Howcan a transformation froma systemof comrade-ranking of rights to a systemof property ranking ofrights be implemented？Ideological and political consid-erations aside，a great difficulty cropped up in the early1980s in that such a change implied a reshuffling ofincome not acceptable to the status quo.My hope at thetime was that the initial transformation would producesuch a sharp jump in total income that individuals expe-riencing a drop in ranking would be compensated bysubstantial absolute increases.A jump in income didoccur，as several localities in southern China experienced50% or more growth rates in 1983.Still，the transforma-tion met with opposition from the earlier privileged.In April 1985 I wrote proposing to pay themoff and buyback the comrade-ranking rights.24 Somewhat quixoticand clearly difficult，this suggestion surprisinglyreceived some support in Beijing.However，no suchaction ever took place.
A different compensation scheme emerged: corrup-tion.Corruption became widespread around mid-1984.
【24】张五常，《官商的天堂》，一九八五年四月十二日发表于《信报》，其后转刊于《中国的前途》。
At first I was relieved，because corruption was replacingthe earlier back-door transactions.25 This was a clearsign that the comrade-ranking systemwas collapsing.However，when Beijing announced in 1985 that theywould introduce controls by product classification，Iimmediately wrote that China was on “the road to India”,arguing that if rights to corrupt were to be delineated interms of regulations，the reformprocess would come to ahalt.26 With this warning，supporting voices from Beijing became strong.Controls by product classifica-tion were abandoned.
I disagree with suggestions that regulated corruptionwould be good for economic development.Experiencein China does not support this view.The fact that cor-ruption is negatively correlated with growth falsifies theviewthat it contributes to growth.However，if there isany credit in corruption，then I may say in the case of China it helped to pay off the privileged and reduce theirresistance to reform.I also disagree with the viewthatcorruption is everywhere in China today.It is still popu-lar，but compared with the 1980s and the early 1990s,
【25】“Back-door transactions” refer to the buying and selling offavoritism.Favoritist transactions do not imply corruption，butare based on rights implicitly granted to comrades of differentranks.There is no violation of the law.见张五常，《贪污的后患》，一九八五年一月三十日发表于《信报》，其后转刊于《中国的前途》。
【26】See Steven N.S.Cheung，“A Simplistic GeneralEquilibriumTheory of Corruption,” Contemporary EconomicPolicy（July 1996）.
corruption has subsided a good deal.I knowenoughgovernment officials who take pride in their work tonegate the viewthat corruption is everywhere.Anti-cor-ruption policies have been strong since 1993，and，as weshall see，these efforts were assisted by locality competi-tion.My viewis that compared with other Asian coun-tries，the level of corruption in China is currently on thelowside.
When transforming from one systemof contractualdelineation of rights to another，China was fortunate thatthe process was assisted at the early stage by a market contract bearing a market price.Known as the responsi-bility contract，it became immediately successful whenapplied to the use of land in agriculture.In 1986 I wrote:The so-called “responsibility contract,” if reduced toits simplest and therefore most perfect form，isequivalent to the granting of private property rightsvia a state lease of land.Duration of the lease maybe for any number of years or，in principle，may beperpetual.Ownership is not relinquished by the state，but the rights to use the land and to obtainincome are exclusively assigned to the lessee.The right to transfer，or to sell，the leased resource maytake the form of subletting.Various dues exactedby the state may be lumped together in the form of afixed rent，and since this rent is paid to the state，it becomes a property tax.If indeed a perpetual leaseis assigned，then the holding becomes fee simple,and if the right is freely transferable，then the leaseis held in fee simple absolute——or private property
in its perfect form!27Trying to understand the development of this contract,I had the good fortune that my colleague C.H.Chai gen-erously made available to me detailed source materialcollected over the years（no small effort，that），and this enabled me to publish a 1984 paper on the responsibilitycontract in agriculture.28 It all began in 1958 with therapid introduction of communes throughout the country.Massive starvation followed，and memory of this painfulexperience lingered for twenty years.To mitigate theeffects，a number of modifications to the commune sys-temwere introduced.First was the work-point system;then came production teams; then there was a shift fromlarge teams to small teams; and then in 1978 responsibil-ity contracts began to emerge.
