Contagious Capitalism

Contagious Capitalism: Globalization and the Politics of Labor in China

Mary Elizabeth Gallagher
Copyright Date: 2005
Pages: 256
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  • Book Info
    Contagious Capitalism
    Book Description:

    One of the core assumptions of recent American foreign policy is that China's post-1978 policy of "reform and openness" will lead to political liberalization. This book challenges that assumption and the general relationship between economic liberalization and democratization. Moreover, it analyzes the effect of foreign direct investment (FDI) liberalization on Chinese labor politics.

    Market reforms and increased integration with the global economy have brought about unprecedented economic growth and social change in China during the last quarter of a century.Contagious Capitalismcontends that FDI liberalization played several roles in the process of China's reforms. First, it placed competitive pressure on the state sector to produce more efficiently, thus necessitating new labor practices. Second, it allowed difficult and politically sensitive labor reforms to be extended to other parts of the economy. Third, it caused a reformulation of one of the key ideological debates of reforming socialism: the relative importance of public industry. China's growing integration with the global economy through FDI led to a new focus of debate--away from the public vs. private industry dichotomy and toward a nationalist concern for the fate of Chinese industry.

    In comparing China with other Eastern European and Asian economies, two important considerations come into play, the book argues: China's pattern of ownership diversification and China's mode of integration into the global economy. This book relates these two factors to the success of economic change without political liberalization and addresses the way FDI liberalization has affected relations between workers and the ruling Communist Party. Its conclusion: reform and openness in this context resulted in a strengthened Chinese state, a weakened civil society (especially labor), and a delay in political liberalization.

    eISBN: 978-1-4008-3729-8
    Subjects: Business, History, Political Science

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. List of Illustrations
    (pp. ix-x)
  4. Acknowledgments
    (pp. xi-xiv)
  5. List of Abbreviations
    (pp. xv-xvi)
  6. CHAPTER ONE Introduction
    (pp. 1-8)

    How does an authoritarian state renegotiate its duties and obligations to society without sacrificing political control? One of the key explanations for the disintegration of socialism in the Soviet Union and Eastern Europe is that these states failed to keep up their end of the “social contract.”¹ Whether through the effects of continual market reform (Hungary, Yugoslavia) or the effects of stagnation (Romania, Bulgaria), these societies were no longer willing to sacrifice autonomy and a liberalized political sphere for a dwindling supply of welfare benefits and job security. As scholars of the region point out, the fusion of economics and...

  7. CHAPTER TWO Contagious Capitalism
    (pp. 9-29)

    China’s gradual reform process is widely acclaimed for achieving “reform without losers.”² For those who study labor, this does not ring quite true.³ There are losers, and they include many of the same Chinese citizens who were earlier lauded as the “masters” of the country and the ruling class: the urban employees of state industry. Why did their declining status not mortally threaten the political rule of the Chinese Communist Party? Most analyses of this question give two answers: rapid growth and gradualism. And indeed, these answers are partially correct. The People’s Republic of China’s (PRC) average growth rate from...

  8. CHAPTER THREE Blurring Boundaries: Foreign Direct Investment and the Evolution of Enterprise Ownership in China
    (pp. 30-61)

    Since 1978 a key element of China’s economic reform has been the opening to foreign investment and trade. This policy has turned out to be one of the most successful reform policies. From 1979 to 2002, China drew in over $446 billion in utilized foreign FDI, second only to the United States worldwide. (See table 3.1) Compared to other socialist or postsocialist economies, China’s ability to attract FDI is unprecedented. Russia, a reforming economy that has also looked to foreign investment as an engine of growth and restructuring, attracted a mere $14.3 billion in FDI in the 1990s. Compared to...

    (pp. 62-97)

    In the absence of large-scale privatization and with the continued existence of large public and collective sectors, China’s transition, although still incomplete in many ways, has resulted in the transformation of labor relations and the widespread adoption of capitalist labor practices by firms of all ownership types.¹ The distinction between public and private firms in labor practices has blurred in tandem with continuous economic deregulation, increased competition within the domestic economy, and China’s continued economic integration with the global economy. Public ownership as a core characteristic of socialism is increasingly irrelevant for the determination of labor relations. To paraphrase Richard...

    (pp. 98-132)

    “The Labor Law is a weapon to protect the rights of workers,” reads an excerpt from a page in the official workers’ newspaper heralding the second year of the law’s implementation. The page details new regulations, shows pictures of child workers in a Yunnan mine, has a write-in advice column for disgruntled workers, and provides information about a legal aid center for workers. Exhorting workers to “use the law as a weapon” is an apt and ironic phrase for this new emphasis on legal institutions. It reflects both the new importance that the state places on law as well as...

  11. CHAPTER SIX From State-owned to National Industry
    (pp. 133-153)

    FDI and the competition it created between regions and firms affected the way state leaders thought about state ownership, leading to a radical reformulation of one of the key debates of socialist transition: the role of public ownership in a global, market economy. In other reforming socialist economies, the debate over public ownership leads to mortal divisions both within the Party-State and between state and society. A decision to abandon public ownership and privatize signals the death of socialism—for what is socialism if not a commitment to public industry for the improvement of the entire economy and the protection...

  12. CONCLUSION The Contradiction of “Reform and Openness”
    (pp. 154-158)

    Viewed in a comparative perspective, China’s gradual reform path is often characterized as a success story or as “reform without losers”.² It may be more accurate to say that China’s reform process has been a success story, so far, in spite of the losers. The pain of the economic transformation of the urban state sector was delayed, sparing workers the unemployment and displacement that shook Eastern Europe and Russia. The sequencing of the Chinese reform process has meant a gradual and correspondingly less painful reform process for China’s urban workforce. Reforms were introduced first at the margins, in the newly...

  13. APPENDIX Firms and Interviews
    (pp. 159-162)
  14. Notes
    (pp. 163-214)
  15. Bibliography
    (pp. 215-234)
  16. Index
    (pp. 235-240)