had expired during the war, so that in the Government's view no compensation for loss of extraction rights was involved. Payment is being made for mills and other equipment taken over. However, under the "denial policy" in 1942 a great deal of physical capital was destroyed, for example, most of the Irrawaddy Flotilla Company's river fleet. The compensation payable for the prewar equipment taken over by the Union Government is much smaller than the war-damage claims, which are being met directly by the British Government.
The real handicap to Burma's rapid economic development has been the war. Her losses in physical capital have been very great and the task of reconstruction alone is considerable. With total income at such a low level, internal savings are small and the financing of her ambitious program of reconstruction and development is a problem. To attempt to finance this development on the Russian model, without foreign borrowing, would depress the already low living standards of her people. This would strain further their loyalty to the new Constitution, and might also lead to the breakdown of her democratic framework. The present Government is supplementing the country's internal savings, produced by the state export monopolies and import control, with some foreign borrowing.
Yet the problem is not merely financial. Much more serious has been the wartime interruption of all education in Burma. With its program of land reform, and the provision of agricultural credit, on the one hand; and with its two Marketing Boards, handling the greater part of postwar exports, the Government is already responsible for the organization and conduct of the more valuable half of economic activity in the country. To this must be added the new Boards of Inland Water Transport, and the state cotton mill erected in 1949, which weaves yarns for internal sale to the handloom weavers of the north. The extent of nationalization has meant that the country's supply of key executives and technicians is already seriously taxed.
Even before the war there were few technically trained Burmese, partly because the wage-competition of trained Indians was acute in all grades. In 1920 a Parliamentary Report stated that whereas in India "all that was not European was Indian . . . in Burma the people were in no position to compete with the influx of Indians who flooded in to exploit the resources of the country and to take up posts for which no trained Burmese were available." This trend was maintained by the policy of the Administration for reasons of budgetary economy, since it was cheaper to employ Indians who were already trained and were willing to accept lower wages. Although this policy was reversed later in the inter-war period, the number of Indians in every department of the government was still very large in 1946. Even by 1937 the proportion of Burmese students taking a scientific or technical training after school was very low. Education in Burma during the period of Japanese occupation had been at a standstill, so that a lot of leeway must be made up before the supply of trained men is adequate.
This difficulty was foreseen in Burma's original Two-Year Plan, but the seriousness of the lack of technicians has only more recently been recognized. Till trained Burmese nationals are available in sufficient numbers, foreign technical assistance is now realized to be necessary, not only to staff the state-operated services and industries, but also the university and the technical schools. Yet with the world-wide shortage of technicians, it has not proved easy to find foreigners with the right training who are willing to accept contracts of even a few years with the new Union Government, despite the high salaries offered. This may partly be due to the political unrest. Unless the Western democracies can find some solution to this problem, the slow rate of economic progress will provide the Communists with increasing political capital as time goes on. One solution canvassed is a technical service of the kind envisaged by Sir John Sargent.[i] Some help is being provided under the technical assistance program of the U.N. and more is envisaged in the new Commonwealth scheme, but the scale of such assistance needs to be considerably increased.
The difficulties that are being experienced in the development of state enterprise in Burma have led recently to a change of attitude towards foreign capital. Although no positive action was taken against private capital other than in the nationalized industries, in the first year of independence the old antagonisms prevailed and public pronouncements gave little encouragement to foreign investors. The precise relationship which would eventually develop between state and private enterprise in other industries was uncertain, but the first official statements were in conformity with the generally left-wing character of all the main political parties in Burma. The original Two-Year Plan stated that "the profit motive and other considerations which usually govern industries in capitalistic economy shall not be allowed to determine the development of basic industries in independent Burma. All such industries shall be established and developed as state enterprises. In regard to consumer goods industries the profit motive and what is described as the free choice of consumers may be allowed greater freedom--to an extent compatible with the basic features of the Plan."
With the difficulties that have been experienced in finding technicians for the Boards of the nationalized enterprises, however, and the lack of industrial "know-how," it has been recognized in Burma that any further extension of state enterprise will be slow, and that private capital from abroad may well once again be a valuable factor in Burma's economic development. In particular, it is expected that private capital will provide in its own enterprises the managers and industrial scientists who have so far been difficult to find from abroad for the public boards. These points were publicly recognized in the "Statement of Industrial Policy," tabled by Thakin Nu in the Burmese Parliament in September 1949.
This new policy lays the Socialist Government open to renewed attack on political grounds, and the Burmese Communists are said to be trying to whip up the fear of foreign capital. Their efforts are meeting with little success as yet, since the country is weary of unrest and violence. Much will depend upon the course of events in Korea and China, but the rate and the character of economic development in Burma will clearly also prove an important factor in the future of Communism. The Union Government's proposals for land reform have gone some way to winning mass support, especially in the countryside. The Communist campaign against foreign capital is being countered by the Union Government's offer to take up a majority of shares in the new enterprises, thus retaining at least nominal control. But despite the new attitude to foreign capital expressed in the Prime Minister's statement of September 1949, private capital is quite naturally disinclined to underwrite political risks along with the usual economic ones in these unstable countries.
This is Burma's dilemma--but it is also a problem for the Western World. Stability in the face of Communism depends upon the relative rate of economic development in such backward areas. The problem is to devise institutions which will provide countries like Burma with financial and technical aid on the scale needed. For inter-governmental loans and technical services the pattern has already been set by the Commonwealth Conference (though Burma has so far elected to remain outside the scope of the Colombo Plan) and the United Nations. The machinery has begun to work. No similar progress can be reported in making possible a freer flow of private international investment. Attempts have been made by the International Bank, but its efficacy has been limited. Without some new safeguards, the deterrents to further private investment in a country with Burma's drawbacks are considerable. If machinery cannot be devised to provide some protection to private capital in such areas, the scale of investment will inevitably be small.
The struggle for stability in independent Burma has not ended with the close of her civil war. It has merely been shifted from the political to the economic plane. It is also, however, now being fought out in a larger area. Foreign economic aid is now seen to be necessary to her survival and progress. After the lessons of her first years of independence, her own leaders have now courageously recognized this.
[i] "Experts for Export," by Sir John Sargent, the London Times, March 14, 1949.