Socialism and the end of the perpetual reform state in China



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Socialism and the end of the perpetual reform state in China
Journal of Contemporary Asia; Manila; 2001; Harry Williams;

Volume: 

31

Issue: 

2

Start Page: 

161-195

ISSN: 

00472336

Subject Terms: 

Politics
Socialism
Governmental reform
Future
Social conditions & trends

Geographic Names: 

China

Abstract:
Williams examines the future of socialism in China. China is not socialist today, nor are its reforms likely to bring about socialism, but China has been "reforming" for over two decades, and Williams argues that reform is no longer the appropriate description for the process of change in China.

Full Text:

Copyright Journal of Contemporary Asia 2001

[Headnote]
[Abstract: This article examines the future of socialism in China. China is not socialist today, nor are its reforms likely to bring about socialism. Indeed, China has been "reforming" for over two decades, and the author argues that reform is no longer the appropriate description for the process of change in China. Change in China is increasingly characterized by uneven, often unpredictable events leading to rapid changes in some areas and stagnation in others. The institutions created over the post-Mao period contain volatile contradictions, and any socialist movement in China must take advantage of the contradictions and volatility to push for an agenda that promotes equality, democracy in both politics and economics, and international peace. These contradictions are examined empirically using the legal system, the class system, and the international system as lenses into the situation in China today and the possibilities for change. While there is a clear trend toward capitalism, this trend faces opposition that will not easily be overcome. The ultimate power of any progressive movement will depend on its ability to organize popular support for alternatives to China's trajectory.]

This essay examines the prospects for socialism in China. I am going to bracket the very contentious task of making a precise definition of socialism. For the purposes of this article, I define socialism loosely: socialism means equality and democracy in society, politics and the economy, and insistence on peace among nation-states. By these criteria, China is not socialist today, nor is it heading towards socialism. In the main section of this article, I will use an extended examination of the legal system to demonstrate the trend towards capitalist institutions, as well as the exceptions to this trend which might become seeds for a socialist alternative. Specifically, I will examine how rural enterprises have been subjected to capitalist laws written in Beijing, while at the local level, experiments in communal ownership of rural enterprises demonstrate a desire for a non-capitalist alternative. I then turn to the ways the Chinese state uses the legal system to cabin China's growing protest movement into government-controlled fora such as courts. Any socialist movement must use these new openings for legal protest while also recognizing their fundamentally conservative nature.

Next, I look at the class situation in China, and argue that a socialist movement in China must dispense with simple notions of working-class solidarity and deal with the complicated relationships between workers in state-owned enterprises, foreign-invested enterprises, and rural enterprises, peasants, and the emerging middle class. Finally, I conclude with a brief discussion of China's relationship to the international system. Despite its size, China has not used its power to modify the neoliberal Washington consensus. Instead of China changing the global system, the global system has changed China, a situation that progressive movements in China must seek to rectify.

To understand the possibilities for socialism in China, it will be helpful to think about what China may look like in the future. Before turning to a substantive analysis of China today, here I sketch four alternative futures for China.

China in 2030: Imagine the year is 2030, and you look up "China" in an encyclopedia. What do you expect to find? How will China look to observers three decades from now? Below, are four possible entries in this future encyclopedia.

Utopia, Capitalist Style: China's economy has grown rapidly over the past fifty years, and China is now the world's largest economy. Economic growth has greatly increased the living standards of the Chinese people. In many sectors of the economy, China is among the most advanced countries in the world. China, Hong Kong, and Taiwan (the latter still politically separate, but tightly integrated with the mainland's economy) have many of the world's largest banks and lead the world in electronic commerce. In the United Nations and international economic fora, China stands equal to the United States and Europe. After 2000, steady economic growth and movement toward the Rule of Law led to the gradual democratization of China's one party state. Although the Unity Party, as the reformed Communist Party now calls itself, has won every national election, several smaller parties have been able openly to challenge the Party's platform in free and fair elections.

Of course, Chinese society is not perfect and problems remain. Income inequality remains high, with many cities surrounded by ghettos of migrant workers. Much of China's interior remains backward, and much of the money made in coastal regions still depends on the exploitation of the natural and human resources of the interior. China's population is no longer growing at any significant rate, but the tremendous number of people it must support have put great strains on the natural environment and social security system. These problems, while important, represent China's progress - they are the typical problems of high and middle income countries.

Middle Way for the Middle Kingdom: In 1978, Deng Xiaoping set out to build "socialism with Chinese characteristics," and fifty years later, he and his successors have built a unique hybrid of statist socialism, capitalism, and Chinese tradition into a world economic powerhouse. While China is one of the world's great trading nations, and markets largely determine the distribution of goods, services, and income, the state continues to play a larger role than in the capitalist states of the west. Equally important, Chinese family businesses, run in a style similar to way they were run in imperial China, have helped create a unique corporate-familial enterprise structure that combines anonymous market transactions for the company's goods and services with intrafamily welfare distribution.

China remains a largely regional power. It is respected for its relative power and peaceful approach to international disputes. In conjunction with other Asian states, China has led the movement to limit the power and reach of international political organizations. China has also been at the forefront of the movement to limit free trade in order to allow "mercantilist" national economic policies, such as China's program of limited outside access to domestic electronic commerce markets.

From Beijing to Rome: China's government in 2030 consists of strong state, run by the Communist Party. Drawing selectively on the Party's revolutionary tradition, the individual citizen is expected to sacrifice for the good of the state. Despite widespread economic corruption, the Communist Party is a relatively disciplined political grouping. Party leaders and their children control state corporations, weapons manufacture, and banking. China's army is mainly concerned with maintaining its political connections inside China and its economic empire. The PLA foments nationalism to justify its economic role. However, China's offensive military actions remain largely symbolic, and many have speculated that the leadership is less interested in regaining the "lost territory" of Taiwan than maintaining power by playing on the national pride of China's people. In all of these ways, the China of 2030 reminds many observers of Italy in 1930.

The People's Commune of China: China continues to defy predictions from western governments and academic observers that its socialist system is bound to fail. Among the most equal countries in the world in terms of income and property distribution, China has also closed the gap between regions, between men and women, and between Han Chinese and minority groups in China. Observers consider China's system of government unwieldy, but it is conceded to be the most democratic on earth. China's example has encouraged other developing nations to experiment with new democratic and egalitarian forms of political and economic life, and even put pressure on richer nations to place a higher priority on equality, diversity, and ecological stewardship.

China in 2030 may resemble one of these scenarios. It is more likely that it will have some characteristics of each of these schematic possible futures, and the scenarios above are meant to be suggestive, not exhaustive. The political system, the economic system, China's relationship to the international system, the relationship between Han Chinese and minority groups in China, the relationship between China and Taiwan, gender relations, and the ecological system are all factors that will influence the course of Chinese history. Many of these factors are considered in detail in the sections of the legal, class, and international system. The first question I want to address, however, is whether these factors influence China in the course of extended reforms, as we have seen over the last two decades, or will they be part of a more dramatic, less controlled process of change?

The End of Reform: China has been "reforming" since 1978. This reform era is over. However apt the term reform may have been, it is no longer useful. To understand the exhaustion of reform as a description of China, or even as a metaphor or shorthand name for China's political, economic, and social changes, we must first delineate the assumptions of reform. A reform model assumes three things: 1) a stable reference point for proposed changes; 2) a gradual, incremental, and largely directed process of change; and 3) a relative consensus on the goals of change. None of these assumptions holds today.

First, there is no agreement today on what is being reformed. For some, the object of reform is still the vestiges of the Soviet model, symbolized by state-owned enterprises (SOEs). For others, it is the Maoist system and its emphasis on equality that must be reformed. In other areas, reform consists of reforms of previous reforms, as in agriculture. What these different positions show is that China today is a fractured, uneven set of institutions with little holding them together beyond a national fear of disintegration. This hodge-podge of institutions cannot be discus"ed productively in terms of reform. Reform assumes change away from something, from some starting point that is collectively known. Since the institutions in China today are so diffuse and poorly understood, reform is an inappropriate description, or metaphor, or short-hand expression, for changes in China's political economy.

Second, reform assumes a gradual, incremental process of change directed by conscious human decisions. The days of such measured change in China are past. Social tensions have reached a point where compromise will satisfy fewer and fewer people and thus be more and more difficult to achieve. If the metaphor of the reform period was feeling one's way across a stream, staying dry by stepping from stone-to-stone, the new era is characterized by leaping across the stream. When reformers were trying to cross a stream by stepping on stones, they assumed they could see that next stone and tell society to place its collective foot there. That is no longer true. Creating a national social security system, for instance, is a leap - a leap of faith in the ability of markets to meet China's needs and a jump in the level of the national government's involvement with individual welfare. From today, change will be quicker, and some changes will be spectacular failures - sometimes policy in China is going to leave many Chinese sitting in the middle of the stream, soaking wet.

The third problem with reform is that it assumes common goals. Tensions in China are great not only because of the disparate effects of two decades of reform, but because there is no longer agreement on where China is heading. The Party once appealed to many sectors of society, from workers in state enterprises to farmers to idealistic socialists. Today, it appeals only to careerists of the dullest sort, those afraid to take the risk of a career trying to make money in the market, or afraid to organize for real political change. Except for bureaucratic careerists, Party membership is merely a perk of success. Entrepreneurs, artists and scientists become Party members in the same way rich and famous people become members of private golf clubs in the United States. The Party is dead as an institution that can promote a vision of China that will appeal to a broad cross-section of Chinese.

Indeed, reform is dead because there are no common goals. Democracy, rule of law, social equality - through these vague slogans China's social groups are demanding their own programs, programs which differ radically from one another. Each group tries to promote themselves as bearers of universal claims, but these programs are, in their details if not their rhetoric, designed to benefit mainly their own social class or group.

The key to understanding China today is to understand it as the fractured, contradictory whole that it is. The only glue holding China together, and the only reason the Communist Party remains in power, is the fear of China falling apart. The scar of national fracture, and of imperialist humiliation, is deep enough to hold back the forces that are pulling China apart. Yet the psychological need for wholeness is also deep enough to bring about chaos - chaos on frontiers such as Taiwan, Tibet, and Xinjiang, areas where tensions will rise if Han China does not find a way to moderate its "will to unity," a unity that encompasses many areas where the native population has no desire to be Beijing-Chinese.

The era of contradictions is upon us. We must understand the contradictions in the process of change in China, in the positions the Chinese state takes internally and externally, the contradictory position of actors in China's political and economic systems, and the contradictions within the institutions that make up China's political economy.

China is in a state of rebellion - but rebellion does not necessarily mean change. As Webster's dictionary tells us, rebellion is "open ... and usually unsuccessful defiance of or resistance to an established government" (Merriam-Webster's 1993: 974, emphasis added). China's rebels are inchoate but mass challengers to some subset of the Party/ state's power - the individual enterprise, the law banning this religion or that, the failure of government regulators to prevent a stock fraud. Where these rebellions bring China will be contingent on what limits are set by national and international power structures, and whether the rebellions become less sporadic, more focused, and able to gain support across social groups.

Rebellion is, by definition, extra-legal activity. The next section will examine the current developments in the legal system. One of the Party's main goals in developing the legal system is to channel the diffuse/mass movements mushrooming throughout China into official channels, where they can be controlled. The other goal is to further the integration of China's economic system with that of international capitalism. As we will see, both of these goals are still some way away. We begin with an analysis of the legal system and its relationship to the economy.

Socialism and the Legal System: Legal "reform" is a hot topic in China today. Producing the statutes, institutions, and actors that will lead to the coveted Rule of Law has garnered support from forces within and outside of China (Xu, 1999). As with the rest of the reform program, terming the changes in the legal field reform misnames them. Movement toward the Rule of Law and the other programs that go under the rubric of "legal reform" are not moderate, cautious steps - China is not feeling its way stone-by-- stone across the legal stream. Instead, legal change produces and reflects sometimes radical reconceptualizations of economic, political, and social relationships. In this section, we will examine the legal realm, demonstrating the exhaustion of the reform metaphor and how the contradictory character of change in China opens opportunities for advocacy of traditional socialist goals such as equality and economic democracy.

Law codifies economic and political relationships. Law is a part of the repressive apparatus of the state, but also plays a positive, legitimating role (Gramsci, 1971: 247). Law, in short, is the routine application of the state's physical power to the population (Foucault, 1980:14). In the criminal realm, police and prisons manifest the state's power, while in the civil realm the state protects property rights and enforces contract claims. Laws reflect real relations of power in society, and codify and reinforce the dominance of groups with access to state power.

Yet law is never a perfect reflection of the interests of the dominant group in society, and law does not merely reflect (or create) the relationships between social classes in the economic realm. Law cannot merely reflect the interests of the dominant social group because no class has cohesive interests (Poulantzas, 1973: 85-85). For instance, the owners of manufacturing capital may desire tariffs and other legal protections from imported goods that compete with their products. Owners of financial capital, in contrast, may favor more open international trading regimes. Thus even if a ruling class was aware of itself as a ruling capitalist class, it would still have internal divisions that would render it impossible for law to merely reflect the wishes of that class. A second problem with the idea that law reflects social power relations is that law must be interpreted and implemented. Each and every act of interpreting law will yield a slightly different result.1 Moreover, the enforcement and implementation of law is likely to vary from place to place and over time.2 Because class interests are not homogeneous, and because interpretation or implementation will always vary, law cannot merely reflect class interests.

A final reason that law cannot merely reflect the base applies especially to Marxist theories of law. Marxists see law as part of the socio-political superstructure that rests on the base of economic relationships. This leads to what Tushnet has called the "The Problem of Law as Constitutive." As Tushnet explains the problem:

How can one simultaneously believe all of the following propositions to be true: (I) The base determines (in some strong or weak sense) the superstructure; (2) law is an element of the superstructure; (3) the base consists of the relations of production; and (4) relations of production are defined in terms of ownership of the means of production? (Tushnet 1983: 285)

Legal terms seem to constitute the base, but the base - that is, the economy - is supposed to determine the legal superstructure. Thus property relations in the superstructure cannot merely reflect the economic relationships at the base because property, the element supposedly reflected, itself is a legal term and therefore part of the superstructure.3

While law does not merely reflect the economic, it is not completely separated from the base or from the relations of power within society. Instead, law is a field of struggle between classes and class fractions, and a particularly important one because of its unique combination of rhetorical and physical power. Law is a potent ideological weapon, sanctioning what is "fair" and "just" in a social system, backed by the power of the repressive apparatus of the state to compel compliance with the law (Carnoy 1984:91). It is thus well worth our time to examine the development of the legal system in contemporary China, because law can tell us much about the possible role of socialism in China's future.

China's Legal System Generally: Law in China is underdetermined by statute, precedent and procedure, making the Chinese system especially open to ideological struggle.4 Another way of stating this is that law has relative autonomy from the economic base it is not determined by the base in any mechanical way, yet the base has a decisive influence on legal structures. The Chinese legal environment has been, and remains, one which is characterized by a high degree of uncertainty. China's legal system is based loosely on the continental European Civil Law system; it is, however, a Civil Law system with a difference: in China, there is no Civil Code. Although the Organic Law, along with numerous new laws over the past twenty years have partly filled this void, it is still perhaps the singular feature of China's legal system. A second important factor which makes Chinese law underdetermined is the low, albeit rapidly developing, level of China's legal apparatus.5 China's corps of lawyers is growing almost as rapidly as its laws and regulations.6 Meanwhile, more attention is being focused on the quality of the judiciary.7 Despite these developments, there is a shortage of lawyers, and corruption remains systemic in the judicial branch (Chen, 1999: 3; Gallaher, 1997). Political interference further undermines the independence of the judiciary,8 and this lack of independence reduces the legitimacy of law.

One specific example of this underdetermination is that until 1999 there was no uniform law of contract in China (Scogin and Braude, 1999). Even after the passage of the Contract Law, there are many types of standard business contracts, including contracts with foreign investors, which are still subject to other statutes, sometimes in addition to, and at other times in place of, the Contract Law. Figuring out when one law supercedes, supplements, or complements the Contract Law is a typical challenge facing those trying to navigate China's underdetermined legal system.

Law is crucial to creating and legitimating economic institutions.9 This helps explain the widespread interest in China's legal transformation, particularly the attempt to instill a system of "Rule of Law."10 The Rule of Law (ROL) can be defined as "a system in which the laws are public knowledge, are clear in meaning, and apply equally to everyone" (Carothers, 1998: 96). Officials in the U.S. State Department, human rights activists, and Chinese and Western academics look at the Rule of Law (ROL) as a logical step toward building Chinese democracy. Economists, and many legal academics, see the Rule of Law as important for establishing secure, stable property rights and a positive environment for business (Sachs, 1998: 5). The Rule of Law is desirable because it means consistency and predictability. ROL protects both property and individuals, and thus allows for greater economic growth and personal security and freedom.11 Rule by Individuals, in contrast, is arbitrary and capricious, and leaves people and property vulnerable to both state-sponsored and private oppression and usurpation.

The Rule of Law and the Economy: Law is influenced by, but not completely determined by, the social relations of power. In China, an underdetermined legal context provides different social fractions with the opportunity to influence the development of China's legal system. Yet, despite all the official rhetoric about "Socialism with Chinese Characteristics," there is little that is specifically either socialist or Chinese about the developing legal code. Instead, under the rubric of Rule of Law, China is adopting capitalist laws virtually identical to those in the west.12 This process is not and cannot be completely "successful" in terms of mirroring Western law. Every social institution contains "traces" of its past which makes them unique. All institutions also embody contradictions that can be exploited by social actors to provide support for alternatives within the dominant system. Both the trend toward capitalist law and the availability of alternatives within that framework are apparent in the rural enterprise (Township and Village Enterprise or TVE) sector.

Recall for a moment the scenarios we began the article with. In one scenario, China becomes a capitalist quasi-utopia. A related trend in the TVE sector is an emphasis on property rights as the key to successful rural enterprises. In another scenario, traditional Chinese social patterns shaped the economic sector. A related trend in the legal field is the emphasis on the community, especially the village community, as the basis for TVE's economic success. Yet another scenario portrayed China as a socialist quasi-utopia. Again there is an analogous trend in the legal field, where creative TVE corporate structures have been created on the hybrid basis of community, individual, and worker ownership. The following sections deepen the analysis of the legal sector through a detailed examination of trends in TVE law.

TVE Overview: TVEs are crucial to China's economy, and have been an important source of economic growth and jobs over the last twenty years. In addition, the legal system is seen as crucial to the on-going success of TVEs (Bao, 1998). But while rural industrialization is one of the great successes of China's capitalist-style reforms, TVE origins go back to one of the great debacles of utopian Maoism. During the Great Leap Forward (1958-1960), Mao called on every village (then Commune) in China to establish their own steel works, so-called "backyard furnaces" (Meisner, 1986: 227-241). The backyard furnaces of the Great Leap, for all their irrationality, are the direct ancestors of today's TVEs. As both Mao and reform leaders have recognized, rural industrialization absorbs surplus labor that is freed through more efficient farming techniques, minimizes migration to cities, increases rural standards of living, and provides inputs which increase agricultural productivity. While backyard steel furnaces disappeared rather quickly, rural industry continued to exist under the commune system throughout China, forming the basis for post-Mao TVEs.

The rural areas changed rapidly after Mao's death in 1976 (Meisner, 1996: 220254). From 1977, there was rapid movement away from the communal system and towards family farming. In 1984, ownership of industrial enterprises owned by the communes and brigades was transferred to towns and villages. Economic growth in the TVE sector has been impressive by any measure. In 1978 rural industry employed 28 million people, while in 1998 there were 20 million TVEs with 125 million employees, creating 28% of China's GDP and 30% of rural income (Xinhua, 1999b).

Neoclassical Approach to TVE Growth: Neoclassical economics has become the ideological foundation of contemporary capitalism (Schamis 1991), and hence for the proponents of China's capitalist future. For neoclassical economists, clear property rights are essential to economic growth. For some economists, all the aspects of ownership must be combined in one "principal" to insure efficiency, while for others, it is simply important that each right in the ownership bundle is clearly defined (Cui 1998: 6-8). From this perspective, China's TVEs lack clear property rights and thus are economic failures. During the first decade of reform, however, TVEs were the engine of China's economic growth. The reality of TVE success has led to a search for hidden efficiencies that explain TVE dynamism. The most common explanation from the neoclassical school is that China's slow resolution of ambiguous property rights resulted in a temporary advantage for TVEs, reducing TVE transaction costs in China's semi-marketized economy.13 These reduced transaction costs were mainly applicable to the early, transitional period of China's reforms.

In the reform period, China's state firms remained tied to central government control, at first via the plan and later by political connections. Meanwhile, private firms face political obstacles and popular backlash. Collective firms, such as some TVEs, maintain a middle ground. Unlike state firms, TVEs are largely free from central plans and able to devote their entire output to economic markets. Unlike private enterprises, however, TVEs have political connections which allow them more security than private entrepreneurs. Local governments depend on TVEs for revenue and jobs, and, unlike private enterprises, they are "semi-socialist" and therefore not subject to confiscation. Indeed, many TVEs are apparently private enterprises which have been registered as TVEs to gain the protection TVEs enjoy (Xinhua, 1998).

Cultural Explanations: In scenario two, China's unique economy was largely driven by communal enterprises run along lineage lines. Some observers have seen TVEs success as based in the family-communal characteristics of Chinese society. Xu Chenggang, for instance, begins his analysis by defining TVEs as "vaguely defined cooperatives." The chief characteristics of these cooperatives are the deep involvement of the community government and an ill-defined legal system (Xu, 1995: 63). Xu argues that TVEs are efficient, however, despite their ill-defined property rights (Xu, 1995: 65). Chinese culture explains this discrepancy between economic theory, which posits that these murky property rights must be inefficient, and the empirical reality of TVE efficiency. Specifically, it is the Chinese cultural propensity to solve conflicts "internally, without explicit rules, laws, rights, procedures and so forth," that has allowed TVEs to thrive in what is, from an economic and legal standpoint, a very difficult situation (Xu, 1995: 79). Xu attempts to further bridge the gap between economic theory and cultural explanation by arguing that Chinese culture creates an environment that simulates an iterated (repeating) game, while property rights theory has traditionally focused on single-play games (Xu, 1995: 80).

Xu's solution to the dilemma of TVE success is ultimately unsatisfactory. First, Xu's theory is too vague and general to encompass the myriad TVEs existing in diverse villages throughout China today. Are factories in Shenzhen making shoes for Nike to export around the world really like a traditional Chinese village? In addition, Xu's notion of culture is vague. Cultural explanations demand great specificity because culture is too broad a concept to have much explanatory power.14 Xu fails to provide this specificity. Finally, if Xu's hypothesis were correct, we should find that state-owned enterprises, which have a very communal atmosphere, would also benefit from Chinese culture, yet state industry has been an increasingly weak sector of China's economy over the reform period.

TVEs as a New Type of Socialist Property: TVEs have also been seen as a harbinger of socialist renewal in China. The property situation in TVEs can be complex. While formal ownership is in collective hands, actual management might be controlled by an individual or family. Other investors, such an individuals, other companies, or the government, may have economic rights but no right of daily control of the TVE. Could these complex property rights, which neoclassical economics sees as an obstacle to TVE development, help create a new socialist economic form?

The social and legal theorist Roberto Unger argues precisely that TVEs are the harbinger of the "disaggregated" property that will be characteristic of a future progressive (or socialist) economic system (Unger, 1998).15 Unger argues that rather than abolishing private property, progressives need to break up the rights associated with property, and vest these powers in different groups.16 Unger's program is quite interesting as a possible path to the traditional goals of socialist movements, and since he has written about China, it is worth examining Unger's work in greater detail.

The disaggregation of property rights is part of the democratization of the economy sought by Unger's program, which he terms Democratic Experimentalism.17 This disaggregation will take place in the course of a progressive decentralization of access to productive resources and opportunities (e.g., the changing relationship of finance to production). The goal is to lift up backward sectors of the economy, not just in terms of consumption but also in access to productive resources. As these programs are deepened or radicalized, different property regimes will emerge. For example, public investment funds might become the center of a small network of firms which compete with each other in selling to consumers but cooperate on issues which offer economies of scale, such as research and development. These funds would have some rights in the firms, and, because the funds are public, the public would be assured of a say in development of the regional economy, down to the level of the firm.

The general thrust of property reforms, then, decentralizes and democratizes economic opportunities and access to capital and productive resources, and also produces a decentralized partnership between government and private parties. In the early stages of democratizing the economy, an intermediate level of capital funds would probably be established. As time goes on, deals between firms and these intermediaries would produce alternative regimes of property. These alternative regimes of property would continue to exist experimentally within the economy; thus a single economy could contain multiple conceptions of legal property rights.

It is in the context of this theoretical program that Unger finds practical significance in China's TVEs. What from the perspective of neoclassical economics are unclear property rights might be, for Unger's progressive democrats, a democratization of the economy. At least on paper, TVEs seem to represent new forms of property that are neither pure private property nor state property. For instance, many TVEs have been converted to shareholding cooperatives, where ownership is divided between labor shares, state shares, and private shares.18

But these reforms in China, as Unger admits, lack any political or even rhetorical force to further or deepen them: "The material of institutional innovation is there lying around, ready to be taken as a starting point for the development of an alternative. It remains, however, truncated by the consequences of a political paradox" (Unger, 1998: 105).19 While imperfect, TVEs remain important as "an original form of association between government and 'private' initiative" that "shows how quasi-public entities can compete and innovate in a market just as well as traditional Western-style firms" (Unger, 1998: 106). The paradox is that while the Chinese regime stifles democratic economics, the inchoate institutional anarchy in China today creates the opportunity for economic experiments that central government officials and their policy advisors would oppose because they are not based on sound, "scientific" western neoclassical economics.

China's Legal Response: If observers have seen TVEs as pregnant with various possibilities, the official government response has been much less imaginative. Indeed, as is typical of virtually every economic question in China, the government holds to a basically neoliberal ideological line on TVEs, although it rarely has the power to carry these policies out in more than a few test sites. A Ministry of Agriculture report outlines an orthodox neoclassical economic analysis of problems in the TVE sector. The report notes four problem areas (Xinhua, 1997). First, TVEs invested without regard to market needs or possible returns, leading to overinvestment. Second, poorly defined property rights led to performance and incentive problems. Third, many TVEs suffered from poor management, high debt, poor quality and low efficiency. Finally, excessive pollution had become a major problem with TVEs. Other reports noted similar problems, such as low quality products, poor technology, and a lack of qualified technical personnel (Xia Jun, 1998). There were also problems of leadership succession, with well-run collectives are having trouble finding replacements for aging leaders (Zhao, 1997). By the end of 1997, 520,000 rural enterprises, one third of the total, had been sold, annexed, declared bankrupt or transformed into shareholding cooperative companies (China Daily, 1998).

Given these problems, the solutions seemed relatively clear, and, unlike the difficulties experienced in the state-owned sector, amenable to statutory changes that would result in better economic performance. Administration had to be separated from management, operating and motivational mechanisms within enterprises had to be optimized, and care had to be taken to prevent the loss of, and encourage the increase of the value of, collective assets (Xinhua, 1997). Put simply, "Township and town enterprises" ownership and autonomy in management should be protected by laws; units and individuals are prohibited to occupy the properties of township and town enterprises. The method of achieving these goals was a new Law on Township Enterprises. The development of laws relating to TVEs has seen a movement toward capitalist norms, especially an emphasis on property rights. However, the chaotic and largely unplanned explosion of TVE corporate forms in various locations has prevented the Chinese government from merely eliminating the unique aspects of TVE structure. As we saw, Unger has seen TVEs as a progressive aspect of China's post-Mao economy. The clear desire of Beijing is to force TVEs into a western legal regime, but forces within China, at the local level and even in the National People's Congress, have prevented the "perfection" of TVE property rights.

The massive growth of TVEs in the late 1980s was followed by the promulgation of the Regulation on Township and Village Enterprises of the People's Republic of China, issued in 1990 by the Ministry of Agriculture (Che and Qian, 1998: 4). While the 1990 Regulations were directed towards former brigade and commune enterprises (as is shown by the fact that they continued to define TVE assets as owned collectively by all rural residents of the township or village, which would obviously not be the case with private enterprises), they also represented the dual nature of TVE property rights: TVEs contained both collective and capitalist property regimes.

Under the 1990 Regulations, the township or village runs the enterprise. The ownership rights over the enterprise were exercised by the rural residents' meeting (or congress), or a collective economic organization that represented all rural residents of the township or village. The collective retained ownership rights when the enterprise came under a managerial contract responsibility system, leasing, or joint operations with enterprises of other types of ownership (Che and Qian, 1998: 4).

The 1990 Regulations did not prevent TVEs from losing momentum in the 1990s. This trend was exacerbated by the state's increasing revenue problems due to losses at SOEs. With SOEs bleeding money, the central government was facing a fiscal crisis with reduced revenue and higher expenditures. At the same time, inflationary pressures in the economy meant that printing money to cover deficits risked setting of high or even hyper-inflation. This meant that local government, especially rural local government, had to depend on the revenue it generated from local sources, such as TVEs.

While there is scant political support for progressive TVEs, such support isn't completely absent. Thus one attempt to "corporatize" TVEs has created what is (at least formally) a novel form of corporate organization.20 Shareholding cooperatives (gufen hezuozhi), as this new form is known, have four main features (Smyth, 1998: 796; An 1998):

* Management and workers both bear risks.

* Each worker has about the same number of shares.

* Ballot-based decisions are determined on the basis of one-worker, one vote, not one share, one vote.

* Profits are shared between management and works according to amount invested and performance.

At least in theory, this new system clarifies the government's relationship with the enterprise, gives workers better incentives, and help raise funds. In a shareholding cooperative enterprise, employees are laborers as well as investors holding shares in the enterprise, and employees and management enjoy equal rights in managing the enterprise (Huang, 1997). Certainly this format appears to be different from, and perhaps even a challenge to, the neoliberal consensus about the proper form of economic organization.

Even under this system, TVEs and TVE workers face many problems. It is difficult for TVEs to raise funds, local governments still interfere with TVE management, workers are not empowered, and some TVEs are simply shells for private corporations (Smyth, 1998:793). As Unger himself notes at several points in his work on China, the political constraints of China's authoritarian system in many ways prevent the realization of what he calls the emancipatory potential of TVEs (Unger, 1998: 105). Perhaps most important, none of these legal innovations give workers a meaningful right to selforganization.

The 1997 Law on Township and Village Enterprises: Since many of the problems of TVEs were widely discussed in China in the 1990s (Shi, 1994), we would expect that the 1997 Law on Township Enterprises, which supplanted the 1990 Regulations, would address these problems. Yet, the 1997 Law largely followed the 1990 Regulations with few modifications - the most important being an emphasis on property rights, including private property rights. This being the case, it is not surprising to find that the Law hasn't fundamentally changed the environment for TVEs or improved their performance.

The drafting of the final version of the Law on Township Enterprises was very contentious (China News Service, 1996). Some members of the National People's Congress (NPC), China's legislature, sought to insert language giving workers more rights. Others worried about pollution (township enterprises are notorious polluters). The majority of legislators, however, were most concerned that the law protect the interests of rural enterprises against encroachment by government entities, that their property rights be protected (Xinhua, 1996). The debate on the law was characterized by the normally understated official Chinese news service as "fierce" (Xinhua, 1996). In the end, the language on worker rights was included, as was language on pollution. But the law itself, as well as subsequent commentary, demonstrate that clarifying property rights was the most important innovation in the law (Commentator, 1997).

As under the 1990 Regulations, Article 10 of the new law specifies that ownership belongs to investors. For TVEs established by the collective, ownership rights remain with the entire collective. For TVEs established with other enterprises, groups, or individuals, ownership is assessed according to investment. Once again similarly to the 1990 Regulations, if the TVE forms a partnership or establishes another TVE by investment, ownership is also according to investment. The law thus allows for, but does not require, private ownership.

Despite its focus on property rights, the 1997 Law didn't solve most TVE problems; in fact, it may not have solved anything. Lu Guanqiu, the entrepreneurial chair of the Wanxiang Group, a Township Enterprise, argued that by 1999 the TVEs had entered a period of unprecedented difficulties. The key to solving these problems is for "all levels of government" to create "a good and relaxed environment" for the development of TVEs (Xia Jun, 1999). Lu's solutions include increased government support for TVEs, freeing TVEs from obligations such as welfare, health insurance, and vacation benefits - but he does not mention property rights.21

If the 1997 Law wasn't so different from the previous regulations, why was so much importance attached to it? I believe that it is a mistaken belief in the importance of property rights to TVE performance - a belief echoed back and forth between Chinese officials and academics and Western academics and institutional specialists (such as the World Bank). Capitalism has won the ideological battle at the highest levels of the central government in Beijing, but it remains problematic to implement the elegant neoclassical solutions in the contentious atmosphere of the Chinese countryside.

Rule of Law and Politics: The Rule of Law is both a rhetorical and a real force in shaping China's economic structure. The Rule of Law plays a second role in China, maintaining social stability. The government deploys the ROL to maintain economic growth, but also as a means of simultaneously channeling and dispersing political challenges to its power. Rule of Law should be seen as the regime's response to China's state of chronic rebellion rather than the first signs of a democratic transition.

The Rule of Law is a tool to keep conflict within acceptable boundaries so that the Communist Party/state apparatus can continue to control the country. ROL in China isn't about democracy. Rather, it is part of a state strategy to prevent challenges to the regime's political power. It is a reaction to, and an attempt to channel, the social changes and social forces which are emerging in China. This conflict management is different from democracy. In fact, it is perhaps more likely that democracy would arise from the failure of ROL to manage conflicts. A failure of Rule of Law, and the resulting loss of governmental power, might force the regime to allow real power to be placed in the hands of the electorate.22 Rule of Law is thus a substitute for, rather than an expression of, democracy in China.

China's Rule of Law project echoes the conservative response in the West to the popular movements of the 1960s. Conservatives regarded these movements as dangerous, and the situation of popular mobilization as a crisis of governability. The way around this crisis was to create institutions that would channel protest into state-controlled institutions, where it would be defused. As the U.S. Political Scientist Samuel Huntington said in his famous bible of conservative "governability" theory, Political Order and Changing Societies:

The most important political determination among countries concerns not their form of government but their degree of government. The differences between democracy and dictatorship are less than the differences between those countries whose politics embodies consensus, community, legitimacy, organization, effectiveness, stability, and those countries whose politics is deficient in these qualities (Huntington, 1968: 1).

Institutionalization becomes the definition order, order the prerequisite of political development, and political institutions the key to economic development.23

Yet, despite the conservative nature of ROL, any force for socialism must take ROL into account and use it to its advantage. Where ROL seeks to cabin protest, popular forces must seek to use law as a tool to discipline property owners and the government to their own will. As described below, however, in the current situation ROL is more a placebo than a real cure for abuse of power. ROL functions to divert rebellion and smaller protests into institutions designed to absorb their impact and leave relations of power unchanged. We can see how this functions by looking more closely at how ROL helps defuse two perennial problems in post-Mao China, corruption and worker unrest.

Corruption: Corruption, using a position of authority for personal gain, is one problem which clearly threatens both government control and economic production; for instance, the main focus of the demonstrators in the 1989 Democracy Movement was official corruption.24 Protests against corruption are one of the main causes of what I called the China's state of rebellion - the situation where mass but inchoate protests spring up continuously across China. Legal reforms are intended as a means of containing corruption.25 Legal reforms contain corruption not by eliminating the problem, but by making victims feel that they have some recourse and recompense for their suffering. There are three ways the Rule of Law helps reduce the impact of corruption. First, ROL helps ferret out problems by encouraging reporting; second, ROL helps protesters against government graft feel vindicated; finally, ROL puts cadres on notice that the Party will not help them if they are caught.

One example of how ROL helps expose problems involves a lawsuit brought by 12,000 farmers in Shaanxi Province. The peasants filed the lawsuit claiming that the Chief Secretary of the Jia Wan Village Communist Party ordered that eight "arbitrary" taxes be collected from the villagers despite a severe drought in 1996. When more than twenty peasants refused to pay the extra taxes, they were arrested. The lawsuit was then filed on behalf of the whole village. A court determination (that ruled three of the eight taxes invalid, but that the farmers should not be compensated) is being appealed to the Shaanxi Province Higher People's Court. The villagers are asking for a full rebate and reversal of the decision ordering them to pay court costs (China Labor Update, 1999b: 9). Cases such as this are common, and their usefulness to the government is threefold. First, the case alerts higher levels of the Party and state about a potentially volatile situation. Second, it alerts the government to local government problems that might otherwise be covered up by local officials, in this case a lack of funds to run basic services. Finally, it helps the government discover genuinely corrupt officials.26

Of course, the courts do not always rule for the peasants, nor do peasants always accept court rulings peacefully. At such times, the repressive apparatus of the state is used to crush rebellions, many of which never reach the courts. Such a case occurred in Hunan in 1999. In this instance, about one hundred peasants started a campaign to 11 save the countryside" by demanding lower taxes. On 8 January 1999 local official issued arrest warrants for many of them, which triggered a mass demonstration of up to 5,000 enraged farmers from the village of Qingshui. One farmer died and many others injured when police moved in with tear gas to disperse the crowd. A protest the next day resulted in eight farmers being released from jail, and there were at least three further demonstrations the next week to protest the death (China Labor Update,1999c: 5). Here, obviously, the word about local problems did not reach upper levels before the protests turned large and violent, demonstrating that ROL will never be completely effective in preventing rural unrest from threatening government power.

David Zweig has reported a case which demonstrates another aspect of the ROL in rural China: helping protesters feel vindicated. Zweig's case began in 1992. The city of Nanjing, in central China, needed more land, so it annexed two rural districts. Although the districts were given money to compensate for the land (as well as some factories that were torn down by the city), the Township government refused to pay retirement benefits to the members of the formerly rural district. The old villagers took the Township to court, and, although they lost, the government was pressured to provide some benefits to retirees (Zweig, 1999: 15). A few years later, the community sued the Township again. This time the court refused to accept the case, insisting the dispute be settled out of court. A settlement was then reached through mediation (Zweig, 1999: 15). While the retirees did not get all the funds they most likely deserved, the government was forced to acknowledge the legitimacy of their claims and give them remuneration.

Worker Unrest: If corruption is the most common source of instability in China, worker protests are the most dangerous. Fear of urban worker protests is one of the main factors driving Chinese policy in the reform era (Williams, 1998). Rule of Law can help contain worker unrest by providing a mechanism for complaints to be heard out resorting to strikes, by preventing organizing, and allowing punishment of aggressive leaders.27 Workers can use the legal system to sue for wages and retirement benefits they are owed,28 which keeps them off the streets. In addition, the individual nature of court cases prevents workers from joining forces with workers in different factories or locations.29

But the authorities need to be careful, because the corruption and inefficiency of the legal system can undermine confidence and satisfaction with the results.-' For instance, when worker Li Chunxuan sued for his pension, "His legal foray has left him bitter. He said the company bribed the lower court judges and his appeal had dragged on for about six months without conclusion" (China Labor Bulletin, 1998e: 14).

The Chinese government would rather have scattered protests than an organized opposition. Thus the government compromises whenever confronted with mass demonstrations, but also severely punishes the leaders of those protests. As one activist has put it, "There is a saying now: they (the authorities) are afraid of trouble makers. When workers agitate and take up protests and demonstrate in the streets, when they create a scene at the plant's director's office, they will get some payments. If you just behave and stay at home, you'll get nowhere."

Another way ROL helps the authorities is to give the strategy of giving concessions while attacking labor protest leaders a veneer of legitimacy. An example of punishing leaders "according to law" is the case of the Peijiang Iron and Steel Factory in the Sichuan city of Jiangyou. On 2 October 1998, Zhang Xucheng, Liu Dingkui, and Yan Jinhong led over 500 fellow workers from the factory in a sitdown protest over the company's refusal to pay pensions to retired employees and living allowances for laidoff workers. Many protesters had not been paid for three months. The protesters blocked the Baoji-Chengdu railway line for over four hours, until police broke up the demonstration. Liu and Yan were punished with reeducation through labor sentences, for 1 year and 18 months, respectively. Zhang has been formally arrested and awaits trial (China Labor Bulletin. 1999f).

Summary of Socialism and the Legal System: Our examination of the legal system tells us three things. First, the dominant trend in China is towards a capital ist/Western set of legal-economic institutions. Second, this trend is not the whole story. In the TVE sector, for instance, there may be opportunities to create innovative economic forms that will increase equality and economic democracy. Finally, the Rule of Law gives Chinese a formal, relatively protected means of protesting government and private abuse. But the Rule of Law is designed to cabin protest in a narrow realm and to defeat the rebel's demands. ROL, moreover, has not included the right to self-organization for citizens or workers. Without the right to self-organization, ROL may provide little more than a way for the government to channel citizen's demands into largely symbolic fora such as the courts.

Who Will Lead China? Change is the only certain thing in China's future. Even if the Party remains in power thirty years from now, the methods and institutions that characterize its rule will be different. If the Party/state in China is going be displaced, the character of the succeeding regime will depend in part on the social makeup of the movement that forces the Party out of power. Given China's fractured state, any group that attempts to seize power will need to do so in alliance with other groups. Nonetheless, it is useful to look first at the two traditional candidates for political leadership, the working class and the middle class, before looking at the alliances these classes must forge to be effective political actors.

Working Class: In traditional Marxist analysis, the working class is the heart of the socialist movement.31 Over time, this notion has been weakened by the unfolding of various historical movements. The orthodox view that the objective position of workers made them opponents of the capitalist system came up against two difficult facts. First, in the Western European democracies, the working class was never a majority of the population, and therefore the working class alone could not win socialism through democratic elections (Przeworski, 1985). Without an absolute majority, the proletariat had to make alliances across classes. In these alliances, the working class was forced to make compromises in its economic and social policies. With no ready-made proletarian majority, no ready-made proletarian political program could institute socialism through peaceful, electoral methods. Thus even if the working class were "spontaneously" socialist as a result of their position in the relations of production, they were numerically unable to translate their preference for socialism into a victory at the ballot box.

Even more important, and more difficult for orthodox theory, was that workers did not automatically adhere to what were, at least to the leaders of socialist parties, properly socialist positions. The most famous example of this ambivalent reliance on the proletariat's inherent radicalism is Lenin's vanguard party, which sought to raise the consciousness of workers to the level of the intellectuals and activists in the party.32 This was an admission that the objective position of workers in the relations of production does not lead to socialism, but perhaps at best a "trade union consciousness," that is, an awareness of the immediate economic struggle against their employers, but not a grasp of class struggle in the larger social field. With the October Revolution in Russia and the resulting world-wide division of the socialist movement, the notion of a monolithic proletarian political position had to be abandoned.33

In China, Mao famously found a substitute for the proletariat in the peasants. But after the revolution, the proletariat - that is, workers in state-owned enterprises - became a privileged strata within China (Sheehan, 1998: 96-99). With high wages, high political status, benefits unavailable to others and guaranteed employment, the Chinese Party/state bought the support of a proletariat its own economic plan had largely created. But in the post-Mao era this privileged group has become disenfranchised, falling behind entrepreneurs and workers in foreign-invested enterprises in the race to economic success. As state enterprises struggle under the reforms, their workers are the main victims. Once generous pensions have been rendered inadequate by inflation, and frequently go unpaid. Especially in central and northeast China, even the meager wages of state workers, like pensions, go unpaid. The loss of benefits and non-payment of wages and pensions has led to widespread, if uncoordinated, protests against individual factories, local governments, and even the basic trajectory of economic reform. Has the regime created a Frankenstein monster? Having called a proletariat into being and infused them with a socialist political mindset, it now faces these workers as the greatest threat to Party control.

Perhaps then, if there is a center of socialist consciousness and activism in China, it appears, perhaps appropriately, to be in the proletariat. As one observer notes, "It is not difficult to find people who continue to be concerned with the problems of inequality, elitism, "capitalism," corruption, and increasing foreign involvement in China's economy." (Gabriel, 1998). Li Minqi, a veteran of the 1989 protests, is perhaps the most vocal promoter of proletarian prominence. Li argues that the working class is growing numerically and that its ability to organize is improving (Lee, 1999: 70). Given its growing power, the only thing keeping the proletariat from leading a transition to a new regime is the government's ability to grant concessions, and, of course, the government cannot do so indefinitely. Thus we can expect worker activism to reach a new level, with better results, in the short or medium term.

Li is right to emphasize the contradictions that constitute the positional struggle between SOE workers and the state, but he overstates the case for a proletarian-led alternative in China. While state workers have staged remarkable, brave protests, we need to understand both their position in China's economy and the nature of socialist ideology. First, the workers who have been most active in the state sector are part of dying industries, and the protests are largely defensive, trying first to hold on to privileges SOE workers had under the old system (health care, housing), and finally merely demanding wages or pensions they are owed. The government is right to fear these protests, because they tend to take place in cities (and are therefore visible) and are carried out by traditional supporters of the regime. However, the government's strategy - granting limited concessions and vigorously repressing the leaders of the protests has been highly effective in preventing these factory protests from becoming city-wide, province-wide, or country-wide protests. Protests seeking to protect relations of production typical of a less-dynamic stage of the global economy are bound to failure.

Working Class Alliances: Given the fractured nature of the Chinese polity, any social movement which wishes to challenge for national power will need to build alliances, and thus we must look at the nature of the ideology of SOE workers to see if they have created a program that is likely to gain widespread support in China. While strikes over unpaid wages and pensions may strike a sympathetic chord with many Chinese, the sympathy is likely to take a passive form and is therefore unlikely to help build a movement. State workers' protests over health care, housing, and other special benefits are even less likely to help them build a strong coalition with other social groups. If strikes become disruptive enough they may indeed induce the government to compromise, showing its weakness and leading to its collapse- but at that point it will likely be some minority faction within the government that takes control, and this is more likely to be a change within the ruling system than systemic change or revolution. The socialist ideology of workers has little support among Chinese intellectuals and high level party functionaries (Lee, 1999: 66). And as we saw in the section on TVEs, there is little intellectual support for progressive socialist alternatives. Dissatisfaction with the current situation makes China volatile, but the lack of an articulated socialist vision from within China reduces the chances that this unrest will lead toward progressive change.34 China has few non-capitalist intellectuals and political activists - can we expect it to have a vigorous non-capitalist social movement?

To be effective political actors, Chinese state worker's protests must consider at least two potential alliances. The first is with the peasants. Like state workers, peasants have been active in protesting the government throughout the 1990s, often over similar issues, such as unpaid government grain purchases and local corruption. Creating a program that appeals to the peasants would greatly aid any socialist movement in China. China's peasants are a diverse group, and any generalizations about 800 million people must be made cautiously. Remembering this caveat, the general ideological trend of China's peasants might be termed "socialist individualism." Socialist individualism combines the desire for a relative egalitarian distribution of property and wealth with the assertion of autonomy about economic decisions about how to use land.

China's peasants were winners of new property rights in land in the post-Mao era, and appear to be extremely happy with their private farms. But some studies indicate that China's peasants do not support vesting absolute property rights in the individual or family. Instead, a recent survey indicated that almost two-thirds of peasants preferred a system which periodically reassigns land among farm families in response to changes in the composition of farm families (Kung and Liu, 1997: 55). These readjustments tend to retain an egalitarian per capita or per family distribution of land. Enforcing absolute private property rights, the preferred solution of China's intellectuals, might 11 encounter resistance at the grass-roots level, as the new policy [of absolute private property] contradicts the egalitarian attitudes that underpin China's present system." Only a tiny minority of farmers think of themselves as landowners (2.5%), whereas almost 95% believe they have contracted the land from the state or collective. In addition, only 14% expressed a preference to become de jure land owners (Kung and Liu, 1997: 40). To farmers, the most important rights were the right to decide what to grow and where to market their crops. The authors of this survey believe peasant's resistance to freezing land adjustments "is that it removes a specific right to which villagers, as members of the community, are currently entitled: an equal share of the land as a means of guaranteeing that basic consumption needs will be met" (Kung and Liu, 1997: 56).

Here, then, is an alternative form of property. But it isn't one that is particularly concerned with increasing productivity. Instead, like the workers in state enterprises, peasants emphasize security. The property rights these peasants prefer are "disaggregated" as in Unger's progressive TVEs - the right of control is most important to peasants, who would trade absolute right to sale of property for security. Peasant's attitudes bode well for a worker-peasant alliance, but China's peasants produce in a large variety of circumstances, and it may be difficult to generalize peasant attitudes.

State workers might also form coalitions with workers in Foreign Invested Enterprises (FIEs) and Township and Village Enterprises (TVEs). FIE workers have engaged in many strikes over the past decade. While state workers are likely to protesting to protect benefits or for back wages, FIE protests are focused on working conditions and abuse by managers. Although FIE and state workers protest different issues, each would greatly benefit from the right to organize and bargain collectively, and this important right could be the basis for a coalition of FIE and SOE workers.

In contrast to both FIE and SOE workers, workers in TVEs generally quit their job rather than organize protests or pursue legal remedies.35 The ability to return to farming and the availability of job opportunities at other factories apparently keeps most TVE workers from staying to try to challenge factory management. Unlike state-owned enterprises, TVEs promise little in the way of benefits. There are no health care, pension, or housing guarantees, removing the largest source of protests in SOEs. The"flexibility" of the rural labor market is, thus, one in which workers leave when conditions are bad, and management uses its powers to dismiss workers who look to "cause trouble" by insisting on their rights.

Small TVEs are generally a part of the community and are frequently family-run. These smaller TVEs can call upon social pressures to force both workers and managers not to publically disagree. Locals may think of the enterprise as a "big family" rather than a balance between the interests of capital and labor. To a certain extent this is true, because some workers will be owners and many owners will be related to workers. Nonetheless, poor working conditions, lack of rights to engage in collective bargaining, gender discrimination, and an absence of basic benefits are recurring features of the TVE.

Some TVEs in China are quite large, with thousands of workers.36 Larger TVEs are often sub-contractors and/or investment partners of international firms. Such firms are usually located in the suburbs of large cities or in areas with a high level of exportoriented production, such as southern Guangdong. Due to these factors, the labor problems in these enterprises probably are more like those we are familiar with in FEEs and sub-contractors than those in counties in China's interior, with no foreign investment.

It will be difficult to target TVE workers with any specific platform. Some will have an agenda similar to workers in FIEs, others will have an outlook similar to peasants, still others might be more like migrant workers. A portion will also have a more conservative, "petty-bourgeois" outlook similar to other small-scale owners of capital. Despite these difficulties, any working class movement would do well to get the 125 million TVE workers on their side.

The Middle Class: Democratization is perhaps the most widely held hope for political change in China, and the bourgeoisie has long been held as the key to democratization globally (Moore, 1966). Since World War II, the bourgeoisie has been subtly replaced by the middle class as the power behind democratization. This change marks an interesting difference between classical and contemporary models of democratization. The bourgeoisie was the middle class in the transition from feudalism to capitalism - they were neither peasants nor nobility but owners of capital, and their need for relative independence created a movement to deepen limits on sovereign power and eventually led the way to democratic revolutions. In the literature on democratization today, the bourgeoisie has been replaced by the middle class. But the middle class is different from the bourgeoisie. Being a member of the middle class is determined by income, educational level, or professional status rather than ownership of the means of production (Wright, 1989). Analysts have largely abandoned the idea that the owners of economic capital, the bourgeoisie, will spearhead the drive for democracy; instead, the middle class is the social force that is supposed to demand democracy.

Economic determinism drives idea that the middle class will be the leaders of democratization.37 For many writers, a certain level of economic development must precede democratization; when that level is achieved, it will have produced a middle class of professionals to administer the economy, and it is this middle class that will demand democracy (Rosen, 1999: 12). The capitalist class, the bourgeoisie, can no longer be counted on to perform its progressive role in advocating for democracy because the owners of capital in late developing nations are highly integrated with the state, and thus less likely to challenge government power. The middle class, in contrast, is seen as desiring democracy, perhaps as a political complement to its new-found power of consumer choice in personal consumption.

The Example of South Korea: South Korea provides an interesting window through which to view the process of democratization in a late-developing country (Pak, 1999; Chu, 1998). Given the ideological nature of the division of the Korean peninsula, the South was obviously going to take a capitalist development path. Capitalist development created a new bourgeoisie, which first emerged during the war with the North and in the subsequent period of heavy American aid. The South Korean bourgeoisie made its living off government contacts and contracts. This set the pattern for South Korean development: the bourgeoisie, owners of the chaebol, has been closely tied to the government, dependent on the state for protection, access to credit, repression of labor, and guidance for investments in new areas of production. Korea's giant chaebol were created by preferential government policies designed to produce a new phase of Korean industrialization based on Korean production of higher technology goods. The result is that "the Korean bourgeoisie remains, despite its wealth and increasing political influence; a decidedly unhegemonic class, estranged from the very society in which it continues to grow" (Eckert, 1993: 96).

With the backing of the US government and the ideological weapon of anti-communism, the state in South Korea was able to guide Korea's economic development and weather repeated mass mobilizations for democracy. But these mobilizations had a profound effect on the development of internal Korean class relations. The turning point came when Chun Doo Hwan ordered the massacre of hundreds, perhaps thousands, in the city of Kwangju in May 1980. The working class and progressive forces that led the Kwangju uprising did not gain support from the middle class, especially in Seoul (Choi, 1993: 31). The split between the middle classes and the working class represented a split between forces, largely middle class, aligned around the dictatorship-democracy axis, and the working class, which also focused on questions of distribution and equality.

When the authoritarian regime faltered in 1987, it fell to a coalition of the working and middle classes, temporarily joined together by the nationalist ideology of minjung and the rallying image of the Kwanju massacre (Kim, 1997). Importantly, the state's high level of involvement with the chaebols, the centerpiece of Korea's development strategy for twenty-five years, had come to be seen by big capital as interference rather than assistance. This left the chaebol indifferent to the survival of the developmental-- authoritarian state, and insured their abstention from the democratic struggle.

Yet once the popular forces had achieved an apparent victory, the middle class working class coalition was dissolved (Lee, 1997). The split between the working class and the middle class, symbolized by the split between Kim Dae Jung and Kim Yong Sam, was a split over the meaning of politics and economics in the new era. Working class views of democracy "gave centrality to the concepts of equality, social justice, and community" (Choi, 1993: 40), while middle class views were focused on the "decompression" of political space and free elections. Similarly, working class views of the economy emphasized redistribution, while the middle classes were more comfortable with a continued focus on economic development (Choi, 1993: 32). The formula might be stated as follows: If the proletariat proposed radical demands beyond democratization, it is unlikely to find middle class allies. If the proletariat does not propose radical reforms, however, the democracy movement will not be able to move China closer to socialism.

The Lessons of 1989: In China, the most recent example of working class - middle class cooperation was the 1989 democracy movement At the start of the protests, workers appeared at the square to "take a look" at what the students were doing. The demands of the students struck a resonant chord with many Chinese, who sought ways to help the students. This appears to be how the leaders of the first independent worker federation in post-Mao China, the Beijing (Capital) Workers Autonomous Federation (WAF) was founded. The workers had little time to organize, and most members joined at the Square; there was only, poorly documented, attempt to organize at the workplace. Workers in other cities followed Beijing's lead, but none of these organizations appear to have attained the size or coherence of the Beijing WAF (Walder and Gong, 1993; AMRC, 1991).

Labor leaders learned two things from 1989. First, although the students appeared to be natural allies of workers, cooperation with the students proved more difficult than expected. Second, the existing Party and union structure was too dominated by pro-- management, or even pro-student (but anti-worker) political institutions to serve as an effective vehicle for worker demands. This drove home the need for a strong, independent worker movement.

But future movements will have the advantage of learning from 1989, and it appears that at least some of the student leaders of 1989 have changed their views about the importance of student-worker alliances (Lee, 1999: 65-66). Still, students are only a small portion of the middle class, and it is difficult to know how China's middle class would react to a closer alliance with workers. There is little evidence that the new Chinese middle class, which, especially in the south, consciously imitates the non-political and materialistic middle class of Hong Kong,38 would be amenable to a worker or worker-peasant coalition that emphasized equality and economic democracy. The middle class are possible allies in a transition to parliamentary rule, but unlikely allies in broader struggle for socialist goals.

Neo-authoritarianism: While democracy is presumed to be the future of political change in China, authoritarianism sits in its shadow, appealing to those who fear the chaos brought on by economic and social change and to those who hold power today and do not wish to subject that power to direct popular approval. China remains an authoritarian state, so it is important to consider the roots of this state and why authoritarianism will continue to appeal to some in China.

Authoritarianism appeals to the lazy. Despite the emphasis on order and discipline that characterize authoritarian movements, it is the ability of authoritarianism to shortcircuit the difficult process of building coalitions for change that explains its appeal. Rather doing the hard work of organizing people and making political compromises, authoritarians dream of complete control.39 Authoritarianism is a disease of both the right or the left. On the right, we have the example of the recently fashionable preference for Neo-Authoritarianism (Xiao and Zhu, 1990-1991). Just before the 1989 Democracy Movement in China, Chinese intellectuals became enamored of the idea that a strong state led by a strong leader would be the best way forward for China. Based on the supposedly unique Asian experience, from Taiwan to Indonesia, intellectuals came to think that only when power was concentrated in the hands of a single, strong leader could a nation overcome the bickering between various interests groups and focus on the task at hand: creating wealth.

For leftists, too, authoritarianism has its attraction.40 The leftist case for authoritarianism can be deepened by examining what is perhaps the fundamental difference between East Asian development and Latin American development: land reform and the resulting equality in East Asia. In Japan, land reform wasn't accomplished by the Meiji elite or their successors, but by the occupying U.S. forces after World War II. In Taiwan, the Nationalists, invaders from the mainland, performed a land reform they were politically incapable of attempting when they controlled China. In Korea, although the withdrawal of Japanese troops opened up the popular space where land reform could begin, the process was greatly radicalized in the South by invading North Korean troops. In China, of course, land reform was a Communist innovation, implemented at a time when the Communist Party was largely indistinguishable from the People's Liberation Army. Land reform was impossible in normal circumstances; so impossible, in fact, that it was carried out by armies.

Given the difficulty and slowness of social change, it is tempting to say that real change can only be started in authoritarian or semi-democratic circumstances, the Neo-- Authoritarian solution. A weary actor comes to think, "It isn't going to be possible to establish a democratic majority in favor of reforms in current circumstances, so somebody must start the ball rolling." A strong leader appears to have the power to force reluctant social, political, economic, and even ideological structures to reform. An economic or ecological crisis could either supplement, or substitute for, an autocrat - either way, faith in the political structures is shaken and larger reforms, even revolutionary acts, appear possible. Without an autocrat or a crisis the radical reform project itself seems doomed.

Near the beginning of this essay, we examined the possibility of a quasi-fascist regime in China. Given the tensions we have examined in this article, and the international pressure on China to resolve these tensions along neoliberal lines, it would be surprising indeed if we did not see a recognizably fascist movement emerge in China. Whether such a movement would gain any real strength or political import is another matter. Single party rule, and especially an appeal to Han nationalism, is likely to be attractive to a part of the population for some time to come. The contradictions that exist in every social, political, and economic institution in China will lead many to seek the easy, authoritarian solution. The fear of China disintegrating remains a huge psychological factor in Chinese politics, and this can be exploited by neo-fascist movements. The strength of neo-fascism would only increase if Uighur or other separatists brought their struggle to eastern China with a systematic campaign of terror, such as the bombing campaigns conducted by the IRA in England.

Fascism is not likely to gain political power in China, but it may influence other groups that do gain power. While militarism would only get in the way of what most Chinese want, which is a better, more peaceful life, an appeal to nationalism and order is likely to attract unemployed workers and other disenfranchised groups. This popularity may cause other political groups to make more strident nationalist appeals. The likely loser here is Taiwan, which will continue to bear the brunt of China's nationalism as the ultimate symbol of China's fractured psycho-political landscape.

Authoritarian solutions to China's current situation will be tempting for any contenders for power, but authoritarianism cannot provide a solution to China's long term needs. A diverse country such as China needs democracy so that all voices can be heard. The current government's suppression of national minorities only feeds the fires of separatism, and authoritarian suppression of such movements only leads to violence, as we have seen from Northern Ireland to Chechnya. These tensions between nationalities with the Chinese political state highlight the importance of international conflict to China's future. The next section examines China's interaction with the global system of nation-states and its impact on the future of Chinese socialism.

International System: The global forces of capitalism, Marx told us, were strong enough to "batter down all Chinese walls" which sought to block their entrance. Because these global capitalist forces were so strong, Marx assumed they would overwhelm any national government's attempt to moderate their impact. In the 1960s and 1970s, radical politicians and academics often advocated a strategy for developing countries based on withdrawal from the world system. Only withdrawal offered the opportunity to develop in a non-capitalist manner. At the time, China appeared as the paradigm case of withdrawal, its apparently high economic growth, equality, and political radicalism standing in stark contrast to the stagnation and inequality of many developing states. Since it was impossible to be both socialist and integrated in the world system, socialist states had to choose withdrawal.

The strategy of withdrawal was based on the premise that large states located on the periphery of the world economy, such as China, offered the best chance for formulating an alternative to North Atlantic capitalism. Today, there is no choice between withdrawal and engagement. Politically and economically, withdrawal was unsuccessful, and may never have even been possible (Frank, 1998). When countries withdrew from the global economic system, domestic class struggle increased, choking economic growth without providing benefits to workers and peasants. Countries that withdrew suffered increased corruption, and economic innovation flagged. In addition, by the late 1970s it became clear that the most successful examples of development, such as South Korea and Taiwan, depended on exports rather than withdrawal or import-substituting industrialization to propel development.41 So the question facing all countries today is no longer whether to engage with the world system, but how to engage with it. While today we concede that globalization is inevitable, the form and effect of globalization will be shaped by domestic and international struggles.

Domestic institutions are extremely important in determining which groups within a country benefit from engagement with the world economy (Weiss, 1999: 126). Moreover, despite the power of institutions such as WTO to force changes in domestic institutions, domestic institutions have a remarkable inertia that makes them resistant to change. This so-called path dependency ("the creation of an interlocked system of ideas, norms, and institutions which structure relations between state and society") means that domestic politics, and institutions that result from domestic politics, are crucial in determining whether globalization increases or decreases inequality (Weiss, 1999:129).

There are many examples of how domestic institutions have shaped countries' interaction with the world system in a way that benefitted domestic economic growth. South Korea and Taiwan were able to parlay their strategic importance to the United States into effective export-led development programs (Cumings, 1983). Similarly, European countries with a strong social-democratic tradition, such as France, have used domestic institutions to shape the domestic impact of globalization.

The 1997 Asian currency collapse and resulting economic crisis demonstrate the importance of having the proper international institutions and for countries to have the flexibility to deal with crises in their own way. One of the initial reactions to the crisis was to blame "Asian Crony Capitalism" and corruption for the panic (Wade and Veneroso, 1998: 7-8). Opening markets for both capital and goods were seen as the only real cure to the Asian flu. But, of course, corruption had existed in Asia for decades, decades in which Asia's economies had grown so quickly that they were dubbed miracle economies, and there was no reason why this corruption should suddenly cause economies to collapse. In addition, many developing countries outside Asia have corruption problems, but they did not suffer similar currency problems.42 A lender of last resort, better banking regulations, in other words, political institutions (albeit institutions that deal with money) have gained credence as the most likely way to prevent further crisis (Sachs, 1998). Similarly, Chile has controls on capital flows which encourage long-term foreign investment but discourage currency speculation.

World Mutual Aid and Trade Organization?: As we have seen, rather than face a stark choice between withdrawal or engagement, countries now face the difficult task of changing the world system itself.43 Given its size, China could be an important force for altering the global system to benefit developing nations, and to promote equality and sound ecological stewardship. Unfortunately, in the short term it looks more likely that WTO will change China than China will change the WTO.

WTO will be a powerful force in shaping China, and many of the changes wrought by WTO will benefit China. Free trade can increase competition and consumer choice. World standards in fields such as accounting can make economic transactions more transparent, which helps root out corruption. Transparency can also help increase equality, because incomes are known to shareholders and employees, and therefore subject to public pressure. In China today, many executives are paid under the table, shielding their income from tax collectors and popular scrutiny. Globalization may produce institutions better suited to international problems such as pollution, arms control, immigration, and public health.

But globalization often has a darker side - the U.S. Treasury Department and multinational corporations seek to set an agenda which gives domestic governments little power and offers few protections to workers or the environment. This top-down, corporate globalization was the focus of the important street demonstrations in Seattle in 1999, which helped slow the WTO process down, and will hopefully result in more diverse voices being heard in the creation of global treaties.

While we know that WTO membership will have an important impact on China's political economy, it is impossible to tell what the impact will be. Some democracy activists, such as Ren Wanding, believe that WTO membership will force legal institutions to become more fair and push the political system toward democracy. Others believe that WTO will keep Chinese economic "liberalization" on track, drowning out the calls from workers and other groups hurt by WTO for relief (Rosen, 1999: 2). Still other analysts point out that WTO will leave many important institutions in China untouched. As labor activist Han Dongfang says, "Without the right for workers to set up unions, job opportunities brought by WTO could turn workers into slaves" (Leicester, 1999). In short, WTO's impact will depend on how international and domestic forces use WTO to push their membership. If WTO is used solely to liberalize China's economy, the impact on democracy, equality, and the environment is likely to be negative. However, groups within China may be able to use WTO to shape legal and political institutions in ways that make China more democratic and perhaps even advance the goal of socialism in China.

Similarly, if China uses its WTO membership solely as a way to increase national prestige, it will only reinforce the one-sided U.S. government view of globalization. However, as a newly-minted member of the World Trade Organization, a progressive China would be well-placed to help the popular groups and unions that protested in Seattle put pressure on the world system. If China were to side with European social democrats on labor protection issues it would make an important dent in Washington Consensus. But if China fights its typical rearguard actions, trying to peddle its theory of Asian Exceptionalism as a shelter for its authoritarian system, it will not be a friend to progressive forces world wide. China is big enough to shelter experiments within its border, as the development of TVEs shows. It may soon be big enough a world actor to assist other nations that want to experiment within the capitalist world system. But the current Chinese government shows little inclination to assist any group outside the ruling clique.

China faces other nations today simply as another would-be Great Power. China's race to put people into space orbit and challenge Taiwan has nothing to offer other nations. Currently, China is on course to use its entry into WTO to do little more than discipline workers and state enterprises at home and push its crypto-authoritarian Asian Exceptionalism in the world arena. While those in the West who resist China's WTO entry probably overestimate the West's power to shape China's policies through trade agreements, they are correct that WTO entry is an important moment for China. But the domestic forces that need to have a voice in the reform process have been shut out by the government. Thus workers and peasants express their anxiety about WTO in sporadic protests, protests that will only intensify if the Chinese government ignores their concerns and implements a corporate version of WTO.

The Chinese government's Asian Exceptionalism is a form of reactive localism. This reactive localism is not an alternative to globalism, but its complement: both oversimplify the choices facing countries as they negotiate their status in the international community. Socialism and internationalism were once synonymous because the socialist movement promised to make the increasingly global world economy benefit workers. Recapturing this idea is crucial to the future of socialism in China.






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