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    Greater China
     Jun 17, 2006
BOOK REVIEW
The quiet revolution
China and Globalization: The Social, Economic and Political Transformation of Chinese Society
by Doug Guthrie

Reviewed by Sreeram Chaulia

China's relentless march of rapid economic growth and reduced poverty qualifies as a quiet revolution in the contemporary world. American sociologist Doug Guthrie's new book challenges neo-liberal dogmas and makes the case that this revolution was successful because it was state-led and gradual.

It is an account of how the forces of globalization played out locally in the world's fastest-growing and sixth-largest economy.

China's economic rise is "the result of methodical and careful government policies" (p 8), state guidance and managed social



upheaval that introduced policies that constructed a market system, vindicating the theory that economic processes are fundamentally political.

Deng Xiaoping's reforms from 1978 introduced controlled modifications to the structure of the socialist economy, "leaving the state apparatus intact while slowly unleashing market forces" (p 38). The Chinese government's strategy was to allow economic actors to learn the rules of capitalism rather than withdrawing and assuming that they knew them intuitively.

Paralleling the household responsibility system in the countryside, in urban China, the planned output of an enterprise was cropped and the market part was permitted to grow. By granting autonomy to local officials and factory managers, incentives were stimulated. Today, rather than dealing with the central government, foreign investors often prefer building long-term alliances with the provincial bureaucracy.

Contrary to International Monetary Fund and World Bank boilerplates, rapid and complete privatization of property was not part of China's success story. Township and village enterprises resembled business organizations, but property rights still resided in the hands of local governments. State-owned enterprises remain a massive force in the Chinese economy.

The institution of lifetime employment and pensions ("iron rice bowl") was carefully dismantled by the state, but this was tempered by labor contracts and labor arbitration commissions (LACs) to give workers recourse against employers. Establishment of special economic zones facilitated colossal inflows of foreign capital into China, dwarfing that of Japan in comparable development periods.

The late premier Zhao Ziyang's coastal-development policy laid the foundation for China to emerge as the third-largest trading economy by 2004.

Besides export-oriented foreign direct investment (FDI), China also attracted investors wanting to capture the gigantic internal market. Guthrie remarks that the country's transition was the product of a "struggle between a government that wants to stay in power and an international community that wants access to a billion consumers" (p 235).

Technology transfer and new management practices were two gifts of FDI to China. Joint ventures between Chinese firms and multinational corporations taught the former about global market principles. Concrete changes in organizational structure that resulted from state-orchestrated reform could be attributed to the innovation, experimentation and imagination of industrial managers who were under high-level governmental offices or exposed to contact with foreign companies.

Premier Zhu Rongji furthered Zhao's vision, knowing "that China's only hope was to put corporate investors of advanced capitalist nations at ease" (p 238). Zhu forced Chinese companies to comply with international accounting standards, another measure of how the state saw itself "in partnership with Western multinationals" (p 146).

Zhao and Zhu pushed China toward rational economic processes and rule of law. As many as 700 national and 2,000 local laws were enacted in the 1980s and 1990s, enabling an explosion of suits against the government. A rights-based labor regime flourished in the ethos of legalism, with workers winning about 60% of cases against employers brought before LACs.

The dramatic ascent of litigation in Chinese society even caused political dissidents to sue the government for violation of constitutional rights.

Chinese social mores were remade by the economic reforms. Steady migration of young women to urban and coastal areas affected the structure of rural families. New elites rediscovered traditional dowries and wedding ceremonies. The state's strict "one-child policy" shrank family sizes and increased female infanticide and girl-child abandonment.

The Chinese Communist Party's (CCP's) control over society receded with reforms. By admitting private capitalists and intellectuals into the party, the signal was sent that business groups could no longer be ignored in Chinese politics.

The dependency of individuals on their work units and superiors was eliminated, even as corruption rose among local bureaucrats. Managers of large firms distanced themselves from guanxi (using connections to accomplish tasks) and drew closer to market imperatives of price, quality, rules and regulations.

Individual life chances swung powerfully because of the economic reforms. University-degree holders and those with foreign-language skills were highly rewarded. Citizens positioned to match the multinationals' ways of doing business benefited the most. Female access to education and contribution to household income improved significantly, but not enough to trump gender inequalities.

Incomes in rural areas were only 40% of urban incomes, while disparities between coastal and inland and western and eastern areas widened. Breakdown of the hukou system (household registration) spurred mass migration to cities.

Freedom to be mobile throughout the economy gave workers the chance to "vote with their feet", but also engendered a floating population of more than 100 million that was vulnerable to mandatory removal from shantytowns. An underclass of rural migrants "begs for a living in China's booming metropolises" (p 214).

Guthrie asserts that the China of the late 1990s was politically much freer than the closed society of the Mao Zedong era. Depletion of the CCP's monitoring capacity and independence of individuals in workplaces were the two underlying mechanisms that boosted the 1989 Tiananmen Square movement.

Reforms gave birth to an economically secure and autonomous middle class. Promotion of private enterprises by the state fostered an autonomous public sphere and civil society as well. Many private companies materially supported the 1989 mobilization.

Alternative sources of information became available to the people as the Chinese government improved access to television, fax and telephone. Guthrie comments that the Internet "is a new frontier for outright resistance and organization of popular movements" (p 275). The Chinese state's fear of losing control over the telecommunications sector has clear political connotations.

As reforms progressed, China's legislature (National People's Congress - NPC) acted with greater independence, and sometimes opposition, to the party-state. The NPC and local councils encouraged election of non-party candidates to government positions.

At the village level, adults had the right to vote, stand for election and run committees of self-governance. Urban Chinese participated in elections to local council deputies, boycotted unfair elections and filed complaints to officials - all pointing to creeping democratic changes from below.

Guthrie calls for stronger US engagement with China since "reformers need greater external impetus to overcome domestic obstacles" (p 327). Reform-minded Chinese elites leverage global economic integration to transform their country's institutions.

As the second-largest purchaser of US Treasury Bonds and the host of billions of US corporate investments, China already has the means to ensure a cooperative United States that is bound to be non-hostile.

Guthrie's main argument that transitions from socialism are better if engineered by a visionary state brings the debate back to whether developing countries need undemocratic polities to grow economically.

The discipline with which Chinese society fell in line with new market-friendly rules in the 1980s deserves comparative analysis with similarly placed democratic countries.

Were Chinese reforms fruitful because they were merely state-driven or because they were authoritarian-state-driven? Guthrie has completely missed the angle on the inverse relationship between democracy and growth in newly industrialized countries.

China and Globalization: The Social, Economic and Political Transformation of Chinese Society by Doug Guthrie. Routledge, New York, 2006. ISBN: 0-415-94991-2. Price: US$29.95, 398 pages.

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