Markets in China and their victims

I finally got around to contributing to The Protest again. This is my summary of what the market reforms have done to China and why massive opposition to them is unlikely to yield anything constructive.

for unknown reasons, the word "China" is not featured in the title

State Power, The Market and Oppression

China is a mess of contradictions. It has the most dynamic and fastest continually growing economy in the world. This economic expansion has lifted millions of people out of poverty and hunger and opened extraordinary new opportunities for millions more. Its cities are filled with construction cranes, new malls (including the biggest mall in the world) and all the luxuries available in the rich countries.

Yet social unrest is greater now than at any time since the Cultural Revolution of the late 1960s. According to government estimates, last year alone saw nearly 90,000 riots and demonstrations, a number that has grown rapidly in the last few years. Juxtaposed against the consumer opulence of the big cities is the appalling exploitation of restaurant staff, factory workers and construction crews, who work 12-hour shifts seven days a week for 40 cents an hour. These workers' employers house them in cramped dorm rooms and regularly interfere in their personal lives, setting curfews or threatening to fire them if they travel home to see their family on the lunar new year, China's most important holiday.

The sweeping market reforms of the last 27 years brought about these devastating contrasts. The government dismantled the planned economy — owned and operated completely by the state — and gradually imposed market forces and the profit motive. These reforms did solve many of the problems of the planned economy, such as an overemphasis on heavy industry, innumerable production bottlenecks, low productivity and allocative inefficiency.

Yet the market reforms also created a host of new social problems. Of all people, China's supposedly Marxist leadership should have foreseen that their reforms would entail increasing levels of worker exploitation, skyrocketing wealth inequality, rapidly expanding corruption and accepting a subordinate position in the global economy. Market-led development has also created innumerable severe environmental problems: China's cities are the most polluted in the world, its waterways are filled with industrial runoff, its forests are disappearing.

Of course we should avoid misplaced nostalgia for the prereform period. Aside from the clear economic problems with central planning, Chinese society before 1979 was highly repressive and imposed strict limits on freedoms of movement, speech, association, sexuality and job choice. Today these freedoms are still restricted in key ways, but the market reforms have helped to expand freedom in China, often in ways unintended by the officials responsible.

Yet neither should we succumb to the kind of free market boosterism so common in the Chinese and Western media. The reforms may have increased freedom, but they have done so in deeply unequal ways and often with ambiguous results. Peasants are now free to leave the land and move to the cities — where they become second-class citizens and highly exploited workers. People are free to pick their own jobs, but what exactly are their choices? For the millions of rural migrants to the cities, their choice is between one kind of degrading work or another, all for pittance wages with no job security or healthcare and no access to education for their children.

Though incomes in China have risen several times over, the new burden of fees for basic services and rising taxes have also increased rapidly, leaving many people actually worse off than before. Nearly everyone once enjoyed the system of public services that included free healthcare, free education and free housing. Of course the market now offers many more choices when it comes to these basic needs, but only the small middle class, 10 to 15 percent of the population, can afford such choices. Just one-third of the country has even basic health insurance, and a World Health Organization survey in 2000 ranked China fourth from last in healthcare fairness. Stuck between school fees for their children and medical fees for their parents or themselves, millions upon millions of peasants must leave their families, travel hundreds of miles to the cities, and suffer appalling working conditions and the contempt of urban residents just to get by.

The reforms have restricted the very intimate power that party cadres once wielded over people's work lives, family lives and even love lives. Yet the decentralization of administrative power has given local officials greater leeway to squeeze taxes out of peasants and expropriate their land, as well as to exploit connections in corrupt or nepotistic fashion. The central government has repeatedly promised to crack down on corruption, yet its power over localities has been deeply compromised by decentralization, and the anti-corruption campaigns amount to little more than rhetoric. Meanwhile the market reforms have ushered in a dramatic rise in previously miniscule social problems like unemployment, homelessness and violent crime.

Popular opposition to the problems created by markets is strong and growing. The Western media have generally misunderstood or ignored this trend. In the 1989 protests that culminated in the massacre around Tian'anmen Square, for instance, the media portrayed only a "Democracy Movement" led by idealistic young students hungry for Western politics. To some extent this was accurate, but what gave the protests real power — and what terrified the government most — was that workers protesting the effects of economic liberalization, especially inflation, joined the demonstrations. The complex reality didn't fit the media's story line, and their blanket prescription for solving China's problems remained unchanged: more market reform.

It's no different today, as the Western media's two most popular economic suggestions to China show. The first is to legally enshrine property rights, ostensibly to help peasants protect their land from corrupt officials who confiscate it and sell it to developers for their own profit. The second is to privatize state-owned enterprises so that they can slim down and start making money. Great suggestions from the point of view of investors, but these reforms would be a disaster for regular workers and peasants. All land is currently state-owned, a vestige of socialism that makes it easy for corrupt officials to force peasants off their land. Already 70 million peasants have lost their land this way. Yet changing land into a private commodity would expose peasants to another equally dangerous threat: expropriation through the market. One of the Chinese revolution's greatest achievements was destroying the old system of a few large landowners controlling masses of destitute tenants. That system would quickly reemerge if land were once again subject to the market.

As the government moves closer to privatizing land, it is already privatizing many state-owned enterprises. Since these businesses are some of the only ones still providing job security and full benefits to their employees, their higher costs leave them uncompetitive against all the rest, which exploit their workers to the breaking point. Not only does privatization lead to major job losses and benefit cuts, but it also allows corrupt officials and their family and friends to accumulate great private wealth at public expense as they buy the companies for next to nothing or rob the pension funds of the employees. Declining job quality and increasing unemployment: this is what economists call "efficiency."

The countless victims of the market reforms don't take all this lying down, as the rapid rise in demonstrations attests. But what are the chances for success in winning something better? Progressive movements face an uphill struggle.

China's two central problems today are the vast, unaccountable power of the state and the growing strength of the market and private wealth. Since the reforms began in 1979, these two forces have forged a powerful and mutually beneficial bond. The state imposes markets, pays for key business requirements like infrastructure and skilled education, develops key sectors through targeted subsidies and protectionism, and represses the social unrest caused by markets. Intimate personal links nourish an alliance between the two sides: most successful businessmen are either former government officials or officials' close friends or family.

Given the strength and unity of elites, workers and peasants can only win meaningful change by uniting as well. Yet protests in China remain local and isolated. The government is partly responsible, controlling the news media and repressing any organization that might serve as a unifying force. But perhaps the bigger problem is how protesters themselves see their problems.

Rural protesters generally aim their ire against some local official who has imposed heavy taxes or expropriated their land or against a factory that has poisoned their air or water. When, inevitably, the official refuses concessions, the peasants frequently send a representative to Beijing to appeal to the central government for help. Labor protests are similarly local in focus. Protesters complain that their boss has stolen their pension fund or illegally forced them off the job, rarely taking aim at the market structures that encourage such abuses.

The problem, directly tied to the fragmented and isolated nature of social protest in China, is that the victims of the state and markets have no structural critique of the forces working against them, and, therefore, no consciousness of how closely related their struggles are. They direct their anger against mere agents — local officials or factory bosses — of those forces, rather than against the government and the economic system, which gives those agents power in the first place. In my two years living in China, I've heard many people criticize the course of their country, but I've never heard anyone locate these problems in the fundamental systems that structure Chinese power and wealth.

The problem should be familiar to Americans, because we suffer from the same short-sightedness. Every new war, every new corporate scandal, every time we hear that the government is spying on citizens or torturing foreigners, every time the number of people without health insurance increases — every perfectly predictable result of the power structure in the United States takes us by surprise. The answer to unceasing abuses of power, in the United States as in China, is to develop a structural understanding of how the inequality of power is built and maintained and how we can undo it. This approach also points toward the strategic and moral necessity of a unified social movement demanding fundamental restructuring rather than tinkering on the margins.

The problems of China may seem far away, but they're not so different from those Americans face, and they're connected in important ways. To address these problems we must all understand what we're facing and all get involved to fix it.
For more information:

On the healthcare system, see The Wall Street Journal, December 5 and 30, 2005.

On inequality and social unrest, see The New York Times series “The Great Divide,” October 13, November 10, December 8, 21 and 31, 2004.

On migrant workers, see Dorothy Solinger, Contesting Citizenship in Urban China: Peasant Migrants, the State, and the Logic of the Market.

On the economics of market reform, see Barry Naughton, Growing Out of the Plan: Chinese Economic Reform, 1978-1993.