The Battle of Reform

Last week the Chinese War Ministry announced "the most brilliant military feat of the entire war," with the capture of the outposts of the city of Nanchang and the destruction of 20,000 out of 56,000 Japanese troops. But it was neither so brilliant nor so bold a victory as Generalissimo Chiang Kai-shek won in his own capital, Chungking.

There in a plenary session of the ruling Kuomintang the Generalissimo stood up and scolded his Party heartily for losing the confidence of the people, for doing a slipshod administrative job, for playing into Japan's hands.

Chastened, the Kuomintang went into an executive huddle, emerged with a set of specific reforms and a manifesto of new intentions. It agreed to form additional local Political Councils. This in itself was a long step toward persuading the doubting Chinese people that the Kuomintang was working for democracy and not for its own perpetuation in power. The Kuomintang also agreed that the National Government would take over the whole job of distributing food and other necessities, thereby doing away with hoarding which has resulted in coolies starving while rich men speculated. It further agreed that the Government would henceforth collect taxes on real estate (hitherto a perquisite of the local governments) under an ingenious system by which landowners will make their own assessments, with the Government reserving the right to buy the land if the assessments are considered too low. This will bring to the central Government revenue which it badly needs. It should put the burden of taxation on the class which can best afford it—the landlords, who have been virtually tax-exempt because they control the local governments, who do most of the speculating in grain and who force their peasantry to pay as much as 60% of their crops for rent (including "protection").

Back of these reforms, letter and spirit, one of the strongest influences was the U.S., represented by the bespectacled face of Lauchlin Currie, economic aide to President Roosevelt. Currie went to Chungking early this year, at the invitation of the National Government, to try to unravel its snarled finances, set up a working budget. But his mission developed into a high-powered diplomatic errand.

In Chungking Currie went everywhere, saw and talked to everyone. To Chiang Kai-shek and the Government, uncertain of President Roosevelt's Far Eastern policy, the very presence of one of Roosevelt's right-hand men was a stimulant. Still more so were his suggestions about land taxes.

One of the gravest dangers to Chiang Kai-shek's Government has long been the rival influence of his Communist allies—whose Army he had recently to discipline (TIME, Feb. 3). If Chiang and the Communists get to fighting, Free China's goose is cooked. The Communists undermine his power by promising to free the peasants from the oppression of the landlords. Why not, Currie suggested, raise needed revenue and undercut Communist influence by taxing the landlords while feeding and pleasing the peasants?