The Social Costs of Neoliberalism in China
The Social Costs of Neoliberalism in China
Han Deqiang is a prolific economist at the Economics and
He has been critical of neoliberal ideology in
At the time, I was conducting research on workers' protests against privatization in
In September 2005, I interviewed Han for about three hours. Our discussion focused on the impact of
In January 2007, I followed up with a second interview. What follows is a translated and edited version of both interviews.
STEPHEN PHILION: The last time I met with you was during the height of the East Asian financial crisis. At that time, we discussed the consequences you foresaw for
HAN DEQIANG: At the time, I argued the greatest damage would be to
Second, I predicted that unemployment would rise dramatically; this has also shown itself to be a reality.
Of course, some say that there has been a shortage of migrant workers from the countryside recently, which allegedly proves that the WTO has not produced greater unemployment. But this requires a more careful analysis.
In the late 1990s, agricultural commodity prices fell, and taxes became heavier. Hence the large mass of migrant workers and the ensuing rise in urban unemployment we saw then. However, starting around 2002-2003, the government implemented new tax cuts for farmers and increased education subsidies in poor rural districts. As a result of these new policies, the contradictions in the countryside were mollified some.
Also, when the price of rice plummeted, large numbers of farmers stopped producing it. As a result, the price rebounded, improving the livelihood of farmers in 2003 and 2004. So rural dwellers now had less motivation to accept the kind of exploitation that exists in the for- export sector of urban industry, much less migrate to the cities in search of it! However, this doesn't nullify our argument that when foreign companies conquer national industries, greater unemployment results. The opposite actually. When Wal-Mart goes to Gweiyang or
PHILION: And smaller shops?
HAN: Hah! Don't even go there! Medium-size department stores, neighborhood sellers, ones that were supposed to be able to dominate local markets by virtue of their size-they saw those advantages disappear.
Third, I have always acknowledged that WTO entry would provide
But I argued that WTO entry was the equivalent of drinking moonshine to deal with thirst. This has two outcomes. One, of course, is the removal of thirst.
After all, if there are no other liquids around, I have no choice but to turn to moonshine. But the other result, of course, is your death! So Chinese industry has resolved its investment problem, but that has been accompanied by its death knell. From what I see, the social crisis facing
PHILION: How has the WTO affected large state-owned enterprises?
HAN: State-owned enterprises (SOEs) fall into two categories. The first are SOEs, like Shenyang Machine Factory or Luoyang Tractor Company, that are subject to competition with private companies. These quickly went bankrupt. Monopoly-sector SOEs, such as petroleum producers, are less directly affected by
PHILION: The Chinese leadership seems to be working under the assumption that as long as the SOEs that produce the greatest revenues remain vital, Chinese socialism can be sustained.
HAN: First of all,
PHILION: Yes, right. I mean in their sense of the phrase, socalled "socialism with Chinese characteristics."
HAN: Not likely either. It is true that in terms of tax contributions and profits, the small and medium-size SOEs are not great, but in the absolute numbers they employ, they are considerable. Their influence on local employment and finances is pretty substantial.
So, in the aftermath of the near complete collapse of these small and medium-size SOEs, for the central state to rely on large enterprises alone for maintaining the subsistence of
PHILION: It seems as though the leadership's hope is for local and foreign private capital to replace these small and medium-size companies as the source of investment and to resolve the unemployment problem in the process.
HAN: What I would contend is that for every one job saved by foreign capitalist investment, three to four will be lost unless the foreign investment produces for foreign export alone. This situation does exist, assuredly. Right now 60% of our export is fueled by foreign companies' For China, WTO entry was the equivalent of drinking moonshine to deal with thirst.
However, the potential for foreign investment to instigate future Chinese economic growth is weak. It can only largely resolve a segment of the unemployment problem. It can't do much in terms of advancing the upgrading or expansion of
And its use to resolve the fiscal crisis facing
HAN: This is a twofold issue. First, whether or not it's possible for the political leadership of a country with no state-owned enterprise to control the direction of the national economy. I think it might be possible. It's the European model, after all, and even in a certain way the American model. In these economies, by and large, control of enterprises is in the hands of private parties. But this doesn't have that much impact on the state's tax receipts and its role in regulating the economy.
If the state is powerful, it can play a crucial role in the management of the economy even if it doesn't control much enterprise.
On the other hand, where the state controls a major portion of enterprises but is weak, it has a difficult time managing the economy. And if the collaboration between that weak state and private interests is deep, the result is distortion of policy by capitalists to the point that the state loses more and more capacity to control the economy and the direction of economic development. The key factor here is the strength of the government, not how many companies it controls.
Stephen Philion is Assistant Professor, Department of Sociology and Anthropology,